Earnings Release • Feb 13, 2018
Earnings Release
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Sweco had a stable development during the quarter. An increased billing ratio and positive fee development contributed positively to EBITA. At the same time calendar effects, project write-downs and restructuring costs in Norway and Denmark impacted EBITA negatively. In summarising the 2017 full-year result, we can conclude that it is the best financial result in Sweco's history, so far.
The positive development continues in the Netherlands. On the back of a solid trajectory in our Dutch business, we now recognise the tax value of historical losses in Grontmii. As a result, a one-off tax asset of SEK 161 million had a positive impact on net profit during the quarter. With a strong financial position, solid increase in earnings per share and a positive outlook for Sweco's business, the Board of Directors proposes increasing the dividend to SEK 5.00 per share.
During and after the quarter, Sweco announced three acquisitions with a total of 300 employees: Dimensjon Rådgivning in Norway, Haskoning DHV in Belgium and Årstiderne Arkitekter in Denmark. Our strategy for the future is to repeat our history. We will continue to strengthen our European leadership through acquisitions and organic growth. Our focus remains on our customers, internal efficiency and having the best people in the business.
Overall, the market for Sweco's services is good. The Swedish market remains strong in most segments, while residential construction is slowing down. The markets in Finland and the Netherlands have improved and are good. Essentially all other core markets remain good.
Sweco plans and designs tomorrow's communities and cities. Our work produces sustainable buildings, efficient infrastructure and access to electricity and clean water. With 14,500 employees in Europe, we offer our customers the right expertise for every project. We carry out projects in 70 countries annually throughout the world. Sweco is Europe's
leading engineering and architecture consulta This information is information that Sweco is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information is information that Sweco is obliged to make public pursuant t
EBITA increased to SEK 448 million (395), an improvement of SEK 53 million. Sweden, the Netherlands and Central Europe were the main Business Areas contributing to the improvement.
Overall for the Group, a positive trend in hourly fees and billing ratio were the main drivers of improved operational performance, while project write-downs and restructuring costs in Norway and Denmark had a negative impact.
The absence of extraordinary items related to the Grontmij acquisition contributed SEK 83 million to the EBITA improvement.
There were 3 less working hours during the fourth quarter compared to last year. This had a negative yearon-year impact on sales and EBITA of approximately SEK 17 million.
The billing ratio improved to 75.8 per cent (75.3), mainly due to positive developments in Central Europe, the Netherlands and Western Europe.
Net sales increased to SEK 4,582 million (4,421). Organic growth amounted to 0 per cent and was negatively impacted by higher project adjustments and negative calendar effects.
Net financial items decreased to SEK-11 million (-5) due primarily to foreign exchange revaluation effects.
Sweco Netherlands is on a solid trajectory of profitability. Due to accounting rules, a deferred tax asset related to historical losses in Grontmij has been recognised. The tax asset is valued at SEK 161 million and impacts net profit positively by the same amount.
Earnings per share increased to SEK 4.02 per share (2.30). Profit after tax excluding the impact from revaluation of tax assets amounted to SEK 2.68 per share.
Adjusted for calendar effects and extraordinary items, EBITA increased SEK 59 million. The improvement was mainly attributable to the Netherlands. Finland and Central Europe.
Overall for the Group, a positive trend in hourly fees was the main driver of improved operational performance.
EBITA increased to SEK 1.492 million (1.336), an improvement of SEK 156 million. The absence of extraordinary items related to the Grontmij acquisition contributed SEK 146 million to the EBITA improvement.
Calendar effects of -8 hours had a negative year-on-year impact of approximately SEK 49 million on net sales and EBITA.
Net sales increased 2 per cent to SEK 16,887 million (16,531). Acquired growth contributed 1 per cent, and currency effects 1 per cent. Excluding calendar effects, organic growth was 1 per cent.
The billing ratio increased to 75.2 per cent (74.9), mainly due to positive developments in Central Europe, the Netherlands and Western Europe.
Net financial items decreased to SEK-49 million (-33) primarily due to foreign exchange revaluation effects.
The deferred tax asset recognised in the fourth quarter had a positive impact of SEK 161 million for the year.
Earnings per share increased to SEK 10.23 per share (7.78). Profit after tax excluding the impact from revaluation of tax assets amounted to SEK 8.88 per share.
| Key ratios | Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 |
|---|---|---|---|---|
| Net sales, SEK M | 4,582 | 4,421 | 16,887 | 16,531 |
| Acquisition-related growth, % | 1 | 42 | ||
| Organic growth, % | 0 | 1 | 0 | 3 |
| EBITA, excl. extraordinary items, SEK M | 448 | 478 | 1,492 | 1,482 |
| Margin, % | 9.8 | 10.8 | 8.8 | 9.0 |
| EBITA, SEK M | 448 | 395 | 1,492 | 1,336 |
| Margin, % | 9.8 | 8.9 | 8.8 | 8,1 |
| Profit after tax, SEK M | 480 | 276 | 1,223 | 931 |
| Earnings per share, SEK | 4.02 | 2.30 | 10.23 | 7.78 |
| Number of full-time employees | 14,774 | 14,482 | 14,530 | 14,365 |
| Billing ratio, % | 75.8 | 75.3 | 75.2 | 74.9 |
| Normal working hours | 490 | 493 | 1,971 | 1,979 |
| Net debt/EBITDA x | 1.0 | 1.0 |
Sweco has been commissioned by a joint venture of Groß & Partner Grundstücksentwicklungsgesellschaft mbH and Phoenix Real Estate Development GmbH to plan and design a vital part of the Grand Central project in Frankfurt am Main. The "Grand Central Frankfurt -Building A and B" project consists of two new interconnected seven-storey buildings, with a gross floor area above ground of approximately 52,000 square metres, extensive outdoor facilities and a two-storey underground parking. The buildings will become the new head office of DB Netz AG, a subsidiary of Deutsche Bahn, with 2,200 employees.
Sweco Norway has been commissioned to design the new 24-kilometre-long E6 motorway in Hedmark. The four lane motorway is one of the largest infrastructure projects in Norway. Sweco's customer is Veidekke, and the responsible authority is Nye Veier, the Norwegian government's road infrastructure development company. The project will start immediately and the motorway is scheduled to open in December 2020. The order value for Sweco is approximately SEK 70 million.
After the quarter, Sweco was commissioned to support the implementation of infrastructure projects in northwest Afghanistan under the endorsement of the RIDF (Regional Infrastructure Development Fund). Sweco will advise and support departments of the Ministry of Finance in Afghanistan during the various projects. The projects are financed by the German BMZ (Federal Ministry of Economic Cooperation and Development) and the German government-owned development bank KfW. Sweco has overall responsibility of the projects in cooperation with consulting companies GOPA and INTEGRATION. The projects are expected to be finished in late September 2020.
Overall, the market for Sweco's services is good. The Swedish market remains strong in most segments, while residential construction is slowing down. The markets in Finland and the Netherlands have improved and are good. Essentially all other core markets remain good.
Demand for Sweco's services predominantly follows the general macroeconomic trend in Sweco's markets, with some time lag.
EBITA by quarter and rolling 12 months SEK million. Actu
The Northern European GDP development is solid. Political uncertainty, the global macroeconomic situation and financial market events are risks to the development.
Sweco does not provide forecasts.
On 23 October Sweco completed the acquisition of Dimension Rådgivning AS, a Norwegian engineering consultancy based in Stavanger with 47 employees that offers services in urban planning, building engineering, municipal engineering and infrastructure.
On 11 December Sweco signed an asset purchase agreement with Royal HaskoningDHV to acquire the operations of HaskoningDHV Belgium. The company has 36 employees and is specialised in soil investigations and decontamination, environmental impact assessments and integrated area development.
On 10 January Sweco announced the acquisition of Årstiderne Arkitekter, one of Denmark's leading architecture firms with approximately 220 employees. Through the acquisition Sweco will establish the first fully integrated architecture and engineering offering in Denmark and become the leading architecture firm in Europe, with more than 1.200 architects.
On 12 January Sweco announced that Tomas Carlsson will leave his position as President and CEO of Sweco. The Board of Directors has initiated the process of finding a replacement. Carlsson will continue in his current role during his termination period until July 2018.
On 6 February Sweco introduced Urban Insight, a global initiative under which Sweco's experts will explore ways in which various urban structures in Europe influence citizens' ability to meet needs and preferences. The experts' insight reports will be shared on an Urban Insight website throughout the year.
Group cash flow from operating activities totalled SEK 1,060 million (1,165) during the year. Net debt remained essentially stable at SEK 1,698 million (1,558).
Cash flow was negatively impacted by an increase in working capital, primarily in Sweden. This increase is expected to be of a temporary nature.
The net debt/EBITDA ratio was 1.0 times (1.0).
Available cash and cash equivalents, including unutilised credit lines, totalled SEK 1,991 million (2,138) at the end of the reporting period.
INVESTMENTS, JANUARY-DECEMBER 2017 Investments in equipment totalled SEK 229 million (213) and were primarily attributable to IT investments. Depreciation of equipment totalled SEK 227 million (219) and amortisation of intangible assets totalled SEK 108 million (133).
Purchase consideration paid to acquire companies and operations totalled SEK 181 million (175) and had an impact of SEK-136 million (-152) on Group cash and cash equivalents. Purchase consideration on the divestment of companies and operations totalled SEK 15 million (10) and had an impact of SEK 13 million (7) on Group cash and cash equivalents. Repurchases of Sweco shares totalled SEK 289 million (126) and had the same effect on Group cash and cash equivalents.
Dividends totalling SEK 513 million (418) were distributed to Sweco AB shareholders during the second quarter.
EBITA increased to SEK 296 million (273). The EBITA improvement was primarily attributable to higher average fees. There was no year-on-year difference in the number of available working hours.
Organic revenue growth from own consultants was 2 per cent. Nominally, organic growth was -1 per cent, mainly due to a reduction in income from subconsultants. The reduced income from subconsultants is related to completion of large projects involving a large proportion of sub-consultants. During the quarter Sweco Sweden implemented a new group-wide ERP system, currently operational in Finland.
The Swedish market is good, but growth is slowing down and competition for talent is intense. There is strong demand in the construction and real estate sector, while residential construction is slowing down. The infrastructure market is strong, supported by major public investments. The industrial market is stable and the market for IT-related services is developing positively. The market for power transmission services is strong while demand in energy generation remains challenging.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 1.936 | 1,951 | 7.024 | 7.064 |
| Organic growth, % | -1 | |||
| Currency, % | ||||
| EBITA, SEK M | 296 | 273 | 844 | 852 |
| EBITA marain, % | 15.3 | 14.0 | 12.0 | 12.1 |
| Number of full-time employees | 5.653 | 5.605 | 5,524 | 5.482 |
Net sales increased 6 per cent, with acquired growth contributing 3 per cent. Organic growth was negatively impacted by increased project write-downs.
EBITA decreased to SEK 29 million (58). EBITA was negatively impacted by project write-downs and restructuring costs. There was no year-on-year difference in the number of available working hours. Overall, the underlying performance during the quarter was satisfactory, although write-downs and restructuring costs of SEK 16 million in Trondheim impacted profits negatively. Actions have been taken to strengthen leadership on the divisional and regional level.
The Norwegian market is good, but demand is distributed unevenly. The markets in the greater Oslo region are strong within public infrastructure, private and public commercial construction and residential construction. The markets in southern and western Norway remain challenging, while the northern areas are experiencing moderate growth.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 561 | 530 | 2.070 | 2.055 |
| Organic growth, % | ||||
| Acquisition-related growth, % | ||||
| Currency, % | ||||
| EBITA, SEK M | 29 | 58 | 148 | 195 |
| EBITA margin, % | 5.2 | 11.0 | 7.2 | 9.5 |
| Number of full-time employees | 1,397 | 1,346 | 1,347 | 1,344 |
Net sales increased to SEK 488 million (462). EBITA decreased to SEK 34 million (41). EBITA was negatively impacted by a lower billing ratio and negative calendar effects. The year-on-year calendar effect of -2 hours had a negative impact of approximately SEK1 million on net sales and EBITA.
The Finnish economy has gradually improved over the last two years and the market is good. Demand for Sweco's services is stable and developing positively, primarily in the building market in the Helsinki region. Demand for industry, construction and real estate-related services is good, while the infrastructure market remains challenging.
As the Finnish economy improves, Sweco Finland is well-positioned to benefit from a market-leading position, high internal efficiency and a strong customer focus.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 488 | 462 | 1.893 | 1.759 |
| Organic growth, % | $-2$ | -5 | ||
| Acquisition-related growth, % | ||||
| Currency, % | 5 | |||
| EBITA, SEK M | 34 | 41 | 187 | 138 |
| EBITA margin, % | 7.0 | 8.8 | 9.9 | 7.9 |
| Number of full-time employees | 2.010 | 1.936 | 2.046 | 1,984 |
EBITA declined SEK 39 million due to operational issues in the Water and Energy division. EBITA in the division was negatively impacted by project write-downs, restructuring cost and a low billing ratio. Write-downs amounted to SEK 16 million. Actions have been taken to strenghthen leadership, improve project control and increase the billing ratio. A positive development in Water and Energy was seen at the end of the period. The two other divisions in Denmark are performing well and Sweco Denmark is well-positioned for profitable growth.
The calendar effect of -8 hours had a negative impact of approximately SEK 5 million on EBITA. Organic growth was negatively impacted by increased write-downs and negative calendar effects.
The market in Denmark is generally good with stable development. The construction and real estate sector is developing well and is particularly strong in the larger cities. The infrastructure market is stable, with the exception of weaker demand in road construction and larger public infrastructure projects. Demand in the water and environmental sectors is increasing. driven by an increased demand for climate adaption services in the larger cities. The energy market is weak due to a decreasing activity level.
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
|---|---|---|---|---|
| Net sales, SEK M | 349 | 351 | 1,371 | 1,375 |
| Organic growth, % | -5 | -4 | -2 | |
| Currency, % | ||||
| EBITA, SEK M | 44 | 44 | 98 | |
| EBITA marain, % | 1.5 | 12.6 | 3.2 | |
| Number of full-time employees | 1.014 | 1,014 | 1,011 | 1,055 |
EBITA increased SEK 18 million, despite a negative calendar effect of 8 hours with a year-on-year impact of approximately SEK 5 million. Adjusted for calendar effects, the improvement in EBITA was approximately SEK 24 million. The profit improvement was mainly attributable to an improved billing ratio, higher average fees and overhead cost savings.
Net sales increased to SEK 459 million (434). Downsizing in the Netherlands is completed and organic growth was 1 per cent. The journey to sustainably improve operational performance continues, with a focus on implementing Sweco's operating model supported by a cultural change programme focused on customers, leadership and collaboration.
Due to the gradual improvement of the Dutch economy, the engineering market in the Netherlands has improved and the demand for Sweco's services is good. Sweco Netherlands is well-positioned for continued growth and delivers services primarily in the areas of public infrastructure, energy, water and public sector buildings.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 459 | 434 | 1,709 | 1,746 |
| Organic growth, % | ||||
| Acquisition-related growth, % | -4 | |||
| Currency, % | ||||
| EBITA, SEK M | 18 | 66 | ||
| EBITA margin, % | 4.0 | $-0.1$ | 3.9 | 1.5 |
| Number of full-time employees | 1.366 | 1.434 | 1.368 | 1,444 |
بالباديات ديدا
Net sales increased to SEK 446 million (420), mainly due to solid growth in the UK and contribution from newly acquired companies M&R and Snoeck & Partners in Belgium. There was no year-on-year difference in the number of available working hours.
EBITA increased approximately SEK 2 million. The main contribution to improved profit came from Belgium, with positive operational momentum in the existing business and positive contribution from recent acquisitions.
Demand for Sweco's services in the UK remains good. The infrastructure and water markets are good. The energy and building markets are stable. Although there are no tangible signs of a slowdown, there is uncertainty about market development following the EU referendum ("Brexit").
The market in Belgium is generally stable within all market segments. The private and public building markets are improving. The industry market and public infrastructure markets are good.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 446 | 420 | 1.637 | 1,579 |
| Organic growth, % | -2 | |||
| Acquisition-related growth, % | ||||
| Currency, % | ٠, | |||
| EBITA, SEK M | 32 | 30 | 115 | 105 |
| EBITA marain, % | 7.3 | 7.1 | 7.0 | 6.6 |
| Number of full-time employees | 1,715 | 1,573 | 1.625 | 1.534 |
Net sales increased to SEK 371 million (297) due to strong organic and acquisition-related growth in Germany. A calendar effect of -13 hours had a negative year-on-year impact of approximately SEK 6 million on net sales and EBITA.
EBITA increased to SEK 34 million (26). Adjusted for calendar effects, the improvement to EBITA was approximately SEK 14 million. The EBITA improvement was mainly due to an improved billing ratio, higher average fees and contribution from the acquisition of Jo. Franzke.
The German market is good overall and is developing positively. The health-care and commercial markets are good. Demand is strong in the transport and environmental sector due to public investments, while the energy market remains challenging.
The Lithuanian market has stabilised and the Czech market is showing signs of a recovery with good demand for Sweco's services. The Polish market is developing positively with good investments in energy, transportation and water.
| IN BRIEF | ||||
|---|---|---|---|---|
| Net sales and profit | Oct-Dec 2017 | Oct-Dec 2016 | Jan-Dec 2017 | Jan-Dec 2016 |
| Net sales, SEK M | 371 | 297 | 1,303 | 1.050 |
| Organic growth, % | 14 | 13 | ||
| Acquisition-related growth, % | 14 | |||
| Currency, % | ||||
| EBITA, SEK M | 34 | 26 | 84 | 58 |
| EBITA marain, % | 9.2 | 8.9 | 6.4 | 5.5 |
| Number of full-time employees | 1,571 | 1,486 | 1,541 | 1,427 |
$\cdots$ = = $\cdots$ = =
Parent Company net sales totalled SEK 621 million (538) and were attributable to intra-group services. Profit after net financial items totalled SEK 1,171 million (488). Investments in equipment totalled SEK 7 million (31). Cash and cash equivalents at the end of the period totalled SEK 218 million (570).
Sweco complies with the International Financial Reporting Standards (IFRS) and interpretive statements from the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU. This interim report was prepared in accordance with IAS 34, Interim Reporting; the Swedish Annual Accounts Act; and the Swedish Financial Reporting Board's RFR 2, Reporting for Legal Entities.
To align internal and external reporting, Sweco has as of 1 January 2017 changed the definition of Net sales. EBITA and Number of full-time employees as below.
The definition of Acquisition-related items, and therefore also the definition of EBITA, has been adjusted. Profit on the divestment of buildings and land has been moved from Net sales to Acquisition-related items, and loss on the divestment of buildings and land has been moved from Other expenses to Acquisition-related items. The definition of Acquisition-related items has thus been changed to "Amortisation and impairment of goodwill and acquisition-related intangible assets, revaluation of additional purchase price, profit and loss on the divestment of companies and operations, and profit and loss on the divestment of buildings and land". Historical figures have been restated, but the change has no material impact on reported figures.
The definition of Net sales has been adjusted to exclude internal revenues concerning internal administrative services. This change only affects Net sales of the business areas. Net sales for previous periods have been restated. This change has no impact on consolidated Group sales and no impact on the Group's or business areas' reported EBITA.
As of 1 January 2017, the accounting treatment of "agency staff" has been aligned across the Group. Accordingly agency staff that were previously reported as employees by former Grontmij entities will now be reported as subconsultants. Historical financial figures have not been restated due to this change in accounting treatment: however, the Number of full-time employees has been restated for previous periods.
In all other respects, the Group applies the same accounting and valuation principles as those described in Note 1 of the 2016 annual report. In this interim report, amounts in brackets refer to the corresponding period of the previous year. Because table items are individually
rounded off, table figures do not always tally. The interim report comprises pages 1 - 15; interim financial information presented on pages 1 - 15 is therefore part of this financial report.
NEW ACCOUNTING PRINCIPLES FOR 2018 IFRS 15, Revenue from Contracts with Customers, and IFRS 9, Financial Instruments, will become effective as from 1 January 2018.
IFRS 15 replaces the current revenue recognition standard IAS 18 and other IFRS interpretations. The standard will be implemented using the retrospective approach with the cumulative effect recognised as an adjustment to the opening balance of equity at 1 January 2018. Comparative figures for 2017 will not be restated.
The new standard will not have a significant impact on the Group's financial statements, due mainly to the fact that Sweco will be able to continue to recognise revenue over time for professional consulting services. The analysis conducted showed limited effects on contract costs and the timing of revenue recognition for licences. These items are not material to Sweco and, accordingly, adjustment of the opening balance is not necessary.
IFRS 9 replaces IAS 39. Financial Instruments: Recognition and Measurement. IFRS 9 introduces a new model for impairment of financial assets. Rather than an incurred credit loss model, IFRS 9 imposes a forwardlooking model that allows recognition of expected credit losses at an earlier stage than that allowed under IAS 39. IFRS 9 also includes new principles for the classification and valuation of financial assets.
As regards expected credit losses. Sweco has chosen the standard's simplified approach. Sweco concluded during the implementation phase that the new impairment model will not have any opening balance effects on the financial statements. The new classification and valuation model will not change the measurement method applied in the Group. The main part of Sweco's financial assets will be measured in the hold-to-collect category. The group will adopt the standard as of 1 January 2018 and comparative figures will not be restated.
Sweco follows the guidelines from ESMA (European Securities and Markets Authority) regarding APMs (Alternative Performance Measures). In brief, these are measures of historical or ongoing operating results and financial performance that are not specified or defined in IFRS. The presentation of non-IFRS financial measures is limited as an analytical tool and should not be used as a substitute for key ratios pursuant to IFRS. Sweco believes that the APMs will enhance the investor's evaluation of our ongoing operating results, aid in forecasting future periods and facilitate meaningful
comparison of results between periods. The non-IFRS financial measures presented in this report may differ from similarly titled measures used by other companies. A complete list of all Sweco's definitions can be found on our website: http://www.sweco.se/en/IR/definitions/.
Key ratio calculations that cannot be obtained directly from the income statement and balance sheet can be found on page 15 (net sales growth) and page 14 (EBITA excluding extraordinary items).
The Sweco share is listed on Nasdag Stockholm. The share price of the Sweco Class B share was SEK 181.80 at the end of the period, representing a 9 per cent decrease during the quarter. The Nasdaq Stockholm General Index decreased by 3 per cent over the same period.
The total number of shares at the end of the period was 121.583.819: 10.533.731 Class A shares, 110.550.088 Class B shares and 500,000 Class C shares. The total number of outstanding shares was 119,124,596: 10,533,731 Class A shares and 108,590,865 Class B shares.
Dividend: The Board of Directors proposes the dividend be increased to SEK 5.00 per share (4.30), not to exceed a dividend amount of SEK 605 million (513).
2018 share savings scheme: The Board of Directors proposes that the 2018 AGM resolve to implement a longterm share savings scheme for up to 100 Sweco Group senior executives and other key employees. The proposal principally corresponds to the terms in last year's proposal. This year's proposal to authorize the Board of Directors to repurchase Series B treasury shares is now part of a separate proposal.
2018 share bonus scheme: The Board of Directors also proposes that the 2018 AGM resolve to implement a share-based incentive scheme for employees in Sweden. The proposal principally corresponds to the terms in last year's proposal. This year's proposal does not include any issue of Series C shares and the proposal authorising the Board of Directors to repurchase Series B treasury shares is now part of a separate proposal.
Significant risks and uncertainties affecting the Sweco Group and the Parent Company include business risks associated with the general economic trend and investment level in various markets, the capacity to attract and retain skilled personnel and the effects of political decisions. The Group is also exposed to various types of financial risks, such as foreign currency. interest rate and credit risks. No significant risks are deemed to have arisen apart from the risks detailed in Sweco's 2016 annual report (page 94, Risks and Risk Management).
The 2018 annual general meeting will be held at 3:00 PM on Thursday, 19 April at Näringslivets Hus, Storgatan 19. Stockholm. Sweco's 2017 annual report will be available for shareholder perusal at Sweco's headquarters, Gjörwellsgatan 22, Stockholm, and on the company's website, www.swecogroup.com, approximately three weeks prior to the AGM.
The number of normal working hours in 2018, based on the 12-month sales-weighted business mix as of September 2017, is broken down as follows:
| 2018 | 2017 | |
|---|---|---|
| 490 | 506 | -16 |
| 474 | 464 | $+10$ |
| 511 | 511 | Π |
| 489 | 490 | -1 |
| 1.964 | 1.971 | -7 |
ACQUISITION-RELATED INTANGIBLE ASSETS Acquisition-related intangible assets will be amortised pursuant to the following schedule, based on acquisitions to date:
| 2017 Actuals | SEK-69 million |
|---|---|
| 2018 Estimate | SEK-63 million |
| 2019 Estimate | SEK-37 million |
| 2020 Estimate | SEK-30 million |
FORTHCOMING FINANCIAL INFORMATION Interim report January-March Interim report January-June Interim report January-September 8 November 2018 Year-end report 2018
9 May 2018 19 July 2018 13 February 2019
Stockholm, 13 February 2018
Tomas Carlsson President and CEO, Member of the Board of Directors
FOR FURTHER INFORMATION, PLEASE CONTACT: Tomas Carlsson, President and CEO Phone +46 8 695 66 60 / +46 70 552 92 75 [email protected]
Phone +46 8 695 63 32 / +46 70 347 23 83 [email protected]
Phone +46 8 695 62 27 / +46 70 273 48 79 [email protected]
Gjörwellsgatan 22, Box 34044, 100 26 Stockholm, Phone: +46 8 695 60 00 Email: [email protected] www.swecogroup.com
This report has not been audited.
| Key ratios 1) | Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 |
|---|---|---|---|---|
| Profitability | ||||
| EBITA margin, % | 9.8 | 8.9 | 8.8 | 8.1 |
| Operating margin (EBIT), % | 9.4 | 8.6 | 8.4 | 7.6 |
| Profit margin, % | 9.1 | 8.4 | 8.2 | 7.4 |
| Revenue growth 2) | ||||
| Organic growth, % | 0 | 1 | 0 | 3 |
| Acquisition-related growth, % | $\mathbf{1}$ | 1 | $\mathbf{1}$ | 42 |
| Currency, % | $\overline{c}$ | 0 | $\mathbf{1}$ | 0 |
| Total growth, % | $\overline{4}$ | $\overline{c}$ | $\overline{c}$ | 45 |
| Debt | ||||
| Net debt, SEK M | 1.698 | 1.558 | ||
| Interest-bearing debt, SEK M | 2,271 | 2,451 | ||
| Financial strength | ||||
| Net debt/Equity, % | 28.4 | 28.7 | ||
| Net debt/EBITDA, x | 1.0 | 1.0 | ||
| Equity/Assets ratio, % Available cash and cash equivalents, SEK M |
41.9 1,991 |
39.3 2,138 |
||
| -of which unutilised credit, SEK M | 1,418 | 1.245 | ||
| Return | ||||
| Return on equity, % | 21.4 | 18.0 | ||
| Return on capital employed, % | 17.8 | 16.8 | ||
| Share data | ||||
| Earnings per share, SEK | 4.02 | 2.30 | 10.23 | 7.78 |
| Diluted earnings per share, SEK | 3.95 | 2.26 | 10.04 | 7.65 |
| Equity per share, SEK3) | 50.09 | 45.37 | ||
| Diluted equity per share, SEK3) | 49.12 | 44.47 | ||
| Number of outstanding shares at reporting date |
119,124,596 | 119,554,270 | ||
| Number of repurchased Class B and Class C | ||||
| shares | 2,459,223 | 2,429,549 |
$^{\rm 1)}$ Key ratio definitions are available on Sweco's website.
2) See page 15 for details on Sweco's calculation of net sales growth.
3) Refers to portion attributable to Parent Company shareholders.
| Income Statement SEK M |
Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 |
|---|---|---|---|---|
| Net sales | 4,582 | 4,421 | 16,887 | 16,531 |
| Other income | 0 | 0 | 2 | 0 |
| Other external expenses | $-1,159$ | $-1,096$ | $-4,187$ | $-4,052$ |
| Personnel expenses | $-2,906$ | $-2,863$ | $-10,938$ | $-10,875$ |
| EBITDA | 518 | 461 | 1,763 | 1,605 |
| Amortisation/depreciation and impairments |
$-69$ | $-66$ | $-272$ | $-269$ |
| EBITA | 448 | 395 | 1,492 | 1,336 |
| Acquisition-related items 1) | $-18$ | $-17$ | $-67$ | -87 |
| Operating profit (EBIT) | 431 | 378 | 1,425 | 1,249 |
| Net financial items | $-11$ | $-5$ | $-49$ | $-33$ |
| Profit before tax | 419 | 373 | 1,377 | 1,216 |
| Income tax | 61 | $-97$ | $-154$ | $-285$ |
| PROFIT FOR THE PERIOD | 480 | 276 | 1,223 | 931 |
| Attributable to: | ||||
| Parent Company shareholders | 479 | 275 | 1.221 | 930 |
| Non-controlling interests | 1 | 1 | $\overline{c}$ | 1 |
| Earnings per share attributable to Parent Company shareholders, SEK |
4.02 | 2.30 | 10.23 | 7.78 |
| Average number of shares Dividend per share, SEK |
119,124,596 | 119,600.937 | 119,432,155 5.00 |
119,598,820 4.30 |
$^{\text{1)}}$ Acquisition-related items are defined as amortisation and impairment of goodwill and acquisition-related intangible assets, revaluation of additional purchase price, and
profit and loss on the divestment of comp
| Consolidated income statement and other comprehensive income, SEK M |
||||
|---|---|---|---|---|
| Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 | |
| Profit for the period | 480 | 276 | 1.223 | 931 |
| Items that will not be reversed in the income statement | ||||
| Revaluation of defined benefit pensions, net after tax 1,2 | $\mathfrak{p}$ | -30 | ||
| Items that may subsequently be reversed in the income state- | ||||
| ment | ||||
| Translation differences, net after tax | 56 | $-12$ | 25 | 38 |
| Translation differences transferred to profit for the period | ||||
| COMPREHENSIVE INCOME FOR THE PERIOD | 538 | 266 | 1,249 | 940 |
| Attributable to: | ||||
| Parent Company shareholders | 537 | 266 | 1,247 | 939 |
| Non-controlling interests | 0 | $\mathcal{P}$ | ||
| $1)$ Tax on revaluation of defined benefit pensions | $-3$ | -4 | $-3$ | 5 |
2) Revalued annually. Reviewed quarterly in the event of material changes to actuarial assumptions.
| Cash flow statement | ||||
|---|---|---|---|---|
| SEK M | Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 |
| Cash flow from operating activities before changes in working capital and tax paid |
509 | 498 | 1.790 | 1.677 |
| Tax paid | $-46$ | $-26$ | $-226$ | -196 |
| Changes in working capital | 284 | 384 | $-504$ | $-316$ |
| Cash flow from operating activities | 747 | 856 | 1,060 | 1,165 |
| Cash flow from investing activities | $-93$ | $-109$ | $-364$ | -401 |
| Cash flow from financing activities | $-414$ | $-320$ | $-1,005$ | $-428$ |
| CASH FLOW FOR THE PERIOD | 240 | 427 | $-309$ | 336 |
| Balance sheet | ||
|---|---|---|
| SEKM | 31 Dec 2017 | 31 Dec 2016 |
| Goodwill | 6,278 | 6.098 |
| Other intangible assets | 315 | 346 |
| Property, plant and equipment | 610 | 616 |
| Financial assets | 343 | 219 |
| Current assets excl. cash and cash equivalents | 6,161 | 5.650 |
| Cash and cash equivalents incl. short-term investments | 572 | 892 |
| TOTAL ASSETS | 14,279 | 13,820 |
| Equity attributable to Parent Company shareholders | 5,967 | 5,424 |
| Non-controlling interests | 12 | 10 |
| Total equity | 5,979 | 5,435 |
| Non-current interest-bearing liabilities | 2.192 | 1,515 |
| Other non-current liabilities | 796 | 833 |
| Current interest-bearing liabilities | 79 | 936 |
| Other current liabilities | 5,234 | 5,102 |
| TOTAL EQUITY AND LIABILITIES | 14,279 | 13,820 |
| Pledged assets | 21 | 22 |
| Contingent liabilities | 711 | 706 |
| Changes in equity SEK M |
Jan-Dec 2017 | Jan-Dec 2016 | |||||
|---|---|---|---|---|---|---|---|
| Equity at- tributable to Parent Company shareholders |
Non- controlling interests |
Total equity | Equity at- tributable to Parent Company shareholders |
Non- controlling interests |
Total equity | ||
| Equity, opening balance | 5,424 | 10 | 5,435 | 4,899 | 9 | 4,907 | |
| Comprehensive income for the period | 1,247 | 2 | 1,249 | 939 | 940 | ||
| Transfer to shareholders | $-513$ | $-1$ | $-514$ | $-418$ | $-1$ | $-419$ | |
| Preferential rights issue | $-2$ | -2 | |||||
| Divestments of non-controlling interests | |||||||
| Acquisition of non-controlling interests | U | ||||||
| Buy-back of treasury shares | $-289$ | $-289$ | $-126$ | $-126$ | |||
| Sale of treasury shares | |||||||
| Share-based incentive schemes | 93 | 93 | 125 | 125 | |||
| Share savings schemes | 5 | $\overline{\phantom{a}}$ | 5 | $\overline{\phantom{a}}$ | 5 | ||
| EQUITY, CLOSING BALANCE | 5,967 | 12 | 5,979 | 5.424 | 10 | 5,435 |
During the period Sweco acquired the operations of Karves Yhtiöt Ltd. MR-Group NV, Byggteam Bodö AS, Snoeck & Partners NV and Dimension Rådgivning AS. The acquired businesses have an aggregate total of approximately 164 employees. Purchase consideration totalled SEK 181 million and had a negative impact on cash and cash equivalents of SEK 136 million. The acquisitions impacted the consolidated balance sheet as detailed in the table below whereof the acquisition analysis regarding Dimension Rådgivning AS is preliminary. Of the unsettled purchase price commitment of SEK 13 million, SEK 13 million refers to conditional contingent consideration. During the period the acquired companies contributed SEK 100 million in net sales and SEK 6 million in operating profit (EBIT). If all of the companies had been owned as of 1 January 2017 they would have contributed approximately SEK 208 million in net sales and about SEK 9 million in operating profit.
| Acquisitions, SEK M | |
|---|---|
| Intangible assets | 157 |
| Property, plant and equipment | 11 |
| Financial assets | 0 |
| Current assets | 84 |
| Non-current liabilities | $-11$ |
| Deferred tax | $-10$ |
| Other current liabilities | $-50$ |
| Total purchase consideration | 181 |
| Unsettled purchase price commitment | $-13$ |
| Cash and cash equivalents | $-32$ |
| DECREASE IN GROUP CASH AND CASH EQUIVALENTS | 136 |
During the period Sweco divested Golfexploitatiemaatschappij Naarderbos B.V and Naarderbos Ontwikkeling B.V., with a total of 65 employees (approximately 25 full-time employees). The businesses contributed SEK 11 million in net sales and SEK-4 million in operating profit during the period. The divestments had a positive impact on profit of SEK0.1 million and a positive impact on the Group's cash and cash equivalents of SEK 13 million. The divestments impacted the consolidated balance sheet as detailed below.
| Divestments, SEK M | |
|---|---|
| Property, plant and equipment | 40 |
| Current assets | 10 |
| Non-current liabilities | -35 |
| Current liabilities | |
| Capital gain recorded on divestment | |
| Total purchase consideration | 15 |
| Cash and cash equivalents in divested companies | ÷ |
| INCREASE IN GROUP CASH AND CASH EQUIVALENTS | 13 |
| Acquisition-related items SEK M |
Oct-Dec 2017 | Oct-Dec 2016 | Full-year 2017 | Full-year 2016 |
|---|---|---|---|---|
| Amortisation of acquisition-related intangible assets |
$-18$ | -22 | $-69$ | -92 |
| Revaluation of additional purchase price | ||||
| Profit/ loss on divestment of buildings and land | ||||
| Profit/loss on divestment of companies and operations |
||||
| ACQUISITION-RELATED ITEMS | -18 | -17 | -67 | -87 |
The Group's financial assets measured at fair value totalled SEK 14 million (16). The derivative instruments are forward currency contracts, the fair value of which is determined based on listed prices for forward currency contracts on the balance sheet date (Level 2). The fair value of unlisted financial assets is determined through market valuation techniques (observable market inputs) such as recent transactions, listed prices of similar instruments and discounted cash flows. In the event no reliable inputs are available for determining fair value, financial assets are reported at acquisition value (Level 3). There were no transfers between levels during the period.
Figures for 2015 and 2016 have been restated to reflect the new definition of Net sales, EBITA and Number of full-time employees as described on page 8.
| Quarterly summary | Actual 201704 |
Actual 201703 |
Actual 2017 02 |
Actual 2017 01 |
Actual 2016 04 |
Actual 2016 03 |
Actual 2016 02 |
Actual 2016 01 |
Actual 2015 04 |
|---|---|---|---|---|---|---|---|---|---|
| Net sales, SEK M | |||||||||
| Sweco Sweden | 1,936 | 1,437 | 1,798 | 1.854 | 1,951 | 1,465 | 1,913 | 1.736 | 1.900 |
| Sweco Norway | 561 | 413 | 506 | 590 | 530 | 457 | 568 | 499 | 508 |
| Sweco Finland | 488 349 |
420 290 |
498 343 |
487 389 |
462 351 |
402 334 |
471 361 |
425 330 |
483 |
| Sweco Denmark Sweco Netherlands |
459 | 389 | 421 | 455 | 365 | ||||
| 390 | 401 | 440 400 |
434 420 |
434 365 |
395 | 423 398 |
450 428 |
||
| Sweco Western Europe | 446 371 |
317 | 329 | 285 | 297 | 289 | 243 | 221 | 261 |
| Sweco Central Europe | $-28$ | $-20$ | $-36$ | $-36$ | $-24$ | $-22$ | $-15$ | -46 | |
| Group-wide, Eliminations, etc. | $-36$ | ||||||||
| TOTAL GROUP | 4,582 | 3.635 | 4,262 | 4,408 | 4,421 | 3,723 | 4.370 | 4,018 | 4,350 |
| EBITA, SEK M | |||||||||
| Sweco Sweden | 296 | 95 | 202 | 251 | 273 | 129 | 280 | 170 | 211 |
| Sweco Norway | 29 | 24 | 7 | 88 | 58 | 40 | 68 | 29 | 52 |
| Sweco Finland | 34 | 43 | 49 | 61 | 41 | 35 | 42 | 21 | 35 |
| Sweco Denmark | 5 | 14 | -4 | 30 | 44 | 27 | 23 | $\overline{4}$ | 28 |
| Sweco Netherlands | 18 | 5 | 14 | 28 | $\mathbf 0$ | -4 | 12 | 18 | $-1$ |
| Sweco Western Europe | 32 | 25 | 29 | 28 | 30 | 18 | 33 | 23 | 25 |
| Sweco Central Europe | 34 | 19 | 18 | 13 | 26 | 18 | 11 | 3 | 19 |
| Group-wide, Eliminations, etc. | $-1$ | 12 | -4 | $-4$ | $-77$ | $-12$ | -9 | -40 | $-170$ |
| EBITA | 448 | 237 | 312 | 494 | 395 | 252 | 462 | 228 | 200 |
| Extraordinary items 1) | ÷, | $\overline{\phantom{a}}$ | 83 | 15 | 12 | 36 | 190 | ||
| EBITA excl. extraordinary items | 448 | 237 | 312 | 494 | 478 | 266 | 474 | 263 | 390 |
| EBITA margin, % | |||||||||
| Sweco Sweden | 15.3 | 6.6 | 11.2 | 13.5 | 14.0 | 8.8 | 14.6 | 9.8 | 11.1 |
| Sweco Norway | 5.2 | 5.8 | 1.5 | 14.9 | 11.0 | 8.8 | 12.0 | 5.8 | 10.2 |
| Sweco Finland | 7.0 | 10.2 | 9.9 | 12.6 | 8.8 | 8.7 | 8.9 | 4.8 | 7.2 |
| Sweco Denmark | 1.5 | 4.7 | $-1.1$ | 7.6 | 12.6 | 8.0 | 6.5 | 1.2 | 7.7 |
| Sweco Netherlands | 4.0 | 1.4 | 3.4 | 6.3 | $-0.1$ | $-0.8$ | 2.7 | 4.4 | $-0.3$ |
| Sweco Western Europe | 7.3 | 6.4 | 7.3 | 7.0 | 7.1 | 5.0 | 8.4 | 5.9 | 5.9 |
| Sweco Central Europe | 9.2 | 6.0 | 5.4 | 4.5 | 8.9 | 6.2 | 4.7 | 1.1 | 7.2 |
| EBITA margin | 9.8 | 6.5 | 7.3 | 11.2 | 8.9 | 6.8 | 10.6 | 5.7 | 4.6 |
| Extraordinary items 1) | 1.9 | 0.4 | 0.2 | 0.9 | 4.4 | ||||
| EBITA margin excl. extraordi- | 6.5 | 7.3 | 11.2 | 10.8 | 7.2 | 10.8 | 6.6 | 9.0 | |
| nary items | 9.8 | ||||||||
| Billing ratio, % | 75.8 | 75.1 | 75.5 | 74.4 | 75.3 | 74.6 | 75.1 | 74.5 | 74.7 |
| Number of normal working | |||||||||
| hours | 490 | 511 | 464 | 506 | 493 | 518 | 490 | 478 | 492 |
| Number of full-time employees | 14,774 | 14,396 | 14,548 | 14,412 | 14,482 | 14,172 | 14,507 | 14,302 | 14,344 |
$1/2$ All extraordinary items are included in Group-wide.
| Number of full-time | ||||||||
|---|---|---|---|---|---|---|---|---|
| January-December | Net sales, SEK M | EBITA, SEK M | EBITA margin,% | employees | ||||
| Business area | 2017 | $2016^{2}$ | 2017 | $2016^{2}$ | 2017 | $2016^{2}$ | 2017 | $2016^{2}$ |
| Sweco Sweden | 7.024 | 7.064 | 844 | 852 | 12.0 | 12.1 | 5.524 | 5.482 |
| Sweco Norway | 2.070 | 2.055 | 148 | 195 | 7.2 | 9.5 | 1,347 | 1,344 |
| Sweco Finland | 1,893 | 1.759 | 187 | 138 | 9.9 | 7.9 | 2.046 | 1.984 |
| Sweco Denmark | 1,371 | 1.375 | 44 | 98 | 3.2 | 7.1 | 1.011 | 1.055 |
| Sweco Netherlands | 1.709 | 1.746 | 66 | 27 | 3.9 | 1.5 | 1,368 | 1.444 |
| Sweco Western Europe | 1.637 | 1.579 | 115 | 105 | 7.0 | 6.6 | 1.625 | 1.534 |
| Sweco Central Europe | 1,303 | 1,050 | 84 | 58 | 6.4 | 5.5 | 1,541 | 1.427 |
| Group-wide, Eliminations, etc. 1) | $-120$ | $-97$ | 4 | $-138$ | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | 68 | 95 |
| TOTAL GROUP | 16.887 | 16,531 | 1,492 | 1.336 | 8.8 | 8.1 | 14,530 | 14.365 |
$^{11}$ Group-wide, Eliminations, etc. includes Group functions and the Dutch real estate operations. All extraordinary items are included in Group-wide.
2) 2016 restated to reflect the new definition of Net sales, EBITA
The below table shows the calculation of organic growth, i.e., net sales growth adjusted for the impact of acquisitions and divestments as well as the effect of foreign currency fluctuations.
| Net sales growth | 2017 Oct-Dec |
2016 Oct-Dec |
Growth.% Oct-Dec 2017 |
2017 Jan-Dec |
2016 Jan-Dec |
Growth.% Jan-Dec 2017 |
|---|---|---|---|---|---|---|
| Reported Net sales | 4.582 | 4.421 | 4% | 16.887 | 16.531 | 2% |
| Adjustment for currency effects | 103 | 2% | 149 | 1% | ||
| Net sales, currency-adjusted | 4.582 | 4.524 | 1% | 16,887 | 16.680 | 1% |
| Adjustment for acquisitions/divestments | $-62$ | . . | 1% | $-165$ | -4 | 1% |
| Comparable net sales, currency-adjusted | 4.521 | 4.517 | $0\%$ | 16.723 | 16,676 | $0\%$ |
| Net sales growth | 2016 Oct-Dec |
2015 Oct-Dec |
Growth.% Oct-Dec 2016 |
2016 Jan-Dec |
2015 Jan-Dec |
Growth.% Jan-Dec 2016 |
|---|---|---|---|---|---|---|
| Reported Net sales | 4,421 | 4,350 | 2% | 16,531 | 11,389 | 45% |
| Adjustment for currency effects | $0\%$ | $-20$ | $0\%$ | |||
| Net sales, currency-adjusted | 4.421 | 4.355 | 2% | 16.531 | 11,370 | 45% |
| Adjustment for acquisitions/divestments | -43 | $-17$ | 1% | $-120$ | 4.546 | 42% |
| Comparable net sales, currency-adjusted | 4.378 | 4.338 | 1% | 16.411 | 15.916 | 3% |
| Parent Company income statement, SEK M | Full-year 2017 | Full-year 2016 |
|---|---|---|
| Net sales | 621 | 538 |
| Operating expenses | $-650$ | $-600$ |
| Operating loss | $-29$ | $-63$ |
| Net financial items | 1,200 | 551 |
| Profit/loss after net financial items | 1,171 | 488 |
| Appropriations | $-178$ | 10 |
| Profit/loss before tax | 994 | 499 |
| Tax | $-127$ | -86 |
| PROFIT/LOSS AFTER TAX | 866 | 413 |
| Parent Company balance sheet, SEK M | 31 Dec 2017 | 31 Dec 2016 |
|---|---|---|
| Intangible assets | 61 | 75 |
| Property, plant and equipment | 36 | 54 |
| Financial assets | 6,347 | 6.346 |
| Current assets | 2.594 | 2,572 |
| TOTAL ASSETS | 9,038 | 9,047 |
| Equity | 4,796 | 4.626 |
| Untaxed reserves | 190 | 12 |
| Non-current liabilities | 1,991 | 1,379 |
| Current liabilities | 2.061 | 3.030 |
| TOTAL EQUITY AND LIABILITIES | 9,038 | 9,047 |
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