Skanska AB (publ)

Good morning and a warm welcome to the presentation of Skanska's fourth quarter report for 2024. I'm Antonija Ljubnerlind, I'm the senior vice president for Skanska's investor relations and here on stage in our studio in Stockholm today is our president and CEO Anders Danielsson and acting CFO responsible for the year-end report Pontus Winqvist. Shortly, they will take you through an update in relation to business performance, financials and the market outlook. And after the initial presentation, we will move over to your questions. If you're watching us online, then I encourage you to join our HD audio link and use the telephone conference number to ask questions. You can follow the instructions by the operator there. But we will get back to you when we're opening for a Q&A. So with that short introduction, I will hand over to you, Anders.

Thank you, Antonia. Before we go into the report, I want you to look at the picture here to the right. It's a project that we're building. It's a new railway connection between New Jersey and Manhattan. And you can see here the bridge arches that is actually prefabricated upstate New York and then taken down by the Hudson River to the site and assembled on site. Great project. If I summarize the fourth quarter, it's a strong, strong quarter. We had a strong performance in the construction stream. We have a record high order backlog, and we also see some gradual improvement in the project development, which is encouraging. Growing the investment property portfolio also in the fourth quarter. Operating margin in construction, 4.5% in the fourth quarter and compared to 4.4 last year. And if you look at the full year, we have a 3.5% operating margin, which is in line with our target. So strong performance. Return on capital employed in product development. That includes residential and commercial. It's 2.6% on a rolling 12. Not at our target level, but improving. Return on capital employed in investment properties, 4.6%. Here we have a target of 6%, so also there we are improving on a rolling 12. Return on equity, 10% on a rolling 12. And we maintain the robust financial position, which is extremely important. That's also a competitive advantage for us. The board has proposed a dividend of eight crowns per share. And we also are in line with our target of reducing carbon emission. And now we have reduced it with 61% compared to the baseline year 2015. So if I go into each stream, starting with construction, we increased the revenue in the quarter, and we have very strong order bookings. So we have a book to build 123% on a rolling 12, which is really strong and giving us a record high order backlog of 285 billion Swedish. Operating income over 2 billion, also a good increase here. Again, the operating margin 4.5. And we can see that it is a strong delivery in all markets. And overall, on a 12-month basis, we are in line with our target. Move over to residential development. Also here, we can see increased revenue since we are selling more apartments, more homes, and we also started more homes, which we have set a couple of quarters now that this is a priority for us to be able to gain profit in the future as well from this. and we are well positioned we have an operating income of just 200 million swedish giving us a rose of 1.6 percent in rolling 12. we continue to see a stable market in central europe that has been stable for for for some time now which is good but and we also see gradually improving in the Nordics, but from low levels, and we expect it to take some time before we're coming back to normal levels. We're starting projects in all home markets, also important, and we can see that we have an operating margin of 8%, a bit below our target of 10%, but encouraging to see that we're holding up the profitability here. Commercial property development, operating income over 300 million in the quarter. We have a gain on sale of 561 million. Return on capital employed of 3%, rolling 12. And we have 15 ongoing projects, which correspond to just over 20 billion in total investment upon completion. We have 24 completed projects corresponding to almost 13 billion in total investment. Of those, we have a 65% lease ratio. We're coming back to that. Five projects, we have divested five projects in the quarter, one internally to our investment property portfolio and the rest externally. And we're also starting, we have said that earlier, we prioritize starting projects. We've started three projects in Finland, Sweden and Hungary during the fourth quarter. Moving on to investment properties. Here we have a stable operating income of 74 million in the quarter and the leasing ratio in the current portfolio, 87%. We added one project property OAS in Malmö. So now we have seven projects all together in the portfolio with a value of 8.2 billion. I'm coming back now to construction, moving into order bookings. Here you can see the order bookings trends over five years. And as you can see, the blue bar is the order backlog, which is on record high level and really strong order intake here. You can see the grey line, the order bookings on the rolling 12 months basis that the last few years in upwards trend. So that's going on. We can go into the each geography as well. On the next slide, here you see overall 123% book-to-build, very strong. And also overall, 93% in the Nordics, just over 100 in Sweden. Also Europe has picked up. You can see we actually increased it somewhat compared to the year before. So overall, very good position. It's extremely high, of course, in the US, 152%, which gives us 24 months of production. But you should also remember that the US order backlog has a longer duration now than we have seen before, and also longer duration compared to the European one, the Nordic and Europe, but strong overall. With that I hand over to Pontus to give us some more.

Thank you Anders. Then, starting with construction, as you can see, we had a revenue in the fourth quarter of 47 billion compared to 41.6 the same quarter last year. That's an increase with 13%, and of those 13%, 1% is related to currency. For the full year, revenue increased by 5% in both local currencies and in Swedish kronor. Operating income then increased in the fourth quarter to 2.1 billion and increased by 15% compared to the fourth quarter last year. And as Anders said earlier, this results in an operating margin of 4.5% for the quarter and 3.5% for the full year, which is in line with our financial targets. Looking then into the different geographies, you can see that we in the fourth quarter actually had an operating margin that's well above 4%. And you can also see that the operating income in all geographies are increasing compared to the fourth quarter last year. So strong delivery from our construction business. Going then into residential development, here you can also see that there is quite an increase of the revenue. It's 30% compared to last year. And that we are increasing our sales, of course, is a result of that. You can also see that the S&A percentage has come down quite a lot. It's now on 5.7%, and that is, of course, a result of that. We have been working with adjusting the business to have a good level or a good organization, but that also is ready to ramp up when we are continuing to start more projects going forward. Regarding the result here, it's impacted of operational losses from Boklok of 60 million, but it also impacted of release of provisions of around the same amount, and those release are spread on the different geographies. So they take out each other, so the underlying 8% is quite representative for the business right now. And if you look into the different geographies, you can see that it is a small negative in Sweden, but that's impacted then of Boklok. Also then, both the Nordics and Europe has an impact of Boklok. And then, as I said, you have the release of provisions that spread around in the geographies. and a blended margin then of 8% for the residential business. Going into the homes started and sold, you can see that we are actually increasing both when it comes to started and sold. We have started projects in the fourth quarter in all geographies, And we sold 573 homes then in the fourth quarter. The market, it has improved, but it's still not good. It's slightly on an improving basis, but we are not where we would like to be long-term yet. Looking then into the number of homes in production, so you can see that we are on the same level as we were in the fourth quarter, but we have completed a number of homes, but also then, as I said earlier, started new projects in all our geographies. Regarding the sales rate, we have a sales rate of 52%, and also that is the same level as we had by the close of Q3. Going then into commercial development, or commercial property development, you can see here that we have a revenue of 3.5 billion, or 3.6 actually. We divested five projects, of which one was internal. Of the divestment value of 3.3 billion, we had 561 million in gains. A part of that gain is coming from release of provisions from older divested projects. So basically, it's risk that has disappeared from those projects and that we have released during the fourth quarter. So don't expect the 561 to be representative for what we have in the portfolio. Looking into the unrealized gains then of the existing portfolio, here you can see that the top of the bar there in Q4, which is represented the completed, has decreased somewhat, and that is since we have divested properties during the fourth quarter, then we have added on the light blue part, which is then the ongoing properties that has been added on here. Because we have started. This quite busy slide is then showing the completion profile of our unsold properties or unsold projects. And you can see in the fourth quarter where it has actually increased since the third quarter because we have then during the fourth quarter completed a couple of projects, which also has an impact of the the leasing ratio in those projects, which has gone down from 75 to 65%, because we have sold projects with higher leasing ratio compared to the new added project in the portfolio that has somewhat lower leasing ratio. Yes. looking then into the leasing ratio. So you can see that we have continued to have a stable leasing ratio. 50 or 64% is the leasing ratio. And you can also see that there is a decline in the completion ratio because we have than starting new projects, which then takes down the completion ratio in the portfolio. But we keep the occupancy rate higher than the completion rate. IP then, investment properties. stable delivery, but it is also, of course, a stable business. We have added on one project that was divested from CD into IP during the quarter, OAS, in Malmö. And we are delivering an operating income on the same level as we did in the fourth quarter of 74 billion. You can also see then that we have a good occupancy rate in this portfolio of 87%. So for the full group then, you see that we had an operating income of 2.7 billion. Just looking into the fourth quarter last year, it's worth to remember that that quarter was impacted of write-downs in the property portfolio and also the divestment of the LaGuardia project coming from asset management. Then we are delivering 2.7 billion in operating income. We have a tax of 647 million, which represents 22% in the quarter and 25% for the full year. You might remember that we had a little bit of a higher tax rate in the third quarter. But now I would say this is quite representative for the business that we have right now, which means less profits coming out from tax-free property divestment and a higher proportion of profits coming in from the US business, where we still, I would say still, have a higher tax rate than the other parts of the business. Cash flow. We had a strong cash flow in the fourth quarter, operating cash flow of 5.1 billion. This is then coming from continued strong cash delivery within the working capital from construction. Added to that, we have divested more than we have invested. So those two parts are continuing in the fourth quarter to deliver a strong cash situation. Going then into the free working capital, you can see here that we have 34.5 billion in free working capital. I would say that that is a record high level in absolute terms. It's an increase from 31 billion in the third quarter. We have the currency effect in this. You can say of that increase, around 1.3 is currencies, because a lot of the free working capital then is coming from the US business, and the development in the fourth quarter was weak, or the Swedish krona was weak. Also, the relative ratio here, 17.5% compared to 17.4% free working capital compared to the revenue, is strong. And I think I said in the third quarter that we had a lot of mobilization payments, etc., that was contributing to the strong cash flow in the third quarter. That's true. But in the fourth quarter, then, we have also had quite a lot of, you can say, to early payments from a number of clients, which boosted the cash flow here or the working capital in the fourth quarter. So I don't think we shall expect this amount of 34.5 billion to continue in the first and the second quarter. investments and divestments. And as I said earlier here, you can see that we have had a net divestment situation during the last quarter. And... Going forward, I think that we are starting more projects, both in CD and RD, so we shall expect that investment pace is increasing somewhat. And when it comes to the divestments, they tend to be a little bit bumpy, so it might differ between the different quarters when those are coming. Of course, this strong cash flow also impacts the liquidity situation. So we have an increase here since the third quarter of almost 5 billion in liquidity. We say that we have available funds of 28.6 billion and we also have quite a good maturity profile of our outstanding debt. So the liquidity seems to be in good shape. Going then into the financial position and of course this cash flow then has contributed to an improved and strong financial position where our net financial receivable has increased from 6.5 billion in the third quarter to 12 billion by the closing of the fourth quarter so you can see even if the if the assets has increased also the equity are increasing so we have a stable equity to asset ratio here of above 36 percent So by that, I leave it to you Anders to talk a little bit about the market. Yes.