Strong position creates solid platform for the future
A well-filled order backlog, good project mix, well-dimensioned development rights portfolio and a strong financial position provide Peab with a good foundation for the future.
2017 was a really good year for Peab. All our financial goals were met and operating profit amounted to SEK 2.4 billion with an improved operating margin of 4.8 percent. The record high level of orders received totaled over SEK 45.2 billion, which gave us an order backlog of SEK 38.5 billion at the end of the year. Even better, the positive development was reflected in all the four business areas. The contract operations in Construction and Civil Engineering continued to deliver stable results and there were substantial margin improvements in the more capital intensive Industry and Project Development business areas. On top of that we had a strong cash flow and low net debt and can conclude that our financial position provides us with a solid platform for the future.
Stable market prospects
With a strong economy, low interest rates and a growing population market prospects appear stable for both other building construction and civil engineering in Peab’s markets. Housing construction is expected to roll back from the current heights in Sweden and Norway while an increase is expected in Finland.
A surplus of houses in a higher price bracket has occurred in some sections of the market which, together with more stringent requirements for financing homes, has led to longer sales processes. Peab develops and builds housing all over Sweden and in large parts of Norway and Finland. Our homes are primarily in the mid-priced segment and we see that there is still a big need for new housing in this range.
A SOUND INDUSTRY
A major challenge and success factor in both the short and long run is handling the resource and competence shortage the industry struggles with. Our stance is that both Swedish and foreign labor is needed to handle the situation. At the same time there should be no doubt as to what rules apply. Healthy competition on equal terms is crucial to creating a construction industry in Sweden that has the long-term capacity to sustainably deliver whatever products are in demand.
It is important to create the conditions needed to broaden our recruitment base and make the industry more attractive. In November 2017 we, together with trade colleagues, signed a statement of intent and thereby took a shared stand for zero tolerance regarding harassment and abuse in the industry. This was an important signal that we are serious about creating a sound, safe and attractive industry. Peab has been working actively for a long time with these matters in order to both attract new employees and keep the ones we have. Among other things, we have a comprehensive internal education program on equal treatment and good and fair workplaces to reinforce an inclusive culture that welcomes everyone. This has led to broad support for these vital issues and also contributed to the fact that we continue to attract more women to our company. A good example of a concrete investment that also increases the recruitment pool in Sweden is Peab School’s three year upper secondary construction and civil engineering program. The so-called 100 club is another important initiative that makes use of the new expertise arriving in Sweden. Our ambition is that by the end of 2018 offer internships to 100 newly arrived immigrants in Sweden as a path to integration.
Peab runs the business responsibly based on the UN Global Compact, our core values, business concept, vision, strategic goals and Code of Conduct, which was updated in 2017 under the concept Fair and good construction. We have adopted our focus areas and business plan goals for the period 2018-2020 taking into consideration the sustainability aspects Social, Environment and Economic. This is the foundation for further work on integrating sustainability aspects into our business. At Peab we work sustainably and care about both big issues and little details!
Four complementary business areas
We have a unique position through our four complementary business areas and all our employees welded together by a strong company culture. Our business model creates opportunities throughout the entire value chain in our projects and provides us with a good platform to deliver comprehensive solutions to our customers. Our four business areas are also a good source of diversity where we are not dependent on demand for a single product or in a particular place. Our business model provides us with a good basis for creating stable and profitable operations.
From this foundation we continue to strive towards our strategic goals of having the most satisfied customers, being the best workplace and the most profitable company in the industry.
In conclusion I want to heartily thank all our employees. You, through your great engagement, make our success possible.
The operative operating margin improved to 4.8 percent compared to 4.5 percent in 2016.
“Our business model with four cooperating business areas creates opportunities throughout the entire value chain in our projects.”
Förslöv in March 2018
President and CEO