Board of Directors’ Report

The Board of Directors and the Chief Executive Officer of Peab AB (publ), Corporate ID Number: 556061-4330, hereby submit the following annual report and consolidated accounts for the 2018 financial year.

New accounting principles for income

IFRS 15 Revenue from contracts with customers, has as of 2018 replaced previous standards related to revenue recognition such as IAS 18 Revenue, IAS 11 Construction contracts and IFRIC 15 Agreements for the construction of real estate. No material effects have been identified. Up until the end of 2017 there were differences between operative and legal accounting in the business area Project Development. This difference was also reflected in the way executive management and the Board followed up the Group as a whole. The operative and segment accounting was based on the percentage of completion. Swedish tenant-owned housing projects will continue to be recognized as previously through revenue over time while our own home developments in Sweden will, as of the implementation of IFRS 15, change over to revenue over time. IFRS 15 will not lead to any changes in reporting regarding housing projects in Finland and Norway compared to the current application since revenue is first recognized when the home is handed over to the buyer. As of implementation of IFRS 15 segment reporting mirrors legal reporting. The differences between operative and legal reporting therefore no longer exist for either business area Project Development or the Group as a whole. For business area Project Development this has entailed recalculating comparable figures in Housing Development. Peab has chosen to apply IFRS 15 retroactively by recalculating the financial reports for 2017. The recalculations have not had any material effect on either business area Project Development or the Group as a whole. All comparable figures for 2017 and 2016 in subsequent report are recalculated if not otherwise noted. For more information regarding IFRS 15 and comparable figures please see note 1, note 2, note 3 or


Group net sales for 2018 amounted to SEK 52,233 million (49,981), which was an increase of five percent. After adjustments for acquired and divested units net sales increased by four percent.

A continued favorable construction and civil engineering market has had a positive effect on the business areas during 2018. Net sales in business area Construction increased by six percent spread over all the three countries. Net sales in business area Civil Engineering increased by 16 percent and activity increased in all product areas. Business area Industry presented an increase in net sales of four percent spread over all product areas except Transportation and Machines where net sales shrunk compared to 2017. Net sales in business area Project Development were slightly lower in both Housing Development and Property Development. The reduction in Housing Development is due to less activity in the housing market in Sweden, primarily in Stockholm. In the first quarter of 2017 net sales in Property Development were affected by SEK 577 million from sales of assets in Arenastaden and Ulriksdal in Solna to Fabege.

Of the year’s net sales SEK 10,297 million (9,089) were attributable to sales and production outside Sweden.


Operating profit for 2018 increased to SEK 2,573 million (2,418) and the operating margin improved to 4.9 percent (4.8).

Development has stable in both contract businesses Construction and Civil Engineering during the year. The operating margin in business area Construction amounted to 2.4 percent compared to 2.3 percent the last year and in business area Civil Engineering the operating margin was 3.0 percent (3.2). Business area Industry showed an improved operating margin of 7.4 percent (6.8) mainly due to increased volumes to the construction and civil engineering market. Business area Project Development had a lower operating profit but the operating margin improved to 10.0 percent (9.6). Operating profit in Housing Development declined as a result of fewer production starts in Sweden, primarily in Stockholm, and lower income recognition from projects in Norway and Finland. The operating margin in Housing Development was 8.7 percent (9.6). The operating profit in Property Development improved through greater profit in both wholly owned and partly owned companies. The transactions regarding Arenastaden and Ulriksdal, which were carried out during the first quarter 2017, had no net effect on the result since the divestitures in Ulriksdal had a positive effect on operating profit by SEK 180 million and the sales of assets in Arenastaden had a negative effect of SEK 180 million. Last year in Property Development also included capital gains of SEK 75 million from the divestiture of Peab’s share in a joint venture company to Catena.

Eliminations and reversal of internal profit in our own projects have affected operating profit net by SEK 0 million (-1). Elimination is reversed in connection with the external divestment of a project.

Depreciation and write-downs for the year were SEK -1,024 million (-957).

Net financial items amounted to SEK -55 million (40) of which net interest was SEK -48 million (-44). Last year net financial items included dividends from Lemminkäinen Oyj of SEK 16 million as well as capital gains of SEK 93 million from the sales of 2,458,447 shares in Lemminkäinen Oyj.

Pre-tax profit was SEK 2,518 million (2,458). Tax for the year was SEK -418 million (-391), which corresponds to 17 percent (16) in tax. The lower tax is due to non-taxable income from the sales of companies as well as the revaluation of deferred taxes.

Profit for the year was SEK 2,100 million (2,067).


The equity/assets ratio on 31 December 2018 was 30.4 percent compared to 32.2 percent at previous year-end. Interest-bearing net debt amounted to SEK 3,551 million compared to SEK 1,216 million at the end of 2017. Net debt increased due to investments in business area Project Development and Industry and more working capital.

The average interest rate in the loan portfolio, including derivatives, was 1.4 percent (2.6) on 31 December 2018.

Group liquid funds, including unutilized credit facilities, were SEK 5,846 million at the end of the year compared to SEK 5,145 million on 31 December 2017.

At the end of the year Group contingent liabilities, including joint and several liabilities in trading and limited partnerships, amounted to SEK 10,404 million compared to SEK 10,502 million on 31 December 2017. SEK 7,580 million (7,750) of contingent liabilities was surety given for credit lines for tenant-owned apartments under production.

Project and development properties

In connection with implementation of IFRS 15 it was decided that the previous balance item Work-in-progress should be included in the balance item Project and development properties. Recalculation of the financial reports for 2017 is presented on Peab’s website As of 1 January 2017 the recalculated reported amount was SEK 1,203 million.


During the year 2018 SEK 1,021 million (1,912) was net invested in tangible and intangible fixed assets and investment property and has primarily consisted of investments in machinery and operations properties and investment properties in Project Development. During the year the property Ångkraftverket 2 in Västerås, containing a hotel and Kokpunkten Actionbad, was divested for around SEK 800 million.

Net investments in project and development properties totaled SEK 2,103 million (847) during the year 2018 and stems from an increase in construction of housing projects in Finland and Norway as well as the acquisition of development rights in, among other places, Finland. Included in 2017 was the acquisition of development rights on Kvarnholmen in Nacka for SEK 658 million as well as the sales of a number of properties in Arenastaden, Solna to Fabege.


Cash flow from current operations was SEK -250 million (2,839) of which cash flow from changes in working capital was SEK -2,944 million (43). The change in working capital included the effects of higher investments in project and development property and construction of our own housing projects in Finland and Norway. Included in 2017 was the acquisition of development rights on Kvarnholmen in Nacka for SEK 658 million as well as the sales of a number of properties in Arenastaden, Solna to Fabege.

Cash flow from investment activities was SEK -771 million (-544) and was largely due to investments in machinery and in operations property and investment property. The amount also included sales of assets of SEK 1,327 million (1,577), which among others, included the divestiture of the property Ångkraftverket 2 in Västerås, containing a hotel and Kokpunkten Actionbad, for around SEK 800 million. The comparable period included the divestiture of shares in Lemminkäinen Oyj for about SEK 575 million, divesture of shares in partly owned companies, the divestiture of financial assets to Fabege as well as amortization of loans from partly owned companies.

Cash flow before financing amounted to SEK -1,021 million compared to SEK 2,295 million for the last year. During the first quarter 2017 the transactions carried out regarding Arenastaden, Solna had a positive effect of SEK 835 million.

Cash flow from financing operations amounted to SEK 1,770 million (-2,750) of which SEK -1,180 million (-1,062) was disbursed dividends and changes in interest-bearing loans was SEK 2,950 million (-1,688).

Order situation

Implementation of IFRS 15 Revenue from contracts with customers entails new disclosure demands. One of the disclosure demands refers to remaining performance obligations, more often called order backlog. In quarterly reports Peab has previously chosen to present information on orders received and order backlog in business areas Construction, Civil Engineering and Project Development. As of 2018 business area Industry presents orders received and order backlog for product areas Asphalt, Construction System and part of Rentals as well. In the other product areas in Industry contracts are usually short and therefore orders received and order backlog are not presented for them. Comparable figures regarding orders received and order backlog have been recalculated for 2017.

Orders received for 2018 amounted to SEK 51,087 million compared to SEK 48,999 million for the last year. The level of orders received has risen in business area Construction and Civil Engineering but contracted in Project Development. Included in orders received for business area Construction is the office project Platinan in Gothenburg for Vasakronan worth SEK 2,100 million. Included in orders received for business area Civil Engineering is the extension of the west Sweden railroad system at Olskroken in Gothenburg, worth SEK 2,900 million, for the Swedish Transport Administration. There have been fewer orders received in business area Project Development as a result of fewer housing production starts. The Group’s orders received in the year are well spread geographically and there is good product diversity.

Order backlog yet to be produced at the end of the year increased to SEK 45,819 million compared to SEK 40,205 million at the end of the last year. Of the total order backlog, 33 percent (34) is expected to be produced after 2019 (2018). Swedish operations accounted for 84 percent (86) of the order backlog.


Peab is characterized by a decentralized and cost-efficient organization with four complementary business areas whose operations are based on local entrepreneurship close to the customer. Peab’s business model with four cooperating business areas creates opportunities throughout the value chain in a construction project. The business areas are also operating segments.

Recognition of internal projects between business areas Construction and Project Development

Business area Construction recognize net sales and profit/loss referring to the construction contract part of our own housing developments, rental project developments and other property development projects to business area Project Development. Recognition takes place over time as the projects are completed. Business area Project Development reports net sales for both contract construction and the developer part of our own housing projects. The reported profit/loss consists of the profit/loss in the developer part recognized over time.

Recognition of property projects on our own balance sheet

The underlying sales value of property projects on our own balance sheet, recognized as project and development property, that are sold in the form of a company via shares, is recognized as net sales and the reported value on the balance sheet is recognized as an expense.  When property projects recognized as operations property or investment property are divested the net effect on profit/loss is recognized as other operating income or other operating cost. Recognition takes place at one point in time.

Group functions

In addition to the business areas, central companies, certain subsidiaries and other holdings are presented as Group functions. The central companies primarily consist of the parent company Peab AB, Peab Finans AB and Peab Support (Shared Service Center). Peab AB’s operations consist of executive management and shared Group functions. The internal bank, Peab Finans AB, handles the Group’s liquidity and debt management as well as financial risk exposure. The company is also a service function for the subsidiaries and works out solutions for loans and investments, project-related financing and hedging. Peab Support delivers services within the process-oriented personnel and systems intensive operational areas Accounting, Payroll/Systems and IT to all Group entities.

Operating profit for the year for Group functions was SEK -274 million (-228).

Read more about Peab’s business areas here.

Net sales
* Not recalculated taking IFRS 15 into account
Net sales per customer type, 2018
Operating profit and margin
* Not recalculated taking IFRS 15 into account
Net debt and debt/equity ratio
* Not recalculated taking IFRS 15 into account
Net investments 1)

1) Including project and development properties, shares and participations.

Cash flow before financing
Project allocation of order backlog, 31 December 2018
Order backlog allocated over time

In Gothenburg Peab is building the sprawling office complex Platinan for Vasakronan under a contract worth SEK 2,100 million. Platinan, with it’s unique architecture of large glass façades and focus on sustainability, will be part of the new Älvstaden (River City). Peab is building according to LEED certification and aims to achieve the highest level – Platinum.

Order situation

Net sales and operating profit per business area

Number of employees per business area