MOST PROFITABLE COMPANY
Sustainable profit through collaboration
With our engaged employees we ensure productivity, quality and continual improvement. Our local presence, size and mix of operations are the way to our target of becoming the most profitable company in our industry.
Target: Most profitable company
We take on the right projects and have the right business mix. Employees work according to quality-ensured work methods that are efficient in every aspect. Through our own resources and internal collaboration we maintain a high degree of value creation. We take advantage of our size and experience.
Strong finish for the year
The year 2024 was marked by varied activity on Peab’s different markets. Public building construction, civil engineering and paving continued to develop well while the weak housing market affected Peab’s housing construction. The last quarter of the year was strong and for the entire year 2024 we reported improved profit, strong cash flow and a higher level of orders received. During the year business area Project Development carried out two major transactions that contributed to the positive development.
The past year once again proved how well Peab’s business model with its four business areas and local roots serves us, in both good and difficult times. We can see how our four collaborating business areas with their extensive local Nordic presence and our skilled employees reduce Peab’s vulnerability in the current market situation. In the long run the conditions for growth in the segments and markets we operate in are good.
Regarding our financial target of an operating margin that surpasses six percent we made progress in 2024. The operating margin improved during the year to 4.7 percent (3.2).
Our second financial target, the net debt/equity ratio, was 0.5 at the end of the year, which is inside the target interval 0.3-0.7. We were intensely focused on cash flow and net debt during the year, and reported significant improvements of these towards the end of 2024.
Based on Peab’s third financial target of a dividend of more than 50 percent of profit for the year according to segment reporting the Board has proposed Peab’s Annual General Meeting a dividend of SEK 2.75 (1.50) per share for the financial year 2024, divided into two payments. Calculated on the number of outstanding shares this is equivalent to 38 percent of profit for the year, which is lower than our financial target of more than 50 percent of profit for the year. The dividend is considered a balanced dividend based on our order situation, earning capacity, financial position and future capital needs.
Operating margin
The target is measured according to segment reporting.
Target: >6%
Outcome 2024: 4.7%
Net debt/equity ratio
Net debt in relation to equity. Measured according to segment reporting.
Target: 0.3-0.7
Outcome 2024: 0.5
Dividends
The target is more than 50 percent of profit for the year. Measured according to segment reporting.
Target: >50%
Outcome 2024: 38%
Peab has a robust business model. With our four business areas we control a large part of the value chain which enables us to increase the level of processing within our own operations. We use our leverage in the vertical processing chain – from acquiring land to production and operation – through good internal collaboration, our own products, technical solutions and sustainable business concepts.
Roads to profitability
Geographic collaboration is essential to promoting internal processing, as are discussions with existing and potential customers at an early stage. Our purchasing function and our Procurement Council are examples of functions that spur our own processing. Conditions for profitability are also improved by our ability to deliver where there is growth, adapt our mix of operations to local conditions and take advantage of our size and experience. This has particulary been evident over the past year when the housing market has been weak, Peab has been able to benefit from investments in other markets.
Meanwhile, we have to continually strive to be more efficient in every aspect of our business. This is particularly important in a market situation where high construction costs and uncertainty regarding interest rate developments have an impact on demand. This includes implementing special measures for units that do not achieve the profitability targets set. Our efforts to increase digitalization is yet another component in becoming more efficient.
Three financial targets
Within the framework of the strategic target most profitable company, we measure our business through three financial targets that are based on segment reporting and over a normal business cycle. They are that the operating margin will exceed six percent, the net debt/equity ratio will be in the interval 0.3-0.7 and that dividends will be more than 50 percent of profit for the year.
The target for the operating margin is based on the prerequisites Peab had in 2020 after the acquisition in business area Industry of Nordic paving and mineral aggregates operations and the distribution of the property portfolio in the form of Annehem Fastigheter as well as the successful work in the Group over several years to stabilize and strengthen the operating margin. The target also comprises various benchmarks for the operating margin per business area, with higher margin demands on the capital intensive business areas Industry and Project Development.
Operations 2024
Peab cars made an appearance on summer roads in Finland
Last summer many drivers on Finnish roads could see pavement being laid by skilled workers from Peab Asfalt. In addition to the country’s roads and bicycle paths, Peab paved areas around housing and public buildings, airports and recycling stations. With all the asphalt Peab manufactured during 2024, an eight meter wide road about 4,000 km long could have been paved. This corresponds to more than three times the length of Finland from one end to the other. Asphalt works well recycled and recycling asphalt reduces the amount of raw materials and transportation needed. Therefore a significant amount of the asphalt Peab uses in Finland is reused asphalt.
“We improved roads for a lot of municipalities and stretches of the network of roads in Finland last year which benefited its inhabitants. In other words, there was a lot of activity in our Finnish asphalt operations with some of the highest production volumes so far,” says Head of Peab Asfalt in Finland, Markku Lilja.
Operating margin
Target: >6% according to segment reporting
* Years 2016-2018 not translated according to changed accounting principles for own housing development projects. **Operating margin 4.5 percent excluding the effect of the distribution of Annehem Fastigheter (SEK 952 million). *** Operating margin 2.5 percent excluding the effect of Mall of Scandinavia (SEK 400 million).
Net debt/equity ratio
0.3-0.7 according to segment reporting
*Years 2016-2018 not translated according to changed accounting principles for own housing development projects.
Dividends
Target: >50% of profit for the year according to segment reporting
*Years 2016-2018 not translated according to changed accounting principles. ** For 2019, no cash dividend has been paid. The value of the distribution of Annehem Fastigheter at the time of the distribution in December 2020 amounted to 97 percent of the profit for the year 2019. *** The proportion is calculated without the effect of SEK 952 million on profit due to the distribution of Annehem Fastigheter. **** Board of Directors’ proposal to the AGM.