Note 4 Operating segments
Accounting principles
Group operations are divided into operating segments based on how the company’s highest executive decision-makers, i.e. the Board and executive management, monitor the business. Segment reporting is the model that best describes Peab’s internal steering and risk profile for the business areas and the Group as a whole. The Group reports in the four business areas Construction, Civil Engineering, Industry and Project Development. The business areas are also operating segments. The Group’s internal reporting is built up so that executive management monitors every business area up to and including operating profit and the operating margin. In business areas Industry and Project Management executive management also monitors development in employed capital and the return on employed capital.
Segments’ operating profit includes directly attributable items and items that can be reasonably and reliably allocated to a segment. Non-allocated items consist of financial income and expenses, and taxes.
Internal prices between the Group’s various segments are set according to the principle of “an arms-length distance”, i.e. between parties that are independent of each other, well informed and have an interest in carrying out the transaction.
Other accounting principles than IFRSs are to some extent applied in segment reporting, as described below.
Differences in segment reporting and reporting according to IFRS
In Peab’s construction contract operations Construction and Civil Engineering revenue and profit are recognized over time in both segment reporting and reporting according to IFRS. In business area Industry revenue and profit are both recognized over time and at one point in time and the accounting is the same in both segment reporting and reporting according to IFRS. In business area Project Development in the unit Housing Development revenue and profit are recognized as the housing projects are successively completed in segment reporting. This is to create clarity and provide the market with the opportunity to monitor Peab’s development regarding our own housing developments. This concerns Swedish tenant-owner associations and our own housing developments, Norwegian condominiums and share housing and Finnish residential limited companies. In reporting according to IFRS housing projects are recognized at the point in time the final homebuyers take over their apartments. In business area Project Development in the unit Property Development revenue and profit/loss are recognized at one point in time in both segment reporting and reporting according to IFRS.
In segment reporting leasing fees for the lessee are recognized linearly over the leasing period for leasing contracts that by the counterparty (lessor) are classified as operational leasing contracts. IFRS 16 Leases is applied in the consolidated accounts according to IFRS which entails that the lessee recognizes depreciation and interest attributable to leasing assets respectively leasing liabilities. Leasing contracts that by the counterparty (lessor) are classified as financial leasing contracts are recognized in Peab’s segment reporting according to the principles that correspond with those for the lessee according to IFRS 16.
Financial key ratios in segment reporting
Financial key ratios such as capital employed, balance sheet total, equity, equity/assets ratio, net debt, net debt/equity ratio, cash flow before financing and earnings per share are reported in segment reporting taking into consideration the above prerequisites. Net debt according to segment reporting includes the unsold portion of housing projects in ongoing production. This is because Peab has a guarantee obligation to acquire unsold homes six months after completion.
Operating segments
The Group consists of the following operating segments:
- Construction: Business area Construction comprises Group resources in construction related services. Construction works for both external and internal customers. The external customers are in both the private and public sectors. Operations are run through eleven regions in Sweden, three in Norway and two in Finland. Specialized housing production units are located in Stockholm, Gothenburg and the Öresund region. Construction maintenance operations are run in a nationwide organization in Sweden focused on the big city regions. The other regions perform all kinds of construction projects within their geographic area.
- Civil Engineering: Business area Civil Engineering works with the construction of large infrastructure and civil engineering projects, foundation work and smaller projects on the local market. Civil Engineering also operates and maintains roads and municipal facilities. The operations are run in geographical regions in Sweden and Norway. Customers are the Swedish Transport Administration, municipalities and local businesses.
- Industry: Business area Industry offers everything from mineral aggregates, concrete, paving and temporary electricity to prefabricated concrete elements. Industry also rents out cranes and equipment, distributes binder to the concrete industry, provides transportation as well as recycles construction waste and excavation soil. The business is run in six product areas; mineral aggregates, paving, concrete, transportation and machines, rentals and construction system. All of them operate on the Nordic construction and civil engineering market. Customers are public clients and Nordic construction and civil engineering companies.
- Project Development: Business area Project Development comprises Peab’s development of housing as well as commercial property and public buildings in Sweden, Norway and Finland. The business is run in two units, Housing Development and Property Development. Housing Development develops all kinds of housing such as tenant-owner, condominium and rental apartment buildings as well as single homes. Operations in Property Development revolve around the acquisition, development and divestiture of commercial properties. The business area has projects in wholly owned companies and joint ventures. Joint ventures include Peab’s holdings in Fastighets AB Centur, Fastighets AB ML4, Skiab Invest AB and Point Hyllie Holding AB. Projects in wholly owned subsidiaries consist of a large number of holdings that include everything from land for development where zoning is in progress to completed projects ready for divestiture. Net sales and operating profit from operations are derived from running our wholly owned property, shares in the profit from joint ventures as well as capital gains from the divestiture of completed property and participations in joint ventures.
Central companies, certain subsidiaries and other holdings are reported as Group functions. Central companies consist mainly of the parent company Peab AB and Peab Finans AB.
| 2024‚ MSEK | Construction | Civil Engineering | Industry | Project Development | Group functions | Elimination | Group Segment | Differences in accounting principles 1) | Group IFRS | |
| 2024. Mkr | Bygg | Anläggning | Industri | Projekt- utveckling | Koncern- gemensamt | Eliminering | Koncernen Segment | Skillnader i redovisnings- principer 1) | Koncernen IFRS | |
| External sales | Extern försäljning | 21,290 | 15,384 | 17,725 | 4,243 | 55 | 58,697 | 2,586 | 61,283 | |
| Internal sales | Intern försäljning | 2,527 | 1,155 | 3,823 | 27 | 1,295 | -8,827 | – | – | |
| Total revenue | Summa intäkter | 23,817 | 16,539 | 21,548 | 4,270 | 1,350 | -8,827 | 58,697 | 2,586 | 61,283 |
| Operating costs | Rörelsekostnader | -23,404 | -16,052 | -20,285 | -3,840 | -1,690 | 8,861 | -56,410 | -2,181 2) | -58,591 |
| Other operating income | Övriga rörelseintäkter | 4 | 17 | 164 | 299 | 1 | 2 | 487 | -5 | 482 |
| Other operating costs | Övriga rörelsekostnader | -1 | -5 | -12 | -1 | -2 | 10 | -11 | -11 | |
| Operating profit | Rörelseresultat | 416 | 499 | 1,415 | 728 | -341 | 46 | 2,763 | 400 | 3,163 |
| Operating margin, % | Rörelsemarginal, % | 1.7 | 3.0 | 6.6 | 17.0 | 4.7 | 5.2 | |||
| Financial income | Finansiella intäkter | 259 | 259 | |||||||
| Financial expenses | Finansiella kostnader | -597 | -45 3) | -642 | ||||||
| Pre-tax profit | Resultat före skatt | 2,425 | 355 | 2,780 | ||||||
| Tax | Skatt | -345 | -47 | -392 | ||||||
| Profit for the year | Årets resultat | 2,080 | 308 | 2,388 | ||||||
| Depreciation | Avskrivningar | -24 | -68 | -1,219 | -7 | -87 | 0 | -1,405 | -358 | -1,763 |
| Write-downs in operating profit | Nedskrivningar inom rörelseresultatet | -3 | -22 | -36 | -34 | 1 | – | -94 | -7 | -101 |
| Profit from Joint ventures | Resultat från joint ventures | 0 | 0 | 3 | 389 | -4 | 48 | 436 | -1 | 435 |
| Capital gains/losses | Realisationsvinster/förluster | 3 | 12 | 115 | 298 | 0 | 13 | 441 | -5 | 436 |
| Other significant non-cash items | Övriga väsentliga icke kassaflödespåverkande poster | 111 | -15 | -253 | -124 | -159 | 280 4) | -160 | 36 | -124 |
| Capital employed (closing balance) | Sysselsatt kapital (UB) | -215 | -370 | 9,920 | 19,767 | -103 4) | 28,999 | 1,879 | 30,878 | |
| Total assets | Balansomslutning | 45,226 | 2,542 5) | 47,768 | ||||||
| Equity | Eget kapital | 16,760 | -256 | 16,504 | ||||||
| Equity/assets ratio, % | Soliditet, % | 37.1 | 34.6 | |||||||
| Net debt | Nettoskuld | 9,118 | 2,135 | 11,253 | ||||||
| Cashflow before financing | Kassaflöde före finansiering | -3 6) | 697 6) | 2,324 6) | 423 6) | -840 7) | 2,601 | 4,143 | 6,744 |
1) For more information about the allocation of revenue and profit items see note 3 and the section Overview business areas and Group functions in Board of Directors’ Report.
2) Refers to IFRS 16, additional leases SEK 41 million and housing projects SEK -2,222 million.
3) Refers to IFRS 16, additional leases SEK -45 million.
4) Unallocated to Group Segment.
5) Divided between IFRS 16, additional leases SEK 1,411 million and housing projects SEK 1,131 million.
6) Refers to operational cash flow. For definition, see section Alternative key figures and definitions.
7) Unallocated cash flow.
| 2023‚ MSEK | Construction | Civil Engineering | Industry | Project Development | Group functions | Elimination | Group Segment | Differences in accounting principles 1) | Group IFRS | |
| 2023. Mkr | Bygg | Anläggning | Industri | Projekt- utveckling | Koncern- gemensamt | Eliminering | Koncernen Segment | Skillnader i redovisnings- principer 1) | Koncernen IFRS | |
| External sales | Extern försäljning | 23,195 | 13,786 | 16,086 | 5,695 | 59 | 58,821 | 2,779 | 61,600 | |
| Internal sales | Intern försäljning | 4,585 | 1,378 | 3,876 | 27 | 1,428 | -11,294 | – | – | |
| Total revenue | Summa intäkter | 27,780 | 15,164 | 19,962 | 5,722 | 1,487 | -11,294 | 58,821 | 2,779 | 61,600 |
| Operating costs | Rörelsekostnader | -27,347 | -14,728 | -19,223 | -5,433 | -1,808 | 11,238 | -57,301 | -2,046 2) | -59,347 |
| Other operating income | Övriga rörelseintäkter | 11 | 76 | 250 | 17 | 24 | -21 | 357 | 357 | |
| Other operating costs | Övriga rörelsekostnader | -3 | -11 | -27 | -2 | -2 | 21 | -24 | -24 | |
| Operating profit | Rörelseresultat | 441 | 501 | 962 | 304 | -299 | -56 | 1,853 | 733 | 2,586 |
| Operating margin, % | Rörelsemarginal, % | 1.6 | 3.3 | 4.8 | 5.3 | 3.2 | 4.2 | |||
| Financial income | Finansiella intäkter | 584 | 584 | |||||||
| Financial expenses | Finansiella kostnader | -542 | -42 3) | -584 | ||||||
| Pre-tax profit | Resultat före skatt | 1,895 | 691 | 2,586 | ||||||
| Tax | Skatt | -481 | -117 | -598 | ||||||
| Profit for the year | Årets resultat | 1,414 | 574 | 1,988 | ||||||
| Depreciation | Avskrivningar | -23 | -72 | -1,190 | -5 | -73 | -2 | -1,365 | -372 | -1,737 |
| Write-downs in operating profit | Nedskrivningar inom rörelseresultatet | -127 | – | -21 | -20 | 1 | – | -167 | -167 | |
| Profit from Joint ventures | Resultat från joint ventures | 1 | 0 | 5 | 89 | -6 | -12 | 77 | 75 | 152 |
| Capital gains/losses | Realisationsvinster/förluster | 7 | 60 | 176 | 17 | 0 | -1 | 259 | 259 | |
| Other significant non-cash items | Övriga väsentliga icke kassaflödespåverkande poster | 148 | -13 | -36 | -43 | -54 | 316 4) | 318 | 3 | 321 |
| Capital employed (closing balance) | Sysselsatt kapital (UB) | -985 | -173 | 10,699 | 18,093 | 5 4) | 27,639 | 5,249 | 32,888 | |
| Total assets | Balansomslutning | 44,295 | 4,881 5) | 49,176 | ||||||
| Equity | Eget kapital | 15,082 | -612 | 14,470 | ||||||
| Equity/assets ratio, % | Soliditet, % | 34.0 | 29.4 | |||||||
| Net debt | Nettoskuld | 8,676 | 5,861 | 14,537 | ||||||
| Cashflow before financing | Kassaflöde före finansiering | 146 6) | 698 6) | 1,012 6) | -2,254 6) | -919 7) | -1,317 | 3,972 | 2,655 |
1) For more information about the allocation of revenue and profit items see note 3 and the section Overview business areas and Group functions in Board of Directors’ Report.
2) Refers to IFRS 16, additional leases SEK 37 million and housing projects SEK -2,083 million.
3) Refers to IFRS 16, additional leases SEK -42 million.
4) Unallocated to Group Segment.
5) Divided between IFRS 16, additional leases SEK 1,386 million and housing projects SEK 3,495 million
6) Refers to operational cash flow. For definition, see section Alternative key figures and definitions.
7) Unallocated cash flow.
Comments on the tables
Group net sales for 2024 according to segment accounting amounted to SEK 58,697 million (58,821). Operating profit for 2024 was SEK 2,763 million (1,853) and the operating margin was 4.7 percent (3.2). During the year business area Project Development carried out two major transactions that contributed a total of SEK 620 million to the Group. The fourth quarter last year was charged with provisions, write-downs and restructuring costs totaling SEK 525 million, of which goodwill write-downs were SEK 125 million. Of the SEK 525 million, SEK 465 million was charged to business area Construction and SEK 60 million to Group functions. Last year included a positive effect of SEK 400 million in business area Construction resulting from arbitration in the case between Peab and Unibail-Rodamco-Westfield regarding the construction contract for Mall of Scandinavia in Solna.
In business area Construction net sales decreased by 14 percent and amounted to SEK 23,817 million (27,780). The decrease is due to less activity in new housing production that has not been fully compensated by other types of projects. Operating profit amounted to SEK 416 million (441) and the operating margin was 1.7 percent (1.6). In business area Civil Engineering net sales increased to SEK 16,539 million (15,164) and the operating margin was 3.0 percent (3.3). Activity was high during 2024 in business area Civil Engineering in both Sweden and Norway. In business area Industry net sales increased by eight percent and amounted to SEK 21,548 million (19,962). Operating profit was SEK 1,415 million (962) and the operating margin was 6.6 percent (4.8). The improvement is due to higher earnings in paving, above all in Finland linked to the Finnish government’s extra funds for road maintenance in 2024. Net sales in business area Project Development contracted and amounted to SEK 4,270 million (5,722). The decrease is related to Housing development. Operating profit amounted to SEK 728 million (304) and the operating margin was 17.0 percent (5.3). Capital gains from the divestiture of the shares in Tornet Bostadsproduktion contributed by SEK 220 million and profit contributions from joint venture company Fastighets AB Centur amounted to SEK 417 million.
Geographic areas
Income from external customers is related to the countries customers are located in. The information concerning intangible and tangible assets is divided into the countries the assets are located in. The table below shows the amounts allocated per geographic region according to IFRS.
| Sweden | Norway | Finland | Denmark | Other markets | Total | ||||||||
| MSEK | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| Sverige | Norge | Finland | Danmark | Övriga marknader | Summa | ||||||||
| Mkr | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| External sales | Extern försäljning | 43,843 | 42,938 | 6,820 | 7,324 | 9,170 | 10,171 | 1,438 | 1,144 | 12 | 23 | 61,283 | 61,600 |
| Fixed assets 1) | Anläggningstillgångar 1) | 9,784 | 10,075 | 1,322 | 1,677 | 2,848 | 2,922 | 281 | 293 | 0 | 0 | 14,235 | 14,967 |
1) Fixed assets include intangible and tangible fixed assets, investment property and shares in joint ventures