Net sales and profit
New accounting principles for income
IFRS 15 Revenue from contracts with customers, replaces as of 2018 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 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 reports are recalculated if not otherwise noted. For more information regarding IFRS 15 and comparable figures please see note 1 or www.peab.com/ifrs.
Net sales and operating profit
April – June 2018
Group net sales for the second quarter 2018 increased by five percent and amounted to SEK 13,453 million (12,791).
Net sales in business area Construction increased by six percent spread over all the business area’s countries. Net sales in business area Civil Engineering increased by 21 percent and stemmed from all product areas. Business area Industry presented an increase in net sales of five percent spread over all product areas except Transportation and Machines where net sales shrunk. Net sales in business area Project Development were slightly lower compared to the second quarter last year. Net sales increased in Property Development compared to the same period last year while net sales in Housing Development contracted by 15 percent due to fewer relinquished projects in Norway and Finland.
Of the quarter’s net sales SEK 2,351 million (2,352) were attributable to sales and production outside Sweden.
Operating profit for the second quarter 2018 amounted to SEK 677 million (631) and the operating margin was 5.0 percent (4.9). All business areas had a higher operting profit in the second quarter. In business area Construction operating margin was 2.4 percent (2.3) and in business area Civil Engineering the operating margin was 3.8 procent (3.9). Business area Industry showed a margin of 7.3 percent (7.2). In business area Project Development the operating profit grew in both Property Development and Housing Development. In Housing Development the operating margin increased to 10.0 percent (8.3).
Depreciation and write-downs for the second quarter were SEK -247 million (-222).
Net financial items amounted to SEK -4 million (-14) of which net interest was SEK -18 million (-16).
Pre-tax profit was SEK 673 million (617).
Profit for the second quarter improved to SEK 572 million (525).
Operating profit and operating margin, per quarter
Ultimes Business Garden
Helsinki, Finland
January – June 2018
Group net sales for first half-year 2018 amounted to SEK 24,943 million (23,896), which was an increase of four percent. After adjustments for acquired and divested units net sales increased by three percent.
A continued favorable construction and civil engineering market has had a positive effect on all business areas during the first half-year. Net sales in business area Construction increased by five percent spread over all the business area’s countries. Net sales in business area Civil Engineering increased by 20 percent and activity increased in all product areas. Business area Industry presented an increase in net sales of two percent spread over all product areas except Transportation and Machines where net sales shrunk. Net sales in business area Project Development were slightly lower, Property Development showing a decrease while net sales in Housing Development rose by eight percent. 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. No property divestitures of significance have occurred in Property Development during the first half-year 2018.
Of the period’s net sales SEK 4,876 million (4,305) were attributable to sales and production outside Sweden.
Operating profit for the first half-year 2018 amounted to SEK 967 million (951) and the operating margin was 3.9 percent (4.0). The operating margin for the latest rolling 12 month period was unchanged at 4.8 percent compared to the entire year 2017.
The operating margin in business area Construction was unchanged at 2.3 percent compared to the same period last year. The operating margin in business area Civil Engineering was 2.7 percent (2.9). Business area Industry showed an unchanged operating margin of 3.9 percent compared to same period last year. The operating profit in business area Project Development was slightly lower due to a lower operating profit in Property Development. The result in Property Development included in the first quarter 2017 capital gains of SEK 75 million from the divestiture of joint venture companies with development properties in Skåne. 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. The operating margin in Housing Development was unchanged at 8.4 percent compared to the same period last year.
Eliminations and reversal of internal profit in our own projects has affected the result net by SEK -15 million (-10). Elimination is reversed in connection with the external divestment of a project.
Depreciation and write-downs for the period were SEK -485 million (-439).
Net financial items amounted to SEK -38 million (-23) of which net interest improved to SEK -21 million (-31).
Pre-tax profit was SEK 929 million (928).
Profit for the period was SEK 790 million (802).
Operating profit and operating margin, rolling 12 months
Seasonal variations
Group operations, particularly in Industry and Civil Engineering, are affected by fluctuations that come with the cold weather during the winter half of the year. Normally the first quarter is weaker than the rest of the year.