Other information
Sustainability
Our workplaces should be secure and safe for everyone at them despite the fact that there are risk-filled aspects of our operations. In addition to our many subcontractors Peab has a high portion of own skilled workers compared to our colleagues in the construction and civil engineering industry. This makes the matter of safe workplaces particularly important to us. The number of employees in Peab at the end of the third quarter 2020 was 16,010, of which skilled workers were 8,887.
Serious accidents
To prevent accidents and incidents at our workplaces we continually develop quality assured work methods and educate our employees. Focus is on planning and risk assessment in connection with running projects going forward as well as learning from reported risk observations, incidents and accidents.
The number of serious accidents* during the first nine months 2020 amounted to 37 regarding our own employees and 33 regarding subcontractors at our workplaces. The industry initiative Maintain Zero, which Peab helped found and that strives for zero accidents in the construction industry, is currently working on developing an industry standard for measuring and monitoring workplace accidents. Peab will begin reporting according to it as soon as the standard is produced and adopted.
Risk observations
Every remedied risk is one less potential accident, which is why we work intensively to raise the number of reported and remedied risk observations*. The goal for 2020 is 45,000 reported and remedied risk observations. The number during the first nine months 2020 was 43,173.
* For definition see section Alternative performance measures and definitions.
Other
- Peab was a driving force behind producing a digital and cost-free education in corruption control, diversity and sound competition that the Ethical Council for the Swedish Construction Sector launched in July. The education is designed for both students and professionals.
- In July Lund Municipality became the first in the world to test a new kind of fall friendly asphalt that Peab paved on a pedestrian and bicycle path. The asphalt is five times more cushioning than normal asphalt and the idea is to reduce the number of accidents among pedestrians and cyclists. The project is the result of a research project with, among others, the research institute RISE.
- As part of an EU research project Peab Asfalt began the first trials of paving asphalt with lignin on a well trafficked stretch of road in Sundsvall. Lignin is the natural binder in trees with both technical and environmental advantages, and the objective is to be able to replace some of oil-based bitumen with it.
- In order to promote a good safety culture in our organization Peab carried out its annual focus week at the end of August. The week is aimed at creating dialogue, participation and engagement in all our employees’ work environment, health and safety. One of the week’s events was dialogue meetings that were held at all our workplaces.
- Since August all our employees receive safety messages in the form of an sms every time a serious accident occurs in our organization. The purpose is to increase safety awareness, whether or not someone works in production or an office, by reminding and pointing out to each other the importance of continuing to work to reduce accidents.
- As part of our organization’s equal treatment and equality work Peab launched together with Svensk Talteknologi a new digital tool that makes it easier to read and write texts for all Peab’s employees in Sweden, whether or not they have reading or writing difficulties. The intention is to make it possible for every employee to communicate on equal terms and not be treated differently because of reading or writing difficulties. The tool for computers and phones includes reading texts aloud and a spelling correction program.
Risks and uncertainty factors
Peab’s business is exposed both to operational and financial risks. How much risks affect Peab’s profits and position depends on how well the company handles daily operations. In addition, as a construction and civil engineering company, Peab is vulnerable to external risks such as developments in the economy, climate effects and changes in circumstances due to amendments in laws and regulations, and other political decisions.
In the beginning of 2020 the coronavirus spread over a large part of the world. Governments and central banks are implementing different forms of crisis packages to reduce the negative financial effects. The entire global economy is affected but it is difficult to say how deeply and for how long. So far the effects of the coronavirus on Peab’s operations have been limited. We closely follow developments in order to assess the effects in the long run. For more information see the section Coronavirus under Important events during the period.
Managing operative risks is a continuous process considering the large number of projects the Group is always starting up, carrying out and completing. Operative risks are managed in the line organization in the business areas through established procedures, processes and control systems. Peab’s business is largely project-related. There are a number of different contract forms where risk levels vary depending on the type of contract. However, with any type of contract ambiguities can arise concerning the terms, which can lead to delimitation issues that create a dispute with the customer.
On December 13, 2019 Peab’s supplier Nynas AB applied for a company reorganization and on March 12, 2020 Nynas AB applied for a further extension of three months which was granted. Thereafter further extensions were applied for, which the latest was granted until December 15, 2020. Nynas AB is an essential supplier of bitumen which is used as a binder in the manufacture of asphalt. If Nynas AB cannot fulfill its obligations it will cause considerable disturbances in the Nordic paving market and affect all the companies involved in asphalt paving, including Peab which is a major actor. Peab has chosen to complement with other suppliers to ensure deliveries of bitumen.
Financial risks are primarily associated with the company’s need for capital, tied up capital and access to financing. Financial risks are managed on Group level. For further information about risks and uncertainty factors, see the Annual and Sustainability Report 2019.
Important events during the period
Dividend and distribution proposals and withdrawal of proposals
In conjuncture with the year-end report 2019 Peab’s Board decided to propose to the AGM an unchanged ordinary dividend of SEK 4.20 per share and an extra distribution of the shares in a newly founded real estate company (Annehem Fastigheter).
When the decision was made the global spread of the coronavirus had not yet begun. It has thereafter developed into a pandemic, which in turn has created enormous uncertainty concerning global financial developments.
On March 24, 2020 the Board reviewed the decision of an extra distribution of all the shares in Annehem Fastigheter. The Board put off the decision to actually distribute and list the company until there was less uncertainty and circumstances improved. The strategy to create the company, distribute and list it did not changed.
On April 7, 2020 Peab’s Board also decided to withdraw in its entirety the proposal to the AGM for an ordinary dividend of SEK 4.20 per share. The Board and executive management have reviewed the situation focusing on identifying measures needed to be taken for different scenarios on the Nordic construction market. Their main purpose is to be able to create the prerequisite conditions to handle overhead in a contracting business and at the same time safeguard long-term production capacity. Examples of measures are furloughs and training.
The Board’s ambition have been to regularly evaluate the dividend capacity and depending on developments make a decision on both an ordinary dividend and when distribution of all the shares in Annehem Fastigheter can take place. Based on market assessments and the development presented in the second quarter report Peab’s Board decided in August 2020 to propose a new date for the distribution of Annehem Fastigheter. On October 19, 2020 the Board summoned an Extra General Meeting on November 12, 2020. For more information see the section Annehem Fastigheter and Important events after the period.
Peab’s Board has also decided not to present a new decision for a cash dividend. Instead the Annual General Meeting’s decision of no dividend for 2019 stands.
Coronavirus
In the beginning of the year the coronavirus spread to a large part of the world. Countries are still putting different measures to limit the spread of the infection, for example entry and quarantine regulations. Governments and central banks are introducing different forms of crisis packages to reduce the financial effects. This will affect the global economy but to what extent is difficult to say.
Peab is a major employer with many employees and many people at our workplaces. As employer we care about our employees but naturally we also care about our customers, subcontractors, suppliers and other partners. For Peab it is important from a societal perspective that we do everything we can to thwart the spread of infection and keep our operations going.
Peab’s measures to limit the spread of the infection are founded on The Public Health Agency of Sweden’s guidelines and instructions as well as those that correspond in the other countries we work in. Since the situation and instructions from the authorities are constantly changing, we closely follow developments and adopt to them. Above all they affect the directives we give our employees.
The short-term effects of the coronavirus on Peab’s operations are limited at the moment but naturally we closely follow developments so that we can continually assess possible affects in a longer perspective. Under the current circumstances we see what a strength it is for us to be the local company with the big group resources. Peab has four business areas – Construction, Civil Engineering, Industry and Project Development that collaborate locally and a large part of input goods and personnel are our own. This gives us good control over the construction process and makes us therefore less vulnerable to production disruptions.
Acquisition of Nordic paving and mineral aggregates operations
On July 4, 2019 Peab signed a contract to acquire YIT’s paving and mineral aggregates operations in the Nordic region. The transaction was conditional on approval from competition authorities as well as the fulfillment of certain contractual conditions. At the end of March 2020 the transaction was approved by the competition authorities and the acquisition was finalized on April 1, 2020. The operations are consolidated into the Peab Group as of that date.
Through the acquisition Peab will expand its presence in Sweden, Norway and Finland and become established in the paving business in Denmark and this will give Peab a unique and market leading position in this business in the Nordic region. The acquisition entails taking over some 2,000 employees, around 200 strategically located quarries along with 63 production asphalt plants in the Nordic region. The deal will also increase the importance of industrial operations for the Group.
Greater geographic proliferation in areas that are normally less sensitive to the business cycle increases stability in the Group. It also provides a platform for further expansion and development in other operations such as Recycling and Concrete.
The transaction is a combination of an asset deal and a share purchase. The purchase price amounted to SEK 3,184 million for a debt-free business and is fully financed. In 2019 the acquired operations had net sales of SEK 5,878 million with an adjusted EBITDA of SEK 282 million.
For more information, see section Business area Industry and note 2.
Important events after the period
Changes in Peab’s executive management
In the spring of 2020 Peab’s acquisition of YIT’s paving and mineral aggregates operations in the Nordic region was finalized. As a result of the acquisition the importance of operations in Industry in the Group have grown at the same time Peab has increased its presence in Sweden, Norway and Finland and established itself in paving in Denmark. Peab has thereby transitioned from being a Swedish company with operations in Norway and Finland to becoming a Nordic company based in Sweden.
Today Peab has 16,000 employees. We now have a greater geographic spread and our local presence is stronger, which makes it possible for us to develop within the framework of what we call locally produced community building. Through Peab’s four collaborating business areas we can, as far as possible, ensure that we use local resources in the form of our own employees, our own input goods and subcontractors.
Business area Industry changes
Business area Industry consists of a number of companies that deliver input goods and services to the construction industry. Due to the acquisition from YIT our operations have grown extensively and therefore need to be steered and led at company level rather than business area level. The industrial companies will continue to report externally as one business area. Operatively they will be led by MDs that report to two members of executive management responsible for them, Roger Linnér and Niclas Winkvist. Karl-Gunnar Karlsson will leave his role as Business Area Industry Manager and therefore executive management. Karl- Gunnar has been appointed MD for Swerock.
Chief Strategic Officer appointed
In order to ensure scale advantages, effectiveness and sustainable products, at the same time we develop our local business, we have to streamline the way we lead and steer. Digitalization will continue to enable this work going forward. In order to support executive management’s work with these matters Johan Dagertun has been appointed CSO.
Johan Dagertun was most recently MD for Construction System in business area Industry and has previously been a business controller in Finance and Treasury at Peab.
After these changes have been made Peab’s executive management will consist of the following members:
- Jesper Göransson, President and CEO
- Niclas Winkvist, CFO, part of business area Industry
- Roger Linnér, COO, part of business area Industry
- Stefan Danielsson, Business Area Construction Manager
- Lotta Brändström, Business Area Civil Engineering Manager
- Göran Linder, Business Area Project Development Manager
- Camila Buzaglo, CCO
- Johan Dagertun, CSO
Summons to an Extra General Meeting
On October 19, 2020 Peab’s Board has summoned to an Extra General Meeting (EGM) November 12, 2020 to decide on its proposal to distribute all the shares in the wholly owned subsidiary Annehem Fastigheter. The intention is to list the B shares in Annehem Fastigheter on Nasdaq Stockholm in December 2020.
The distribution ratio is 1:5 which means that one (1) share in Peab entitles to one (1) share right of the same sort in Annehem Fastigheter, and five (5) share rights entitle to one (1) share of the same sort in Annehem Fastigheter. The distribution corresponds to equity of around SEK 2 billion. The level of equity and borrowing in Annehem Fastigheter has been determined based on the current property portfolio and taking into consideration future growth.
If the EGM votes according to the proposal to distribute Annehem Fastigheter the record day is expected to be in close connection with the listing of B shares in Annehem Fastigheter. The Board’s intention is to list the company in December 2020. When Annehem Fastigheter is distributed the difference between fair value and book values will be taken up as income in Peab. This preliminarily amounts to SEK 800 million. To this will be added eliminated construction contract profit of around SEK 50 million.
Holdings of own shares
At the beginning of 2020 Peab’s own B shareholding was 1,086,984 which corresponds to 0.4 percent of the total number of shares. No changes have taken place during the period January-September 2020.
The Peab share
Peab’s B share is listed on the Nasdaq Stockholm, Large Cap list. As of October 21, 2020, the price of the Peab share was SEK 89.00 a decrease of five percent during 2020. During the same period, the Swedish stock market increased by seven percent according to the general index in the business magazine “Affärsvärlden”. During 2020 the Peab share has been quoted at a maximum of SEK 110.70 and a minimum of SEK 59.30.