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Welcome, everyone. This is Andre Lofgren, Head of Investor Relations speaking. I'd like to welcome you to this webcast where we will be presenting Skanska 3 months report for 2020. The presentation will be held by our CEO, Anders Danielsson; and also our CFO, Magnus Persson. After the presentation, you will be able to ask questions. With that, Anders, I'll leave it to you.
Thank you, Andre. On this very first slide, you see a golden bridge approaching Slussen in Stockholm all the way from China. This bridge is a crucial part of the reconstruction of a very important transportation hub at the central Stockholm where about 480,000 people pass through every day. So let's go into the figures then on Page #2. The 3-month report. The first quarter performance was strong in all 3 business streams, both on volumes and profitability, and we reported an all-time high operating income in Q1 and also on a rolling 12 months basis. The Construction stream improved profitability. Volumes were strong in Residential Development, and profitability was maintained at a good level in the first quarter. In Commercial Development, 2 significant and very profitable divestments were signed during the quarter. We had a return on equity amounted to 27%. However, it is also important to stress that the impact of COVID-19 pandemic is yet to be seen. Currently, it is very difficult to say how severe the impact will be and exactly how long it will last. We are, of course, monitoring this on a daily basis and taking precautionary action in many areas. It is crucial for us to both protect the people and the company. To protect the strong balance sheet and the good liquidity, it's also of great importance. As communicated earlier, the Board withdrew the dividend proposal to the AGM with the ambition to convene an Extra General Meeting in the autumn if the circumstances permits. Thanks to the strategic initiative that were initiated in 2018, Skanska is standing strong. To make sure that we maintain that position long term, we are taking actions that will allow us to adjust to the future that will look different after the COVID-19 pandemic. Page #3. In Construction, revenue increased 2% to SEK 35.9 billion. Order bookings were strong in all our markets, and we had a book-to-build of 100%. Order backlog amount to SEK 199 billion, which corresponds to 15 months of production. Operating income increased 59% to SEK 589 million. Operating margin increased to 1.6% versus 1.1% the year before. This quarter proves yet again that we are on the right track as we continue to improve our profitability in the Construction stream. The stream was not substantially impacted by COVID-19 outbreak during the first quarter as many projects have been able to proceed according to plan. But we are -- but we currently have about 370 projects impacted more or less by either shutdown due to government decision, mainly -- that's mainly in the U.S. and U.K. operation, or inefficiencies due to the COVID-19. This will, of course, impact us negatively for some time ahead. Worth knowing though is that Skanska roughly had close to 10,000 ongoing projects up and running. Our top priority is, of course, to get these projects back to full production as soon as possible and avoid additional shutdowns or reduction in execution. The extensive lockdown measures in countries outside of Sweden are now starting to impact the construction industry, and we expect a weaker market outlook, which I will come back to. However, our long-term strategy remains: selective bidding, improved commercial focus and increased cost efficiency. Let's go into the next page on Residential Development. Revenue increased 59% to SEK 3.4 billion. Both sales and starts were strong. We sold 911 homes and started 971 homes. Profitability was maintained at a good level with an operating margin of 11.6%. Return on capital employed steady at 11.5%. However, we can see some -- that home sales since the COVID-19 outbreak become very serious by the end of the first quarter had slowed down. It is encouraging to see that our handovers are going according to plan, with the exception of some postponements in handovers due to some practical problems as a result of quarantines, et cetera. So we are collecting the cash. Looking ahead, a reduction in consumer confidence due to weaker economies and increased unemployment is likely to negatively impact the housing market. Primary focus is to adjust to this new market situation. But long term, our ambition is to be a leading developer in our home markets remain. Commercial Property Development. 2 significant divestments contributed to an all-time high in gain of sales, SEK 2.2 billion, and were the main contributor to the strong performance in the first quarter. Operating income increased substantially and amounted to SEK 2.1 billion. Return on capital employed was 16%. We had 37 ongoing project, and we started only 1 new project in the quarter. Investment value upon completion is SEK 25.9 billion. And the occupancy rate and the completion rate is on a good level, 57% and 60%, respectively. We started just 1 project in the quarter, but we have a strong pipeline of developments to spreads -- to start, and we will do that when we think it's the right time to do so. Leasing is a bit slower. We foresee a decline in transaction volumes as the uncertainties in the financial market likely will turn property investors more risk averse. Leasing activities will most likely also be a bit more challenging for some time to come, but we still strive to grow this business stream as we believe in its long term. Next page, order situation for the Construction. Looking at the order situation, bookings were strong in the first quarter, and we are building backlog in the quarter. Bookings came in at SEK 41.3 billion and the backlog closed at SEK 199 billion at the end of the quarter. Rolling 12 months, book-to-build ratio is 100%. So we are booking in the same pace as we are burning. Next page. Zooming in on the different geographies when it comes to booking, it's basically an increase in all areas. Sweden, almost flat, but the book-to-build is over 100%. So there, we are building backlog. And for the second quarter per now, we have announced orders of close to SEK 16 billion: one large railway project on the West Coast of Sweden and the high-speed rail project in the U.K., our third largest project ever. HS2 is an ECI project, early contractor involvement, with well-known customers and executed by a very experienced team, and the risk return balance in the contract is in a way we like it. Worth noting through is that due to the current pandemic situation, we see signs of approvals of new projects being postponed by some clients. This is slightly temporary, but it will likely impact us to some extent going forward. I will get back to you regarding the market outlook shortly. But now Magnus, I'll leave it to you to go a bit deeper in the numbers.
Thank you, Anders. So I go to Page 8 in the presentation, which is the Construction income statement. And here you can see volumes in Construction were roughly in line with the comparable quarter. We're down about 1% in local currencies. But nominally speaking, in Swedish kroner, it's a couple of percent up. Gross margins came up 0.7% to 6.2, essentially reflecting the successive improvements that we have been working on for quite some time in Construction, as Anders pointed out. S&A, you can see they are, nominally speaking, in line with the comparable quarter and also in terms of percent of the revenue. Then the first quarter is often or almost always a low volume quarter, so the percent level of S&A is a bit higher than what we see for the remaining part of the year. Operating margin, 1.6%. No major result impacting events in the Construction business stream in the first quarter. If we go to Page 9, and the Construction income statement by geography. You can see that there's been a very stable development in the Nordics, with the margins in line with the comparable quarter, both for the Nordics as such and also for the Swedish operation isolated. Both Europe and U.S. is improving. In Europe, we have a negative margin, a negative result in the quarter. But the size of the negative impact is considerably smaller than what we had last year. And the reason to this, which you all can see when we report in the first quarter, is that we have a fairly large seasonal effect in our Central European operations. In the U.S., we have successive improvements of profitability with a margin of 1.9% compared to 1.3% in the comparable quarter. And one of the reasons to this is, of course, that we are successfully completing the problematic projects that we have that are causing us to burn that revenue. I move on to Residential Development on Slide #10. Here, you can see a fairly large increase in revenue. We sold very well in the first quarter. And the revenue increase is in part due to an increase in sold units, that went up about 20% quarter-to-quarter. And in part, it's because we have been selling more expensive units during this quarter if you compare it to the first quarter of 2019. The volume improvement is in the Nordics with Sweden going up around SEK 0.5 billion, and the improvement is driven by the sale of housing co-ops. Gross margin comes down somewhat compared to Q1 2019, 16.3%, which feels it's still a good level. S&A is basically maintained. Nominally, we have a slight decrease in S&A here. And as you can see a very large decrease over revenue, which, of course, is driven by the rapid volume increase in the first quarter here. Coming down to operating margin of 11.6% for the quarter. And we -- in terms of the underlying margin, we can say that, that is successfully improving also compared to the comparison quarter. I move on to Slide #11, which is Residential Development by the different geographies. And here, you can see margin improvements in the Nordics, coming up from 8.9% to 11.7%. And also a good margin improvement in the Swedish RD operations isolated with the 13.8% margin. In part, this improvement is due to the volume effect. We essentially can amortize fixed costs and organization costs over bigger volume. And in part, this is because we have sold, comparatively speaking, less units of affordable character in the first quarter this year compared to the first quarter last year. In Europe, the margins are held steady. I move to Slide #12, which is the home started and sold. And here, you can see that we sold 911 units, which is up 23% from last year in the comparable quarter, and started quite a lot more units this quarter compared to 2019 with 971 units. If you look at the chart, you can now see that on a rolling 12-month basis, these 2 lines are in sync with each other, so you can say that the starts and sales in the portfolio are balanced here. I move on to the next slide, Slide #13, which is homes in production. We have had at the end of the first quarter around 6,900 units in ongoing production. Of which, we had sold already 68%. So we still have a good and high sales rate in the portfolio here. And we have a low number of unsold completed units. And with the current market situation, this is, of course, a reassuring starting point. I move to Slide #14, which is Commercial Property Development. As Anders has already described, this has been a very strong quarter. We have, in fact, also an all-time high for Commercial Development in the first quarter in terms of gains on sale. That came in at SEK 2.3 billion, driven by 2 major divestments, one in Poland and one in Sweden. We also have slightly lower S&A in the quarter if you compare it to the same quarter last year. I move on to Slide #15 where we can see that we have now in the Commercial Development portfolio assessed unrealized gains of SEK 6.8 billion, of which SEK 4.7 billion related ongoing projects. That is a fairly significant step-down compared to what we reported at the end of 2019, with the -- since we have realized then SEK 2.3 billion in gains on sale during the first quarter, that is quite natural. And those realizations, those divestments were also done to prices that were exceeding our previous internal market valuations of those properties. It's quite hard today to read the Commercial Development market. There are no transactions of any significance that going on, so it's difficult to see what the investors are transacting on in terms of yields and so on. And given this and also the expected slowdown on the leasing market, we have gone through our -- the properties that we have in our portfolio. And given the uncertainties, we'll make some revisions to assess market values to meet this uncertainty. I move on to Slide #16, which is the completion profile. And here, you can see that in the first quarter, we have 2 major projects that stands for SEK 6 billion in total investment. That is completed. Both these projects are well leased. Both of them are in the U.S. In the second quarter, we have -- we expect to complete 5 projects. The total investment value of those completions are around SEK 2 billion. And here, you can see a lower leasing rate, but this is essentially 2 individual projects where we are lagging a bit in leasing. Both of them are in Poland. In the third quarter, we expect to complete 1 project with a total investment of SEK 0.5 billion. Has a low leasing also on this, but it's a very nice project, and it's not causing us any concern. I move on to the next slide, which is leasing, Slide #17. The leasing in the first quarter was 48,000 square meters. In the rolling 12 months, you can see on the slide that we were close to 400,000 square meters. And currently, the leasing market has slowed down. What we experience is that the ongoing discussions with potential tenants that we had before the pandemic situation, they continue. But the number of new leads coming to the market are quite a lot less as we stand today. And we do experience an increased level of negotiation concerning rents and handover dates with tenants. And this especially goes for those that are to occupy retail spaces. We have a fairly low degree of retail tenants in our properties. It's mainly ground floor of some of the bigger properties. But this is what we experienced now. I move to the next slide, which is the income statement for the group. Here, you can see the total operating income from our business streams was SEK 3.1 billion in the first quarter, obviously, a significant step-up from the same number last year. Central items was minus SEK 121 million. And here, I think it's fair to point out because we have both the headquarters organization and some of our legacy businesses here. The underlying costs, organizational costs that we carry here is around SEK 150 million in the quarter. And then we have that smaller positive accounting effect on top of that. Net financials, minus SEK 48 million. This includes the financial component of the lease costs that we've said before is around SEK 70 million per quarter. And this also goes for this quarter. So there has to be another item in here that generates some positive. And that is true because we are carrying a very good balance sheet with us. And we have been able to utilize the cash in various placements. We have very good development of our net interest item in the first quarter. Taxes at 16.5% [ across the group ], which is the same as the comparable quarter. I'll move on to the next slide, #19, on the PPP portfolio. And here, this is a portfolio that we have. It's a runoff portfolio, and we are to complete these assets, and then we will transact them. And we continue to complete the assets according to plan. There's been no real event in this portfolio. And the changes to the numbers are mainly driven by time changes and time value and also foreign exchange rates. I move to the next slide, #20, on cash flow, with a strong cash flow, comparably speaking, in the first quarter. The main improvement compared to the first quarter in 2019 was handovers in Commercial Development, where we had 2 fairly large handovers in the quarter. And it is, of course, very important, as Anders already pointed out, for us to make sure that we continue to hand over properties in Residential Development and Commercial Development for our cash flow. And so far, we have had no major issues in handovers. I move to the next slide, which is Construction free working capital. As you can see on the right-hand side of the chart, we had a very good net working capital position at the end of the quarter with 15.8% of revenue or around SEK 27 billion in free net working capital. Cash flow effect from working capital in Construction was slightly negative. So there is a certain foreign exchange component in the balance sheet items underlying the numbers here. I move to the next slide, #22, on investments and divestments. And here, you can clearly see that the group is and has been for a while in a net divestment territory. Of course, we have started a lot of properties in Residential Development, a lot of units in Residential Development during the first quarter. While in Commercial Development, there's been a bit slow starts over the last few months, but works in completing and handover according to plan. Capital employed is increasing somewhat in both Residential and Commercial Development if we compare it to the end of 2019. I'll move to the next slide, on the financial position. As you can see here, we ended the first quarter with a very strong balance sheet. We had close to SEK 35 billion in equity and an adjusted net debt of SEK 5.3 billion, equity to assets ratio of 26.5%. And of course, given the situation on the market, it feels very good to go into this with such a strong equity position and low debt. And I'm comfortable that this must be very reassuring also for our clients that puts their trust in us to deliver on their most important CapEx projects. I'll move to the next slide, which is an overview of our external funding. Total available funds in the group at the end of the quarter was SEK 19.3 billion. Of that, around SEK 7.1 billion was in terms of undrawn but still committed credit facilities. And if you look at our external funding, which amounted to SEK 3.7 billion, then the maturity profile of that are represented by the bars in the graph. And here, you can see that we have maturities of approximately SEK 1.1 billion during 2020. But after that, we have no maturities up until 2023. And after the close of the first quarter, we have secured an additional SEK 1.7 billion in loans and credit commitments. So I'm quite comfortable with our current balance sheet position. Anders?
Yes. A few words about the market in the coming 12 months. One thing is for sure. It is very difficult to say how severe the impact will be and also how long -- for how long it will last. The outlook is therefore uncertain, but currently, this is our view. It is a weaker market outlook all over in all segments. Start with Construction. The country, 50 lockdowns impacting projects. We can see disruption in supply chain of materials, equipment and subcontractors. Lower demand from private clients. However, public investment into infrastructure and social infrastructure is usually a good tool to stimulate the economies, and we expect that to come eventually. Residential Development. Consumer confidence impacted by rising unemployment. This will lead to a weakening demand and impacting houses prices negatively. Low interest rates policies to stimulate the economies and the housing shortage in many markets that we experience in -- will support the long-term need for residentials. Commercial Development. Uncertainties in financial markets are making investors more risk averse and it is also limiting the access to credit. This will likely impact the transaction volumes going forward. We are also expecting a decrease in leasing activities as economies suffers. But with all the monetary and fiscal stimuli packages that have been launched at once uncertainty about how severe the impacts from this pandemic will be, there is definitely a recovery potential here. Going to the group summary on 26. Finally, to sum up things here. First quarter was very strong, but we are in a rapidly deteriorating and uncertain situation due to the pandemic. First of all, we are protecting our people and the company via different measures, and we aim at getting back in full production as soon as and as safely possible. The future will look different, and we will adapt to that new future. But in that adaption, we will still have our long-term ambition of what we want to achieve: strong financial position, improved profitability in construction, leading residential developer in our home market and grow the Commercial Property Development. With that, I would like to end the presentation and hand it over to Andre for the Q&A.
Great. Thank you, guys. Yes. Let's open up for questions. So please follow the instructions from the operator.
[Operator Instructions] We have a question from Simen Mortensen from DNB Markets.
This is Simen from DNB Markets. I have a few questions. First of all, you mentioned something that you had done some value changes to the CD assets, at least you said you were considering it. Could you please clarify to what extent that has been? And how much has been so far? And what steps have been taken in the reported figures?
Okay. Yes. This is Magnus answering your question. Thank you for your question. If I understood your question correct, you're asking how much have we changed our external market valuation on the Commercial Development properties. Was that correct?
Correct, correct.
I mean -- correct. That's not the number we're going to communicate, but we have gone through our portfolio, of course, which we always do if we have a market uncertainties to make sure that we can sort of feel comfortable with the valuations, and that has led to some changes in the portfolio. As you can see also when we report the unrealized gains and if you compare that to the number -- to the gains that we realized in the quarter, I'm sure you quickly see that it's not a huge amount that we have made. But the point I think that we're sending here is that we are on top of this matter.
Okay. And also you said in terms of adjusting and keeping volumes up, especially in CD and RD, what kind of -- how willing are you to -- and quickly, are you considering doing price adjustments for Residential Developments, perhaps vetting prices? And how important is it to keep the volumes up for you? Can you just give some coloring on that for us?
Yes. If I understand it, how important is it for us to keep up the volume? I think -- I mean -- or the long-term ambition is -- remains that we want to grow the project development as the market allows us. We have a very good position. If we start with the Residential Development, we have high sales rate in the ongoing portfolio, 68%. We have a very low number of unsold completed. So I'm not afraid to start new projects when we feel it's right. And the same is for the Commercial Development. We had a strong pipeline to start and we have the financial capacity to do that as well. So we will do it when we feel it's right. There's no rush. We don't need to rush anything here.
Just also, if you have asked the other construction companies under exposure to [indiscernible]. How is your exposure to those in both perhaps Norway and Sweden in terms of, if that company actually goes bankrupt, how much are they supplying of your total revenues in the Nordics?
This is Magnus again. Thank you for your question. Obviously, we can't give you any comments to that level of detail that you're asking for. But we, as all other major players in this sector in Sweden, are, of course, working with that company, with [indiscernible]. We are continuously reviewing the situation and ensuring that we have mitigation plans in case that should happen.
Okay. And just some questions -- my last questions will go to the construction margin in Europe. It's negative in the quarter. How much does that reflect is actually versus COVID lockdown in the U.K. versus normal seasonality? If you could just help us with that too.
Yes. In the first quarter, we have a very limited impact from the COVID-19. Usually, the first quarter is always a weaker one, especially in Central Europe here, and this is no exception. But if you compare to last year, we have increased the profitability. So we are definitely going in the right direction there as well.
[Operator Instructions] We have a question from the line of [ Steffan Youlet ] from ABG.
[ Steffan Delow ], ABG. I have one question, and that is regarding the gains from divestments of the Commercial Development. It came in at roughly SEK 2.3 billions, and you have announced the 2 divestments. Are there any more unannounced divestments in these figures that is worth highlighting?
[ Steffan ], this is Magnus to answer your question. We have in total made 3 divestments, but it is essentially 2 of those that make up the [ blunt ] of those SEK 2.3 billion.
It appear to be no further questions registered, so I hand back to the speakers for any closing remarks.
All right. Great. Thank you for that, and thank you for your attention. We will be back with the second quarter results in July. So we'll just hope for warmer weather and the pandemic to blow over. Thank you very much.