STOCKHOLM, Sweden, April 18, 2002 (PRIMEZONE) -- Skanska's project development strategy has been characterized by a high rate of turnover in the past five years, with the divestment of projects and properties in a value of approximately SEK 14 billion during this period. To this can be added the spin-off of the Drott real estate company in 1998, corresponding to a further SEK 10 billion in market value.
Skanska's strategic approach is primarily focused on construction-related services and project development. Real estate management is only conducted during a limited period of ownership in order to optimize the value in project development. For this reason, the managed properties will be reclassified from fixed to current assets, effective January 1, 2002, since the ownership of properties is not intended for long-term management.
Against this background, depreciation in an accounting context will also cease, effective January 1, 2002. The average rate of depreciation amounted to approximately 50 years (2 percent) on the buildings' acquisition value. The depreciation of managed properties amounted to SEK 184 M for full-year 2001. Depreciation will instead be replaced by valuation in accordance with the Lowest Value Principle (LVP), which means that the book value of each property will be either the acquisition value or the assessed market value, whichever is lowest.
The acquisition value corresponds to the book value on December 31, 2001, with additions for any write-downs made in prior years, which can be reversed (written up) if the assessed market value exceeds the book value. The write-ups and write-downs that are considered necessary will be made via the income statement and reported under operating income in core operations. In the consolidated accounts, consideration will be taken for the deferred tax that arises when there is a difference between the book value and the assessed value for tax purposes.
As previously, properties included in project-development operations will be reported under a separate heading in the balance sheet.
Adaptation to Industry Practice -- Interest-Rate Expenses in the Development of New Projects Will Start to be Capitalized
Skanska has previously booked all interest-rate expenses that have arisen in project-development operations. In order to adapt to the practice that prevails in the industry, both in Sweden and internationally, Skanska has decided to capitalize - that is, add - interest expense to the acquisition value of other production costs in project development.
The capitalization of interest expense will only be applied for ongoing projects conducted under the management of Skanska and which are considered to be value-enhancing (that is, not ordinary repair and maintenance measures) and reflect the actual interest expense. With the estimated project volume in 2002 , this corresponds to a capitalization of approximately SEK 140 M in interest expense for the full year, based on a financing cost of 5 percent. The capitalization of interest expenses ceases when the project is completed, which may be during the calendar year. The tax effect is taken into consideration in the consolidated accounts.
Financial Goals Prior to 2004 Remain Unchanged
The changed application of accounting principles will not have a major effect on the previously published financial goals for the three-year period through 2004. The financial goals thereby remain unchanged.
Comparative Data for Q1 2001
The reorganization into 17 business units was conducted during Q2 2001. Comparative data for 2001 is reported below within the current organizational structure.
THE SKANSKA GROUP JANUARY TO MARCH, 2002
SEKM Net Sales Operat- Operat- Order Order
ing ing
income margin bookings backlog
Scandinavia 8 906 -412 neg 10 384 27 238
Europe 7 098 -227 neg 12 610 38 748
USA 15 936 265 1,7% 20 416 102 139
Other markets 2 241 34 1,5% 4 752 16 738
Total construction-
related Services 34 181 -340 neg 48 162 184 863
Services 704 50 7,1% 573 410
Total Services and
Construction-
related Services 34 885 -290 neg 48 735 185 273
Project development &
BOT 348 139 39,9% - -
Central and
eliminations -497 -156 - 191 288
Total Core business 34 736 -307 neg 48 926 185 561
Non-core 82 -10 - 82 0
Total Skanska Group 34 818 -317 neg 49 008 185 560
Property Sales and Items Affecting Comparability During Q1 2002
Earnings from the sale of properties amounted to SEK 40 (2) M during the first quarter.
The Resolution real estate fund exercised its right to hot purchase the Armbaga 3 property in Boras, which, if it had been sold, would have generated a gain of SEK 60 M during the first quarter.
Profit of SEK 47 M from the sale of shares in Pandox will be reported under net financial income as "other financial items."
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