Skanska's strategy for the future
| PRESS RELEASE, JANUARY 29, 1998 07/98 SKANSKA'S STRATEGY FOR THE FUTURE * Focus on core operations, that is, construction and civil engineering-related services and the development of projects and properties. * Continued transactions to restructure the construction and real estate industries - proposal to distribute a property company valued at SEK 10 billion to the shareholders. * Increased internationalization and development of new domestic markets. * Assets valued at SEK 10 billion that are not related to Skanska's operations to be divested in order to invest in continued development of core operations. * Allocation of SEK 1,500 million in the 1997 year-end accounts, of which SEK 1,000 million is earmarked for restructuring of the Swedish and European operations. A personnel reduction of 1,500 being made in the Swedish operations. These restructuring measures are expected to yield an annual improvement in earnings totaling SEK 450 million.
Core operations Skanska's strategy for the future is an intensified focus on construction and civil engineering-related services and project development. By taking advantage of the company's expertise in its core operations, Skanska will also be able to serve a larger segment of the construction market than to date. This broadening makes it easier to meet demand in all phases of the construction process, from project development and construction to the after-market, where Skanska's European building components companies will be a major asset. "Skanska's major strength is our ability to develop and carry out projects," says Claes Björk, President and CEO of Skanska. "The new organization will enable us to take better advantage if this. The ability to delivery package solutions is becoming increasingly important. "The sooner we become involved in the process, the more our experience can benefit the customer. We shall offer our expertise from the concept stage to the operational stage in order to assist the customer in minimizing the project's entire life-cycle cost." Property projects shall be developed, built and sold at a more rapid pace than previously. "Through proper timing and management of property development, we create greater added value. It is this knowledge which separates us from a pure property management company," says Mr. Björk. "Project and property development will also enable us to carry out industry-restructuring transactions in the future."
Transfer to shareholders In the preliminary report on 1997 operations released on February 25, 1997, the Board of Directors announced that an additional transfer of capital to the shareholders of about SEK 8-10 billion would be carried out. The Board has now agreed to propose a transfer of about SEK 10 billion to the shareholders. The proposal involves distribution of a debt free real estate group - including the Drott residential real estate company, Skanska Fastigheter Riks (with properties outside Sweden's three largest metropolitan regions) and a number of properties in Stockholm - to the shareholders. Combined with the previously implemented redemption of about SEK 5 billion, SEK 15 million is being transferred to the shareholders.
Establishment of new domestic markets Skanska will continue with its successful internationalization. The Group's domestic markets - today Sweden, the United States, Denmark and Finland - will increase in number. Within the Europe business area there are several growth markets in which Skanska already is engaged in project development and where a further expansion of operations shall occur. Examples of such markets are England, Norway, Poland, the Czech Republic and Hungary. "In terms of our existing domestic markets, currently I see favorable growth potential in the United States and Finland. The Swedish market in the construction sector is still very weak, as a result of which we will concentrate most of our resources in regions where we can broaden our operations," says Claes Björk. The Group's building components companies are an important asset in its planned expansion in new markets in Europe.
Sale of assets The continued expansion of core operations will be financed by the liquidation of assets not related to core operations. Non-core shareholdings are being combined in Skanska Invest. The holdings in Scancem, SKF, Sandvik, Rörvik Timber and Boxholms Skogar - with a combined market value of SEK 10 billion - will be sold. The holding in JM will be evaluated during 1998.
Restructuring As a result of the continued weak Swedish construction market, Skanska will adjust its operations to correspond better with demand. Priority will be given to markets based on anticipated demand. This change will result in a personnel reduction of about 1,500. "It is with great regret that we are being forced to make further cutbacks in Sweden in response to the weak market," says Mr. Björk. "However, for the Group as a whole, it is, of course, a strength that we can focus on continued strong expansion in prioritized Swedish regions and in our other domestic markets. Despite the weak market in Sweden, the overall outlook for our markets is very promising." Skanska's Board of Directors today decided to allocate a total of SEK 1,500 million in the 1997 year-end accounts, of which SEK 1,000 million is earmarked for restructuring of Swedish and European operations and SEK 500 million is for cutbacks and other provisions. "I estimate that restructuring will result in an annual improvement in earnings of SEK 450 million, with full effect starting in 1999," concludes Mr. Björk.
New organization As a result of the strategy, a new organizational structure is becoming effective as of February 1. It comprises the Sweden, Europe and USA business areas - which will be active within construction-related services - and the Project Development and Properties business area. The construction-related business areas will have a close working relationship with the Project Development and Real Estate business area in order to achieve synergies and resulting competitive advantages.
Danderyd, January 29, 1998
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