New financial targets for Skanska - focus on profitability
Press Release
February 14, 2002
New financial targets for Skanska - focus on profitability
Today Skanska's Board of Directors established new financial targets for the Group during the three-year period from 2002 through 2004.
The Group's new financial targets for 2002-2004
# Organic growth in net sales, annual average: 4-5 percent
# Operating margin
- Construction-related services and the Services business unit: 2.5-3.0 percent
# Return on capital employed
- Project Development and BOT 1): >/=16 percent
- The Group 1): >/= 16 percent
# Return on shareholders' equity 1): >/= 16 percent
# Capital structure
- Debt/equity ratio: 0.4 - 0.6
- Equity/assets ratio: 20 - 25 percent
1) The targets for return on capital employed and shareholders' equity also include changes in the value of the investment property portfolio on each respective measurement date (based on external appraisals carried out at the end of each year).
"These new targets may be perceived as high, but in our judgment it is entirely realistic to achieve them during the next three-year period. We must improve profitability in general, not only in unprofitable units but also in those units that are already profitable today. We must achieve the new targets without increasing the Group's risk profile," says Claes Björk, President and CEO of Skanska.
The new targets were established after the extensive strategic review of operations that Skanska conducted during 2001. Three-year business plans were drafted concurrently. The financial targets do not include major effects of any future acquisitions.
The business plans have been drafted on the basis of two financial themes, operational efficiency and more efficient use of capital:
Operational efficiency refers to improving risk evaluation and the pricing of risks in the tender offer stage, decreasing overhead as a percentage of sales and increasing productivity at the project level.
Efficient use of capital refers to decreasing the capital tied up in fixed assets (machinery and equipment) for contracting operations and increasing the turnover rate in commercial and residential project development.
The Group's incentive systems will be adjusted to better reflect the new targets. The new incentive structure is expected to be implemented by the end of 2002.
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For further information, please contact:
Peter Wallin, Senior Vice President, Investor Relations, Skanska AB,
Tel +46 8 753 88 00