Skanska Investment Story Profit with Purpose. We build for a better society. Transbay Transit Center, San Francisco, USA

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1 Skanska Investment Story Profit with Purpose We build for a better society. Transbay Transit Center, San Francisco, USA

2 Why invest in Skanska? Skanska is a market leader focused on select home markets Supported by strong trends in demographics, urbanization and sustainability Focus on green construction, health, safety and ethical business practices with a competitive offer Our financial strength, combined with deep expertise, enable us to meet the requirements of the largest and most complex assignments and an attractive business model Positive cash flow from Construction is continuously invested in well-defined project development for enhanced returns that creates value for shareholders, Our business model has provided a history of strong returns and consistent dividends May 2018 Skanska Investment Story 2

3 Skanska in brief One of the world s leading project development and construction groups Operations in the Nordics, Europe and USA 2017 revenue of SEK 161 bn 40,000 employees (largest shareholder group 1 ) Listed on Nasdaq OMX Market Cap SEK 70 bn Our four business streams Construction Project Development Residential Development Commercial Property Development Local presence, global strength Infrastructure Development USA 36% 1 % of total revenue at Dec 31, 2017 (R-12) United Kingdom Norway 22% Denmark 42% Sweden Finland Poland Czech Slovakia Republic Hungary Romania 1 Combined with Parent Company holdings of Series B treasury shares for future delivery to Skanska employee ownership program (Seop) Well diversified Revenue* 6% 8% 86% % of total at Dec 31, % 18% EBIT* 14% Construction 26% Residential Development Commercial Property Development Infrastructure Development May 2018 Skanska Investment Story 3

4 A history of competitive returns ROE Dividend Total Shareholder Return vs. indices (5yr.) 45% 14 10% 18% 40% 35% 30% 25% 20% 15% 10% 5% % 8% 7% 6% 5% 4% 3% 2% 1% 16% 14% 12% 10% 8% 6% 4% 2% 7% 6% 5% 3% 10% 11% 11% 8% 0% Extra dividend, SEK % 0% Skanska B SIX Portfolio Index SBI* DJ Titans Con & Mat Ordinary dividend, SEK Dividend yield % *SBI: Strategic Benchmark Index consist of companies that, taken together, reflects Skanska s operations May 2018 Skanska Investment Story 4

5 Key market trends and drivers Urbanization GDP growth The urban population is growing all over the world, with an average of 70 percent of the global population living in urban areas by 2050 compared to 50% in All of Skanska s markets are above that average and have a higher degree of urbanization. The global upswing in economic activity during 2017 was also noticeable in Skanska s markets. The Central European countries continued to perform strongly, while the Nordics showed synchronized growth. In the USA, the pick-up was driven by the recovery in business investments. The only country reporting slightly slower development was the UK, due to Brexit uncertainty. May 2018 Skanska Investment Story 5

6 Key market trends and drivers Public spending Nordics home supply 250,000 D C+ D- 200, , ,000 D+ D D+ Our current levels of investment fall far short of even what is needed just to keep our existing roads, bridges and transit in good condition. Anthony Foxx, U.S. Transportation Secretary 50, E Annual urban population increase Homes started, per year Growth in Nordic urban populations continuous to outpace home construction in the region. Skanska targets the more resilient affordable and core segments of the Nordic residential markets. May 2018 Skanska Investment Story 6

7 One Skanska business model The free working capital in Construction combined with the profits generated by the Group enable the financing of investments in Project Development Revenue from external customers Construction Revenue with associated contract profits Investment opportunities Internal contracts are generated by investments in Project Development Project Development Development gains are generated and are realized upon divestment External financing Operating margin Return on capital employed Return on equity Dividend May 2018 Skanska Investment Story 7

8 Aspirations 2020 Industry-leading total shareholder return Balanced value creation between Construction and Project Development Recognized as a preferred partner for innovative and green solutions Living our values and recognized as a value-driven company building for a better society An injury free and ethical environment The most attractive employer in our industry A company fostering One Skanska and high performing teams Improved operational efficiency May 2018 Skanska Investment Story 8

9 Updated Business Plan Focus on profitability in Construction Controlled growth Further enhance risk management Higher degree of early involvement Continued focus on working capital Stable Residential Development Controlled growth Design to cost Grow BoKlok (Skanska-IKEA joint venture) Establish RD Europe in Warsaw Expand Commercial Property Development Increase investments Select additions to landbank Drive cost efficiency Consider expansion in CEE and US Leverage Infrastructure Development business model Maximize values in portfolio and divest mature projects Grow presence in USA Downsize European operations May 2018 Skanska Investment Story 9

10 Improving Construction operating margin With Construction stream at 86%* of group revenue, restoring target EBIT margin of 3.5% will be key value driver Downsizing operations with continuously low profitability as well as eliminating those no longer strategically important Streamlining management structure Decentralize organization and increase accountability at unit levels Bring management closer to operations, customers and markets Further improve risk management and cost structure by strengthening controls and processes where necessary * at Dec 31, 2017 (R-12) May 2018 Skanska Investment Story 10

11 Increasing value contribution from Project Development Group EPS vs. unrealized Project Development gains Per share Group EPS Unrealized gains per share, Product Development May 2018 Skanska Investment Story 11