New financial targets and new reporting structure
As a result of the proposed distribution of shares in Peab Industri, in future Peab’s activities will consist of construction and civil engineering operations. This are resulted in a review of the financial targets and of the external reporting structure.
Financial targets
Peab has established new financial targets in order to clearly state the group’s objectives and potential as a dedicated construction and civil engineering company. These targets are:
Return on equity of at least 20 percent (up from the previous 15 per cent)
Equity/assets ratio of at least 25 per cent (unchanged)
Dividend of at least 50 percent of profit after tax (unchanged)
The earlier targets for return on capital employed and cash flow have been discontinued.
The new targets have been elaborated based on Peab’s approach as a dedicated construction and civil engineering company with activities in Sweden, Norway and Finland. The distribution of Peab Industri will free Peab of this capital intensive business, thus reducing the company’s needs for investment and working capital and the withdrawal of the capital employed target.
Peab intends to develop its own project development, and therefore the board of directors has decided to expand the framework for possession of Project and Development Properties from the previous maximum commitment of some SEK 2,000 million to a future maximum commitment of approx. SEK 3,000 million. Peab’s requirements for the proportion of apartments subscribed for in advance and sales of commercial projects prior to project start remain unchanged.
The group’s targets will then be divided proportionately between the business areas relative to individual profitability, cash flow and operating margin targets.
Where there are major changes in Peab’s structure or external conditions, for example on the financial markets or through political decisions, Peab will modify the financial objectives as necessary.
New reporting structure
As a result of the proposed distribution of shares in Peab Industri, in future Peab’s activities will consist of construction and civil engineering operations. Peab operates in Sweden, Norway and Finland.
From the first quarter of 2007 onwards the new business areas in external reporting will be:
• Construction Sweden
• Construction Abroad
• Civil Engineering
• Trust/Management
This division is assessed to describe opportunities and risks for the dedicated construction and civil engineering company, which will remain after the distribution of Peab Industri.
Peab will report Peab Industri as an own business area until the decision of distribution. Given adoption of the decision to distribute the shares in Peab Industri by the annual general meeting, this business area will thereafter be withdrawn.
The below table shows the revised business areas based on the new reporting structure.
When establishing Peab Industri AB on 31 December 2006, there were certain minor company handovers between the Industry, Construction and Civil Engineering business areas, which means that historical values for Industry business area in Peab’s report, will diverge from historical values in the future economic information of Peab Industry. Figures have not been translated at historical values because of these handovers.
“Our financial targets are there so that parties interested in investing in the Peab share can gain an impression of the company's possibilities and potential. The high return on equity requirement in the remaining dedicated construction and civil engineering business reflects our belief in a continued good building market climate. The new reporting structure will result in easy and clear analysis of the company in the future too, " says Peab’s MD Mats Paulsson in a commentary.
For further information:
Mats Leifland, CFO Peab +46 37 10 06 Gösta Sjöström, information manager Peab +46 37 10 10
Previous press releases are available at peab.com