Year-End Report January - December 2016

Record sales and strong earnings for 2016

October–December 2016

• Revenues amounted to SEK 1,266 million (1,010), an increase of 25 percent
• Operating profit amounted to SEK 34 million (122) and the operating margin was 2.7 percent (12.1)
• Profit for the period amounted to SEK 26 million (138)
• Order bookings amounted to SEK 1,650 million (1,988)
• Serneke series B shares were listed on the Nasdaq Stockholm exchange on November 24
• A new share issue was carried out in connection with the listing and raised a net of SEK 598 million

January–December 2016

• Revenues amounted to SEK 3,978 million (3,107), an increase of 28 percent
• Operating profit amounted to SEK 411 million (128) and the operating margin was 10.3 percent (4.1)
• Profit for the period amounted to SEK 394 million (137)
• Earnings per share after dilution amounted to SEK 21.22 (8.11)
• The equity/assets ratio was 42.7 percent (27.4)
• Order bookings amounted to SEK 5,539 million (5,094)
• The order backlog loss amounted to SEK 7,041 million (5,125)
• In June, 50 percent of the Karlastaden project in Gothenburg was sold to private equity firm Nordic Real Estate Partners (NREP)
• The Board of Directors proposes that no dividend be paid for 2016 (0)

CEO STATEMENT

Serneke’s business model and long-term business plan are delivering results –
profit in our largest business area, Construction, is rising sharply.

In 2016, Serneke took another important step towards achieving its future objectives. With the listing of its Series B shares and a bond loan of SEK 300 million on the Nasdaq Stockholm exchange, we established the conditions for the Company, its employees and its investors to all benefit from the increase in value. For me personally, as the founder and principal owner, this is a milestone and our current position is an acknowledgment of the hard work put in by many dedicated employees.Serneke is the next generation contractor. Between 2002 and 2015, our strategy has been to capture market share to reach our goal of becoming one of the leaders in our industry. We continued our long-term efforts in 2016, and consolidated sales rose from SEK 3,107 million to SEK 3,978 million, an increase of 28 percent compared with 2015. Our largest business area, Construction, contributed strong growth and good margin improvement, from 1.9 to 2.7 percent. Historically, we have managed to generate continuous profitable growth, through periods of expansion, price pressure and recession. We have invested the surplus in continued expansion of our construction activities, as well as in properties and project development initiatives where we have identified favorable potential returns.

Today, Serneke has a strong balance sheet as a result of the new share issue implemented in connection with the listing, continued strong order bookings and a motivated organization that is ready to deliver. We see good opportunities to now reap the benefits of that work. Our long-term objective remains strong growth focused on profitability, and we are convinced that correct pricing is crucial to stable development of benefit to all stakeholders. We continue to target an operating margin of at least 5 percent in our contracting operations and a return on capital employed of 20 percent in our Project Development operations.

Current demand and the fundamental conditions of the construction and property markets have not been this favorable since Sweden’s million homes program of the 60s and 70s, when central and local government authorities were largely able to finance the comprehensive construction program. We now have a market with considerably more private players, which accelerates activity in the sector and means that transactions can be made more quickly. This benefits us further in our Project Development operations where, in 2016, we advanced our positions in all three metropolitan regions, opening doors for pioneering collaborations and innovative project opportunities. We have presented ideas and proposals for many new projects, which have been very well received, and we continue working to bring these to fruition so that we, together with both local government authorities private players, can move forward with planning and development.

The housing shortage and urbanization trend are driving demand in the market and we see no slowdown in order bookings in our contracting segments Construction and Civil Engineering. The operating margin in Construction strengthened in the fourth quarter, amounting to 3.7 percent (2.0). We can see that the years in which we prioritized growth to achieve a competitive size are now paying off as we shift our focus to increased profitability while maintaining our cost awareness and commitment. We are building up our Civil Engineering operations and carried out a major action program over the year to achieve profitability. The segment’s main focus is to now derive effects from this and to show well-controlled, profitable growth in 2017.

With the prevailing conditions in our contracting segments, we view our growth model – which is mostly focused on organic growth – as our continued priority. Although this will initially be at the cost of increased initiatives, we see clear benefits in pursuing a familiar path that has proven to be successful historically. It may be necessary to complement organic growth with acquisitions to achieve our long-term strategic goals.

During the year, we completed two major transactions. With the purchase of Säve flygplats, we are creating exciting opportunities for the Group’s four segments, and their combined offering, to further develop the area and generate long-term value growth for the approximately 2 million square meters of land and associated buildings included in the acquisition. Our sale of 50 percent and the joint venture with NREP for the Karlastaden project strengthens the entire project and gives it a strong long-term platform, which will enter an exciting phase in 2017 with the detailed development plan now under review and expected to gain legal force. Satisfyingly, we note that the apartments we are offering in the Karlatornet Tower have been very favorably received, with about 80 percent of the more than 300 apartments offered to date now having been signed.

With our recent recruitment of Krister Johansson as Managing Director of Business Area Property Management, Serneke – previously recognized mainly as a skilled contractor and developer – will also, in the longer term, become known as a successful player in the property market. We will leverage the Group’s various business areas to sign long-term, secure leases, building a strong property portfolio generating favorable growth in value. 

At the end of the year, the Group had nearly 850 employees – growing by more than 100 new employees in a year once again. It is through our employees’ high level of commitment and ability to innovate that we lay the foundation for an even stronger Serneke. I thank you all for that.

Ola Serneke, President and CEO

PRESENTATION OF THE YEAR-END REPORT

Today, February 28, 2017 at 10:00 a.m. (CET), Serneke Group will hold a conference call with a web presentation for investors, analysts and media. The presentation will be in Swedish and can be followed live via webcast at www.serneke.group. Presentation materials for the presentation will be available on the website one hour before the webcast begins.

To participate, please dial:

From Sweden: +46 (0)8-5664 2690
From the UK: +44 20 3008 9803

For further information:

Michael Berglin, Deputy CEO
e-mail: michael.berglin@serneke.se
tel: +46 (0)738 101 817

Camilla Heyman, CFO
e-mail: camilla.heyman@serneke.se
tel: +46 (0)706 276 979

Anders Antonsson, Investor relations
e-mail: anders.antonsson@serneke.se
tel: +46 (0)709 994 970

This information is such that Serneke Group AB (publ) is obliged to publish pursuant to the EU Market Abuse Regulation. The information was submitted for publication on February 28, 2017, at 8:00 a.m. CET.

Serneke is a rapidly growing corporate group active in construction, civil engineering, project development and property management. The Group was founded in 2002 and today has annual income of close to SEK 4 billion and around 850 employees. Through novel thinking, the Company drives development and create more effective and more innovative solutions for responsible construction. The Company builds and develops housing, commercial buildings, industrial facilities, public buildings, roads and civil engineering projects, and other infrastructure. The Company’s customers are public and commercial clients and operations are focused on the three metropolitan regions in Sweden, Gothenburg (Region West), Stockholm (Region East) and Malmö (Region South). Serneke’s headquarters are located in Gothenburg and the Company also has offices in Stockholm, Malmö, Helsingborg, Borås, Halmstad, Strömstad, Trollhättan, Varberg and Alingsås. The Company’s Series B shares (SRNKE) have been listed on the Nasdaq Stockholm exchange since November 2016.

Further information about Serneke is available at www.serneke.group

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