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Skanska's profit falls 66% driven by £222m cost hit

Skanska’s latest financial results have revealed that group operating profit for construction activities in 2017 declined 66 per cent to SEK1.2bn (£107m).

Revenue for the construction division rose to SEK150bn (£13.4bn) in the 12 months to 31 December 2017 – a 6 per cent increase on 2016, producing an operating margin of 0.8 per cent.

Overall group revenue was up 6 per cent for the year to SEK160bn (£14.3bn).

Skanska group chief executive and president Anders Danielsson blamed the fall in profit on construction operations outside of the Nordic region, covering mainly UK, Poland, Czech Republic and the US.

These regions suffered impairment charges and project writedowns that cost the business SEK2.5bn (£222m).

Skanska’s UK, Poland and Czech Republic construction operations tumbled to an operating loss of SEK1bn (£92m), compared with an operating profit of SEK247m (£22m) in 2016.

Mr Danielsson said: “In spite of a very strong performance in the Nordic countries during 2017, profitability in our construction stream was not acceptable.

“The actions to restore profitability mentioned above are now being implemented, meaning a restructuring of the Polish operations, exiting the power sector in the US, focusing on the core business in the UK and continuing to adapt to tougher market conditions in the Czech Republic.”

Mr Danielsson revealed more details about the 3,000 job cuts the company announced earlier this month, confirming that approximately 2,500 of those would occur in its Polish operations.

He also confirmed that restructuring measures would continue to hit Skanska’s profitability throughout 2018.

Skanska 2018 forecast for its UK operations was muted, with the group predicting a weak market for non-residential construction as “Brexit continues to have a negative impact”.

The UK civils market is expected to be “stable” during 2018.

As indicated in its trading update two weeks ago, Skanska plans to scale back its involvement in PPP deals in Europe due to a ”thin pipeline”.

Skanska was one of three firms shortlisted in March last year to deliver the £1bn PF2 Silvertown Tunnel.

Skanska’s cashflow from operations improved in 2017, hitting SEK2.88bn (£250m) compared with 2016’s negative figure of SEK-1.15bn (-£107m).

More to follow…

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