It's 10 o'clock. Welcome to the presentation of Skanska's year-end results for 2017. I'm André Löfgren, and I'm heading up investor relations at Skanska. The presentation is held here in Stockholm at our headquarters, but there's also a lot of participants on the web, and also over the phone. You will all be able to ask questions after the presentation. The presentation will be held by our CEO, Anders Danielsson, and our CFO, Peter Wallin. And with that, I leave the stage to you, Anders.
Thank you, André. Hi, everyone, and before I go into the figures, I want you to look at the picture here behind me. It's the Farley Post Office, middle of Manhattan, and we are renovating that into completely new buildings. It's around the Penn Station area. And this is actually our biggest win during 2017. It's a cooperation between U.S. Building and U.S. Civil, so it's a one Skanska project. Going into the year-end report, then, overall, we have an operating income of SEK 5.5 billion, lower than last year, and we are not satisfied with the parts of the construction performance and the margin there.
So we have decided to do a restructure to increase focus on profitability in Poland, Czech Republic, focus on the core business in U.K., and also to leave some of the power segment in U.S.A., in that market. We have taken one-off costs for restructuring for SEK 1.1 billion in Q4. We also have seen project write-downs in Poland during the fourth quarter of SEK 1,400 million. We have had very strong performance in the Nordic construction units, and that has been for a while, and that's continuing, which is really important and good. We also have, since many years, very strong performance in project development.
Commercial development has outperformed many years now, and we also have seen the last few years, a lot of improvement in the residential development. And infrastructure development, it has also had a good year last year. Earnings per share, pretty much on the same level that we communicated two weeks ago, SEK 12 per share. We have a very strong financial position, so we are in a very good position, and the board has proposed a maintained dividend level of SEK 8.25 per share. If I go a bit deeper into the restructuring overview, so we have decided to reduce the size of unprofitable units, and also to units which we don't think is fit into our core operation, going forward.
So we will reduce the number of people, and that's predominantly in Poland, where we have announced that 3,000 people has to leave Skanska, which of 2,000, about 2,500 in Poland. The rest of the layoffs is spread around the different actions that we have to take. We will focus, when it comes to infrastructure development, on the U.S. market, and that is due to that we see a very thin pipeline when it comes to PPP project or OPS project in Europe, both here in the Nordic and in U.K. We're also reviewing our governance structure.
So we have created, we have chosen a new team, a smaller team on the group level, a Group Leadership Team, that will work much closer to the operating units, the business units around our footprint. So that is also... We're also reviewing the overall governance structure. So that work has been initiated, and we will continue to work with it in a comprehensive, and careful, responsible way during the spring. So we will come back to you during Q2 with that. We also have, as I said, very strong performance when it comes to commercial and residential development, so we want to grow that business. That has also been part of the strategic review during the fall. So we want to increase that operation, and we are looking for opportunity for growth there.
Going into construction, the revenue has increased with about 9% in local currencies. The order bookings has reduced, and that's due to the fact that we are more careful when we select projects that we go for, that we're bidding for. But we still have a book-to-build 101%, so we are in line with the revenue we have seen last year. We have a strong order backlog. The operating income SEK 1.2 billion in the construction stream, compared to SEK 3.5 billion last year. So the operating margin is 0.8%, so overall operating margin is unacceptable. We do perform well in the Nordics. We do perform well in the majority of the U.S. operation, but we have those isolated units that we need to improve profitability.
We have a plan for that, and we are executing it right now, hard focus on that. So we have seen write-downs in projects of totaling SEK 1.5 billion during the last year, of which the SEK 400 million which we communicated two weeks ago in the fourth quarter in Poland. We also have taken an impairment charge of SEK 1 billion in the fourth quarter, and that is write-down of goodwill and assets. And if you add them back, if you add the impairment back to the margin, it would have ended up in 1.5% instead of 0.8%. Residential development. Revenue is pretty much on the same level. The sold apartment and started apartment is slightly down.
The operating income is a bit up due to the fact that we have increased our our margins, our operating margins. We have a strong performance in all markets. We have a return on capital employed of 15.4%, which is well above our targets. We have a target, as you know, of 10% EBIT and 10% return on capital employed, and we are beating both of them. I think we, Skanska, has a good product mix. We have a good diversified portfolio when it comes to geographies. We also have a diversified portfolio when it comes to segment, which segment we are operating in. So we see less impact of an uncertain market in the in the lower segment, lower end core segment, than we do in the high end. So overall, stabilized market.
We have reduced it somewhat, the expectation going forward, coming back to that. And we also see a slower sales pace, especially in Stockholm and Oslo. But I'm confident on our position, because we have a healthy, we have a good level of sales rate in the ongoing project. We also have a few, very few, unsold completed in our portfolio. Commercial property development. It's a very good year, very good year. It's on a record high level. We had an operating income SEK 2.7 billion, gain on sale SEK 3.5 billion, including the joint venture we have. 46 ongoing projects, so which represent SEK 20 billion, almost SEK 28 billion in investment value upon completion.
We have actually started as many as 24 projects during 2017, which explains that we have a 44% pre-lease, pre-leasing rate versus 49% completion rate in those projects. The leasing activities is also on a very high level during 2017, but we also have a good opportunity going forward. We have around 1 million sq m in leasable area, leasable areas in those ongoing projects. Infrastructure development, good year. We sold divestment of A1 in Poland for SEK 1.4 billion in the first quarter. The project's portfolio net present value is SEK 3 billion, and the surplus value is SEK 0.5 billion. That's, of course, that we have sold off a lot of assets. We sold M25 2016 and A1 2017.
As I mentioned on the pipeline, it's quite thin here in Europe, so we will, going forward, focus on the pipeline in the U.S., which is encouraging. We see a pipeline there, and we'll see what the administration and the state, different states are deciding going forward. But the need is tremendous for infrastructure investment. If I look at the book-to-build, you can see here that the rolling order bookings is somewhat sliding down, meeting up the revenue in the rolling twelve, so it's again 101%. So we are, we are seeing...
We have a healthy backlog, so we can afford ourselves to be more selective going forward and focus on the project that we can see that we have a competitive advantage and that we can perform on a higher level. So it's back focusing on the core competence, because it's crucial to have the right team, being in the right geography, and having the right contract to be successful. If you look at the different regions on the order booking, it's pretty much even if you compare to last year. We either slightly below or slightly above the order bookings for compared to last year. We can also see the numbers month is 15, which is on a good level.
The U.S., duration in the U.S. is 19, which is also makes sense because it's larger project in U.S., so the months of production yet to produce is longer. And with that, I will leave it to Peter to go through the details.
Thank you. So details, we mean profit and loss. So let's start with construction, and the first and biggest stream then. We recorded SEK 150 billion in revenue, which represent a 9% increase year-over-year, the same in SEK as in local currencies. The operating income was SEK 1.2 billion, then hit by the SEK 1 billion in impairment charges made into the fourth quarter, and a SEK 1.5 billion in project write-downs. As Anders has said, this is completely unacceptable, and we are taking measures which is now manifested itself in the impairment charges also made. If we look into the various market, we can take one market segment away right away, and that's the Nordic part. The Nordic businesses are doing great, and they're really reaping the benefits from the very good markets.
The Finnish market is a market where we are seeing more and more positive signs from, where we have a strong performance. The European segment, representing Poland, Czech, and the U.K., is of course very much hit by the one-off of SEK 1 billion made in the fourth quarter. Roughly SEK 600 million is of the billion; it stems in the European area there, and it's predominantly in the Polish business. If you look into the U.K. business, for example, one business which I have overseen now, the profit and loss is actually improving quarter by quarter, and we are at a decent level. We can do much better. Czech is also doing relatively good, but the market in Czech is very tough.
So here we are taking some measures in order to improve our competitiveness in that tough market. In the U.S., the remaining SEK 400 million, then, of the one-off charge relates to the civil business. So that also means that the U.S.A. building business is doing quite okay. So that's the way it looks across the construction part. 0.8% is not a good market margin at all. 3.5% remains the target for the construction stream in operating margin terms. But it's not all bad. You have some really good businesses as well. Residential, our second stream, is doing very well. SEK 13.2 billion in revenue, which represent a reduction by 7% compared to last year. That's, that is 0% compared to last year.
That means 7% negative in volumes of sold units, but +7% in terms of price mix. The operating income amounted to SEK 1.7 billion, and you can see the margins. Here, it's easy math, and it's quite fun math. 18 minus 5 is 13, and it's quite a good operating margin we record in the RD segment. If we look into the various markets, you're gonna see the Nordics is doing well, Sweden is doing well. And with the Swedish line, you can also see that the, the, the Norwegian and Finnish businesses are doing okay within the Nordic part. Europe is also doing well, so 13% is a good level. And as you saw from the previous graph, they are coming down somewhat.
That also represent somewhat of the slower market we see in Stockholm and in Oslo, but the, the affordable segment, the affordable segment called BoKlok, is doing quite good. So that is offsetting some of the negative impact, which is then showing into stability then. So we are hovering around 4,300 units, sold and started, very much in line. And, we have a volume of 7,200 units under production, homes under production. And as you can see, we are maintaining a very strong, sales rate in our portfolio.
I would like to also comment that the process we have for starting up projects, where we are really vetting the design and costing to design, the micro market, and also achieving pre-sales rates before we start product, is very good in the current market context. We really have good control over RD business. You can also see that the completed unsold is being lower compared to last year. CD, yet another record year. SEK 11.4 billion in revenue from divestment, principally. SEK 2.7 billion in operating income. And in the income from associated companies, you can find SEK 600 million positive, and that is the joint ventures where we have sold properties during the year. That is not recorded in the revenue line. That's also, that's only a one-liner in the operating income sense.
So it's a very good business. And in terms of the divestments, only that's close to SEK 11 billion. And that means that we are doing close to 27% in margin from the sales, excluding the joint venture deals in 2017. And you can see this graph down on a rolling 12-month basis behind me. And for 2018, we are set to continue to divest at around the same level. But the margins then, is the market gonna be as strong? And also, we are also selling a newer part of the portfolio, which means we have a somewhat higher value of the land as well, which is also impacting the margins that we can get on it.
Then on the portfolio, you can see we are realizing profit, and we are taking somewhat from the balance in the portfolio, but we are gradually rebuilding it. A key component to that is the leasing. The lines you can see represent completion rate and leasing rate, and those are very much in line. But you can also see the fantastic 477,000 sq m, which represent the equivalent of 2 Freedom Towers in one year. So it's a fantastic achievement, both of creating new value and also mitigating risk in this portfolio. Last but not least, perhaps least, infrastructure development. Here we have sold the last parts of our wind power plants in the fourth quarter, which gave sort of a little bit uptick on the operating income here.
The year started with the sale of A1 that Anders has talked about. If you look into next year, we will not have any pieces to sell. We have four projects in the portfolio, and they are not mature to be sold. And that means that the return from the four recurring revenue from the four products that we have in the portfolio and the cost of building projects now only in the U.S. market, that's gonna be even-steven, more or less. So don't expect a strong positive EBIT from infrastructure development for 2018. The portfolio is shrinking as we are selling off, so we realized SEK 1 billion in value, and it's knocked down the value by 0.9, so you see it makes sense.
We are continuing to de-risk the portfolio and work to enhance the values until we are going to sell it. So putting it all together into the group, and here I would like to talk about then the operating income of SEK 5.5 billion includes the SEK 1.1 billion in charges. As I said, SEK 1 billion is pointed into the construction part and roughly SEK 100 million into the central part. We are operating with a very strong handle on the cash and cash management. And so we are operating all of this with a growing product development portfolio with a positive financial items line.
Taxes is then 11%, and if you look into the U.S. tax situation now, we have not incurred any special one-offs relating to the changes in the federal tax rate from 35% to 21%. With the change, that will push down our tax rate in our U.S. operations from around 40% down to 24%. On a group level, it's gonna go to be roughly 16% weighted. So put that into on your Excel sheets. It's gonna be a good tip of the day. But just represent then, we've talked more about the one negative one-off effects from the U.S. tax rate impact. Just think about the size of the U.S. businesses in Skanska and the benefit we will have from this tax change.
I would also like to touch base on the six hundred million that we have told, talked about that we will incur during the course of 2018 on the back of the actions that we have seen. So the SEK 600 million, you can plunk in 400 of those into this, the European construction part. This is restructuring charges for laying off people, principally. Then the remaining 200 is roughly 100 in infrastructure development and 100 on the central line. That is what you can expect. But this is the actions that we have identified so far, and it's principally lay off of people.
The other part I would like to mention is what to expect from the revenue, from a group point of view, with the strategic actions that we are now decided and that we are now executing. That will roughly push down the revenue line, top line, by roughly 9% over two years, 9%. And it's a mix of businesses to be exited and regions to be closed down. And then, of course, we need to complete the project, so this downward will be sort of gradual. All clear, I hope. Another thing which is clear is the very strong cash flow we see in the fourth quarter. And we have a very strong working capital in construction continuously. And then also on top of that, we have a sort of a balanced divestment, investments in our development streams.
So on the free working capital in construction, you can see that we have a quite stable in terms of the revenue. Anders talked about the order situation and the gradual decrease of the order bookings is also sort of giving somewhat of a... That deceleration is giving somewhat of an impact also, if you look on the working capital over revenue, the green line there. And the investments is continuously, as planned, going to increase in the development streams. And you can also see that in December, we did sell the M25, which means that we handed over M25 in the beginning of 2017.
But that inflated the number in ID, as you can see from that line. So the increases in residential and commercial is quite substantial and quite according to plan. Now, my friends, this is the last slide I have to present here. It's the last slide of this presentation, and it's the last slide as 28 quarterly presentation as the CFO of Skanska. I wish to thank you all, and I have the privilege to work with all of you over my 18 years while in Skanska. Thank you.
Good. Okay. I will go into the market outlook, then we can go back if there's any question on the other ones. The market outlook on the construction stream, start with the Nordics. Very strong non-residential and stable residential building market in Sweden.
We see a stable building market in Norway and Finland, a very strong civil market in Sweden, and also strong, strong market in Norway, but with fierce competition. We also see a lot of competition here in Sweden from other parts of Europe. Finland is slightly improving. It's a stable market with a little encouraging outlook. Europe, we go to Europe, Poland, the building market is stable. The Brexit, we are monitoring that very carefully, how the impact will be on the U.K. non-residential. We can see it, some implication, but, not a big drop yet. Stable civil market in U.K. and Poland, and a weaker market in the Czech Republic, where we need to adjust. U.S.A. continues to be a very good market, but also here, fierce competition. Go to the residential development.
Here, we have lowered the outlook with one notch for the Nordics, so it's more uncertainty. Sweden and Norway are stable, but it's a slower sales pace, especially in Stockholm and Oslo. The other parts of our geographies are more stable, and also the affordable segment is also pretty much in line with 2016, which was a record year when it comes to residential construction and residential development. Europe, robust market in Central Europe, so no change there. When it comes to commercial development, in general, the tenants and investors, there we can see a strong demand, and the vacancy rates where we operate are low. The Nordics, high interest from investors and low vacancy rates, especially in Sweden. Finland is improving also in this area.
Europe, strong demand in Poland and also improving in other parts of Central Europe. U.S.A., strong investor appetite and good tenant demand. Here, we're also looking for new opportunities in new cities. Infrastructure development, strong market for PPP projects in the U.S., but the competition is considerable. It's a lot of companies who want those—want to go for those projects. A very thin, as I said earlier, very thin pipeline in other markets where we operate. Okay. Before we start the Q&A here, I want to present the new Group Leadership Team. Here are the people that are going to lead the company going forward. I've stepped into my role here in the first of January, and I will have a direct reporting line to the European construction units, and also be responsible for communication and operational efficiency.
As the new CFO, Magnus Persson, he used to be the CFO recently in Skanska Sweden. He will take on all the normal CFO sort of staff units, but also adding to him risk management and information technology. This is effective as of tomorrow, so I want to thank Peter for all your years and all your contribution to the company. Thank you. On legal affairs, Caroline Fellenius Omnell. She keeps responsibility for legal, also adding on the ethics and green and CCI to her responsibility. Richard Kennedy, previously the BUP, Business Unit President for U.S.A. Building. He's heading up the U.S. operation now, the U.S. construction units and infrastructure development, and also he's taking on the safety responsibility for the whole group.
Claes Larsson, Executive Vice President for the Commercial Development Units we have in Nordics, Central Europe, and U.S. He is also adding on the BoKlok Housing, which has been very successful during the last few years. And Therese Tegner, stepping in as a EVP for human resources. She used to be the HR Director for Skanska Finland for many years. So this is, we have created a smaller team than before. We are going to work more closely to the operating unit, the business units, and we are pushing out responsibility and having them more accountable and responsible for performing the business and also improving the business. So this is, well, and that's also why we are reviewing the governance structure on AB level. With that, I leave over to André.
Thank you. All right, and I will leave it over to you guys. Time for questions and thoughtful answers as well. Let's start with the audience here in Stockholm, then we will hand it over to the web and the phone conference. So please state your name and the company you represent, and ask your question. We have microphones running around in the room as well, so just raise your hands, please. Shy audience today? All right, then, in that case, we will leave it over to the phone conference and see if there are any questions online.
Thank you. Ladies and gentlemen, on the telephones, if you have a question, please press zero one on your telephone keypad. And we'll have a brief pause while our first questions are registered. May I remind you that if you want to ask a question, please press zero one on your telephone keypad. And our first question comes on the line of Erik Granström of Carnegie. Please go ahead. Your line is open.
Thank you very much, gentlemen. I had a few questions. My first question was basically to Peter, and your comment on the expected drop in volumes. You were talking about 9% over two years. Could you clarify that? Is that construction volumes, or is that group volumes that you were talking about?
Hi, Eric. It was group volume I was talking about.
But I assume that the majority of that will be within construction, because that's where you're doing the most of the restructuring in general.
Correct.
All right. Thank you. And then, and also sort of a detailed question on ID. Is it... Given the fact that you're not expecting to divest anything for next year, should we expect the fact that ID could do simply a negative result next year? Or is it, is it also the fact that you, you do have some sort of revenue running through the business stream that means it shouldn't, it should at least break even?
I think you should be expected to break even, but on quarter-by-quarter basis, could fluctuate around the zero, depending on the level of bid costs and recurring revenue from the projects.
Okay, thank you. And my final question then is regarding what you were talking about, the your expansion plans or plans for growth within the development operation, excluding ID then, both RD and CD. Could you explain a little bit, where do you see the growth opportunities within RD, and where do you see the growth opportunities within CD? Thank you.
I can comment on that. When it comes to RD, we are mainly focusing on our current geographies. But, of course, we can also consider that when we have a construction footprint. But mainly it's in the shorter term, in a few years ahead, we are focusing on the core, the current footprint. When it comes to commercial development, we can see the biggest opportunities for growth are in the U.S. So we are looking at a few cities on the West Coast. So we'll come back, but no decision has been taken yet, so we will come back to that.
Okay, thank you. Those were my questions.
Thank you. There are no further questions on the telephone lines at this time.
All right. Was very clear and crisp then, the messages. With that, we thank you all for listening and for your attention, and see you at the, what's that, in May, sometime in May for the first quarter report of 2018. Thank you.