Welcome, everyone. This is Andreas Löwen, Head of Investor Relations, speaking. I'd like to welcome you to this webcast where we will be presenting Skanska's three-month report for 2020. The presentation will be held by our CEO, Anders Danielsson, and also our CFO, Magnus Persson. After the presentation, you will be able to ask questions. With that, Anders, I leave it to you.
Thank you, Andriy. On this very first slide, you see the Golden Bridge approaching Slussen in Stockholm, all the way from China. This bridge is a crucial part of the reconstruction of a very important transportation hub at the center of Stockholm, where about 480,000 people pass through every day. Let's go into the figures then, page number two. Three-month report, the first quarter performance was strong in all three business streams, both on volumes and profitability, and we reported an all-time high operating income in Q1 and also on a rolling 12-month basis. The construction stream improved profitability, volumes were strong in residential development, and profitability was maintained at a good level in the first quarter. In commercial development, two significant and very profitable divestments were signed during the quarter. We had a return on equity amounted to 27%.
However, it is also important to stress that the impact of the COVID-19 pandemic is yet to be seen. Currently, it is very difficult to say how severe the impact will be and exactly how long it will last. We are, of course, monitoring this on a daily basis and taking precautionary action in many areas. It is crucial for us to both protect the people and the company, to protect the strong balance sheet and the good liquidity. It is also of great importance. As communicated earlier, the board withdrew the dividend proposal to the AGM with the ambition to convene an extra general meeting in the autumn if the circumstances permit. Thanks to the strategic initiative that was initiated in 2018, Skanska is standing strong.
To make sure that we maintain that position long-term, we are taking actions that will allow us to adjust to the future that will look different after the COVID-19 pandemic. Page number three. In construction, revenue increased 2% to SEK 35.9 billion. Order bookings were strong in all of our markets, and we had a book-to-build of 100%. Order backlog amounts to SEK 199 billion, which corresponds to 15 months of production. Operating income increased 59% to SEK 589 million. Operating margin increased to 1.6% versus 1.1% the year before. This quarter proves yet again that we are on the right track as we continue to improve our profitability in the construction stream. The stream was not substantially impacted by the COVID-19 outbreak during the first quarter, as many projects have been able to proceed according to plan.
We currently have about 370 projects impacted more or less by either shutdown due to government decision, mainly that's mainly in the US and UK operations, or inefficiencies due to the COVID-19. This will, of course, impact us negatively for some time ahead. Worth knowing, though, is that Skanska roughly has close to 10,000 ongoing projects up and running. Our top priority is, of course, to get these projects back in full production as soon as possible and avoid additional shutdowns or reduction in execution. The extensive lockdown measures in countries outside of Sweden are now starting to impact the construction industry, and we expect a weaker market outlook, which I will come back to. However, our long-term strategy remains: selective bidding, improved commercial focus, and increased cost efficiency. Let's go into the next page from residential development. Revenue increased 59% to SEK 3.4 billion.
Both sales and stocks were strong. We sold 911 homes and started 971 homes. Profitability was maintained at a good level with an operating margin of 11.6%. Return on capital employed steadied at 11.5%. However, we can see that home sales since the COVID-19 outbreak became very serious by the end of the first quarter have slowed down. It is encouraging to see that our handovers are going according to plan, with the exception of some postponements in handovers due to some practical problems as a result of quarantines, etc. We are collecting the cash. Looking ahead, a reduction in consumer confidence due to weaker economies and increased unemployment is likely to negatively impact the housing market. Primary focus is to adjust to this new market situation, but long-term, our ambition to be a leading developer in our home market remains.
Commercial property development, two significant investments contributed to an all-time high in gain on sale, SEK 2.2 billion, and were the main contributor to the strong performance in the first quarter. Operating income increased substantially and amounted to SEK 2.1 billion. Return on capital employed was 16%. We have 37 ongoing projects, and we started only one new project in the quarter. Investment value upon completion is SEK 25.9 billion, and the occupancy rate and the completion rate is on a good level, 57% and 60% respectively. We started just one project in the quarter, but we have a strong pipeline of developments to start, and we will do that when we think it's the right time to do so. Leasing is a bit slower. We foresee a decline in transaction volumes as the uncertainties in the financial market likely will turn property investors more risk-averse.
Leasing activities will most likely also be a bit more challenging for some time to come. We still strive to grow this business stream as we believe in its long term. Next page. Order situation for the construction. Looking at the order situation, bookings were strong in the first quarter, and we are building backlog in the quarter. Bookings came in at SEK 41.3 billion, and the backlog closed at SEK 199 billion at the end of the quarter. Rolling 12 months, the book-to-build rate is 100%, so we are booking in the same pace as we are burning. Next page. Zooming in on the different geographies when it comes to booking, it is basically an increase in all areas. Sweden almost flat, but the book-to-build is over 100%, so we are building backlog.
For the second quarter per now, we have announced orders of close to SEK 16 billion. One large railway project on the west coast of Sweden and the high-speed rail project in the UK , our third largest project ever. HS2 is an ECI project, early contractor involvement, with well-known customers and executed by a very experienced team, and the risk-return balance in the contract is in a way we like it. Worth noting is that due to the current pandemic situation, we see signs of approvals of new projects being postponed by some clients. This is likely temporary, but it will likely impact us to some extent going forward. I will get back to you regarding the market outlook shortly, but now, Magnus, I will leave it to you to go a bit deeper in the numbers. Thank you, Anders.
I'll go to page eight in the presentation, which is the construction income statement. Here you can see volumes in construction were roughly in line with the comparable quarter, were down about 1% in local currencies. Nominally speaking, in SEK, it's a couple of percent up. Gross margins came up 0.7% to 6.2%, essentially reflecting the successive improvements that we have been working on for quite some time in construction, as Anders pointed out. S&A, you can see they are nominally speaking in line with the comparable quarter and also in terms of percent of the revenue. The first quarter is often, or almost always, a low-volume quarter, so the percent level of S&A is a bit higher than what we see for the remaining parts of the year. Operating margin 1.6%.
No major result-impacting events in the construction business stream in the first quarter. If I go to page nine of the construction income statement by geography, you can see that there has been a very stable development in the Nordics, with the margins in line with the comparable quarter, both for the Nordics as such and also for the Swedish operation isolated. Both Europe and US is improving. In Europe, we have a negative margin, a negative result in the quarter, but the size of the negative impact is considerably smaller than what we had last year. The reason for this, which you often see when we report in the first quarter, is that we have a fairly large seasonal effect in our Central European operations. In the US , we have successive improvements of profitability with a margin of 1.9% compared to 1.3% in the comparable quarter.
One of the reasons for this is, of course, that we are successively completing the problematic projects that we have that are causing us to burn that revenue. I move on to residential development on slide number 10. Here you can see a fairly large increase in revenue. We sold very well in the first quarter, and the revenue increase is in part due to an increase in the sold units that went up about 20% quarter to quarter. In part, it is because we have been selling more expensive units during this quarter if you compare it to the first quarter of 2019. The volume improvement is in the Nordics with Sweden going up around SEK 500,000,000. The improvement is driven by the sale of house and coats.
Gross margin comes down somewhat compared to Q1 2019, 16.3%, which we feel is still a good level. S&A is basically maintained nominally. We have a slight decrease in S&A here, and as you can see, a fairly large decrease over revenue, which, of course, is driven by the rapid volume increase in the first quarter here. Coming down to an operating margin of 11.6% for the quarter. In terms of the underlying margin, we can say that that is successively improving also compared to the comparison quarter. I am moving on to slide number 11, which is residential development by the different geographies. Here you can see margin improvements in the Nordics coming up from 8.9% to 11.7%, and also a good margin improvement in the Swedish RD operations isolated with a 13.8% margin. In part, this improvement is due to the volume effect.
We essentially can amortize fixed costs and organizational costs over bigger volume. In part, it is because we have sold, comparatively speaking, less units of affordable character in the first quarter this year compared to the first quarter last year. In Europe, the margins are held steady. I will move to slide number 12, which is the home started and sold. Here you can see that we sold 911 units, which is up 23% from last year in the comparable quarter, and started quite a lot more units this quarter compared to 2019 with 971 units. If you look at the chart, you can now see that on a rolling 12-month basis, these two lines are in sync with each other. You can say that the starts and sales in the portfolio are in balance here.
I move on to the next slide, slide number 13, which is homes in production. We have had at the end of the first quarter around 6,900 units in ongoing production, of which we had sold already 68%. You still have a good and high sales rate in the portfolio here. You have a low number of unsold completed units. With the current market situation, this is, of course, a reassuring starting point. I move to slide number 14, which is commercial property development. As Anders has already described, this has been a very strong quarter. You have, in fact, also an all-time high for commercial development in the first quarter in terms of gains on sale. That came in at SEK 2.3 billion, driven by two major divestments, one in Poland and one in Sweden.
We also have a slightly lower S&A in the quarter if you compare it to the same quarter last year. I move on to slide number 15, where we can see that we have now in the commercial development portfolio assessed unrealized gains of SEK 6.8 billion, of which SEK 4.7 billion related to ongoing projects. That is a fairly significant step down compared to what we reported at the end of 2019. Since we have realized then SEK 2.3 billion in gains on sale during the first quarter, that is quite natural. Those realizations, those divestments, were also done to prices that were exceeding our previous internal market valuations of those properties. It's quite hard today to read the commercial development market. There are no transactions of any significance going on, so it's difficult to see what the investors are transacting on in terms of yields and so on.
Given this and also the expected slowdown on the leasing market, we have gone through the properties that we have in our portfolio. Given the uncertainties, we have made some revisions to the assessed market values to meet this uncertainty. I move on to slide number 16, which is the completion profile. Here you can see that in the first quarter, we have two major projects that stand for SEK 6 billion in total investment that is completed. Both these projects are well-leased. Both of them are in the US. In the second quarter, we expect to complete five projects. The total investment value of those completions is around SEK 2 billion. Here you can see a lower leasing rate, but this is essentially two individual projects where we are lagging a bit in leasing. Both of them are in Poland.
In the third quarter, we expect to complete one project with a total investment of SEK 500,000,000. It's a low leasing also on this, but it's a very nice project, and it's not causing us any concern. I move on to the next slide, which is leasing, slide number 17. The leasing in the first quarter was 48,000 sq m. In the rolling 12 months, you can see on the slide that we were close to 400,000 sq m. Currently, the leasing market has slowed down. What we experience is that the ongoing discussions with potential tenants that we had before the pandemic situation, they continue, but the number of new leads coming to the market are quite a lot less as we stand today. We do experience an increased level of negotiations concerning rents and handover dates with tenants.
This especially goes for those that are to occupy retail spaces. We have a fairly low degree of retail tenants in our properties. It is mainly ground floor or some of the bigger properties, but this is what we experience now. I move to the next slide, which is the income statement for the group. Here you can see the total operating income from our business streams was SEK 3.1 billion in the first quarter, obviously a significant step up from the same number last year. Central items was minus SEK 121 million. I think it is fair to point out, because we have both the headquarters organization and some of our legacy businesses here, the underlying organizational cost that we carry here is around SEK 150 million in the quarter. Then we have a smaller positive accounting effect on top of that. Net financials minus SEK 48 million.
This includes the financial component of the lease costs that we have said before is around SEK 70 million per quarter. This also goes for this quarter. There has to be another item in here that generates some positive. That is true because we are carrying a very good balance sheet with us. We have been able to utilize the cash in various placements. We have very good development of our net interest item in the first quarter. Taxes at 16.5% approximately, which is the same as the comparable quarter. I move on to the next slide, number 19, on the PPP portfolio. Here, this is a portfolio that we have. It is a run-off portfolio, and we are to complete these assets, and then we will transact them. We continue to complete the assets according to plan.
There's been no real event in this portfolio, and the changes to the numbers are mainly driven by changes in time value and also foreign exchange effects. I'll move to the next slide, number 20, on cash flow. We had a strong cash flow, comparably speaking, in the first quarter. The main improvement compared to the first quarter in 2019 was handovers in commercial development, where we had two fairly large handovers in the quarter. It is, of course, very important, as Anders already pointed out, for us to make sure that we continue to hand over properties in residential development and commercial development for our cash flow. So far, we have had no major issues in handovers. I move to the next slide, which is construction, free working capital.
As you can see on the right-hand side of the chart, we had a very good net working capital position at the end of the quarter with 15.8% of revenue, or around SEK 27 billion in free net working capital. Cash flow effect from working capital in construction was slightly negative, so there is a certain foreign exchange component in the balance sheet items underlying the numbers here. I move to the next slide, number 22, on investments and divestments. Here you can clearly see that the group is and has been for a while in a net divestment territory. Of course, we have started a lot of properties in residential development, a lot of units in residential development during the first quarter.
While in commercial development, there's been a bit slow start over the last few months, but we're, as I said, completing and handing this over according to plan. Capital employed is increasing somewhat in both residential and commercial development if we compare it to the end of 2019. I move to the next slide on the financial position. As you can see here, we ended the first quarter with a very strong balance sheet. We had close to SEK 35 billion in equity and an adjusted net debt of SEK 5.3 billion, equity-to-assets ratio of 26.5%. Of course, given the situation on the market, it feels very good to go into this with such a strong equity position and low debt. I'm comfortable that this must be very reassuring also for our clients that put their trust in us to deliver on their most important CapEx projects.
I move to the next slide, which is an overview of our external funding. Total available funds in the group at the end of the quarter was SEK 19.3 billion. Of that, around SEK 7.1 billion was in terms of undrawn but still committed credit facilities. If you look at our external funding, which amounted to SEK 3.7 billion then, the maturity profile of that is represented by the bars in the graph. Here you can see that we have maturities of approximately SEK 1.1 billion during 2020. After that, we have no maturities up until 2023. After the close of the first quarter, we have secured an additional SEK 1.7 billion in loans and credit commitments. I am quite comfortable with our current balance sheet position. Anders. Yes. A few words about the market in the coming 12 months. One thing is for sure.
It is very difficult to say how severe the impact will be and also for how long it will last. The outlook is therefore uncertain, but currently, this is our view. It is a weaker market outlook all over in all segments, stock reconstruction, the country and city lockdowns impacting projects. We can see disruption in supply chain of materials, equipment, and subcontractors, lower demand from private clients. However, public investments into infrastructure and social infrastructure are usually a good tool to stimulate the economies, and we expect that to come eventually. Residential development, consumer confidence impacted by rising unemployment. This will lead to a weakening demand and impacting houses' prices negatively. Low interest rate policies to stimulate the economies and the housing shortage in many markets that we experience will support the long-term need for residentials.
Commercial development uncertainties in financial markets are making investors more risk-averse, and it is also limiting the access to credit. This will likely impact the transaction volumes going forward. We are also expecting a decrease in leasing activities as the economy suffers. With all the monetary and fiscal stimuli packages that have been launched, once uncertainty about how severe the impact from this pandemic will be, there is definitely a recovery potential here. Going to the group summary on 26. Finally, to sum up things here, the first quarter was very strong, but we are in a rapidly deteriorating and uncertain situation due to the pandemic. First of all, we are protecting our people and the company by different measures, and we aim at getting back in full production as soon as safely possible. The future will look different, and we will adapt to that new future.
In that adaptation, we will still have our long-term ambition of what we want to achieve: strong financial position, improved profitability in construction, leading residential developer in our home market, and grow the commercial property development. With that, I would like to end the presentation and hand it over to Andrea for the Q&A.
Great. Thank you, guys. Yes, let's open up for questions. Please follow the instructions from the operator.
Thank you. Ladies and gentlemen, if you wish to ask an audio question, please press zero one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero two to cancel. That is zero one to register for a question. We have a question from Kjetil Mårtensson from DNB Markets. Please go ahead. Your line is open.
Yes. Hi. This is Simon from DNB Markets. I have a few questions.
First of all, you mentioned something that you had done some value changes to the CD assets. At least you said you were considering it. Could you please clarify to what extent that has been and how much it's been so far and what steps you have been taking in the reported figures? Kjetil? Okay. Kjetil, this is Magnus answering your question. Thank you for your question. If I understood your question correct, you're asking how much have we changed our external market valuation on the commercial development properties. Was that correct? Correct. Correct. I mean, correct. That's not the number we're going to communicate, but we have gone through our portfolio, of course, which we always do if we have a market uncertainty, is to make sure that we can sort of feel comfortable with the valuations. And that has led to some changes in the portfolio.
As you can see also when we report the unrealized gains, and if you compare that to the gains that we realized in the quarter, I'm sure you quickly see that it's not a huge amount that we have made. The point I think that we're sending here is that we are on top of this matter. Okay. Also, you said in terms of adjusting and keeping volumes up, especially in CD and RD, how willing are you to and quickly are you considering doing price adjustments for residential developments, perhaps letting prices? How important is it to keep the volumes up for you? Just to give you some coloring on that for us. Yeah. As Anders said, how important is it for us to keep up the volume?
I mean, the long-term ambition remains that we want to grow the project development as the market allows us. We have a very good position. If you start with the residential development, we have a high sales rate in the ongoing portfolio, 68%. We have a very low number of unsold completed. I am not afraid to start new projects when we feel it's right. The same is for the commercial development. We have a strong pipeline to start, and we have the financial capacity to do that as well. We will do it when we feel it's right. There is no rush. We do not need to rush anything here. Also, we have asked the other construction companies on their exposure to Ninas and the Ninas. How is your exposure to those in both Perth, Norway, and Sweden in terms of if that company actually goes bankrupt?
How much are they supplying of your total revenues in the Nordics? Kjetil, this is Magnus again. Thank you for your question. Obviously, we can't give you any comments to that level of detail that you're asking for, but we, as all other major players in this sector in Sweden, are of course working with that company, with Ninas. We are continuously reviewing the situation and ensuring that we have mitigation plans in case that should happen. Okay. Just some questions. My last question will go to the construction margin in Europe. It's negative in the quarter. How much does that reflect, if actually, versus COVID lockdowns in the UK versus normal seasonality? If you could just help us with that. Yeah. In the first quarter, we had a very limited impact from the COVID-19.
Usually, the first quarter is always a weaker one, especially in Central Europe here, and this is no exception. If you compare the last year, we have increased the profitability. We are definitely going in the right direction there as well.
Thank you for taking my questions. Congratulations.
Thank you.
I remind you that if you would like to register for a question, please press zero one on your telephone keypad now. Please hold while questions are being registered. We have a question from the line of Stefan Bülow from ABG. Please go ahead. Your line is open.
Good morning, Stefan Bülow of ABG. I have one question, and that is regarding the gains from divestments of the commercial development. It came in at roughly SEK 2.3 billion, and you have announced two divestments. Are there any more unannounced divestments in this figure that is worth highlighting?
Hi, Stefan.
This is Magnus answering your question. We have in total made three divestments, but it is essentially two of those that make up the blunt of those SEK 2.3 billion.
Okay. Thank you.
Thank you.
It appears to be no further questions registered, so I hand back to the speakers for any closing remarks.
All right. Great. Thank you for that, and thank you for your attention. We will be back with the second quarter starting in July. We just hope for warmer weather and the pandemic to blow over. Thank you very much.