Earnings Call: Q4 2020

Feb 5, 2021

Hey, hey, everyone. This is Andre Loehgen, Senior Vice President of Investor Relations, speaking. And I would like to welcome you to the presentation of Skanska's year end report for 2020. And the presentation will be held, as usual, by our BO, Anders Januson and also CFO, Magnus Persson. And after the presentation, you will be able to ask questions. And with that, I leave it to you, Anders. Thank you, Andrea. If you look at the first slide here, you can see the project in Seattle, 2 venue, which we divestiture in the Q4 with a very high profit. So go on to the year end report. Next slide. Overall, Skanska delivered record high profit, the highest ever in our history. And the earnings per share was SEK 22.46 per share. And we also managed to increase the margin in construction. We'll go into that in detail later here. And return on capital employed, way above our target of 10% in Project Development. That goes for both Residential Development and Commercial Development. And return on equity, 26%. You should compare that to our target of 18%. So solid performance and also solid improvements. Construction steadily improving despite the COVID, so our employees have been able to, in a safe way, keep our projects up and running. GMM that's very impressive. Residential Development came back really strong here after the summer in the 3rd Q4. So volumes are very strong and also profitability is solid. Commercial Property Development, we have a record high divestment gain, the highest ever here as well. And we have a strong cash flow, very strong financial position. And we have the board has proposed a dividend of total SEK 9.5 per share, and that includes SEK 6,500,000 in ordinary dividend and an extra dividend of SEK 3 per share. In Construction, we have decreased revenue, 10% if you look at the local currency. But we have been good in with the cost control here. So we have enable to keep up the margin and even improve them. Order bookings, close to SEK 150,000,000,000 for the year on the book to build of 107%. And actually, in the last quarter, we had the 117 percent book to bill. So we have a healthy backlog. We'll come back to the detail later here. And as I said, the operating margin for construction, 2.5%. The last quarter was 3.3%. So improving despite the COVID pandemic that hit us last year. Solid performance overall. U. S. Operation continued to improve the profitability. Here in the construction stream, our strategy remains. We are selective in bidding. We improve the commercial focus in our projects And also continue to have cost efficiency and strategic action remains, focusing in the UK operation, adapting to lower volumes in Central Europe due to the market. And also additional measures has taken place here in parts of the Swedish operations to improve that going forward. If we go to Residential Development, revenue increase for the year. We were also able to increase both the sold homes and also the started homes for the full year. And here, we could see that the rental homes increased the most. Operating income, SEK 1,500,000,000 and we have an operating margin of 11.8%. Here we have a target of 10%, so it's above the target there. And return on capital employed, 12.8%, also here above our target. And we managed to maintain good profitability and return levels. And we also started our first booklog project In the U. K. And our ambition here, as we talked about earlier, is to ramp up that business. It has been well received, and we're starting to build the land bank here, and our ambition is to start more projects going forward. And overall, we have a strong land bank in our market. So we have a good land bank in the right location, and we have the financial strength to start new projects, which we will do. And in the longer term, of course, if we see higher employment level, that's a concern. But the structural shortage of home, that goes for all our markets. Let's go into the commercial property development. Operating income, SEK 3,900,000,000 and the gain on sale, again, record high SEK 4,750,000,000 and return on capital employed, SEK 11,900,000,000 above our target. And today, we have 31 ongoing projects, which corresponds to SEK 17,400,000,000 upon completion. The occupancy rate and the completion rate is in a balanced way. You should always strive for having those in balance, which they are. And they are also on a good level, so we can start new projects there. GM. In 2020, we started 10 new projects in the commercial property development. The leasing has been a challenge During the year, it has been slow. Our the market for leasing has been due to the has been slowed due to the tenants potential tenants are hesitating before they sign the contract. And it's also a challenge in some of the markets where there have been heavy lockdown. It's a challenge to even show the potential tenants the facilities. So that's a fact, and I think that will remain during the pandemic. But we still have good dialogue with the tenants. So it's and that has been the case in the 3rd Q4. So There's still demand for our facilities. That's clear. And we can also see a solid appetite from investors. And there you look for high quality environmental friendly facilities and offices. And one proof of that is, of course, the divestment we made in the Q4 in Seattle. If I go into the order situation in construction, you see here that we have overall a book to bill of 177 percent. You can also see that The revenue is down 12%, 10% in local currencies. And the order bookings has actually increased during the year. And we have order backlog of close to SEK 180,000,000,000, which is on a good level. I can go into the next slide and see the details of the order bookings. The Nordics overall, 106% book to build. We have teen months of production there, good position. Europe, very high order bookings for the year. We have a book to bill of 166 percent 20% month of production. Of course, the High Speed 2 project in the UK earlier last year is part of this. In the U. S, somewhat slower order bookings. But on the other hand, if you look at the amounts of production, 2017, we are still in a good place there. So overall, I think I'm confident that we have a stable and solid order backlog. And I also think that today, the order backlog, we are in a better place. It's more stable. It's not shaky in the project overall, and that's good for the future, of course. With that, I'll leave it to Magnus to go through the details. Thank you, Anders. If we move to the next slide, which is the income statement from construction, You can see the revenues, as Anders pointed out, is down 12% year over year in Swedish krona, so slightly less down in local currencies. 4th quarter revenues were down 19% in Swedish kronas. And of course, we started the year We came into the year of 2020 with a higher burn rate then. So then the sort of lower end average is then 12%. We have a good order backlog, and we booked a good amount of work during the year, which is, of course, very positive given that we're deal in the middle of a pandemic and the market is a bit uncertain in that sense. Gross margin, 6.7%. Glad to see it's moving in the right direction. And of course, all the efforts we have taken Just moving it over there. Looking at the 4th quarter isolated, we were at a stable 7.5%. So That's very good to see that. We managed to maintain our sales and administrative expenses. As you can see here, 4.2% over the year, same number also in the Q4. And we have been working very hard with the cost structure throughout the construction operation. And I think this is also evident when you witness and you can see the revenue decline and the fact that we're still maintaining the overhead in relation to revenue here at the same level. Operating margin then comes up 2.5% compared to 2.4% in the last year and in the quarter isolated 3.3%, which is the right level, and we're moving slowly according to the profitability improvement plan we had. I should also say here, when you look at the result and compare it to last year, we had a couple of fairly large one off impacts, one in the Norwegian operations of around SEK 200,000,000 positive. And then we had the goodwill write down in the U. K. Operations in the Q4 last year. If we go to the next slide, we can look at distribution of the operating income and the resulting margin over the different geographies then. Starting with the Nordics, we delivered 3.6% operator margin, down from SEK 3,900,000,000. And of course, if you want to make a fair comparison here, you need to take into account the positive impact we had in 2019 from the one off in the Norwegian operations then. Sweden, 3.2% versus 3.8%. Obviously, this is not a profitability level that we are satisfied in quarter isolated 3.3%. It's still the same areas that we are working with, as we have reported on before, which is the residential construction business in the Stockholm area And our industrial operations. We have taken a lot of actions to come to terms with these matters. Unfortunately, the resulting profitability improvement have taken a longer time than our original ambition to materialize there. If we look at the European part of the business, we see 1.3% operating margin for the full year, 2.5% in the Q4 isolated, which is a lot better than the NOK 0.2 last year. And also here, you need to recall that last year, we had write down of goodwill in the UK, if you want to make the comparisons here. If you look at the U. S. Operations, 2% operating margin versus 1.5% and in the 4th quarter, 2.7%. So very clear here that this operation is definitely moving in the right direction after all the measures that we have taken. Part of it is sort of a solid underlying improvement of the works we are taking in and the risk profile of those jobs And also the fact that we are successively reducing the amount of remaining dead revenue that is running through our books and diluting Gjindar. So overall, a very positive development. If we go on to the next slide, we have Residential Development. You can see the volume here was good, a little bit above SEK 13,000,000,000 for the full year, slightly up from last year For the full year then in the Q4, we had lower revenues if we compare to a significant amount of rental units that were sold in the Q4 of 2019. Gross margin, 16.7%, a very healthy level, also that up from last year. And we're keeping the sales and administrative costs very well in check here, as you can see, at 4 point 9%, resulting then in an operating margin that is north of our target for this business. We're coming in at close to 12%, up from last year. And in the quarter isolated, very, very strong quarter, 13.5%. In these numbers, there are no major effects from any land sales or other types of things that would sort of the The way you should see the result, but this is actually where we have been trading this business now, both through the year and in the 4th quarter. So again, a very solid performance from Residential Development. If we look at the different geographies, you can see that all parts, Nordics. In total, Swedish Residential Development business isolated And the Europe are above the targets of 10%, which is of course very good there. And the same goes for the 4th quarter isolated. We can jump to the next slide, which shows you the homes started and sold. As you note, we have commented on this couple of quarters that we have the ambition to increase our volumes of ongoing projects somewhat. So it's good to see here that we managed to start more projects now during the year 2020 We did in 2019. And then we should recall that especially during the spring, a few months during the spring this year, of course, Any type of commitments into new projects were heavily scrutinized by us. So we think this is a good development. Homes sold, also that a little bit better. And if you do the math and compare the number of sold units to the revenue, you would see that Excluding the rental sales that we had, we are also increasing the revenue we get per sold unit a little bit. We had SEK 3,300,000 per sold unit in 2020 compared to SEK 3,200,000 per sold unit in 2019. We can go to the next slide and look at the homes in production. Here you can see we have just north of 6,900 units under production, which is then a bit down from the end of 2019. We've had 7,100 units. But more importantly, if you look at the graph a little bit above, You can see that the last three quarters, we have been successively increasing the number of homes in production, and that is what we would like to see here also. We have an organization that is geared for a slightly higher volume than this. We have sold 72% of the units that we have in production. This is a high number. It's, I'd say, on the upper end of where we would like to have it. It is important that we don't have too much already sold of what we're producing because we need inventory to sell from also. Number of unsold completed units still very low, 154,000,000, which is then roughly 2% of the total ongoing portfolio. So that's very solid. If we move to Commercial Property Development, as Anders has pointed out, a record year, SEK 4,800,000,000 in the gain from divestments, very, very strong and of course, very big contributors to this great result are the divestments of Sonae United and then very late in the year 2 and you in Seattle. If you move further down in the P and L, you can see that we have also adjusted the value of a couple of properties. And these are properties that we have sort of talked about before. It's 2 properties in the Houston Energy Corridor Just outside of Houston. It's a very, very challenging submarket, and we have decided to adjust the value downwards of those two properties in the 4th quarter. If we move to the next slide, you can see that we have in the portfolio today unrealized the gains of approximately SEK 6,300,000,000. You can compare that to the previous quarter where we had SEK 8,000,000,000. So the difference there is SEK 1,700,000,000. And we have then during the quarter realized SEK 2,100,000,000 in gains. So that is sort of a testament to the underlying value creation that we have in the business there. So that's very good. Then if we move to the next slide, you can see the completion profile of the ongoing unsold entities we have. We completed 9 projects in the 4th quarter that then moved from the blue bars to become orange, so to speak, on the far left side of the graph here. And the total amount of ongoing unsold properties, total investment of those is approximately SEK 13,000,000,000 and we have completed unsold properties of approximately SEK 7,200,000,000 then. And of course, the reason that the orange bar is higher than usual is partly due to the fact that It has been a challenging year when it comes to leasing. And of course, we do not want to sell properties that aren't lease to the right level because that would mean that we would sort of forego profit in those. And we have very good properties, And we feel confident with not rushing to the sales exit, so to speak, but instead make sure that we extract the full value out of these properties. And in addition to that, there are also commercial reasons to why we sort of not sell immediately when they are completed. If projects are multi phased, for instance, and they are heavily integrated between phases. So there's a good reason to sort of not go and sell it even if it's 2 different properties So this has nothing to do with the with that there would be a hesitance among investors. There's very good demand from And the yield that we obtained and what we witnessed in the market, they are still very low and very strong here. So And overall, we have a good surplus value in the ongoing projects. If you go to the next slide and look at leasing. Of course, the year has been characterized by a challenging leasing environment. So there's no surprise in that. Then I think towards the latter part of the year, we did lease 98,000 square meters in Q4 isolated, which is a good quarter by sort of any standard. And that's a testament to that the properties that we are developing are very much in demand there. And of course, it's a little bit difficult to separate the year end effects of closing these leasing transactions from an improvement in the underlying market, and we will get a bit wiser in the Q1 on this end. And I would also like to add that we do not I mean, we are in a lot of discussions and a lot of negotiations With potential tenants, of course. So we know their intentions very well. And we do not experience any clear consensus in the tenant collective, so to speak, on what will the future office demand look like. There's no clear change in the tenant preferences on the back of the pandemic here. If we move to the next slide, we have the group income statement. And operating income from the business streams, SEK 8,000,000,000, SEK 9,000,000,000. And then we have the central line, plus SEK 2 point SEK 8,000,000,000. That's a number you're not used to seeing on that line. And of course, in this, we have the gains from the divestment of Elizabeth River Crossings in Virginia. That in Virginia. That divestment gave us a gain of SEK 4,100,000,000 that are accounted for here in the Central Stream. Then you know that we have central costs in here. And in addition to that, we have what which we do every year, a reassessment of the risks and costs associated with closing out our legacy portfolio and asset management business. And against this, we have decided to take provisions to the size of SEK 700,000,000 in the 4th quarter. That takes us down to the operating income SEK 11,900,000,000 in net financial items that are a bit higher than the last year. There's two reasons to that. One is that we are having a slightly smaller portfolio of ongoing development projects. And that means that we're capitalizing the lower amount of our interest costs into those projects. And the other reason is that on the back of falling interest grades. We of course have a longer maturity on the average in our loan portfolio than we have in our financial deposits. So we're more negatively impacted we're quicker negatively impacted by on the income side than on the then we're positively impacted on the loan side by falling interest rates there. Taxes, minus SEK 2,350,000,000 makes up 20% tax rate and a 22% tax rate in the quarter isolated, quite a lot higher also here than what you're used to seeing. But this is on the back of the divestment of 2 and You And Elizabeth River Crossings. Both of these were obviously in the U. S. Fiscal jurisdiction, and that is a high tax environment for us. It's the market, the single market that has the highest nominal tax that we are operating in. So that's the reason to the higher tax amount here. If we move on to the next slide, you can see our PPP portfolio. And obviously, this the movement here is driven by the sale of the Elizabeth River Crossings. What we have communicated, we sold this for SEK 5,500,000,000. And if you look at the top line here, you can see that the present value of cash flow from the projects moves from SEK4.9 billion down to SEK2.2 billion. So it's pretty obvious that we had a very cautious valuation of Elizabeth River Crossings in our valuation here and also, of course, in the carrying amount. So given the small size of this portfolio We have a carrying amount of SEK 700,000,000 approximately at the end of 2020. This will be the last time we have this slide in the quarterly result presentations, but you will find information going forward, of course, in the quarterly reports. If you move to the next slide, you can see our cash flow development. And here, I think it's important to point out, on the back of the super strong cash flow development, We had both in the Q4 and the strong development we had through 2019 up until today that we have been in a very strong divestment cycle from our property development operations here. And that is, of course, what is giving us this strong cash flow. And we are we have an organization and we have ambitions in the project development to sort of grow this. So this will likely be we will not see these high levels sort of going into the next year as well. If you move to the next slide, you can see the free working capital in construction. We ended the year with an 18% working capital over revenue in Construction, that is the highest number we have ever seen. And of course, that gives us access to approximately SEK 25,000,000,000 in Capital to Employ elsewhere. Given where we are, both in the sort of the business cycle and the very strong performance in this KPI. We are very hesitant in sort of extrapolating this situation into the future. You can go to the next slide and look at investments and divestments. And circling back a bit to what I said on the cash flow, here you have a maybe an even better illustration of our net divestment part where we have been in the cycle then since, say, late 2018 up until today. And We have geared ourselves with the organization and the ambitions to increase investments again here. So we have a very good pipeline to do so of investment opportunities. But of course, every project have to be have to meet the commercial criteria on its own before we decide to start them. But it's clear our ambitions are to backfill the project development portfolio. If we look at the bottom here, you can see the capital employed, SEK 44,500,000,000 at the end of 2020, which is then slightly lower what we had the year before. All of that is driven by Commercial Property Development. If you go to the next slide, you can see the funding situation of the group. We have access to SEK 27,000,000,000 of which And it stands for SEK 7,500,000,000. And here you also see the maturity profile of our loan portfolio. And we have smaller maturity coming up this year. And after that, we have nothing like that up until 2023, as you can see here. So very comfortable situation here. If you move to the next slide, we have the financial position for the group. We close the year with total assets amounting to SEK 125,000,000,000 and an equity position of close to SEK 39,000,000,000, Which then gives us an equity asset ratio of 31%, which is a very strong balance sheet here. We have plenty of capital And a good very good amount of financial capacity to put into play. Adjusted net debt or if I should call it adjusted net cash now came in at NOK 16,000,000,000 at the end of the year, up from NOK 3,200,000,000 at the end of 2019. Anders. Thank you. So let's go into the market outlook for the next 12 months. So starting with the construction, we can see a bit of a mixed picture when it comes to the building, the commercial building, the residential construction. We still believe in a slow market going forward. We could see we can see in the commercial side that our clients, they are postponing projects due to the uncertainty in the market and also because the leasing activities is slower. And in the residential construction, we can also see that the fewer starts of residential construction. We believe that for the next 12 months, weak market. On the other hand, we believe in a continuous stable civil market. We can see that in the Nordics and Europe, We actually believe that the uncertainty in the U. K. Has reduced significantly after Brexit. So we can see that projects in pipeline. They are actually started, which is encouraging. In the U. S. Civil market in the U. S. On the other hand, we believe in the more short term, 12 months ahead, slower market. Of course, we noticed all the infrastructure announcement for investments in infrastructure with the new administration. But it will take some time before that hits the market and we can bid for them. And in the Residential Development, we believe in a continued stable market. It's picked up really good here in the second half of twenty twenty, and we believe that to continue during 2021. The commercial development. On the other hand, we believe in a weak market due to the tenant are still hesitant. On the other hand, as we have talked about here, the investor appetite are still solid. It's a low the interest rate and stable credit markets, and we expect that to continue. So if I summarize the group here. Record profit and a solid performance in all business stream. We have a very strong cash flow and a very strong position. The market uncertainty is still present but has reduced somewhat after Brexit, we have a new administration in place in the U. S, and we also have a vaccine coming in all over the markets. Long term focus remains. We're focusing on improving the profitability in construction, And we also want to grow the project development. Our ambition is to be the leading developer residential developer in our home markets and also to expand in a responsible way, of course, the commercial property development. Main focus on health and safety. That's crucial for us. We're working very hard with that. And also strong focus on reducing the carbon emission, which we have been very successful. Last year, we had summarized it more than 30% reduction from the base year in 2015. With that, I leave it to Andrea for open up for Q and A. Right. Thank you very much, Anders and Magnus. Yes, Q and A time. So please follow the instructions from the operator and also please state your name and the company that you work for. The Thank you. A few questions for me then. Starting off with the provision of SEK 700,000,000, could you possibly just mention what it's relating to? Stefan, this is Magnus. As I said, this is related to the legacy portfolio we have in the business, including also then the asset management. And these are run off businesses that we're working to close. And in doing that, we continuously sort of assess the costs the risks associated with that. I mean, it's no I think it's no news to anyone that we've had a bit difficulty to controlling some of the costs some of the PPP projects in the PPP portfolio for instance. And so these are the reasons to that. Not going to sort of point out in a particular country or project. Just so I understand, I believe it's relating to the PPP or is it relating to the Construction division? Now the construction business is not part of the Legals operation. The construction is on stream. This is only sort of past remains from Skanska's old history we're talking about. And part of this provision does relate to the PPP portfolio. Okay, good. Then just a question on your balance You're on a fantastic position financially. Just what is your thinking About that, are we in a new situation in a new world where the historical net debt situation, so to speak, should be Guarded and you want to be have more capital hanging around? Or Are you looking at maybe starting more projects? You've been a little bit slower on that last few years, maybe catch up speed there? And in that case, are you willing to do it on speculation since the tenant situation and renting out What is your thinking about that? I know it's a difficult question and it's the board's discussion as well, of course. But if you could give more flavor on your thinking regarding having such a strong balance sheet. Yes, I'd be happy to share some of that. Of course, in our business, it's absolutely crucial to have a strong balance sheet and a solid financial position. And as I think it has been evident throughout 2020, we have decreased the development portfolios somewhat. That is not in our long term strategy. So in part, we need this balance sheet because we are coming or aiming to come into a net investment cycle again. And that, of course, consumes capital, and it's important also To be able to sort of show with confidence to negotiation partners, whether it is on the investment or the divestment side, that if we go into an agreement, We will have the financial means to close that deal, and that is definitely a competitive advantage for us. Then of course, it is also so that in the construction business, we are in the middle of a pandemic still. This business is late cyclical, irrespective of the reason to why the overall sort of growth or market situation is moving up and down. So we need to have some caution also on that then, talking mainly about working capital. So these are main reasons that we think it makes a lot of sense to have this balance sheet there for all the right commercial reasons. Then add on to that follow-up question on that. If 2 ways to invest more than you divest, I guess. 1 would be to stop projects, the other one would be to not sell anything. So how do you see that going into next year? Is the are you seeing I know there's interest to buy the properties, but if they're not fully leased. I guess you would rather hold on to the so you get the full price for them. Are you Are you expected to ramp up from 'ten to 'fifteen, 'twenty starts? Or are you expected to hold on to some properties this I can comment on that, Anders here. We have a very strong very good pipeline to start projects, both in the commercial development and residential development. And our ambition is definitely to increase the start of project. And we have the pipeline. We have definitely the financial strength to do that. And of course, when it comes to we don't given a forecast when we want to sell divest projects, but we have a principle that We want to take out the full value of the offices and facilities. And that means we need to rent them out, so we don't leave any money on the table, unnecessary. Okay. Good. And my final question was Actually relating to the construction business of Sweden. I think if I understood you correctly, you explained the drop With the turnaround taking longer, my question would be then, are we too diverse? And should the improvements from here on or have new challenges arise, so we also have to wait longer into next year before you see the channel? I think it's the same units that we have been talking about for some quarters now. It has taken some more longer time than we expected earlier, but I my view is we are through the worst part out of it. We still have to close some of the project or complete some of the projects and that way that don't really contribute to the margin. But I expect it to improve going forward, the margin in Sweden. Thank you. All clear. Thank you. Our next question comes from Simon Mortensen from DNB Markets. Please go ahead. GM. Yes, hi. Congratulations on the solid results. I have a few questions. It also come back to the very strong balance sheet, but you also have a very high level of the working capital this quarter, one of the highest levels we ever see in 18.4 percent of revenues. Are the reason you're holding back on dividends in any way associated with this level of the negative working capital? I can begin answering that question, if you would like, Siemon. As I said, I mean, We think this balance sheet is very well motivated by the fact that we have the ambition to ramp up investments end the situation we have with an uncertain market in construction, coupled with the fact that we have an extremely high net working capital position. And we do not want to extrapolate that into the future when we plan our financial structure. Thank you. And in terms of the development completion pipeline you showed there, I think it was Page 17. There's a lot of developments which are completed, but not many which is coming up on the rentals, etcetera. But my question also comes to the Houston write downs here. Are those where are those in that pipeline? And for instance, when you sell those have done the write down. Are we then to assume these will be 0 profits developments? Or how what can you communicate around those? Yes, they are completed. So they are on the far left side of the slide I showed you. And when we sell them, you should not expect a big profit from that. Thank you. Can you imagine a bit of the size of these in terms of your U. S. Exposure, I assume they are in the Energy Corridor as well? Yes, they are in the Energy Corridor in Houston. Yes. And the size of the value of the investment? No, we don't go into individual projects. Okay. Thank you. The other question is Helmut Schmale, which I had. So thank you. The Our next question comes from Tobias Kud from ABG. GM. Yes. Thank you. Good morning. My first question is regarding revenues and the building streams, Which declined in 2020. However, the book to bill reached above 100%. Should we expect the decline to continue? Or do you think that revenues have dropped within construction? I can comment on that. It's different reasons why we see a drop. It's 10% in local currency, so it's not dramatic. But We do see the order encouraging to see that the order intake has been even higher, as you said, 107%. So that's I'm confident for the future, but it's still the strategy remains. It's profit before volume, We are going to be selective going forward as well. So that's also one of the reasons. So it's not only the pandemic that has reduced the revenue. It's more strategic decisions as well, and that strategy remains. Okay. And regarding the margin, you said in previous quarters that you had some negative impact related to COVID actions. Did you have that in Q4 as well? And can you specify how large those impacts were for the full year? We had limited impact. We were impacted in the Q2 when the pandemic hit us and everyone else in the society. But during the Q3, Q4, we sort of learned how to deal with it. We have been able in an impressive way to keep up the operation, keep the projects up and running in a safe way. So we are applying social distancing. All our projects are deemed essential for in our different markets. So That means that we are even though it's a heavy lockdown now in different cities in U. K, U. S, we are still allowed to get our people into the safe and safe way. They are confident. They feel safe when they come to that. And so it hasn't really hit us much in the Q4. Okay. And you have a target of 3.5% building margin, which you haven't reached for several years. Do you still feel that's relevant? And if so, how long do you think it will take to reach that margin? Yes, it's definitely a relevant target, and I'm confident that we will reach it eventually. What we need to do, of course, is to continue to improve margin in U. S, for example, there and we can see good signs. It's definitely going in the right direction. We need to improve margins in Central in Europe, Central Europe and also need to continue to we need to improve the margins in Sweden, as we talked about. So the answer is yes, it's definitely relevant. And a similar question for commercial development, where you have a target of 10% return on capital employed. Office. This is an important part of your operation, and it's an uncertain market. Do you still think that the 10% target is relevant also for 2021? Tobias, this is Magnus. Yes, this target is still relevant. And as you can see, we have delivered just north of 12% now in 2020. So as a relevant target. Okay. And One final question regarding your interest expenses. They increased year over year in the Q4 despite the very strong improvement of the balance sheet. Why is that? And should we expect that to continue for 2021? You can expect the same ratio in 2021 as we had in 2020. It has the movements in the net financials is driven to a large extent by how much we can capitalize in ongoing development projects. And then as I said, it was The fact that rates has come down were more quickly impacted negatively by falling rates on our deposits than we're gaining by lower interest costs on the loans because they are longer maturity. So it takes a longer time for that effect to hit the P and L, so to speak. So these are the main effects you see there. Okay. Thank you. That's all for me. Thank you. There appears to be no further questions, so I'll hand back to the speakers for any other remarks. All right. Thank you very much. Then we're done for today. So we will close and looking forward to 2021. Thank you all.