Good afternoon, and welcome to the presentation of Skanska's Q1 report. This will be a combined live webcast and telephone conference. My name is Pontus Winqvist, I'm responsible for investor relations here in Skanska. The presentations will be made by our CEO, Johan Karlström, and our CFO, Peter Wallin. And there will be possibilities after the presentation to ask questions towards Peter and Johan. So by that, we welcome Johan up to present.
Thank you, Pontus. I will start with some highlights from the Q1. On the Q1, we have shown a stable result throughout the entire group. And what we can see here also is it's a very solid business, a solid performance, especially from the U.S. operation, both in USA Building, but also on the civil side. If we take a look at the Norwegian and the Finnish construction market, and the operations that we have there, we can see that it's improved result in both of the business units there, and they are on the way up to the level where they should perform, and we have taken a further step this quarter.
If you look at the market, it's a very good and healthy pipeline of products in U.S., both in infrastructure, but also in the various segments in for the building area, aviation, healthcare, IT industries, and so on. But what we can see, that there is a very tough and fierce competition. We are not the only one that have recognized and seen that there is a good pipeline of products there. We have also seen a very good and a substantial improvement of the results in the RD stream. So let me continue here with the construction stream. The revenue was basically flat in the Q1 compared to the same quarter the previous year. The income, we ended up with SEK 518 million, corresponding to 1.99%.
Lower profit, if you talk about the margin in Sweden, and that is due to a long and tough winter, so it took some time before we could start up the asphalt operation, longer time than we used to have. And that has an impact also, the winter also have an impact on the business that we have in Poland and Czech Republic. That's a typical pattern that we see during the years. The order bookings, basically the same, down 3% in Swedish kronor, and 1% in local currencies, comparing with the same period, the previous year. Up in the Nordics, and a little bit down in the U.S., and I will come back and comment that when we're looking at the breakdown.
Take a look at some of the products that we booked in, in the quarter. The first one, or the largest one that we booked, is an IT facility in the U.S. We have a science park in Norway for SEK 820 million, a big shopping center in Finland. Then you can see on the bridge, on the picture here, you see the Longfellow Bridge in Boston. It is also called the Salt and Pepper Bridge, and you can actually understand why. It's a little bit how it looked like there.
And that is also a picture of how we want and are trying to expand the U.S. operations out from the core and the whole market in N.Y. to the West Coast, but also up the coast up to Boston, and we were also expanding down in the south, down to the south. And here is one example of how we are expanding our operations geographically in the U.S. We have added one project in the U.K. for the Crossrail program, and we have also landed a big highway project on the West Coast in Sweden. During the quarter, we also saw a cancellation of a mining order in Latin America.
That's a part of a bigger program for one of the largest companies in the mining area, and they've decided to shut down the entire program, and we had one piece of that. The cancellation has nothing to do with our performance. It's just due to the decision from the mining company that they decided to shut down the entire program. So we have backed that out in the order bookings during the quarter.
If we move on and take a look at the residential development, you can see here that we have increased the sales in the RD operations, and that is coming from the number of apartments that we sold, a little bit more than 300 more than the same quarter previous year. It's basically equally distributed, the increase between Sweden and Finland. You can also see that we have started more projects, substantially more projects, this quarter compared with the same one. I think it's important here that everybody understand that when we start a project in residential development, we always have a proportion of the project pre-sold.
Once we are coming to the pre-sale hurdle, we start a project, and that is the time when we book the number of sold apartments. So they are coming into the sales. So if we start more projects in a quarter, then the sales will automatically get an uptick because we booked the pre-sold apartments. So the number of apartments you see the increase here is both coming from a positive sign in some in the market, especially in Stockholm, but it's also coming from that we started more projects. So I think it's important to understand that. You can see that we have increased the profitability 5.8% for the stream, and it's on the way up to our 10/10 target, 10% ROCE and 10% operating margin.
This is a step to that level. The margin will vary between the quarters because the S&A is basically spread equally throughout the years between the quarters. Depending on the volume of numbers of apartments they have sold, then the margin can fluctuate up and down. One other factor that I think it's important to know here as well, and that is in Finland, which has a market that is now declining. The sales in the Q1 were helped by an increased tax March 1st . So a lot of the buyers, they wanted to buy their apartment before the tax increase. So that was like a one-time impact there in the market.
So moving over to commercial development, low transaction volume during the year, sorry, during the quarter, here, and that was according to the plan. It goes up and down between the quarters, and we have a very healthy and underlying business, and we see potential for further divestment profit during the year. Started new projects. We have now 27 ongoing projects with a total volume of SEK 8.3 billion, as you can see here. And the key ratio that we follow to make sure that we have the risk in that portfolio under control is that we compare the pre-lease ratio, 63%, that you have here, with the completion ratio in construction.
The completion ratio is 53%, and we always want to be ahead with the pre-lease percentage, which we are here in the portfolio. You saw that we leased 15,000 sq m during the quarter as well. Infrastructure development, the net present value stayed the same during the quarter. And we have done no transactions during Q1, but in the second one, we have already announced that we sold a package of five different projects in the U.K. Three schools, two street lighting projects with a total volume, transaction volume of SEK 220 million. Looking at the order situation in construction, if you look up there in the right-hand corner, you can see that the book-to-bill ratio over a 12-month period is 95%.
Down here in the numbers, you can see that the book-to-bill ratio for the isolated quarter is 91%. Taking a look at the breakdown between the various business units, you can see here that Sweden, Norway, Finland, and Poland, on the top there, had a very good order intake versus compared to the revenue. And we can also see that there is lower in Czech Republic and U.K. there. The reason why we see lower order intake in Czech Republic and U.K., I see it's more like an it's a market that is that is sliding down, and it remain to be to be low activity there.
In the U.S. market, there we see a healthy pipeline of a lot of projects coming, but there is a lot of other companies that are interested in them as well. So looking at just one isolated quarter, I think it's a too short period. The best way to have a view of it is to look at the order intake on a rolling twelve-month basis. And you can see the numbers out there to the right, and the breakdown between the various business units. And in Latin America, we have included the cancellation of the mining project. So with that, Peter, I hand it over to you.
Thank you, Johan. That was a flying start.
Yeah.
Okay, let's take a look at the meat now, and the profit. If we start with the construction stream, we landed revenue at SEK 26.7 billion, which is up 2% in Swedish krona or 6% in local currencies, taking the impact of the stronger Swedish krona. We saw quite an improved profitability, both stemming from the fact that it was a very stable quarter. No write-downs compared to last year. And at the same token, a very strong control on our overhead costs, giving us a margin of 1.9% for the quarter.
Taking a look at the various businesses and starting with Sweden, it's no news for all of us that we have winter in the Q1 in the Northern Hemisphere, and the same is true even for this year, even though the ice melted on my lawn just three weeks ago. So we had a bit of a weaker result compared to last year. In the last year period, we also had a close of a very profitable project, which positively impacted Q1 2012. We are very bullish on the Swedish operations in terms of stability and ability to deliver good and stable margins over the year. We also see a good improvement in the Norwegian and Finnish operations, and the gradual improvement there is something which we expect to continue to see.
We have a cautious view on how we report profits, so the sequential improvement is something that we are continuing to look forward to. Poland and Czech, very impacted of a very strong and fierce winter, and a very big proportion of civil business, which makes it even more, gives an even more underlying impact of the fact that we can't work during the wintertime. U.K., a very stable performance, continues to be above 3% in operating margin. The market is fierce and tough. We are keeping our good risk management procedures and performing very stable there. And now to some of the record profits that we see from our U.S. businesses, our USA Building, a very stable, good margin, and a record margin on the USA Civil part in the Q1.
Very good and stable, and nothing unusual in it other than very profitable projects and well-managed. And then talk about that, we come to Latin America. We had major issues, as you know, in Q4. We're muddling through and getting increased stability in the business. So we were happy to see the positive sign on the EBIT line, and we are working very diligently to continue to improve performance there. And that gives us an overall SEK 518 million in EBIT in the construction stream. RD, we have seen 58% improvement in top line, 49% driven by volume, increased number of sold compared to last year, and 8% of the price mix.
We had a lot of very good projects to put to the market, and we saw also an improvement in the market as such, especially in the Swedish market. The efficiencies measures we have taken in the business and the restructuring of the business has made that we have lowered the costs, both in the production and in the selling and admin. And on top of which, we are keeping a very strong risk management control over the business. And if you look on the selling and admin, which Johan pointed out, it is towards the low level. We should be able to see the S&A in our RD business hover around between 5%- 6% overall.
And the 5.8% margin then is what we believe is a fairly good step. Reaching the 10/10 will not be done in Q2 this year. It will take several years until we are there, so gradually improving the performance in this business. Taking a look at the various markets here, you can see the biggest step forward is where we have had large challenges last year in the Swedish RD business. So it's a very positive step. Norway, continued good and strong market, and Finland is struggling a bit from the market point of view. However, given the market and given how the costs and returns looks like, we still believe that this margin is a fairly good one in Finland.
So for the Nordics, overall, SEK 160 million in EBIT compared to -SEK 7 million last year, giving us a 6.5% operating margin. The other RD, other European countries, includes Czech, U.K., and Poland. When it comes to Czech, the market is very fierce. However, our RD operations in Czech is faring quite well in terms of performance. The UK and Poland is still in a startup phase, so they are not fully covering the overhead costs. So that's why you see a negative there. There is nothing in the performance that creates that negative sign overall.
If we look on the sold and started, you can see the big pickup now, even in the rolling 12-month number, coming from a strong Q1, and the fact that we last year halted the startup of new projects during the Q2 because of the challenges we had in the business. The volumes that we have started, you should expect to be hovering around the same level for the full year, given that the market keeps holding up the way it is right now. Taking a look on the how we have compiled the portfolio of projects. We have close to 5,000 homes under production, of which the ongoing projects, 62% is sold with a binding agreement.
The completed unsold is now amounting to 367, which is a drop by 15% compared to year end. The number 367 is still fairly low compared to the total volume of the portfolio as such. When it comes to start-up of new phases, as Johan said, we will not compromise on the strict risk management procedures, how we push a project forward to the market. So it could happen that the volumes of started and sold projects does vary quite a bit between the quarters without having to be any signs that the market is off or that the demand is not there. We do not compromise on the start-up of new projects. Coming into CD, there is not that much to talk about, as Johan has already said.
We are not covering the full overhead costs because we are selling the projects so quickly after they are completed, or even under the construction, that we do not get that much operating net to cover for the bid costs and overhead costs in that business. So if you take a look on the rolling 12, and look on how we are selling, which is the natural course of the business, selling properties and posting gains. On average, over a long period of time, seven years, we are over and above SEK 5 billion per year, and we will market projects when they are ready to be marketed, from a leasing perspective and a completion perspective. So we will continue to make deals, even though we haven't posted any in this quarter.
If we take a look on the portfolio, we have an excess value in the portfolio of SEK 3.2 billion currently, and we have started three new projects in the quarter. The starting of new projects is a very good sign of us believing in the market and the market believing in our projects. If we take a look on one of the most important key performance indicators in this business, is the leasing. It needs to be kept high. If you look on the current ongoing portfolio, we have a fairly young Eastern European portfolio, and which makes you need to come forward a bit in terms of completion before the clients are prepared to sign a leasing agreement.
So we are quite content with what we have in the portfolio. We are also seeing very promising signs in the U.S. ID, last but not least, not much to write home about in terms of performance either. Stable performance. We haven't taken some write-downs on previously capitalized bid costs relating to a project in the U.K., which got the preferred bidder status, where the government now has withdrawn their support in terms of loans. So that is some costs we have taken in the Q1 in ID. If we take a look on the portfolio, the fact that the value has increased has been taken away, but the fact that the currency, Swedish krona, has strengthened, so we are at the same level as we started the year on.
That brings me to the total number for the group. The operating income, as it happens, happens to be the same as we had for the construction, SEK 518. As you can see, we are maintaining our central overhead costs at the same level as last year. We are at a net debt position, meaning that we have a negative financial net item compared to last year. We have also extended our duration of our portfolio of loans, so that is also adding a bit to the interest line. But it also gives us a very good, secure, secured level of funding at a very favorable interest rate right now. Taxes, 24%, has dropped somewhat on the basis of the lowered corporate tax rate in Sweden.
And you should expect that to be around 24%-25% throughout the year. If we take a look on the cash flow, our cash flow is 0.1, but it's very good for to be a Q1, and to be a Q1 in which we are developing a lot of projects in our development businesses. As expected, in the Q1, we saw working capital leave us to the tune of SEK 2.1 billion. And we also then which was offset by the fact that we got SEK 2.3 billion of earlier reported CD deals made in Q4 last year. And that gave the exciting number of zero in cash flow.
If you take a look on the working capital in our construction business, or the free working capital, as we call it, you can see that the Q1 bar is much lower than the Q4 bar, and that is the normal pattern each Q1, as you can see. And we had an extraordinarily push, high push in the Q4 working capital. Now we are settling with the subcontractors, and we do not fully have the civil business ongoing due to the winter. So this is very typical because of the season. But you can see the red line depicting working capital on average compared to the revenue. It's starting to level off somewhat, coming down from the extraordinary high levels around 17% towards 14%. And during the year, you will see this continue to level off.
So we believe that we throughout the year will start to be at the neutral position in terms of working capital formation. Taking a look at the financial position of the group, net visible net debt was SEK 1.2 billion, and the net operating financial assets was SEK 5.1 billion. But there's an increase by 0.5 billion due to the better profitability and cash flow in the business. The increase in capital employed compared to the year end of the year is actually since we define it as the gross capital employed and not the operating capital, it's very much fueled by the fact that we have more cash on the balance sheet.
Taking us down to 1.9x as we started the year 2022, we had zero in cash flow, as I talked about, and we also saw the pension liability debt, defined benefit obligation drop by SEK 0.7 billion. Half of it stems from the fact that we've increased the discount rates, and half of it stems from the fact that we had very good performance in the assets in the trusts. That leads us to the SEK 1.2 billion, and then we add the co-op loans and the defined benefit obligations, giving us the SEK 5.1 billion in own fund. Taking a look on the group investments, you can see that the capital employed in our development businesses has dropped compared to the year end.
We are gradually making use of the land that we have in our RD, and we also have received on the settlements on the CD, which I talked about, leading to a lower number, Johan ?
Yes. Thanks, Peter. So let us take a look at the market. I think I've, you know, touched upon it earlier in the presentation, but let's go over it anyway. The market in construction basically the same. It's just overall, it's a stable business, healthy pipeline of products. But what we can see is a very tough competition in most of the markets, including the U.S. one. In Latin America, we see less activities in the mining sector, and that's the reason why we have downgraded it one notch. And in the Nordics, it's overall stable. Norway is the best market. The underlying economy in that country is very good.
They spend a lot of money coming from the oil funds now, and the infrastructure, and then the different type of public spendings. The market in Finland, declining, slowing. Sweden is basically flat. We see some improvements, and in the residential market, especially in Stockholm, which is leading us into the next page regarding residential development. So we see the best market there is Norway, the same as the construction, and it's tougher in Finland, even though it was held during the Q1 by the increased tax. So a lot of buyers used the opportunity to buy before the increase of that tax. And in Sweden, we see somewhat better market in Stockholm, and to some extent, also in Gothenburg.
No changes on the commercial development side to previous market. What we can see here is that the U.S. market looks like it's the best for the time being, if you talk about the vacancies. The vacancy is going down in all the four major cities that we have targeted in the U.S. And if you take a look at the last stream, infrastructure development, the greatest potential for the time being and for the coming years will also be in the U.S. We see a lot of PPP projects. It's a big demand for increased spending in the infrastructure sector.
Even if there's a lot of funding from this, the various states and from the federal government, there has also been openings for a lot of PPP projects in several of the states. But we are not the only one that have recognized that, so there is several out there and trying to get those projects. We're a little bit more concerned about the PFI sector in U.K. It's going down, and it's also we can see in some example, some projects, we have seen example where the government have taken away the subsidy in the loans that they used to provide to some of the projects there. So with that, summing up, taking a look at what's on our radar screen and top of the agenda for the company.
In construction, making sure that we turn around Latin America and coming back to the level where we should be, and also use the opportunity in the U.S. and the good and stable performance that we have in the business, very healthy operation, and use the opportunity in the market to expand it. So that's like, you know, the two main focus areas. In residential development, it's about increasing the profitability up to the level, up to the target of 10/10 that Peter mentioned. We are working really hard on it. It's gonna take several years. It's a long-term plan to reach that one, but we are confident that we will come to that level. Commercial development, very healthy operation, based on leasing and divestments, like, you know, the two main operations that we have there.
For the time being, we see a lot of opportunities coming in Poland, with Warsaw, of course, as the main city. But also, a lot of opportunities and a lot of leads in leasing discussing also in the U.S. In infrastructure, we see a lot of activities in the bid rooms. And we have a lot of people engaged, especially in the U.S. market. With that, I'm gonna give you a special invitation here to all of you, you know, that is participating here, and that is for our, like, in a high-performing project, and the flagship project that we have here, actually, in Stockholm and in Solna, Karolinska Hospital. We're gonna have an open house.
It's a Saturday, May 18th, and you can bring your family, your kids with you, and take a look at the project, and walk through it, and get a feeling for how it's gonna look like. It's very interesting now, because all the buildings are more or less up now, so we can see, like, you know, the shape of the hospital. And we have activities on all floors, so there is a tremendous amount of people working on the project. It's on time. We will deliver it exactly according to the contracts that we signed several years back, and it's gonna be a fantastic project that we are so proud of to deliver to the taxpayers here in Sweden. So you're all welcome. So with that, Pontus?
Then we open up for questions.
Yeah.
We start with the audience here in Stockholm, if we have any questions here. Please tell who you are and what company you represent.
Hi, Niclas Höglund, Swedbank. A couple of questions, if I may. If we start with the construction side, you, Peter mentioned that you feel quite confident on the Swedish outlook for the Swedish profitability and Swedish margins. Could you elaborate a little bit on the opportunity after the poor weather? Should we see a catch-up in the operations, given the very poor margins that we see right now?
It was lower margin in the Q1, and it's coming from the longer winter, and also, if you compare it with the previous period, the same period last year of a big write-up that we had that year in one project that we completed. The underlying business is very stable in the Swedish operations we have, and I'm very confident that we're gonna deliver on the level where we think that we should be.
You're also taking some new orders in the Swedish market. Could you elaborate on the profitability side on those orders?
Yes, in all the markets, we look at the margin, and we have a very strict process of what we're asking for, if you talk about the profitability in the projects. We also price the various risks that is always included in all the projects to make sure that we can maintain the level that we should have in each and every one of the various sub-segments in the markets.
So the competition in the Swedish and the Nordic market, is that hurting profitability somewhat compared to the backlog?
I would say that we have a good backlog, and we are confident of the products that we have taken, that we have signed and been awarded.
Yeah.
But there is an increased competition. There is many players, especially in Sweden, but I will say also in Norway today, where we see a lot of new projects coming in the infrastructure sector. And it's easier to come as an international player into a market, into the civil sector, versus the building one, because it's less subcontractors, local subcontractors that you have to sign up for. So we see more inflow of international players, especially in the civil sector, which we have seen in Sweden for some time, but that's something that is now happening in Norway.
Okay, and I'm moving on to the U.S. Civil. Once again, a stellar performance and a record margin. You've been indicating that these sort of very healthy or very strong projects, profitability-wise, should continue for a while, but then maybe move over to a more normalized 6% margin. Could you elaborate a little bit more?
Yeah, they will do that gradually, you know, if you talk about the really long horizon here. Because that's basically where we have the market now is to talk about the margin. But to that, if you have a very competent and high-performing team, you can work with the projects, you can work with alternatives, you can improve the projects and increase the productivity. That's exactly what we're working with and working on in the civil business in the U.S. We do that elsewhere as well.
But I will say that we have been able to actually increase the profit in the backlog as well.
Should it be more towards the 7% rather than the 6%, in the year before?
Well, I'm not coming out with any percentages here, but we have a very high-performing team in that business, and we are very satisfied with them.
Yeah, if I may, just moving on to the residential side. Well, maybe not stellar performance when we look at the margin, but still a very good improvement. Could you say something on how the process to divest land is moving on, and if we have seen any gains related to selling of land in the quarter?
Yes, you have, but you haven't seen it in RD. It's kept at the excess land bank, which is kept centrally. The excess land bank, which we transferred to a central unit, amounted to SEK 2 billion at the start of the year. It now amounts to around SEK 1.6 billion. And we are defending the values quite well. We haven't recorded any huge profits, but some profit is embedded in the central numbers.
Great, that's my questions. Just a quick follow-up. Czech Republic, you're not disclosing the underlying profits for the Czech markets. Could we— Is it improving or?
Yes. That's improving dramatically compared to last year, when we had the write-down of SEK 80 million. But other than that, compared to the, and just linking into what I said, they are performing very well on a percentage basis. But the market is tough, and that's why we're keeping the volumes down compared to where they used to be.
Okay. Thank you.
Thank you, Niclas. Yes, we have some more questions here.
Hi, Hakan Filipson from ABG Sundal Collier. I was wondering if you could tell me, what are your key focuses from the management perspective? I mean, what do you want to achieve? Is it EBIT? Is it EPS? Is it cash flow? What are you? How are you driving the company? Is it market shares? What are you really aiming to do here?
Bottom line goes before top line. That's like, you know, one simple message. But, EBIT in kroner and dollar goes before percentage, of course, because that's what's like, you know, boils down to the EPS. So that's like, you know, the ultimate target is to increase the EPS. So that's like, you know, the very simple answer. But of course, cash and getting cash flow in the construction machine , that's one of the key driver for increasing the EPS. Because the cash that we get in construction, that is used as a financing engine on the development side. So everything is like in a link together, but of course, the ultimate target is to increase the EPS.
Thank you.
Thank you. Any more questions here from the audience in Stockholm? Then I think we go to our telephone participants.
Thank you. We have a question on the line from Manu Rimpelä , Carnegie Bank. , Carnegie Bank. Your line is open.
Good afternoon, gentlemen. Can you hear me well?
Yes.
Yeah.
Perfect. I had a couple of questions. Firstly, just continuing on the U.S. So the way I understood you, the answer a couple of minutes ago on the margins is that, has there been a change in the way you think about the margins, that you actually think, believe today that you could be able to sustain the higher margins for longer, given the internal measures that you're able to do in terms of project profitability? And we necessarily won't see the normalization in the margins if you're able to maintain those measures. Second question is on the working capital. Can you just kind of give us a bit more guidance on what kind of working capital outflows you expect for the year?
And also, has there been any kind of change in the competitive landscape that has led to the changes in the payment terms of new projects with less prepayments, for instance? In the Nordics or Norway, you mentioned that the competition and it has increased there. And can you just give us a bit more feel for the Eastern European construction markets, Poland and Czech Republic, that what's kind of the not thinking about the quarter, but maybe six to 18 months ahead. So do you see that the market is going to remain at the certain level, or is kind of the pressure still clearly on the downside? Thank you.
Okay, thanks. Let me start to answer the question regarding the margins in the U.S. and Eastern Europe, and let Peter take the remaining part of the question. Starting with the U.S. I would say that maybe we are, we will keep the margin longer in the U.S. civil than we expected one to two years back, when we started to talk about that it's gradually gonna go down to some like, you know, the long-term level, which is somewhat lower than we have today. And it's coming from very high performance and a good performance in the ongoing projects, where we have had the ability to increase the underlying performance there .
If I move over to Poland and Czech Republic, Czech Republic is a very tough market for the time being. It's a very little spending or less spending in the on the public side. So the civil sector and the activities towards the public sector is going down. So the overall market is actually shrinking, and it has been so for some time, for some years. It will be a pressure, and it has been a pressure on the margin for several years. We have been able to cut the overhead ahead of the decrease in volume for us in Czech Republic, which is, of course, very important, because otherwise the overhead will eat up the profit.
I don't think that we're gonna see an increased profitability and the margin in the market in that country, because I don't see a substantive change regarding projects there that's gonna come to the market. Regarding Poland, if you go back some years in Skanska, we had a fantastic A1 product with the which was highly profitable over the average. That is now a history. So that's like in one piece of information. The other thing that is like in a fundamental in the market is that Poland for the time being is like an in-between two EU funds.
They have been very successful in the past to negotiate a lot of money from the EU, and they have also enormously improved the negotiations with the EU, so they will get more in the next tranche of EU funds there. But for the time being, they are in between these two funds, so it's gonna take some years before it starts to be delivered into the market and materialize in projects. So that's what we see in Poland now, especially on the infrastructure side. And that, of course, will have an impact and pressure on the margins in the market. Peter?
Okay, thank you. Hi, Manu. The working capital question, seasonally, you see a very strong outflow typically in the Q1, and then you see a fairly weak cash flow generation in the Q2, and then it has a huge pickup in the third and Q4, because then you sort of settle and also start to build for new projects there. So that's the system building. So linking that to my comment that we are leveling off when it comes to working capital compared to revenue, that means that from a working capital point of view, we should have seen the biggest outflow in the Q1, and then we're gonna keep the working capital in line around this percentage number with how the revenue develops.
In absolute terms, you should see a much more stable performance the remainder of the year.
If I may just follow up on the working capital. So you basically expect working capital to stabilize this year, and we don't, we shouldn't expect any meaningful outflows in 2014?
You should see it being stabilized. What we have experienced, well, and what we have also expected and talked very much about is the fact that we are ending very profitable cash-rich projects and unwinding them. That is creating one impact. And the second impact is to take some time to make the billing and the start-up of the new larger design build projects that we have been awarded. So it has been an expected journey, and we are now expecting that to stabilize with the old profitable cash-rich projects going out and leaving room for new ones.
Just getting back to the original question. The competitor landscape hasn't had any kind of impact on the working capital in terms of the new projects that you have in the backlog, which gives you the confidence to say this?
Yeah, I mean, we try to stay extremely focused on the an EVA-based model, and that means that you get really hurt out in the business if you start to bid projects, which involves lending the client money. So that's something which also links into the question that you want answered previously, what is most important for you? Well, it all ties together with EPS and cash flow at the end.
Okay. Thank you.
Thank you, Manu.
Thank you. Your next question comes from the line of Marcin Ruczaj, Bank of America. Your line is open.
I have a couple of questions.
Could you talk a little bit higher or closer to your telephone, please?
I'll speak up a little bit. So, my first question is on the U.S. building business. Looks like in the Q1, revenue growth rate was more than 20%, which is from close to around 30% in local currency. Can you just explain if that was all organic, was there any one-off factor, and how representative it is, it is for the full year, the U.S. building? And second question, that's on infrastructure development. Having sold again a few projects at the beginning of the year, are there further projects that you tend to divest in the remainder of the year in that division? You mentioned the disposal in commercial development, development, but not in ID.
Okay, I think I heard the first one, so I'm gonna try to answer the question that which I think I heard, but on the second questions, I couldn't get at all. So let me talk about the USA building one. The volume fluctuates there, and we have had a lot of projects coming in during 2012 that is now increasing the revenue in that business. And we see a good underlying performance, and I think that we will have a good development there as well.
And the second question-
Let me just repeat the second question because-
Okay, yeah.
I think I had some technical difficulty here. So the question was, are you planning to divest any infrastructure assets from the infrastructure development division for the remainder of the year?
No, I think the simple answer is no, because the products we have currently in the portfolio is too immature to divest in order to optimize the value.
Okay.
Okay. Thank you, Marcin.
We have no further questions on the telephone line, sir, please continue.
I don't think that we have any questions from the webcast either. By that, we close this Q1 presentation from Skanska. Thank you.
Thanks a lot.