Message from the CEO

We also downsized in Småland in Sweden to compensate for the loss of a major local framework contract. However, we are performing well in the Swedish industrial market, in particular in the distribution grid where Vattenfall, as a leading grid owner, opened its first geographical area to competition – and Infratek won the ensuing tender process.

One of Infratek’s core values is presence. Each day we strive to be visible and available to our customers. This is quite critical if we are to succeed as the leading Nordic supplier of end-to-end solutions within building, operation and securing of critical infrastructure. In the week between Christmas and New Year, Storm Dagmar helped to highlight the importance of having good contingency agreements in place. It also spotlighted the need to maintain large expertise pools with the capacity to mobilise at short notice, both in the company’s own operating and neighbouring areas. I was incredibly impressed by our employees and their conduct during work to re-establish the power supply for end customers during what was undoubtedly a critical period.

During and after the financial crisis we saw a somewhat one-sided focus on pricing in tender processes and less emphasis on quality considerations in the awarding of new assignments. This trend looks about to turn. An increasing number of clients are experiencing the unwelcome consequences of such a pricing policy. Quality is becoming an increasingly important award criterion for customers in the final reckoning, while potential negative consequences for customers’ reputations of low quality of deliveries are also gaining more attention. Infratek welcomes this development.

Local Infrastructure turned in a strong performance in Sweden on the back of high-quality deliveries and high levels of customer satisfaction. We succeeded in our set up in Gothenburg, and made an acquisition in the Malmo region with the aim of achieving similar growth in this area. The Norwegian business was largely unbalanced due to overcapacity in a challenging market. This necessitated staffing adjustments, and the company also implemented cost-saving measures in a bid to boost competitiveness and profitability. The order situation for 2012 is satisfactory and an improvement in results margins is now a realistic expectation.

Central Infrastructure experienced a weak year in terms of results. The disappointing annual result was largely attributable to the loss of a historically strong contract, two loss-making contracts and a misfiring Norwegian market. The business area restructured its customer and product organisation based on the strategy plan for the period leading up to 2015. The company aims to participate in the expanding central grid market in the Nordic region, and to double sales in this period.

Security posted satisfactory results in a market that is yet to fully recover in the wake of the financial crisis. Nonetheless, all indicators suggest that investment levels within high security solutions will gradually rally in future, and the electrical security market is stable.

A number of structural shifts are currently underway in the security and infrastructure segments in the industries in which Infratek operates. Global security companies are undergoing major changes in strategic direction and ownership. The attractiveness of high security companies is rising due to a need to be able to supply a combination of manual and technical security solutions. In addition, the customer segments are streamlining to focus on either the business market or the consumer market. Within Infrastructure, developments are being driven by the way in which the larger integrated energy producers are establishing an interface with the market. It is therefore extremely pleasing to see Swedish authorities moving towards a further deregulation of the market. This is a sensible development that will professionalise both ownership and performance in a similar fashion to previous developments in related industries. In order to establish a well-functioning market with the capacity to boost future investment requirements, the infrastructure industry as a whole has no choice but to release locked-in capacity and improve efficiency.

The building and operation of critical infrastructure in Norway continues to be characterised by low levels of industrial development and outdated thinking. There is little political will to adopt a long-term approach. Furthermore, many people regard a competitive market as a threat, rather than an efficient social solution. To date end customers have been accepting higher prices and lower quality. This is in particular evident in the Norwegian railway sector, where operations and maintenance are defined as a public assignment and managed by the Norwegian National Rail Association. In light of the above, in the coming years Infratek will focus on the available Swedish market within the railway sector.

Infratek places a high priority on securing the best available new recruits. In the past year we therefore further strengthened our HR function. We are also establishing a new management programme and continuing the Infratek School, an in-house technical training facility which develops the expertise of the company’s fitters. The aim is to increase our attractiveness as an employer and deliver even better quality to existing and new customers. A sharper focus on the railway sector and growth within Central Infrastructure will be near the top of the agenda in 2012. If it is to achieve these targets, the Group will require a greater supply of expertise and capacity, and this, together with improved profit margins, will be a top priority in 2012.