Earnings Call: Q2 2021

Jul 16, 2021

Hello, and welcome to the interim report from January to June 2021. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. And you will be connected to an operator. I will now hand you over to your host, CEO, Erik Selin, to begin today's call. Thank you. Hi, good morning, everybody. And we apologize for the hassle with dialing in some sort of Bug in the system, what we heard. But anyway, we have the Q2 today. It's been quite a calm quarter for us. We didn't do much business, but existing business has been Performing according to our expectations. In Q2, we had 9% increase in profits from property management per share, also the same for the First half year of 'twenty one. If we look at earnings capacity, cash flow per share, we are 25% over last year's cash flow per share at Now it stands at 28.28. So that's the figure that we kind of like. The NAV is 18% better than compared to 1 year ago. Net debt to assets, $44,600,000 and modest rental growth of 1%. Turning to the next Page 3, you can see the development in profit from property management and also the NAV, the sort of long term trend going back to 2018. And I think this is also going according to what you could have expected. We have obviously the goal to over time increase the Cash flow and then the NAV will follow. Page 4, current earnings capacity. Here you can see it in more detail. And in these figures, we included the ABP acquisition We took possession 1st July, so we thought it was appropriate to include it. So this is Current portfolio and ABP also. And then you have the figures rental income 9.1 percent and then profit from property management, as I just said, 28.28 percent last year at this time was So good development there. Next slide. You can see the P and L. We have 5% higher rental income, partly affected by currencies. And then the NOI is also slightly up. And then we have a better Result from the JVs and that is a combination of Entra, who is associated Excuse me, better contribution from associated. Entre is a new associated company and also the Yes, portfolio. Otherwise, it's been also performing well in the joint venture part. So this adds up to profit from property management for the parent company of EUR 1,161,000,000 And that is 13% better as you can see, but then we issued some shares. So that's why the figure per share is 9%. Important to keep track of that. Property values didn't happen much this quarter, Roughly 1% higher and that adds up the result to SEK 3,200,000,000 before tax. Financial position in next slide, also pretty stable from year end. Investment Properties is up 10% or so and Development Properties is A bit lower and that is due to completion of some projects. So that figure will go up and down over different quarters. That the development part is performing really well, but in the balance sheet, it It's not an upward trend as the same as investment properties. And you can see also further down the equity Increased from SEK 60,000,000,000 to SEK 73,000,000 compared to last year. Next Slide 7, property portfolio. This is the same split basically that's It's been for many years that we have Helsinki, Gothenburg, Stockholm, Copenhagen as the big 4% and that is 80% of the portfolio and residential normally hoover around 60% and it's the same case In this report. And then we have office, retail and other. And in the segment, we have the weak part That is obviously hotels and then we have some headwind in the Finnish resi portfolio. Otherwise, it's quite stable and offices is Also stable. That's been many been thinking about that segment, but it's quite okay. And the strong part is residential and selling apartments. And next slide, we have the property development slide. So you can see there we have 2 kinds of construction basically. This is mostly Residential and one part we build and keep and one part we build and sell. So we have Total investment of SEK 9,200,000 in properties that we will go into keep. And the majority is Helsinki, Copenhagen and And then we have on top of that 2,400 that we think that we're going to start From Q3 now to Q3 next year. So it will ramp up the pace a bit. And then we have development properties that we sell. That is basically in Sweden. We sell some in Finland as well. And the markets for selling apartments is, as you perhaps or most likely know, very strong in Sweden, very good Demand in the projects, even if completion is maybe 1, 2, even 3 years ahead, still a very big demand for buying apartments. The result from those projects will show up in our P and L After it's completed and the tenants or the buyers of the apartments move in. So that's a time lag of 2, 3 years between the project start selling and then when we actually book the profit. So it sort of underestimates the development in a way, but you have to choose some methods. So Good to know. And it will be very from quarter to quarter, very uneven developments as the year passes by. But The segment is doing very well and we're ramping up the pace and feel optimistic about the future. And we have Expectation of starting 2,000 or so apartments from Q3 now to Q3 next year In this segment, partners that you're selling. And then we have financing on the next slide. Financing market in general is very favorable, both in the bond and in the bank market. There's a That's good access to funding and also the spreads are back, where they were Before the COVID crisis or in some cases even lower spreads than actually before all this happened. So that is, of course, positive for us. You can see the Maturity structure of the debt, it's spread out 10 years. You can see the percentage or amounts in every year. And then Interest rate maturity structure you can see on the right hand side. Average cost is 1.4% and the total portfolio is SEK113,000,000,000 and in this is also included hybrid loans. So In our case, the hybrid is booked as debt, and it's included in the Total debt portfolio. Next financing slide shows the development of the Net debt to total assets that have been trending down for many years. And also you can see Secured debt out of assets and secured debt out of debt. And those are figures that is Have a meaning when you look at the rating agencies. Otherwise, as a common shareholder, maybe it's not that interesting. But from a Bond investing or bondholder perspective, it's good to know that these figures are also we have very Big headroom compared to what we need to have for the current rating from S and P. And finally, we have some long term trends graphs for the share and we compare it with the NAV and profit from property management. And It's been up for these trends over the year. Otherwise, this quarter been quite calm. We didn't Buy or sell almost nothing. So it's been going on regular business. And I said beginning of this quarter, we took possession of ABP and that will show up in Q3. So that was a short summary. And as said, we apologize for the hassle with the call. And now we can see if there are any questions. And the first question comes from the line of Jan Eufelt from Kepler Cheuvreux. Please go ahead. Okay. Thanks for taking my questions. Actually, I have Two questions. And the first one is really regarding your equity ratio. So that it's Like just 37% and your target is 40%. How soon will you close the gap there, Yes. That's any input? Yes. We don't know exactly. And we have this is a long term target and we are not obsessed with Meeting the target every quarter, but now the level decreased a bit because we have so much cash on hand. That's why this quarter sort of had a slightly lower equity ratio. But the trend over the years will be We have maybe a couple of percent to get to 40%. But on the other hand, the LTV is in line or below our target. So But we don't know exactly. It depends on if we find good investments and also obviously how the company is performing in the P and L. Okay. And the next question regards the Finnish Resi market, if you could Maybe elaborate a little bit what's happening there when it comes to vacancies and so on. Yes, absolutely. It's basically the same thing that was last quarter and quarter before that and so on. So what we saw when this pandemic emerged was that there were less demand for Apartments in Helsinki for two reasons basically. 1 was student and the other one was Sort of long stay, people who were there working. And At the same time, there are a lot of apartments being completed. So you have sort of the supply coming out as planned, but then demand temporarily A bit weaker, but we don't worry about the long term trend because nothing has happened there. So we think this is very temporary. And I think it was in April or May. I don't remember exactly. But Then we saw for the first time in our portfolio that there were more new Apartments that we rented out compared to what the tenants left us, we had a positive figure. And that's before that, it was negative like 13 months in a row or 14. So We are not worried. It's just but it's of course, you can see it in our figures With some rent that we actually don't get, higher vacancies, but no drama. And We are not worried for the long term. Okay. And just a final question, if I may. The property uplifts, So could you maybe split that into yield shifts and more cash flow effects? I think it was the same yield actually. It was very small uplift. It was like 1%. So and I think the rental growth was like 1%. Okay. Okay. Thanks for taking my questions. Thanks, Jan. Thanks. The next question comes from the line of Ryan Bouygues from Clearance Capital. Please go ahead. Eric, just a quick one. With regards to the like like, was that all indexation? Or was there an element of Reversion in that? No, it's indexation basically, but then you have also For apartments, it's not exactly indexation. It's more like a negotiation in Sweden. So You can say that the big chunk is indexation and small parties negotiation. Okay, perfect. Thanks. There are currently no questions in the queue. You can always e mail me or Markus later on if your Question comes to your mind. There are no further questions in the queue. So I'll hand the call back to your host for any closing remarks. Okay. But thank you very much and apologies for this hassle in the morning. But thank you very much for listening in and See you soon. Bye bye. Thank you for joining today's call. You may now disconnect your lines.