Earnings Call: Q4 2020

Feb 11, 2021

Good morning, and welcome to the conference call in connection with the Year End Report 2020. My name is Anna, and I will be your coordinator for today's conference. During this call, you will be on listening only. However, in the end of the presentation, you will have opportunity to ask questions. I will now hand you over to CEO, Erik Selim, your host for this call. Thank you. Hi, good morning, everybody. Erik Sillen here from Valder. I also have Markus with me to Give some comments about our Q4 figures that we released just now. If we start with the Regarding COVID-nineteen, we have not had any problems with collecting the rents, And that is the same situation as quarter before and so on. So the rent collection is very stable. Actually, it is like Yes, the same works the same way as last year. We are, of course, in need of helping some Especially troublesome tenants, and that could be, particularly, small shops and restaurants and so on. And we look at that case by case. And as you all know, we have some hotel turnover rent that Obviously, it will not be paid now. But otherwise, all in all, it's a quite stable Situation regarding the pandemic. Otherwise, in Q4, we made a share issue of B shares, €6,500,000, we took possession of 50% of Anton Ville Nielsen in Norway. We communicated that A while ago, but now, of course, the deal closed. And also, 50% of Karlakruenet, the project in Gothenburg and some shares in Entra. We also signed to Acquire a company in Sweden called Maas Nestaren that has real estate of roughly SEK 5,000,000,000 That is 50% commercial and 50% residential properties, and That fits us very well. We completed our partners in Denmark and Finland for rental. And we also Completed some development projects in Gothenburg and Denmark, and there was profit on those Projects in Q4 of the €109,000,000 And we have the system that when a project is completed and we Sort of hand over the keys to the buyers, then we book the profits. So before that, we had it only at cost in our books. And there could be huge differences between different companies, how they book their Results of the Projects and Developments. And if we look at some figures at Page 3, in Q4, Property Management was up 3% and for the whole year, 5% per share, and that is, of course, a bit low as we see it, but that is affected from turnover ends and so on. So the underlying trend is Obviously stronger, but 5% is we think it's a bit too little. NAV, 13% better than last year, like for like rental growth, 1%. And if we look at earnings capacity Year on year, this year end compared to last year end, we are 12% better per share. Next Slide number 4. You can see here the developments from property management per share and the NAV. So it's continuing to trend upwards. And next Slide 5. There we have again the earnings capacity. You can see around the level income, property costs, management, administration, financials, everything. And then At the bottom of the page, what is really important is obviously profit from property management per share. Now we are at 25 compared to 1 year ago at 22.39. And that figure is counted on the current situation. So Obviously, when COVID will be okay again, we will have, on top of this, turnover ends Coming back as well, but this is calculated in the present situation with no turnover answers. Important to know that. And next Slide number 6. We have the Income statement, not that exciting. I think it's pretty stable And one item there, which perhaps you could wonder how we booked it, and that was unrealized change in value of long term financial assets, €462,000,000 that is related to the Entra shares. So that is now in the books. Otherwise, nothing special in this. So we have the property management, SEK 1,100,000,000, some value changes. And then at the bottom, we have profit per share after tax, change from the government. And the balance sheet at Page 7 compared to last year, they are Also not that dramatic. We have a lot a bit higher value on investment properties. It's more development properties Associated companies is a big increase that is Entire share in that figure included. And then we have €9,000,000,000, €10,000,000,000 in more equity, some more debt. So year on year, it's Improvements on all the lines and a bit bigger, but for bidding us, it's very stable 'nineteen compared to 'twenty. Property portfolio on Page 8 often looks Quite the same. And this quarter is no exception. So you have the biggest part in Helsinki Stock on Gaffney by Copenhagen. And also then residential is the biggest category, office, retail and other. And Of the other 14% we have, 8% is hotel. And other things could be, As we said, we care with different kind of mixed properties. And in the retail segment, The part that is sort of struggling right now is city retail, and that is maybe 1% or perhaps 2%, I think 1%, 1.5% For us, so this has not a big impact on the overall portfolio as you saw during the year. And then we have made some updates. If you look at Page 9 and in the report also, it's in more detail of our Ongoing projects that is more or less on the residential projects. So if you look there later on when you have the time, you can see Projects that are ongoing, projects that will be able to start in the next 12 months. And then also looking beyond that, how is the Pipeline after 1 year from now It's also divided between projects that we keep and projects that is for sale. So as you can see, we have a very good pipeline, and we'll be able to start a lot more Residential projects from Q1 'twenty one until Q1 'twenty two. And it's more or less only residential. And the majority is for keeping and renting it out. But in Sweden, we also Cell Owners Apartments or Condominiums. It is worth to Even more detail about this because this business has performing very well, very stable, and we see over a long time a Big opportunity for us there. And we actually think it's perhaps the best statement for us to invest in our own resin development. That will be a bigger part going forward. Looking at finances, Page 10, The ratios and figures are roughly what it did last year, a bit lower net debt to assets. We put in some equity in Q4, so obviously strengthened the balance sheet a bit. And you can also see we have Very much liquidity, euros 20,000,000,000 for year end. Page 11 Shows that net debt to assets over time and also secure debt Out of assets and out of debt over time. And those are important for the rating agencies. So that's why it's worth to have them that stable. As you can see, Not much happened from quarter to quarter in our business. Page 12 is also You see the share price compared to profit from property management and compared to NAV and over Time, this will correlate pretty good. And that was a brief summary of Q4 and now we can see if we have anything on Q and A. Thank you. And the first question comes from Tobias Kai from ABG Sundal Polyure. Please go ahead. Your line is now open. Yes. Thank you. Good morning. I would like to start to ask regarding the development of the earnings capacity. NOI Proved by some EUR 115,000,000 in the quarter, but I would have assumed that it should have grown around EUR €100,000,000 more just due to the fact of the acquisition of Maersk Master. And is the split or the deviation there, is it Related to currency headwinds or it's something else? Exactly. No, you're right. Exactly. I think the currency is about 150,000,000 But euro is lowered. Swisscom is much stronger than it since in the last quarter. So So that has an effect of SEK 150,000,000 just on the income. Okay. And the improvement of income from JV in the earnings As of the, what's that related to more than the Norwegian acquisition? No, it's related to the Norwegian acquisition. You see, it's not if you thought about it's not Anton B, it's more on Entries booked as Associated company. So it's 25% of Entra is included in the earnings capacity. Okay. And does that mean that the remaining part has been declining? And regard you gave some figures about expected production Can you say how long is the average production time? 24 months on average, I would say. That's the normal. And a final question regarding Sato. Have you been able to increase your ownership during 2020 or has it been unchanged? I think it's 1% more than last year. And what would you say is the main similarities and the main difference In your differences in your investments in Sarta compared to your investments in Entre? Yes. Obviously, Enclave is a listed company, so that is a big difference. And Sato, we wouldn't mind buying the whole company. And we prefer to stay on as a listed independent company, but we can be the largest shareholder, but we would prefer it to Continue the way it is. But would you prefer to reach above 50% also for Entrance and the Consolidated in your balance sheet and P and L? No. We think we would we think it's Quite okay the way we are around these levels actually. But I mean, we can't really that is also I mean, we don't know what Obviously, it happened among other owners of the company and so on. But if we could decide ourselves, we can think it's The next question comes from Eric Johnson from Carnegie. Please go ahead. Your line is now open. Thank you. I have a few questions as well. I think you invested about $4,000,000,000 in your Portfolio for 2020. And it seems that you're ramping up residential production In terms of sort of projects in general, what do you look for in terms of project investments for 2021? Is 2020 a good level? Or would you like that to be a higher figure when we leave 2021? I think we have in the report, you can see what we expect the volume that we have Thank you to start at year end. And obviously, I mean, we're going to do hopefully, going to find some More land that we can start construction on during the year. But at this point, I mean, The volume is included in the report, but we expect to start as compared to last year. It's very likely that we'll be Yes. I mean, if you look at The both the rentals and the co ops, the total investment for expected starts during 2021 It's almost EUR 11,000,000,000 in total investment. And with 24 months, is about half a good proxy for that? Or Roughly, I mean, normally, you have more investments later on in the project than in the beginning. So and it's, of course, Very complicated to know exactly because we are also depending on construction companies' municipalities and so on. But the long term trend, you can find out there. But on a 12 month basis is we can't Exactly beside ourselves. But if you calculate it roughly, it would be somewhere around there. But you are in the right area, you can say. Okay. Thank you. And then also perhaps a bit of a follow-up on how you report Entra. You stated that 25 percent of entry is included in the earnings capacity. In terms of the value changes in the P and L For Q4, is that do you also calculate 25%? Or was that the 18% or the 17 point No, that was what we actually had, 17,700,000. Okay. And 400 something million that you can see specified on that other income. Yes. Okay. And do you think I mean, it used to be that JVs were Quite a small part overall. And with the current state of the fact that you own 25% of Entra, It's becoming a larger part of the P and L. Now do you think that you will try to Report the actual part of Entra a little bit further, will we continue to do it this way to have it with If it continues to be associates, then it will be We booked as an associate or It's still included in the associated companies. So it's already Going forward, it's going to be recognized in the P and L as an associated company together with that group, of course. Okay. And I assume that it will be a fairly large part of that associated then given the fact that it's a quite large company. Yes. Okay. Thank you. And my final question is regarding The outlook for Entra, as the largest shareholder now, do you think that there are Other things that Entre should be doing going forward, do you have any plans to sort of change the strategy of the company? What is the plan to remain I'm more of a passive partner to the rest of the ownership base. We think Genther is a great company, so I don't see any dramatic changes, but that will be something to discuss between us and the management in Entrance and see if there's things that we could add on Because it's been stated before, and maybe there can be some possibilities when they have the Hi, Detolmer. But we haven't had any discussions about that yet. Of course, it could be your potential. Okay. Thank you. Those were my questions. Thank you very much. The next question comes from Markus Henriksen from Pareto Securities. Please go ahead. Your line is now open. Good morning, guys. I just have one question regarding the project pipeline. Thanks for the new Tables, just looking at the construction starts from 2022 and beyond, this is almost 16,000 apartments. How do you think we should view that on a time frame? It's very what can I say? Something could start 'twenty two, but the latest could be, I mean, 5, 10 years from now. So This is more of an overview that I mean, we can see what will happen the next year, and this It's important to for you to know that this will be an ongoing business for a very, very long time. You could meet you can see it as a Running business or segment for us. So that's why we also put in what we have coming after the next year. And then we will have more on top of this, of course. So but it's very hard to guide exactly Because we are depending on other parties, municipalities most, but also other authorities. So This is more for you to be able to see, okay, this segment will over time contribute and be roughly in this size. So We will try to develop this information also as we go along because it's starting to be a good part of our company. Yes. And a follow-up there. Looking at you have still gave some guidance historically on Finland And Copenhagen as well as Sweden, do we have if we look in a 10 year perspective, do we have any drops Regarding like your big zoning plans where it might be a lower volume or higher volume in a 10 year Perspectives, for example, lower we don't see. So perhaps we can achieve more, We don't like to overpromise. Okay. Thank you. The next question comes from Victor Fridberg from Vasterheitskaya. Please go ahead. Your line is now open. Thank you. I think I more or less got the answer, but can you just clarify one more time for me regarding The number of or the percentage of your ownership in Entrance, it was 18% as of the year end, and now it's 25 Thank you. Okay. That was my question. Thank you. Okay. And we do have a follow-up question from to BFI from ABG Sundar Koller. Yes. Thanks again. I would like to come back To your view on Entra and in general, the Norwegian market, what kind of different outlook Do you see for offices in Norway or maybe Oslo specific compared to the outlook for offices in Stockholm, Do you think that one of those markets will perform different? Or do you see a similar development? We think that both markets will be good over the coming years. And it's not easy to guess who will be the strongest of the 2. We think actually both looks very strong, very promising. And you said in the past that you are interested in making direct Investments in Norway, is that less likely now when you have a big position in Entre? Or are you still looking for direct investments as well. We look at direct investments also. It has been quite hard for us to find actually. So then we think it's Interesting to buy a part of a fantastic company. Okay. Excellent. Thank you. Thanks. At the moment, there is nobody in the queue. So if you would like to ask a question, please press star 1. There is no further questions coming through. So I will hand the call back to you again. Thank you. Thank you. Thank you for joining this meeting. To end this call, you may now replace your handset. Thank you.