Earnings Call: Q4 2020

Jan 29, 2021

Good morning all and welcome to Bonnava's 4th quarter report for 2020. Joakim Hallingren speaking. And with me today, I have Lars Gerandle, our CFO and later you will also meet Carolina Strom, Lied, our Head of Investor Relations, who will moderate the Q and A session. Starting with the highlights of the 4th quarter report, we have a high demand on all our markets despite the pandemic. We also see a very interesting trend in an increased focus on homes and neighborhoods. And of course, the pandemic changed the game for working. We work to a larger extent remotely. And suddenly you need to take care of new functionality in the home that you wasn't used to before. I think that we also see a spillover in do it yourself business, in furniture, Gen Furniture and so on. So it's a really clear trend. What that means, we don't really know yet, but it is certainly supporting Bonavas Business. The macro conditions are still very favorable and stable. We have more disposable income. We see an increasing growing population. We do have migration to larger metropolitan areas. So everything is supporting the business, but the pandemic of course influences us a bit. I will get back to that later with Anati. Looking at the numbers and focusing more on our own performance, we had significantly higher rate of housing DARTs. We were up with 67% and of course, that is the result of very hard work during the whole year. There is also something that we have communicated earlier that we were backloaded when it came to project storms. I'm also really proud to announce that we Canal Call, the turnaround in Finland completed. We have cleaned out all the bad project. We went through everything very thoroughly and I'm actually very pleased to announce that the Finnish operations is now showing positive numbers. However and of course not on the level that we would like to see going forward, but I think it's a very important milestone indeed. We will dive into the numbers later in the presentation, but I think that few has miss that we had an extremely strong cash flow during all the year and that Bonnava has a very strong financial position indeed. And that has led to proposal from the Board to the AGM of an ordinary dividend of NOK3.25 and on top of that an extra dividend of NOK2 per share. The extra dividend should be seen in the light of the canceled dividend last year. Was decided by the AGM to distribute or it was supposed to the AGM to distribute DKK3. We hold on to NOK1 of that amount and that is of course due to the uncertainty that still lingers around the pandemic. If we look on the Q4 figures more in brief, The top line increased with 16% and that of course was driven by more recognized units especially in Germany and St. Petersburg. The EBIT. And now I would like to point out that this is excluding items affecting comparability in 2019 where we had a write down in the Finnish business due to the decision to do a turnaround. So the EBIT is actually strengthened with 31%. It is boosted by the said turnaround in Finland where we have scene improving project margins and it's also supported by a really nice project in St. Petersburg, which we hand over with higher margins. I would like to stress that the project itself does not bring higher margins than we used to in St. Petersburg, in the top range, but it's pretty big, it's 210 units and of course that influences the margin for the whole quarter. The EBIT margin again excluding items affecting comparability is increasing from 10 point 7% to 12%. And as I said earlier, in regards of the dividend, we do have a very solid position indeed, and the cash flow was extremely strong during 2020. An update on the COVID and the pandemic and our operations. First, I would like to state that the main priority for us here at Bonnava is, of course, our co workers and our customers and other stakeholders. All Bonnava sites, as far as I know, is operational and has been so more or less during the pandemic. I know that we have had maybe a handful of stops, but they have lasted somewhere between a few days and up to 1.5 to 2 weeks. So that is progressing well and construction sites on all our markets are being deemed to be of utmost importance. So they are allowed to stay open, of course, respecting all the regulations and rules. However, we see some question marks and some potential impact, especially in our largest market, Germany, it has to do with the decision process. And so the administration around zoning and other construction related permits, rules and regulation. There are Two reasons for that. First, it is that the German market is one of the markets in Europe where The lockdown has been the strictest and we are now actually into our second pretty tough hard lockdown and that was prolonged by the Chancellor just last week. The other reason might be a bit pricing for us who lives in the Nordic countries. A part of the German society is not as digitalized as one would spec and that goes especially for municipalities and authorities. Many civil servants still work with desk tops and not laptops and not all have access to broadband at home. So that means that whenever they switch into remote work, The productivity and the momentum goes down, but this is all just a parallelization, a delay. We're still seeing building permits coming out of the system, but at a slower pace. We do not foresee But this will affect our handovers. There might be a bit more challenging to predict exactly in what quarter they will come if the delay is planned in the very last week, but it's more a question of 1 to 2 weeks delay. But for starts, for project starts, of course, it is essential that we have all the permits in place. There is also an upside if you can use that word in a pandemic, but this is from a strict business perspective and that is that we have been able to accelerate our digital customer journey, taking care of both the sales, but also parts of the handover process. However, I would like to stress that parts of the handover process is still requiring physical presence. It's hard to, for instance, hand over keys digitally as of now. So there are some uncertainty regarding that, but we passed Q4 handovers with flying colors, but I still would like to mention that It makes things a bit more tricky to predict. I will now spend some time on 2 graphs that you know very well. We have to develop them a bit to help you follow us closely understand them a bit better. And I would like to start by addressing a question gen that we have had since we released our reverse profit warning and that was how much did you borrow from the future to be able to deliver such a growth of top line and result in the Q4. And the answer is Pretty Blunt More or Less Nothing. So this is the consumer completions. We have added 2 rows with data sets. The first and the one on top, delta since Q3 might require some explanation. It solely means that in this row you can see The changes or the redistribution of the volume that we reported as ongoing and for completion within these quarters in the Q3. So you can for instance see that when it comes to Q1 2021. We actually added 70 units. However, that most likely came from the 2nd quarter where We now have 9 units less and so forth. The second set of data is the starts. So this is the start That should be added to the Q3 reported numbers starts that we did during the Q4. And here you can see that We actually were able to start 420 new units to be recognized in 2021. And in all we started 2,365 units to be recognized from now on and later. A gentle reminder, this is stating the obvious, but looking at the Q4, you can see that as Very often for Bonnava, we will have a Q1 with very low volume. We only have 400 units to consumer to recognize in the Q1. Moving over to investors, here you can actually see that one project, 70 units that was in Finland was ready earlier than we forecasted and was recognized already in the Q4 last year. But to compensate that, we actually succeeded start, another project on 80 units that will be handed over in Q4 2021. So The impact of the 2021 numbers for investors is unaffected. In total, we were able to start 8 20 units to be recognized from now on and going forward. And that does not include a project that we succeeded to sell in Sweden in Umea 100 and 75 units because that's actually conditioned by building permit and some other topics. So that's sold on the binding contract, but we're still waiting for the contract to be fulfilled. And here you can also see in Q1, we will have no units for investors to recognize. So just to give you a flavor of what we actually have started and what we're doing out there, there are 2 projects, but before I walk you through them. Let's just look at the sold and started numbers. Let's start with consumers. We were more or less on par Q4 with last year and I think that's actually an achievement because we ad, a hard lockdown in Germany in the last 2.5, 3 weeks and that has affected the sales in terms of building permits and start of new projects where we have print level. We also saw a handful of more units where we couldn't hand over as planned, they were delayed. The started units, I'm really proud of that number. We achieved to deliver upon what we planned to do. So we are significantly up in starts to consumers. And looking at the full year, the 2 biggest markets, Germany delivered approximately, well, exactly 1501 stores to consumers. So it's substantially over 2019. Sweden also succeeded to start a lot more consumer units than in 2019. We are now at the level, which we think is a good starting point for continuous growth. So we are planning to start a bit more in both Germany and in Eden in 2021 and grow from there. And that is based on the assumption that COVID does not play us a trick and that the market's concessions are still in our favor. Looking at the investors, we sold a bit more $820,000,000 compared to $712,000,000 And we also started that. And as I said, we also had solar project that is not yet started because it has not fulfilled the condition precedent in the contract. Looking at the projects, I'm really happy to announce or to introduce you to Kongs Loken in Oslo, 127 Units to Consumers. That was one project in the Urbaneum portfolio that we acquired in 20 2019. We succeeded to start some projects from that portfolio actually in Q4. And unfortunately due to the production times, we are not able to recognize anything from that 2021. But in 2022, you will see the Bonavas Oslo region and the undrawnium investment starting to yield. The I would call it a smashing success the sales started on Kongsluk and we sold very well and been able to increase the prices a few times. So I'm really proud to see that coming into action now. Looking at investors, this is a project in 2 phases in Helsinki and it's called SITA Delhi, 110 plus 138 units that we started and sold to investors in Q4. And to be able to facilitate you who are really interested in details, we have some news from this quarterly report. We will update you more in details on our starts on the investor website, bonnava.com. And there you can follow the starts more in detail per region. So with that, I would like to hand the word over to Lars for some more numbers. Thank you, Hakim. Hello, everyone. It's very nice to start presenting as the new CFO started presenting the Bonnava numbers with such a solid performance that we see in the Q4. So if we start with the group income statement, as Joakim said, we have improved net sales and we have strengthened both the operating profit and the operating margin. And of course, net sales is coming from more units recognized than in the prior year. Quarter. And I will come back to that in the coming slides, give you a bit of a flavor for what has happened in the Q4. Since we had this positive profit warning. We realized then that we actually delivered more net sales than was expected in the market. So I walk you through that in the next slide. If you look at gross profit, we have a gross profit margin that has increased coming from A better underlying margin Joakim mentioned St. Petersburg and also the turnaround in Finland that has improved our gross margin, But we also see positive mix in other areas. But maybe I should point out as well then that as You see in the box underneath the income statement, we have had this legal case from old housing delivered in 2000, We had to take further provisions of SEK67 1,000,000 that is affecting margin, is affecting the gross margin as well as the EBIT margin. So factoring in that, we actually have an improvement on almost 2 percentage point on the gross margin level. If you look at the selling and administrative expenses, it's in line with the prior year. But if we actually look into The underlying expenses, we should then consider that we actually recorded some SEK 25,000,000 in cost for management changes now in the Q4. And with such a solid performance that we are delivering for the year, We also have an increase in short term incentives bonuses in say some delta of maybe SEK 20,000,000 Between the year. So factoring in that we have a significant underlying reduction of cost in the quarter. Quarter. The EBIT margin, solid 12% compared to 10.7% and add back the 0.9% negative impact from this legal case in Germany, quarter. We are actually up on close to 13% underlying in the quarter. We have net financial items week. Slightly higher than the prior year, but for those of you that are following us, you've seen that we have prolonged the duration of our loan portfolio to reduce the funding and the refinancing risk. So with the longer duration we also have of course higher interest rates. For instance, we launched this green bond successfully during the autumn. Looking at tax, we are delivering a tax at the tax rate of 27%. So it's in line with the prior year, it's in line with what we have been delivering during the year as well. And just to remind you, it's high due to that such a large proportion of our earnings are in Germany and the German tax rate is the highest among the different countries that we are operating in. And you can see the graph also then on the right hand side. I won't dwell back on the first half of 2020. You all know that we were all disappointed with the performance then partly driven by COVID, the pandemic outbreak. But we started to see an uptick in the Q3, quarter. Not in at the same level as the Q3 last year, but it was moving in the right direction, but with small volumes. And now with large volumes in the 4th quarter. We are delivering a good solid profit increase. I said that let me walk you through how we See what have happened in relation to what we said in the Q3 report. If we start on the left hand side, If we then look at these graphs that Joakim showed you as they are now in Q4, we had them in Q3 And we said that 1600 units to consumers and 670 units to investors, Those were the ones that we are estimated for completion in the Q4. We were delivering that and if we then use the average sale price to calculate what kind of revenue stream we have. It's a net sale of SEK6.3. But over and above that, we actually delivered 36 consumer units, mainly in Germany, And we delivered 72 investor units in Finland, so over and above what we said in the 3rd quarter report and that is approximately SEK300,000,000 in additional net sales. And you also know that we are selling from completed unsold that we have in the balance sheet. In quarter. The Q3 we also had a large level of completed sold but not recognized because We were not able to close the handovers in time for the Q3. So those are then delivered and recognized now in the Q4. In total, it's about SEK 400,000,000 in net sales. We have Also sold some land in the Nordic segment primarily and that's SEK 300,000,000 of SEK 1,000,000,000 not with very big impact on earnings low profitability in those sales. And then of course you have a mix of Price increase is due to cost increases etcetera, so say SEK200 1,000,000,000 in Others. So that is explaining the difference between quarter. What you might have calculated based on the estimates that we had in Q3 report and what we now are delivering in the 4th quarter. So then look at let's look at the group figures and this is really a very good, very slide where you see that we have higher volumes recognized, we have higher volumes started and have higher volumes sold as an average for the group. So it's really pointing in the right direction. So let's move into the segment. And starting then, of course, with Germany being the largest LVC that Germany has increased net sales of course driven out of more recognized units both in the consumer area and in the investor area. They have a gross profit that is slightly down, 1 percentage point, but here we have the impact of this old legal case. So with that added back, there is actually an increase of about 1% each point on the gross margin level as well as on the EBIT margin level. If you look at starts and sold units, we see an increase in started units to consumers. We had quarter. A slight downturn in terms of investors, but it's like we're saying also that it's a timing issue. We have a lot of different projects that we are discussing. And with the pandemic, some of them are moved in time as Joakim mentioned earlier on. So the authorities, the longer process is to get building permits, to get starts, but also for handovers when week. We are due to hand over to our customers. We see that we have one investor deal here recognized which In Liebig, some 155 units and we also had some earlier on during the quarter. The sold units are decreasing, but it goes back to the comment I had before that we have seen delays in the authorities and we see delays also in handovers and maybe that is due to COVID that our customers cannot take access of their units. Let's move to Sweden. Sweden, We actually have a significant decline in sales as you see. We have delivered recognized units in line based again slightly higher than we did in the Q4 last year. But year. As you see down in the box below the income statement, a significant portion in the prior year of the almost SEK 1,300,000,000 in net sales was coming from sale of land with high profits as well in that quarter. So factoring out that and also the small sale of land that we have this year's Q4, We have a slight decline in net sales. We have a significant reduction in gross margin, but again it's a land sale in the prior year that has driven the gross margin upwards than in 2019. So if you look if you're factoring that out and make it apple to apple in terms of the operating margin, the EBIT margin, quarter. The EBIT margin for 20 24th quarter is 6.2% compared to 6.8% in 2019, so a slight decrease in margin. But on the full year basis, we have improved margin quarter over the prior year when we are factoring out the sale of land. So In terms of the market, you've probably seen that just the other week where more information out and they're saying that 2. We have a price level increase in Sweden of about 10%. If you look at the projects that we have completed and realized of course we have not Benefited from that in all of those projects, but it looks very promising going forward, in particular when you are Considering that we are that we have secured a lot of building rights, some 700 new building rights in the Stockholm area That builds a good base for the Swedish business going forward even though we have a slight reduction in starts and sold units now in the Q4 compared to the prior year. Let's move to the Nordic segment then. Here we have it The other way around. Here we have sold some land this year that is explaining some of the increase in net sales. So factoring out that we still have An increase in net sales, but not as big as you see in the reported figures. We have a solid gross profit, Not driven that much out of the sale of land, but as Joakim mentioned, we have the turnaround now completed in Finland. So we are seeing significantly better margins in our Nordic business, where we also have significant reduction session in our selling and administrative expenses. You see down here also in the box that factoring out to the sale of land. The EBIT margin is some 10.3%, significantly above the 2% that we were delivering in the 4th quarter in 2019. Looking at the development in terms of starts and sold units. This is really the all time high quarter in sold and started units so far. We see strong underlying demand for both from consumers and investors in all our free Nordic markets. And just some highlights here. We have actually concluded 5 investor deals during the quarter, 3 in Finland and 2 in Denmark. Week. We are continuing to discuss even further deals going forward. So here we really see uptick and a positive base for the business going forward. And speaking about positive base, St. Petersburg, Baltics, really high volume recognized units and a strong EBIT margin. In particular, some projects in the St. Petersburg area where we're delivering very good margins. You see 23% compared to 17% Already in the prior year, of course, good margins, but even higher now. And we managed to keep that selling and administrative expenses in line with the prior year. So we have an EBIT margin of 21% compared to 11% in the prior year. And if we look then at starts and sold units, in terms of started units, A significant uptick in the quarter and that is coming in the consumer area. So it's strong market development in St. Petersburg And we see continued recovery in the Baltics. And there are several major projects that is being started. We see a slight decline in sorry, we see a slight decline in sold units, but Probably some impact also here about the COVID and taking delivery of the housing is impacting the sold units. This is the segment where we have seen a decline in the completed unsold wells sold from the stock in the Q4. And also important to mention that we're now taking the first step into Lithuania where we have launched started the first project in Lithuania during the quarter. So let's leave the segments and go to our balance sheet. This is then the total assets. You see that we have a decline in assets, which is normally with our normal with our seasonality where we are finalizing a lot of housing projects in the Q4. So we are actually down below the SEK23 billion level and it's even down then compared to where we were in the prior year. And you see that we are up again in the equity to asset ratio almost 35%, so really well above the financial objective of 30% that we have. If we move into the capital employed, of course with assets being reduced. We have a significant reduction also in capital employed to SEK 12,600,000,000 and even though we are not In return on capital employed in line or in the within the 10% to 15% into all that we have as a financial objective, We are moving in the right direction. So we have been down during the year, but now moving in the right direction and delivering 7.9% in the quarter. Joakim mentioned strong cash flow, absolutely strong cash flow. We see for the Q3 in a row, a significant positive cash flow. You see here on the right hand side how it looked like in 2019. If I use also 2018 figures, it would look as 2019 with close to SEK1 1,000,000,000 in the 4th quarter, but basically negative cash flow in the 1st three quarters. In 2020, we had a negative cash flow in the Q1, but then we were delivering strong cash flow now in 3 quarters in a row. I would say at some of that SEK 1,900,000,000 of cash flow in the 4th quarter is an effect of that we have not invested in land etcetera in line with the prior year. So that is some timing differences that will come going into the next year. But as you see in the table on the left hand side, we have Strong cash flow coming from the divestment of the housing projects, finalizing them. We also have good income of advanced payments on the units in production in the quarter. So really good to see this positive development of cash flow in 2020. And of course, with such a cash flow, it's not Yes, it goes without saying that the net debt has been coming down. So the net debt is actually year. Less than half of what it was 1 year ago, so SEK 3,300,000,000 in net debt, which sets a good base for us going forward because we have of course a lot of unutilized credit facilities, SEK 4,500,000,000 of unutilized credit facilities by year end. So we have the base for investing in good land and also investing in new housing projects, of course. Quarter. So rounding off my presentation, let's then look back on the financial objectives and dividend policy that we have in Bonnava, Starting with the return on capital employed, of course, as I said, we are not within the 10% to 15% yet, but we are moving in the right direction with 7.9%. We are clearly above our 30% target of equity to asset ratio with SEK 34.6 billion. And if we look at the dividend policy, we're saying that we are going to dividend At least 40% more than 40% of our earnings per share per year. The earnings per share for 2020 was SEK 6.82 And the Board of Directors have proposed then to a ordinary dividend of SEK 3.25 which is 48% of our EPS 2020 and extra dividend of SEK 2 and that is corresponding to 35% of the earnings per share in 2019. So by that, I end my presentation and leave it to Carolina. No, back to you Joakim. Actually to me. Thank you very much. Yes. Sorry. I will just wrap up. So concluding the 4th quarter report, We have a really strong position financially not least, which creates possibilities for the future. So there is a strong demand on all markets despite of the pandemic, But the extended lockdowns in some of our markets makes a bit more difficult to forecast, especially everything around decisions and permits coming from authorities. It will not have any significant impact on the numbers of units that we're actually finalizing this year, but it has more to do with in which quarter we can start projects with building permits pending. Good momentum in Germany. As we said, We had quite low stores in 2019. We have now recovered. We're also seeing sales in par with the sales in 2019 despite 2 lockdowns. So we really hope that we can leverage on this going into 2021 once the pandemic is out of the way. The turnaround in Finland is completed. We're back into black numbers, not on the level that we want to be in the future, but very important milestone and the turnaround is now closed. Going forward, we are focusing on housing starts. I mentioned before the 2 biggest units, Germany and Sweden, we think that we are on decent level and sort of it's also levels that we can grow from. Depending on the development of the pandemic, but also market conditions, but if the stars are right, we are able to start more units going forward. And then as we have stated many times during this presentation, a really strong financial position, fantastic cash flow. And of course, that gives us a lot of opportunities to act in the future. But you also gave us the opportunity to present dividend both ordinary and extraordinary dividend to our shareholders which we really think that they deserve. So with those concluding words, I would like to hand the word over to Caroline Astrand Elid, our Head of Investor Relations, to moderate the Q and A session. Please go ahead, Karolik. Thank you, Joakim and Lars. We will now open up for questions from the telephone, and you're also welcome to post questions on the web. So operator, please go ahead with the first question. Quarter. And our first question comes from the line of Stefan Andersen of SEB. Please go ahead. Thank you. Two questions from me. Starting with a subject I think you touched Stephane in the presentation that I'm still not fully understanding. When we had the Q3 coming out, quarter. I think you delivered or handed over some 220 more apartments than you guided for the quarter before. And then this time, I think it's like 3.60 more handovers. So it's quite a lot of apartments. And we're not seeing I think you're even, well, plusminus17 in Investor. No change in Q1 one next year. So I'm just trying to understand where those apartments are coming from. I guess Some of them could be invested packages being upfront. So, but could you help out a little bit? What am I misunderstanding? Stefan, if you look at this bridge that trying to convey the SEK 6.3 billion to SEK 7 point 5. Yes, it's true. We have 108 more completions than We were estimating in the Q3 for the Q4, 36 units in the Consumer segment And that was mainly coming in Germany in different projects. And 72 units in the investor segments and that is in Finland. Of course, these things are happening. And we are in this time, we actually managed to conclude and complete them before we actually estimated. In addition to that, we sold some, I would say 250 units or 220 units I think it is, all in all from completed Unsul, I. E. What we have in the balance sheet and that is hard of course to guide on because that is happening all throughout, but we can never predict really when that is happening. And then we had included in that number some 200 units coming from completed but sold but not recognized by the end of Q3. And those were it was in St. Petersburg where we have had a project that was just closed by the end of September, but the handovers were not we couldn't do that, could not complete before the end of the quarter. So hence, it was coming was spilling over to the Q4. And then of course we have sale of land on others, but basically more completed units and sale of units that we had in the balance sheet by the end of Q3. Okay. I'll try to work with that. Then another question on the how do you experience the markets of buying land, I guess, especially Sweden where you've been lagging a little bit and trying to catch up, I guess. Norway, you're in a good situation already. And maybe Touch on Germany. So Sweden, Germany primarily, I guess. Are you seeing any big changes in negotiations to find land given that the end markets have been rather strong this year or how do you see that situation? I would argue that the situation is pretty day. While we were actually expecting a sort of a downturn in land prices after the setback in prices in Sweden, but the market has been very active. It is tough competition. We're also seeing an understanding that there is a lot of money on the sidelines. So we're seeing actors that are not typically real estate related, but they got money somewhere else that moves into this business. So high competition, But we are really pleased that we were able to land 700 units for Sweden in the Stockholm area this quarter. So we are optimistic that it is a tough market out there. And that also goes for Germany, especially for smaller plots. But for bigger plots, there's still decent competition. Just to add on to that, is it correct if I'm assuming that it's primarily Sweden and Germany where you think You have a bigger need, so at least to add up. You always have to add up, but it's a bigger there than maybe Norway after the acquisition you made and what you already have in San Francisco, is that a correct assumption or? Both yes and no, I would argue, because if you look on the numbers for Sweden and for Germany, We actually have pretty good portfolios, but they are unevenly distributed in time. Many plots in Sweden that we have is not due to zoning until a few years ahead in time. So yes, you're right, we need to add in Germany and in Sweden. In Germany, it's more a question of complementing regions. We never had more land in Germany in relation to our turnover in starting units than we have now. We have increased that a lot. But still we want to continue grow and securing a land, yes. But if you look at the total numbers, We're well prepared for the future, so to say. Yes. And my final question is on prices. You mentioned in Sweden that quarter. The market prices are up some about 10%. I guess, just a little bit I mean apartments are actually up 5 and villas are up a lot. So just a little bit curious if you're in a situation where you see that your market actually is about 10% this year and that you can raise prices with that kind of amount. And then Touch on this on the investor packages. We're seeing that's been a very hot market and there's lots of money over there. What kind of price changes are you seeing in the investor market. Deals are coming down rather quickly on the valuation of those properties. So are you benefiting as well, Mikey, on that? Let's start with the consumer side. I think we need to remember that there are long sort of duration times between start and end of project. And we will normally start with a 30% to 35% presales rates. Of course, We are not able to leverage on increased prices immediately. I support your conclusion, Stefan, with the numbers. We see more rapid growth on our single family business than we do on our multi family business. But We are following that trend. However, some projects were started earlier and they have not the profitability that we were used to in the good old days, so to speak. So I wouldn't expect to add on that price increase on top of 18% to 20% expectance. So we are more coming into the normal range if this keeps up. Moving over to investors. There is an issue with investor deals. I know, yes, yields are compressing a bit, but it's also a price regulated system in Sweden, which that we can't increase prices to the tenants so much more. And the prices are more or the same across Sweden and then we see increasing construction costs as well. So I mentioned before that we would expect to be in a range between 10% to 15%. 15% means that we are really skilled and cost efficient and the market is super strong. And 10% would be some kind of floor. And we've been struggling a bit to grow into the 10% in the Nordic countries that we're coming closer and closer to that. But 15%, we're not there yet unfortunately. Okay, great. Thank you so much. Thank you. Our next question comes from the line of Simeon Mortensen of DNB Markets. Please go ahead. Hi, this is Simon. And first of all, congratulation with a very good result and strong dividend. Just noted a few things in the report. In St. Petersburg, you now stated also you have to use local funding while construction while doing construction there. Will that at all impact margins in any way or what kind of impact is that expected to have? My other question goes into Sweden. And your project margins, which basically is 9.5% in the quarter, typically You stated that you didn't expect you to come back to the 18%, 20% project margin. But can you tell us help us a bit Why are the margins so low today and where do you actually expect the project margins? I'm not saying I'm looking at the project margins and not the EBIT because I want scale out the profitability from the development in terms of the volumes being delivered. And look, can you please help me understand those two questions, please? So if I start with the first question and then hand over to Lars for the second question. What has happened in Central or in Russia in general is the following that To be able to provide or to prevent scam, the authorities have decided that you need to hold an escrow account in a local bank. It will not affect go back. It will not affect our margin significantly. We used to work with foreign banks before for the project financing. And so it will affect the cash flow a bit. The IRR would go down slightly. On the other hand, as sort of a treat because we use the local banks for the escrow accounts. They also now provide us with very cheap project financing. So To conclude, no, not a substantial impact on margins at all, but another kind of business model. Okay. And the other question was about the Swedish project margins. Project margins exactly which has been below 10 for several quarters now in terms of the projects having been delivered. Yes. Maybe I cannot give you very much insight into it. But of course, since We are as you know accounting for based on completed contract. It just happens that The contracts that we have recognized and completed have had a lower margin quarter. And some of these projects have been there for a few years where we have had to reduce profitability because of additional costs, etcetera. I believe even though I cannot give you any figures, I believe that we have ongoing production in Sweden That is building better margins for projects to be realized going forward, but I can't give you sort of figures Per year or per quarter. I can confirm. I understand. And one project, for instance, that we are agonizing now in the second half of the year is Stolar Teras, a project that was started in 2018 with more or less no margins left. So it comes it's sort of a it comes from that and going forward with a much better project margins in the ongoing portfolio in Sweden. But then you have the volume effect. The volume I think is different. I was just thinking some of these margins and projects, if they stand back to when the prices in Stockholm, for instance, dropped in '17. Is that a correct assumption that these deliveries have so low margin because of that? Year. That is exactly what's happening in Vola. It was an area where we chose to develop some developers and the prices went down and we went from 18% to 1%. Okay. And just two other questions. You might have touched upon it. I didn't catch it exactly. But in other and eliminations, the cost is up to NOK 93,000,000 this quarter. Quarter. There's no comments in report. There's nothing. It's a high level than I expected consensus expected. Can you please give a bit of flavoring on that? And the second, you talk about the plot investments. And as you have a cyclical note, what kind of level do you key week. You want to be buying land for as an enormous level in 2021 and 2022 hopefully. Thank you. If I take the first question then about the cost level. Yes, the cost level in the quarter was in line with the Q4 last year Or actually SEK 2,000,000 above that. But as I said, we have included in this Q4, we have expenses for management changes in the area of about SEK 25,000,000 impact in the 4th quarter. And also with good delivery all over our businesses, we have higher STIs, higher bonuses That is primarily I think recorded in the 4th quarter say as a delta compared year. Last year we have about EUR 20,000,000 of increased bonuses. So if you factor that in, we actually have a significant reduction of expenses underlying in the quarter. It wasn't coming in anywhere, so that's one of them. Yes. Okay. I'm not really sure I thought your second question, Asim. And was it in relation to land? Land and plot investments going forward, what market we're in, what kind of volumes? When we bought the urban portfolio, we Said that we wanted to sort of get a foothold in Oslo before growing and we were planning to be somewhere in the neighborhoods of 200 to 300 starts per year and that was what the portfolio allowed. If we should follow our own sort of conviction that to be a player in a market And really properly you should be number 1 to number 3. That would mean that we would need to size up the volume to plus 500 or no slow going forward. I would suggest or my plan was to sort of stabilize first on the 200 to 300 level and then make issue whether to go further. Now I will leave that question to Peter Valin and to Lars to make that assessment. But the plan as it lays today is to be on a regular basis between NOK 200,000,000 to NOK 300,000,000 and we need to complement the portfolio to do that. Thank you. You have answered my questions and congratulations on the solid results. Thank you very much. Our next question comes from the line of Frederik Sillem of Carnegie. Please go ahead. Quarter. Thank you. Yes, a couple of questions from my side. Starting off with the started units in 2020, I think they were fairly strong at above 5,700 units. And quarter. As I interpreted your communication now, Joakim, it's that the ambition if the market stays as healthy as it is that you aim to grow in Germany and Sweden. Correct me if I'm wrong. But given the high pace in the Nordics and also to some 17. And thanks to this report, do you think that on a group level that the aim is to grow start ups 2021 versus 2020? No, I'm not sure we want to do that. We just concluded that Finland was out of its turnaround. One sort of course to that turnaround for us was that we decided to cut down on volume to get control. And I'm not sure that we want to sort of open that throttle again, at least not sort of short term before we are feeling really, really secure. And as you well know, Peder, the starts in St. Petersburg with a pretty large project, they come in lumps. So and we started a lot now in the Q4. So we would like to see the development of Oslo. We would like to see some more starts in Bergen and sort of I gave you some flavor around Oslo and you know Bergen pretty well. Sweden should be up a bit. Germany continue to grow into the fantastic market. I mean, we're looking at a sales ratio of plus 70%. That's too high to my taste. We're missing out potential on the market. But we don't I think it's we're more focusing on the 2 major segments going forward. And then in general, we're looking for profitability and for safety in delivery and the project margins. Makes sense. And my question the second question is on Germany. Gross margins were under quarter. Sure. In the 1st 3 quarters of the year and now in Q4, Klavazader and they are back at a very healthy level. Based on the current pipeline and the very strong market, I would say. What kind of gross margin should we expect going forward? Was it a temporary reduction that we witnessed in 2020? Yeah, I tried to communicate that in the spring that what we saw in the first half of 2020. When it comes to German project margins, we're sort of an exception from the rule. They were extraordinary weak and they actually lumped together in the 1st 2 quarters. We also guided that we will see more normalized margins going forward in the second half of the year with emphasis on the 4th quarter. And I think that The numbers speaks for themselves. I remember being asked in the Q3 call about sort of my perception of what is a normalized level in Germany. We were talking about now I'm talking about the EBIT margin. In the neighborhood of 12%. So yes, we are expecting solid performance from Germany. And unfortunately, we had a bump in the road with a lump of poor performing progress, also due to corona because there were some delays, there was some additional cost to speed up and to take precautions and all of that. So Yes, moving into the future, we should say on healthy levels in Germany, and we stated that an EBIT margin of 12% is a good level. That's clear. And then moving over to start up units that might be profit Profit Recognizing 2021, I acknowledge and appreciate the new information you provide. Should we expect more units to filter through in Q1 2021 that might be profit strike recognized in 2021 as well. And if so, is that mainly related to Germany then. There are only one kind of customer offering that still can succeed to be finalized. And that is actually single family house or row houses. We only do that in Germany and in Sweden. I would say that It would be a very small volume. Germany struggling with building permits. There might some might trickle through early enough, so we can conclude in Q4. I can't say from the top of my head whether we have a project start in Sweden for Rohas that should be finalized. I doubt it. It would be really good. So very small numbers will be added to the 2021. We will build on 2022 and forward. Thank you. And then my final question. Of course, with your accounting methodology, the quarterly results are lumpy and volatile. Is there anything that you think is worthwhile highlighting moving into the Q1 that we should keep in mind on a group level or another divisional level? I can respond. I mean, I'll try to highlight that we only have over 400 units for consumers. To be honest, I don't really remember the geographical spread that will come into play. But I don't know Lars, would you like to complement anything on that question? No, I think that's correct. Quarter. You mentioned this Swedish investor project 175 units that is subject to financing. We don't know when that can happen of course. So it's not included. So we have 0 completions in the Investor segment as we estimated right now. Other than that of course can be some sale of completed on so from the balance sheet to be added, but That should not be a very significant portion. Okay, thank you. Those were my questions. Thank you. Our next question comes from the line of David Flemish of Nordea. Please go ahead. Hi. I have a follow-up question on starts. You mentioned you aim to increase starts in Germany and Sweden in 2021. Could you please elaborate a bit on the level we should effect. I mean, in Germany, you started between 23,000 units in 2015 to 2018. Year. Last year, you started 1800 in Germany. Is it around 2000 to expect? Or can you say anything about that? Yeah, let me start by saying that the stores in 2018 were sort of they were a bit off the chart. I think a good guidance would be what we sell. We sold the 1270 ish this year, so we don't want the 2 big delta. Of course, we want to lower the sales ratio in the portfolio. But I mean for me and I'm not I will not be in charge of this going forward, but I think that I can I think Lars and Peter, it would be more or so increasing by 100 than many 100? And we have to be really, really close to the market taking into consideration the permit process, the effects of the lockdown and all of that. So growth, but it will not be an exponential growth. You will be guided by the sales numbers, especially in the consumer segment. So we don't create too big delta. Okay. And in terms of mix, should we expect the same mix as in 2020? Or do you see another mix for 2021 between investor and consumer starts. Yes, we're I think I'm just sort of reflecting, the sorry, the investor starts were pretty low 2020. But there is a factor or 2 factors actually driving down our eagerness to start Investor Pro. The first one is that, I think it was Efrain asked about the land market in Germany. It's very competitive, which means that It is pretty tricky to buy land today that is suitable for investor deals because if you turn them into condominiums consumers. You have much more profits. So they are like in Sweden there. They are priced for condominiums and not rentals. And it's not really keen to go in and take projects just because and by doing so diluting margins. The second factor that we need to take into account is that The land that is available has a greater sort of there is a greater demand and Ruz steering towards social housing and that will also put pressure on them on the margins. So if you go back when we started 800 units, we will not be on that level because it doesn't make business sense for now short term. Maybe somewhere in the range between 300 to 500 would be a good number going forward, but it's very dependent on zoning and Building Permits. Hopefully, we can boost up the consumer sales a bit more because I Do believe that the market has that potential, but you will not see numbers short term going up to 800 or so unless we find a golden nugget. As I said, there are 2 dimensions working in the opposite direction. It doesn't make sense to dilute margins. Fair enough. And my final question on starts. 2020 was very backloaded in terms of starts. Do you see the same for 2021 or is it more evenly spread out? We are planning to be a bit more even. But again, with a hard lockdown and with all the sort of the fog around the market, I wouldn't take a bet on that. So I think it's fair to assume that we will be fairly back loaded. That's how it normally looks and especially factoring in the COVID pandemic. I think we should stick to that assumption. Okay, great. Thank you very much. Thank you. Our next question comes from the line of Jan Ivers of Kepler Cheuvreux. Please go ahead. Okay. Thanks, Orest. I have actually three questions. And the first one With regard to St. Petersburg, Joakim, we started to comment on St. Petersburg telling that It seems to me that the margins were a little bit boasted about better product mix than you had in the past. Is that the true? Is that the case or? It's spot on. Okay. And second question relates to the profit you receive from the sold apartments from the stock. Did you have to lower prices? Is there some margin dilutive sales or could you just comment on your price that you get on the already finished unit? With very, very, very few exceptions, we do not lower any prices. We actually been able to increase prices also on the completed Unstalled. We have a very, very strong market, but there was, I mean, 1 or 2 projects where we might have had handful of units that we just wanted to get rid of that we gave some discount. But otherwise, that is nothing to factor in. Okay. The 700 building rights you acquired or going to acquire here in Sweden. How quickly could you turn that into starts? Or could you just give a rough figure of where what you could start this year or maybe next year? That's the €1,000,000 question. But a very simple answer is later than we think, taking into consideration the very slow and complicated zoning process in Sweden and especially in the Stockholm region. I can't Do you really see anything out of that portfolio being started this year, but I would be positively surprised. But Most likely, we will look at starts in 'twenty three to 'twenty four. That would be my best assessment. And the geographical split in this building back portfolio, could you give us a hint of where these are located? Karl, as you know, I live in Gothenburg, so I have to be as specific as Greater Stockholm. I can't help you more than that, unfortunately. Okay, Okay. And my final question regards your also your building wide portfolio as there has been such huge difference between the price increase on single houses and on apartments here in Sweden. What's your How large is the portion of single houses in your building back portfolio in Sweden? I have to take that from the shop, but from the hip, but I guess it could be somewhere between 20% to 30% of the portfolio. It is interesting because there is a huge demand from customers, but the municipalities has for a long time been pretty reluctant to single family, but they have also understood extent to single family. But there they have also understood that, that would be very much in demand. So they are trying to speed up the process, but it will take some time before enough land is available for developers. So unfortunately, we will be on that level for a time. And it's a very profitable and very interesting business. We actually do our 1,000 industrial single family house next week. To have a very good, very cost efficient product that is supporting us very much. But unfortunately, it's very hard to expand the land bank. Okay. Thank you very much for taking my questions. Thank you. Our last question comes from the line of Johan Hellakamp of Svenske Daghloudis. Please go ahead. Yes. Hello. It's a broader question. I wonder, now many people are in distant work. Quarter. And what are the implications for how you plan for the how you rollout layout of The flats and condominiums, will that be more doors, more inner walls? Will there be a need for more quiet corners? Or would there be a separation between living and the living room and the kitchen? I mean, Do you work on another kind of demand now? And how do you see The demand for is changing because of a lot of people working from home. This is a very relevant question. Unfortunately, I cannot quantify that. As I stated earlier in the presentation, we see an increased interest and demand. We have a demand for homes with more rooms that does not mean that our customers can afford to buy bigger flat, but if there is a flat or a home with more rooms, they prefer that. Unfortunately, due to the zoning process in Sweden and many other countries. We will still live with, if I call it, pre COVID designs for maybe 5, 6, 7, 8 years. And I think it's way too early to draw any conclusions of how a post COVID home will look like. But it's something that we will certainly follow in the future. Okay. So what would you guess that post COVID layout would be? I don't know. And why does it take 8 years? Because that's the time frame for a zoning permit to go through and the exterior of a building has so much impact on how we can design the apartment itself, unfortunately. Okay. So could you get a brand guess how is the post COVID design? No, I'm sorry, I can't. I can just see that there is a discussion and interest and I think that it would be Very interesting to follow that closely, but I can't help you out because we're just in the beginning of something. Okay. And quarter. You talked about 10% higher pricing in Sweden. What about Your main market Germany, how much is pricing has it changed there? We see a positive price development. It's different from region to region. It has bin. Earlier, double digits, I think that we are into single digits now, but I can't quantify it more than that unfortunately. Okay. Thank you so much. Thank you. We'll now hand back to Joakim for closing comments. No, actually, I will close. That was the last question. And the question that has been posted on the website have already been addressed. So we would like to thank you all for listening in and welcome you back