Earnings Call: Q4 2020

Feb 25, 2021

Thank you very much and also a warm welcome from us at CBIZ. As said, I'm Sjerg Kjellborn, the CEO of the company. And with me today is Pierre Ljellsson, the Group CFO. Next slide, please. Pierre Ljellsson will go through all these numbers in more detail later on. Please go to the next slide. It's just significant events during the period. Well, the 4th quarter was busy and with great acquisitions. Firstly, we started by announcing that the nomination committee in preparation for the next Annual General Meeting have been appointed. And then in 4 transactions, we acquired 11 properties. Three transactions were in Finland and one in Sweden. And that makes the total acquisitions for 2020 is over €370,000,000 which just great and very we're very happy about that. These acquisitions were in Finland and in Sweden, as I said. And it's the same kind of properties that we always buy grocery anchored retails retail Properties. And to partly finance these and to keep our LTV within our target, we completed a directed new issue of 2,680,000 shares, raising proceeds of approximately €41,000,000 next slide, please. A quick description of CBIZ and our business model. We have a very clear strategy. We buy and own and develop daily goods properties with strong tenants that provide dependable income to our shareholders. We focus on supermarket sized grocery stores with the leading Nordic grocery companies as tenants. Next slide, please. The story of SIEBERS is the story about portfolio diversification. Traditionally, these kind of assets were owned as either single assets or in small portfolios of 2 to 5 assets by private persons or other companies, which meant that this business had a very high risk concentration because if the tenant left, you lost all your cash flow. You also came into a very weak negotiation position with the tenants. The banks realized this. It was hard to get proper funding, which meant it was a high risk but also a high return business. And what Silos realized is that if you bundle these kind of assets together in a large portfolio of 290 assets as we own today. You diversify the risk and you lower the concentration. None of our assets is worth more than 2.5% of our NOI. As a matter of fact, only one asset is worth more than 2% of our NOI. So it's very low concentration of the risk in our portfolio. When you own as many, many assets as we do. You become an active cooperator with the tenants instead of just the landlord. So it's easier to get the higher bankability, so you lower the risk and you have the same return as for a single asset. Next slide, please. But what about your in detail and what about e commerce? Well, the Swedish Trade Council has produced a report on Amazon's fact on different kinds of retail where they now have entered the Nordic markets. And as you can see, the effects, which is the arrow on the far right with a high effect are electronics, books and toys, not on the other end of the scale with a very low effect or daily goods. Next slide, please. And this is what sets Sibas apart as a real estate company within retail. We have a resilience toward e commerce in our portfolio. Food stores have seen a very negligible negative effect on sales. Even in the during the pandemic, the share of online train is just around 4% and a large share of that volume is Click and Collect, which is collected from our stores. And you can see very few operators worldwide are making profit on online food sales. On the other hand, we see a notable positive effect as our existing stores work as a natural distribution network for other goods the project online, which can then be delivered to supermarket and picked up there by the customers when they do their weekly grocery shopping. This is a very strong trend all over the Nordic countries. Next slide, please. What also sets Sieders apart is that we have our own organization that actively works with our portfolio of new acquisitions. We can be an active property manager. And this is important mostly for our tenants because they're very secure that they can get hold of one of CBIZ if they want to discuss whatever matter they have on their minds. So it's a very comfort it's comfort for the tenants that we have our own organization. And it also means that we can be very quick in the transaction Faith as we have our own staff who works daily with these kind of issues as well. Next slide, please. Sustainability. We are driven by the conviction that we, in our decisions about our real estate portfolio can contribute to a responsible social development. We have the ambition to promote sustainable development of both tenants as well as a living community and that this contributes to long term long good term profit development for our shareholders. We do this together with our tenants. And a very successful project that Pokmanivans is a solar panel plant project on the top of our on the roofs on the top of our buildings. Today, 26 of our properties have solar panels. And the annual carbon dioxide reduction they generate is about 3.82 tons. We have also taken our responsibility during the corona pandemic, and we have lowered the rents around €200,000 for our smallest tenants who were forced to close their business due to the corona pandemic. That was in the Q2 and in the 3rd and the 4th quarter have no additional rent discounts being given. And we're also proud that we have issued our 1st green bond during 2020. Next slide, please. What effects have corona had on Siebel's business? Well, Siebel's business model is non cyclical, which really has proven during this pandemic. We see a very limited negative effect. Grocery sales are on record levels and our tenants have handled increased demand professionally. Approximately 90% of our income comes from the leading food change. And if you look at the full year 2020, more than 99% of the invoice trends have been paid. And during the Q4, the impact on profit was negligible as well with €900,000 next slide, please. What about growth? Well, the Board of Direction changed our growth target from €50,000,000 to €100,000,000 during 2020. But if you look at the full year figures. As I said, we have grown by more than €370,000,000 in both Sweden and Finland. So we have dramatically succeeded on that target. And the market continues to be strong. It's unaffected by the corona pandemic. Finland and Sweden are still our main markets, the other Nordic markets are monitored. It is a bit difficult to buy properties in a country which you can't even visit. So we are at this moment, we are focused on Finland and Sweden, but we are looking at if deals are coming out of the other market as well. We still have a strong cash position and a strong pipeline regarding possible acquisitions both in Finland and Sweden. A normal growth will be financed through cash and bank or bond financing. But if we see opportunities for more rapid growth, that this may lead to an equity raise or a hybrid bond to secure the LTV within the company financial targets. Next slide, please. The shareholders list as of the 31st December 2020. The 4th AP fund is still the largest shareholder, followed by Marian Dragacevich Entre Akfaas. And then BMO Global Asset Management is the 4th. If you sum up the 15 largest shareholders, they own 43.4 percent of the company. And during 2020, we have really improved our the shareholders list, and we now have over 27,000 shareholders. Next slide, please. If you look at the share price performance, we have an average daily volume of SEK 24,000,000 with about 2,100 transactions just per day, which means this is a very liquid share. And even if our operational results were negatively impacted by the coronavirus, the CEVA share price was affected by the stock market unease in March due to the coronavirus that has recovered since Ben. And the share price at the last day of December was $167,600,000 and we're still trading around that level. Total share returns if the IPO is over 80% if you account in CX. Next slide, please. And then over to you, Pielena, for the financial overview. Thank you. I will go to the next page and look at some key figures for the quarter. Rental income grew with 34% to €17,600,000 Net operating income increased with 33% to EUR 16,700,000 Profit from Property Management was EUR 9,300,000 And earnings after tax, euros 9,100,000 or euros 0.24 per share. Next slide, please. If we look at the P and L in more detail, as I mentioned, net operating income was euros 16,700,000. Administration costs are affected by nonrecurring costs of €500,000 And these comprise of costs for the plan list change to Nasdaq's main list, But also cost for conducting an inventory of equipment in the Swedish portfolio. And this will increase our ongoing cash flow over the coming years. We also have some cost in connection with the liquidation of 2 dormant subsidiaries. Net financial items includes unrealized exchange rate loss of EUR 500,000. Anurag's changes in value of investment properties was €1,300,000 in the 4th quarter. The inventory of equipment in the Swedish property portfolio, as I mentioned before, has a positive effect on current tax. So it was positive with EUR 500,000 in the quarter. Next slide, please. Our current earnings capacity on a 12 month basis shows a net operating income of EUR 72,600,000 with the properties we own now. Profit from property management is €45,900,000 EUR 1.15 per share. And this is counted on the full number of shares after the directed new issue That was the place in December, so 14,000,000 shares. Next slide, please. We have 290 properties at the end of the 4th quarter. Property value was EUR 1.270 EUR 3,000,000, and we have 744,000 square meters. Our anchor tenants, Tesco, Top 20, Coop and Eskom stands for about 90% of our net operating income. Our daily goods include Lidl, stand for 6% And Other Retail, 4% of net operating income. Next slide. Looking at our 2 segments, Finland and Sweden, 86% of our net operating income comes from Finland And 14% from Sweden during the full year 2020. But bear that in mind that we Acquired the Swedish portfolio in March 2020. Of the property value, 84% is in Finland and 16% in Sweden. Next slide. Svebel's strategy is to give our shareholders stable and reliable dividend that increase over time. Our dividend policy says that we should increase our dividend with 5% per year. Sverd's Board follows the policy and proposes to the 2021 Annual Meeting that a dividend be increased by over 5% a total of €0.94 per share, divided into 12 monthly dividends. And a complete proposal with monthly amount and record dates will be published in connection with the convenience of the Annual General Meeting. Next slide. Looking at the balance sheet, we have a property value of EUR 1,273,000,000. Senior debt EUR 622,000,000 giving a loan to value unsecured debt of 49%. And then we have 2 senior unsecured bonds of €195,000,000 giving a net loan to value of 61.3%, Which is within our finance policy target to be between 55% 65%. Our net asset value, Extra NRV was EUR 485,000,000 or EUR 12.1 per share. Next slide. Our average remaining lease time was 5.5 years at the end of the quarter And has been very stable between 5% and 5.5% years. And we believe it will stay around 5 years Since we are renewing our leases on a regular basis and also buy new properties with usually long lease contracts. Next slide. We have 5 bank loans with a total of EUR 622,000,000. In the Q4, we started our cooperation with Ophi Bank. The average floating interest margin is 3 months euro versus euro depending on currency, plus 1.7%. Our weighted average tenure is 2.9 years. 61% of the bank loans are hedged with interest rates derivatives. All bank loans are long term, and first one which is in 2.1 years. And then we have our 2 senior shared bonds on the market. So 1 green SEK bond of SEK 600,000,000 that matures at 12 June 2023 and one your bond that matures 18th September 2023. Over to you, Berke. Thank you, Thierryna. Next slide, please. We go to Slide number 26, the focus areas going forward. Well, we continue to work with the CBIZ change to the Netherlands Stockholm main list. We have a target to change list in the 1st 6 months of this year. We are looking at new geographies in the Nordics. But as I said, focus is now continued growth in Finland and Sweden to become the leading daily goods real estate company in the Nordics. Efficiency is always important and also to increase the return from the existing portfolio. And two examples of this is that we are looking at the partnership with a leading car wash company that wants to build on our parking lots. And we are also evaluating properties suitable for residential developments. That means if we have a large parking lot or if we can if we would be able to fit in a residential house on our premises in attractive areas. Next slide, please. Last but not least, what are the primary reasons to invest in the Fibers share? Well, we produce a high and stable yield. We strive to earn a high and stable yield for shareholders. From the outset, Sibos has never lowered our dividend in euros Per Share from 1 quarter to the next. There is a potential for favorable value growth as we can buy single assets or small portfolios to a higher yield and existing portfolios trading at. And we have planned yearly investments of around €50,000,000 to €100,000,000 we are in a segment with long term resilience and stability as the grocery and dairy goods industry has experienced stable non cyclical growth over time. And we give out monthly dividend that increases gradually. Since October 2020, we pay our dividends monthly as the first company on the Nordic Stock Exchange. And dividend policy says that dividend should increase with 5% per year. That was all for us. So please, if you have any questions, go ahead. Thank is. Our first question is from Svante Krogfort of Nordea. Please go ahead. Your line is open. Yes, good morning. Sverd Kjellborn, BRLENA. Hope you can hear me. Yes, good morning. Loud and clear. Good. So first, regarding the one off in the administration costs. Could you elaborate a bit more specifically what you have done there and how it will improve the cash flow going forward. Okay. You were talking well, it's an inventory Of the properties to clarify how much is building equipment and fitting and how much is to the building, which means that we can Have a higher taxable deduction depreciation, which means that we will have lower actual tax going forward for several years because we can make higher tax depreciation, Taxable depreciation on this equipment. Okay. Thank you. And that perhaps your value increases for the full year was SEK 6,500,000. Could you split up that on cash flow and yield changes? No. We haven't seen any large yield changes. We can say that Finland is very stable. We do see that there's a little bit yield compression in Sweden, but nothing really dramatic. Okay. Thank you. And then on loan availability from banks, is there any changes? Or are they There's still very interesting. And then also, as you can see that we have Additional cooperation with a new bank, Oppie Bank now. But we also have good dialogue and still a lot of interest from our other corporation banks as well. So no, we don't see any change in that. Okay. And perhaps on the acquisition targets, of course, you don't cannot specify it more, But is it mainly smaller? Or do you also have you identified some larger portfolios that Good fit into your portfolio. Yes. Well, the bulk and the day to day business is single assets or small portfolios. But there are there will certainly be opportunities during 2021 as well for hopefully for a bit larger portfolios as well. We have our targets set on some portfolios. Then it's more or less a question if the sellers or the owner is willing to sell them. But there are businesses to evaluate and there is a steady flow of the prospects into our transactions team. So we are very positive for about 2021. Okay. And the target to grow the portfolio by SEK 100,000,000 per year, but this reset each year. So the fact that you made SEK 370,000,000 In acquisitions last year, it doesn't kind of change that. No, not at all. We start every year with the clean sheet. So we have the ambition to grow our portfolio by €50,000,000 to €100,000,000 annually. Absolutely. And perhaps on the you mentioned the residential side also. What kind of strategy would you take there? Would you sell it and sell it? Or what's the main path there? Probably to make a collaboration with some development company and to but we won't take any risk on our own balance sheet, that's for sure. But we will there is probably there is possibilities in our portfolio, especially in Sweden. And we are looking at collaborations the other company. So we will get back to you more in detail when we have something to tell. Okay. Thank you. And then last question. You now said that you plan the main list to take place during H1. Have you Have you considered any dual listings listing to Finland as 84% of your properties in Finland. And I think, for example, Adaptia, which has a bit of similar situation is also in that process. Yes. We will consider do a listing into Finland. But we are now we concentrate on doing the list change. And then if we are on the main list in Stockholm, that would be easier to would be an easy process to make a dual listing. But that we will evaluate that, yes. Okay. That's all from me. Thank you very much. Sverd Kjellborn. Thank you, Sverd Kjellborn. Thank you. Our next question is from Stefan Andersen of SAB. Please go ahead. Thank you. A few questions from me. If I start on the centrifuge costs, I mean, there will always be some one offs, I guess, and especially since you do acquisitions. And just looking compared to your earnings capacity, you're roughly this well, it's hard to do comparison, but it's €1,500,000 above this year and last year as well. Is Is that the kind of run rate of 1 offs with the activities you have on acquisitions, you think? Or have these 2 years been extraordinary, large or small in any respect? Well, it's not really in regards Through acquisitions, the one offs. But I mean, one offs are special because they are one offs. It depends on what projects you have and what things you do. And of course, we have been very active. And now, of course, in the quarter, as you say, we have costs for the list change. And that, of course, we will not have after we have been listed on the main list at Stockholm. But then we can have other costs as well that are one offs. But I you can't say a Specific number. It depends on what projects we do and if there is something special going on, but we try to be an active company and to look at different possibilities And to improve our position in any way we can. And the projects that we did With the inventory of the Swedish portfolio is one of that kind of project that we have done. And just To have gained for several years to come with increased cash flows due to that we Can make deductions on paid tax. So you can't say a specific number, I would say. But of course, Since the company is growing and is getting more mature, perhaps the one offs will be a little bit less Frequent, but who knows? We can't say that. Okay. Thank you. That's good enough for me. Thank you. Then on just your thoughts on your financial side. And if you could maybe elaborate on how you view fixed versus variable rents. I guess some I do see examples of more longer fixed out there in the industry. But can you get your view on that, where you want to be and then maybe why? Well, we have discussed, of course, different scenarios. But as we say, For the midterm, we see that we will finance Sibos With additional bank financing and then bonds, I would say. And if we go quicker, then of course, we Would have to make a rights issue or perhaps some hybrid. And when it comes to our financing strategy, of course, in the long term and When we grow, we would like to have an official rating, for example. And of course, that would affect our financing. And And the bonds that we did, we did that in the middle of the pandemic when the bond market was closed. So of course, those interest rates are higher than we would if we were to refinance those bonds now. So yes, that's a little bit about our thoughts when it comes to financing. When it comes to fixed Or not fixed interest rates. That depends, of course, on what we are getting and what we're seeing in the market. But no, we don't have any really thoughts. We're evaluating different scenarios, and we're looking at the long term financing of CBIZ, of course. And then on the residential, I guess, Sampo touched on that. But I fully understand you're not going to let you develop yourself. But one way would be to find areas which could totally just be sold off of the planning process, which I guess you would like to do and that someone else would build on it to take the risk. But because it would be an alternative, I guess, to totally convert an area, I mean, one way would be to take away the shop that is there And just to get something else on that plot, another alternative would be to rebuild with a store in the bottom and then Flor Sebbard with Resi. Are you open for all those alternatives? Or are you mainly just looking for excess land to divest? Well, as our main focus is to own grocery stores, we are not very keen on taking any stores away because we have good collaboration with Coop, and we had 10 year leases on the 111 stores we own in Sweden with Coop. So it's more or less a combination of maybe we could build the tear the store down, build a new one and with residential on top. Or if the parking lot is big enough, we can build a residential house on the parking lot, and it will be large enough for both the store and the apartment that this is we are in the very early stages of this. And it takes a very long time to change the plan. So we will we just wanted you to know that we are looking at different kind of projects to increase the return from the existing portfolios. And these are two examples. So but there are it's very interesting to look at it. Okay. Then for my last question, your comment there to that your focus is to become the DbD Daily Goods with the company in the Nordics. I guess, in a way, you kind of are as well. So just what do you mean, what do you when have you reached that target? What do you mean by that? Well, we're not the largest company yet. So how large would you yes, sorry. Yes, we're close. We're close. And we are working every day to become the largest and the leading company because in this business, as in all businesses, it's very important to be top of mind. If a company wants to sell their Food Store. It's very important to top of mind, so you can get access to the material very early on. And if you are the leading company, you are always or mostly always top of mind. So that is important. Great. Thank you. Thank you. Thank you. There will be a brief pause while we register any further questions. There are no more questions at this time. So I'll hand back over to our speakers. Yes. We do have one question from the web. Well, there are 2 questions. When will Schiebes move from First North to the main list in the on Swedish exchange? Yes, I think we have more or less answered that question. The target is for 6 months this year. Yeah. Any plans to enter the Baltic market? We have looked at the Baltic market, but the Baltic market is very small, and the regulations are a bit different between the countries and as well as between the Baltics and the rest of the Nordics. So it's kind of difficult process to do. And you need foot on the ground in the Baltics as well. And as it is a fairly small market, up until now, we haven't really considered the Baltics. But you never you should never say never, but it's not the focus at the moment. Yeah. That was all the questions from the web. Okay. Thank you very much for listening. Thank you.