Selvaag Bolig ASA

Good morning and a warm welcome to the presentation of the Q1 results for Selvåg Bolig. We are at Høyres Hus in the centre of Oslo and this presentation will be broadcast on webcast. It is a bit of an unusual setting because there is no one else in the room but us, and there are usually people here, so we assume that you are following us from outside in cyberspace. My name is Rolf Thorsen, I am the leader of Selvåg Bolig, and together with Sverre Målvik, who is CFO, we will present the results for QN. The agenda looks like this. I will start by telling a little about some key points and comment on sales in a little more specific way. We will have a little tour of COVID-19 and both the status and what we have done in that area. I will, unfortunately, go into more detail on both operational and financial figures and facts. I will be back with some market updates, and then we will try to give some future insights at the end. It has been a good start in 2020. Good results, and we have seen that we have had relatively few deliveries. Good sales, so the first months of the quarter were very good, and we were of course a little affected by the situation that arose at the end of the quarter. A large milestone also occurred when the Urban Property transaction was completed at the beginning of the quarter. An additional exchange rate of 22 kroner was also paid in the course of the quarter. A quarter that is characterized, among other things, by this up-transaction. And even if we remove the effects of the up-transaction, the main numbers become quite special. As you can see here, we operate with an EBITDA margin in the IFRS result of 56%. And I'm not going to get into explaining this. This requires a little more depth, and we'll get back to that. I'm just referring to the fact that we have an IFRS turnover of 209 million kroner, and as I said, a margin of 56 percent, and an NGAP turnover of 756 million kroner, and a more normalized margin of 21.1 percent, and we'll get back to I will explain this in more detail. A little about the sale. We sold 196 units during the quarter. 164 of them were ours. That means that the rest is done in joint ventures or in associated companies. This represents a value of 1 billion kroner and 840 million kroner in our book. This is a sale that we are very pleased with, especially considering the situation that has been in the course of the quarter. We actually see that the sales value goes up compared to the last quarter. There is also a rather flat development on this with value per unit, which is quite natural as the situation is now. The rolling 12s in terms of sales, slightly down, but still higher than the first quarter of last year. That is 3.4 billion in value on the rolling 12, and 834 units compared to 831 at the same time last year. So still a good sale. It is also worth mentioning that the sale has been good in the later part of the quarter. Of course affected by the corona situation, but especially now in the last period, it is a completely okay sale. I'll tell you a little bit about the corona situation. Our focus from the beginning of March was first and foremost to focus on life and health, of course. And it concerns both our own employees, customers and suppliers. It was a focus on social distancing, it was a focus on hygiene. We chose early to say that everyone who could do it would work from home, but we have also kept our offices open throughout the period. And we are now on our way back to what we call a normal situation in relation to our office use. So from the fact that at one point we said that everyone who could or should use a home office, we now say that everyone who, or only those who must use a home office, should use a home office. A nanosecond after we had focused on life and health, there was a focus on maintaining the business. So this growth, which has been talked about a lot, Seville has two elements in it, and both are important. Of course, life and health are the most important, but we also think that the part that goes into keeping the wheels running is also incredibly important. So we have a lot of focus on that, to keep our projects going, to keep sales going. And I want to say that we have succeeded in that. Our projects are slightly affected by the situation. We have small disruptions in our projects. And of course sales are affected. But I want to honour our sales team. Both have shown a lot of interest and a lot of support in the situation we have been in. We have managed to maintain a good sales through the crisis we have been through, and we see a pretty good development in sales. It has of course also been about being prepared that things can get worse. Look at unnecessary costs, try to take down the risk where we can take down the risk and so on. So we are prepared that this can also get worse again if that were to happen. We of course hope that it will not happen, but we are prepared for it. If it were to, presumably, become, for example, a resurgence of the virus. Yes, that is actually the introduction and the main things that Sverre Moldvik will cover and will bring us into more detail. Here you go, Sverre. Thank you.

Yes, let's start by looking at the operation. We completed 89 units in the quarter. Byggestartet 13, som betyr at vi har en nedgang på antall enheter under produksjon på cirka 5% ned til 1431 enheter til en verdi av 6,7 milliarder drøye. Of this, we had sold 76% at the beginning of the quarter, which is compared to out of Q4, we sold 70% sales, so we have increased the sales rate. That's a bit of what Rolf was talking about, it's to ensure These values ensure that we have a good sales level, which ensures that we are more secure in ensuring that these units are delivered and not just finished, of course. I'll just continue. 92% of this volume that is under production is in the Storoslo area. Almost nothing, only 8% in Bergen, Stavanger, Trondheim and Stockholm. If we look at... Do you have the picture? Yes, I will just continue to talk through this. If we continue and if we look further at how the finishes will be in the future, then we will guide on finishes in the next five quarters. The next three, that is to say throughout the year, we will guide on 711 units. Last quarter there was a guideline of 745. That is one construction line on a project in Strømmen that is being cut out as a result of the coronavirus. There is no drama, there are very small changes in relation to what one could expect. So it is only one construction line on some 30 units that will be reduced to Q1, cut out from Q4 to Q1 next year. We can't guarantee that this will be the whole effect, but we assume it, and that's why we guide these units. But as I said, if there is an uptrend, there may be further delays in the projects. 82% of these finishes were sold at the beginning of the quarter, and more now. 82% of these finishes were sold at the beginning of the quarter and more now. The sales, as Rolf mentioned, have been surprisingly good. Rolf will come back to that, but that is through the measures we have taken. We have a campaign going on, and the sales have been good. So it looks good in terms of operations and in terms of sales this year. And also through deliveries, high sales. There are other special things that have happened in the quarter. We have, among other things, carried out this urban property transaction. where we have an extraordinary result of 1 billion and 29 million. We have taken that out of the P&L. There were two P&Ls. We have taken that out to get a more normalized number, which shows underlying operations, which is most important. We also have 74 out of 114 deliveries through collaboration companies. which means that the IFRS figures become very rare, because you do not take into account income and costs ordinarily, only the result-effects of cooperating companies. It is therefore important to point out that we have a normalized situation by showing a proportionally consolidated result that we have created here, which we use as an underlayer to explain underlying operations. We have a... Is it in order? Do you have to follow it? Yes, I'm sorry about this. It's a bit back and forth. Yes, where was I? We sold or delivered 114 units to a value of 566 million. We also had other revenues of 17 million, so the total revenues ended up at 584 million. The project costs end up at 384 million, which is as expected. As I usually say, we are very good at estimating our project costs, or the enterprise costs, at the start of sales. And we manage to keep those costs, and often lower, in fact, at the end of sales than we assumed they would be at the start of sales. Of this, it is 22 million that are previously activated construction and land loan interest rates in these overlaid units. Other costs are sales, marketing and wages, 59 million against 71 in the same period last year. So slightly lower costs, and this is mainly due to lower sales and marketing costs. We report an adjusted EBITDA, and what we do is that we correct for these significant financial costs, which are part of the project costs for IFRS. So when we correct for these 22 million in the quarter, we get an adjusted EBITDA of 152 million. So we end up with a corresponding margin of 26% in the quarter. We also made pro-forma numbers, five quarters in the back, so you can see what the effect is when you consolidate these cooperation units. Normalised numbers are a turnover of 5.84% and 26% margin, even if these had been consolidated. The EBITDA is at 130 million, In other words, it is proportionally consolidated. It is about 20 million more than the EBITDA, which I will show you later, which is after the FRS. This is due to the fact that the figures come in with tax, finance and deductions. The result per share in the quarter ended at 12.08 kroner. Approximately 11 of them come from this one-time effect from Urban Property and a little over 1 kroner in relation to ordinary operation. Then we come to the ordinary result after IFRS, which is what you have to relate to. It is a very rare number, but there are 114 agreed units, and only 30 of them are consolidated, which gives an income of 196. The project cost is also only related to those that are 100%. 134 million. I will not comment on that in detail, because it is so misleading. Other costs are 54 million against 60. This is due to the fact that they are lower than the proportionally consolidated ones, because these costs are again backed into the bottom line you get from the TS's. Then you end up with an adjusted EBITDA of 117, which then accounts for 56%, which is a lot and again misleading. Summa summarum, it will be anyway 12.08 kroner in results per share in the quarter. Proportional consolidated figures show that the underlying operations are quite good. 26% margin, so we have delivered good margins both on those we own 100% and on the companies we own in the same area. That concludes that a bit. We also have the running calculation method that we report after. And just as I usually say, it is the way to show results that best reflects the value creation in the projects. And that is a very good example, especially in this quarter when we have such a large number of theses. The ongoing evaluation method takes into account both sales and completion in 100% owned companies and shared companies. In contrast to IFRS, where you take 100% of the result by completion or delivery of the unit to end users on 100% owned companies, and as I said, only EBITDA effect on the result line on shared companies. 756 million i omsetning, en margin på 21%. Litt lavere enn i samme periode i fjor i forhold til margin, litt høyre omsetning. The margin is a little lower, which is perhaps not so strange. At least one effect that is close to mind is that when you are reporting on these in the project management and you have the coronavirus situation going on, you do not rely so much on the reserves in the projects. I'm not saying that there should necessarily be something higher, because it is high, but it is, as I said, now lower than in the same period last year. 12 months of circulating speed, 3.336, and 23 percent, slightly lower. If we look at the cash flow, it is quite special in the quarter due to the very affected U.P. transaction. Incoming balance of 1.179.000. Positive cash flow from the business, especially through the sale of urban property, or the sale of ownership of urban property, and some on ordinary business. Cash flow from the investment side at 220 million is also due to urban property, sale of shares in subsidiary companies, Sinsenveien and En tom til Trondheim, Ringve. The cash flow from the financing side was negative 1.810, mainly due to an exchange rate of over 2 billion. The balance was 7.71 million. If we look at the balance, we had a capital of 26.20 Euro per quarter. corresponding to 2 billion 460 million, corresponding to a one-capital share of over 40%, which is very, very solid. And that is, I should say, unnecessarily solid, but it's a matter of... And you don't know what's going on with corona, so we choose to stay more solid than we may have a need for in relation to the new business model. Other changes. The warehouse has increased by 417 million. The cash is down by a little over 400 million, as we were talking about. And the customer benefits are flat at a fairly low level. Pre-payment from the customer results in an undercut of 300 million from other short-term interest rates. If we look at our warehouse, The land bank went down by up to 40 million. That is due to some interest. The main transaction with UP went down in Q4. Then the tokens that were to be sold were declassified. You can see the step down from Q3 to Q4, which is the big effect of UP. Varearbeid er opp med 422 millioner som bare viser at det er en kjempeaktivitet i prosjektene våre. Vi har, det er egentlig ganske vanlig at det hopper litt opp i Q1. Q4 har december og jul og er litt roligere, derfor får man ofte en ny give på nyåret, og entreprenørene skriver fakturer, sender fakturer. Our finished goods are down by 47 million, and that is quite impressive in the middle of the corona crisis, that we manage to get the finished goods down, the finished products, the unsold ones down. I also comment that it has continued out in the quarter here. We have had a couple of projects where we, in December, were sitting with a number of unsold finished goods, which we decided that it would be okay to sell out over the spring, and we have been completely right about that. If we look at the yield structure, there are some small changes there. We have higher construction loans due to the high activity. There is no drama around that. We have declassified. We have come up with a new loan type, and that is loan to urban property, or obligation to urban property, on this B portfolio. That is to say, these are the loans that we will take over during for about 10 years. That is 864 million. The conditions for that are 375 plus Nibor, which is profitable in today's market, where Nibor is between 30 and 40 points. In addition, we naturally have this transaction fee of 2% in what we take over the account. Otherwise, we do not have any changes in our margin picture on construction loans at the moment. So it is very stable. Good cooperation partners on the bank side. The net interest rate is 1 billion and 75 million. If we look at the withdrawal of equity, For 12 months, if we just correct for the Urban Property Deal, we end up with 25%, which is very good. If we include Urban Property, we are up to 58% in the quarter. I thought I would just go through a little quickly, as I have done in the last few quarters, try to explain our value chain one more time to ensure that there is less misunderstanding of how this Urban Property transaction affects the margin picture in our projects compared to if we had bought Tomten's own books. I have shown the development of margin in the value chain many times. The only new thing after Urban is these dotted lines and a decline in the margin that comes in here at Tomtekjøp and Færdigstilse. When we usually buy Tomt, we buy at 12% margin when we buy our own books. Now, due to some higher financial costs, since we buy through Urban Property, than what we had in the bank, the margin is down by 10% instead, to illustrate this. So the margin in a project that we buy is a little lower at the moment of acquisition than it was before. But we also don't use any of our own capital and money. When it comes to the project development phase, it is identical to before. The same project managers we have, the same people doing the same things, so there is no change in the value creation in that phase. That is, we have a delta of 3%, an increase in value of 3% on average in our projects. Likewise, when we contract, we do it in exactly the same way as we did before. We prefer to do it in the same way. If we have reached 60%, we increase the prices in exactly the same way as before. So there is no change there. There is also a 2% growth in value in that phase. Likewise, we increase the prices in our projects through the construction period in exactly the same way as before. On average, this gives a value in a flat market share of 3%. 20% earlier, and 18% now with the new model. Remember that this is an average project, with a flat market share, that is, zero price growth. And this is the current status. I have talked a lot about this. But now we have had a margin in our projects from 19 to 30 percent, as this chart shows, in the last four years. And we are now at 28% out of the quarter. I have said this many times, this is not sustainable. Or it should not be. And it is natural to think that there will be competitors who will eat from this. I have said this many times, and we will continue to deliver very good numbers. That was what I was going to say.

Thank you very much. We are sorry that we have some technical problems. We hope that does not disturb the message that we are trying to get to you, but we are doing our best here. I want to talk a little bit about the market. To find out in detail where the market is going now is a bit difficult. There is uncertainty, and I think everyone feels that. So I'm going to focus on the underlying drivers, the underlying ones, and not speculate in what degree corona will bring us here or there. The fundamental thing is that people will continue to live in cities. The growing population in Norway is happening in cities. Last year, in 2019, the population of Oslo grew by about 12,000 residents. Just to underline that point. And if we look at the offer side, we see that it is strongly affected by how the authorities manage to regulate the number of vacancies. We see that on these grey graphs, we see an average over the years 2012-2019, or we see the development over 2012-2019, which shows that the average number of The units that have been delivered are about 3,000 units. If you look at the red graphs, and also at the dotted line above, it shows an estimate of what the needs are, estimated by the prognosis center, to be in the order of 4,500 units that there is a need for. in the Oslo market. And it rhymes quite well with a population growth of 12,000 people last year, so 4,500 units are heard, at least not too much. If we look at the graphs, we see that what will actually be delivered is much less, mostly up to 2,000 units. This is a fairly safe number. The housing that will be delivered in 2020 is already in progress and far on the way produced. The same applies to what will be delivered in 2021. In 2022, there will of course be some more uncertainty around the numbers. And when I talk about, in terms of size, 12,000 new buildings in Oslo, the number of new sales starts is about 1,900 sales starts. So it started much less in 2019 than is needed, and it actually underpins the supply in terms of size of 2,000 units in both 2021 and 2022. If we look at more details, we see that when we entered 2020, 1735 units were available for sale in the new housing market. And we see that only 182 new units have come out, have been built in this quarter. It's disappearing a little. 552 units are sold, and that means that the stock of new housing has gone down by 400 units. A little of the same trend if you look at the surrounding area of Oslo. If you look at Storoslo and the entire Storoslo area, the stock goes down. There is little supply of new goods, and it is actually sold a lot. So what we have said over time is that this will be a supply surplus in the Oslo market, and it will be a surplus of demand. So we don't think the prices will go down. If we look at the other cities, the trend is the same, but with a small exception for Stavanger, where we have a small increase in the stock market, we see that both for Bergen and Trondheim, the stock market is going down. It is interesting to see that there is actually a larger supply of new homes in all these three cities than there is in Oslo. Both in Bergen, Trondheim and Stavanger, there is a higher supply. a higher number of building starters than in Oslo. If we look at the used housing market, If we look at the period of the first four months of this year, we can see that the stock market is going down a bit. There was a bit of a slowdown in the stock market for a while, and the traders have reported record losses. fast in this market now in the last period. So a relatively flat development on the stock market, slightly down on the number of units that are sold. That was for Oslo. Bergen still has the same development. And for Trondheim, we see exactly the same development. Stavanger is slightly different in that they actually have a warehouse that goes down. Price development. I said something about the number of units sold earlier in this presentation, and what is interesting to see, I think, It is that, just like under earlier crises, you actually get little influence on new housing prices in a period like this, and of course also on used housing prices. What happens is that the volume goes down, prices vary slightly. If we look at Oslo, there is 1% positive price development in the course of the first four months, while the other cities actually have much more positive development. And if we look at the last month, only April specifically, we see that there is actually plus or minus 1% in price development on the homes. So there is little influence on prices, it is actually the volume that varies up and down. That was a little attempt to understand the market, and the signal I'm trying to give is that we see that the underlying drivers are still strong for the housing market. Of course, this also plays into the interest rate development, with an interest rate that is historically low. We also see that these fluctuations that have been on the housing loans, We have also had a campaign specially directed towards younger people between 18 and 34 years old that we have succeeded very well with and actually taken market shares in the market that we have had and what we have right now. To sum up, we experienced a normal, good market in 2020, and we have of course been affected by the corona situation towards the end of the quarter. That has created a lot of uncertainty, and that uncertainty is still here. But low interest rates, which I have talked about with housing loan regulations, Combined with the fact that Norway is on its way to reopening, it concerns both our company and the society as such, we feel that we are about to take down that uncertainty. So we don't experience the same uncertainty now. And of course, the uncertainty is whether we can keep the coronavirus in check, or whether we get a new spring. In the long run, we believe that urbanization and population growth in urban areas is good for us. It is where we are with our products. This with our strategy to make it easier for most people to live better, and by building for most people, we see that we create a very robust business model also in a market like the one we have been in now. So we believe that the need for housing will not go away, and it will be good for us from a longer perspective. So we are a housing developer that focuses on big projects. We are a city developer, we are a community developer, we are an area developer, and we work in the growth areas. It is the big cities that are the interesting ones, and this is also where It is possible to do good business, not independent of the market development, but it is possible to create a robust model in this market. Summary. Strong results. We are proud of our results in the first quarter. It is of course affected by of Corona, but we have managed to keep our projects going without disturbances, and we have managed to keep sales up very well. We have also received the urban property transaction in Havn, which has resulted in an extraordinary exchange rate of 22 kroner, so that we maintain the style as an exchange rate share. Then we open for questions. It will be possible to send in questions via the web portal, so if there is anything that anyone wants to ask, we are available, both Sverre and I, to answer questions. So, without further ado, Kristoffer.

Simen Mortensen, DNB Markets. What is an OK sale given according to the conditions, as you say? What is the sale due in May, year on year, in April and May?

Can you say that sales are ... We sell, we don't usually go into that, but it's plus or minus two figures a week. Some weeks we sell well over ten, which Simon has probably talked to himself about. We have probably been the best week in over 20, and then there are some weeks where we almost don't sell anything. So what is normalized, Simon must almost think about himself, how much he thinks we would have sold in a regular market. Det blir litt vanskelig å si. Vi selger bra. Vi har samme fart røffelig som det vi hadde i Q1.

Dere snakker mye om rente, befolkning og så videre, om markedet, boliglån, om at markedet kommer til å bli stert. Hva er deres erfaring om effekten av arbeidsledighet? Hva lærte dere av oljekrisen i 2012 som dere vil bruke med dere fremover?

What we generally see in a crisis situation is that the volume goes down and that it is sold less. It seems to me, at least as the situation is now, that we are not going to a standstill in relation to sales. We had a good dip to start with in this crisis, and then we see that sales start to normalize, or at least rise again. So I expect that we will get a leap back and that in a year's time we will be at full speed again, and maybe even at a higher level.

What we learned from the oil crisis is that the supply and demand, or we could have done that before, but it is the supply and demand that determines this. In Stavanger, of course, it became very quiet because the supply side was much larger than the demand side, and there were a lot of apartments that were empty because consultants went back to Overseas, among other things, so that there has been an offer situation in Stavanger, which has destroyed the market there primarily. Not the fact that it is oil, or that it is a consequence of the oil crisis, of course. And then there is the employment setting, which affects a lot, and the picture of the interest rate. Now the interest rates are record low. Very low interest rates. We still don't know how the employment situation in the east will be affected, but we have housing for most people, and there is a low supply side, especially in the Storoslo region, which makes it possible to have a very, very good market in the Storoslo region. The easing of the housing tax reform, not least, means that there will be many more teachers, nurses and that category, or income group there, who now have the opportunity to buy housing, Simon writes, how many projects are running under urban property?

Løpende?

Løpende means started up, taken out. I don't understand the question. You can call me later if you want to go over it. Are there any other questions?

We're waiting a bit so we can at least give people a chance to fill in. We are of course also available at the end of this webcast if anyone wants to talk to us. Thank you for your attention. Again, I apologize that we had some technical problems, something that disturbed us a bit. We hope it didn't disturb you. Thank you for today, and have a nice day.