Selvaag Bolig ASA

Good morning and welcome to Førstekvartals Resultatfremleggelse for Selvvåg Bolig. My name is Sverre Måhvik and together with Kristoffer Brunvold, who is the financial director, we will go through today's agenda. We'll start by looking at some highlights. Before we look at the business, Kristoffer will talk about the finances. Then we'll look at the market, future prospects and the Q&A at the end. The first quarter was a good quarter in terms of sales, especially given the circumstances in the world. We sold over 200 units for over 1 billion kroner. We had a good result in terms of the fact that we had only a few orders or deliveries, 77 deliveries, and with the overhead costs, it is a very good result. That was taken into account. We have increased the number of units under production. And the value of units under production is now past 7 billion kroner, which is the highest in a few years. And 73% of this was sold at the beginning of the quarter. This pipeline has also secured the costs, so these 7 billion have a cost of 4 billion, that is, construction costs, and they are then closed. Yes, key figures. Relatively low turnover, as I said earlier, few finishes, but a good margin, a 17% margin, which is good considering that we have fixed costs in BUM. The current calculation is 7.50-8.00 turnover, which is more normalized, and a margin of 14%, which is the same as we had reported on in the previous quarter. Kristoffer will come back to that in more detail later. When it comes to sales, over 200 units on our hands. We have a lot of TS's as well, so we have sold more than that brutto, but over 200 units on our hands to over 1 billion. That's fine. It's not as good as last quarter, or Q4, but still good, given the circumstances in the world. The 12-month turnover is at approximately the same level as in Q1 last year, a little lower than last quarter, 3.8 billion. We have started building more than we have completed, 113 against 74, which means that we have increased the pipeline, or units under production, to 1,361, to a value of over 7 billion. 73% of this was sold at the beginning of the quarter, and more now, so that's a good increase in sales. 77% of it is in the Storoslo region, or in the Østlands region. If we look at the finish line in the future, we are now guiding at 586 units this year, which is 39 less than last year. As we said in the previous quarter, this is a project in Ski that has been postponed from December to January, due to material delivery problems. There is no other drama than that, so the units will be postponed from Q4 2022 to Q1 2023. Moreover, we have had very little consequences as a result of both corona and material crisis in general. 89% of what was completed this year was sold at the beginning of the quarter. I have received quite a few questions about building costs from both journalists and investors lately. This clarifies very much how we work. I have also read about some projects that have stopped and that the builder withdraws the project due to building costs. We will not do that. What we do is that before we put out a project for sale, we hire an entrepreneur or secure the costs. Then we see if it is marked for sale, and that means that there will be a profitability in the project that is satisfactory for us. Then we put it up for sale. If we do not achieve satisfactory profitability in a project, we will not put it up for sale. So that means that we have a binding enterprise contract before we put it up for sale. We sell 60% of that as a basic rule before we start building. Sometimes we start at 50%, but the basic rule is 60%. In our portfolio, we have sold 73% of what is going on, with fixed building costs, including wages and price increases. then there will of course be some changes often in a project, because you can't catch up absolutely all the costs in a total enterprise. But that's what we put money for. We put 3% as a basic rule on the enterprise chapter in all projects to catch up on this. And as you who have been with us for a while have probably heard, I usually say that we have a profitability on costs, I've said now, in 30 quarters. And we have that. So that's important to keep in mind. And then there's the general... The price of building now has gone up, but that doesn't mean we won't lock it. We will lock it as long as we can. We have done that so far, and we will see how it will be in the future. It may be that there will be single elements that will be difficult to lock, for example, raw buildings. We have to share the risk with the entrepreneur, but not yet. Kristoffer, do you have...

Good morning. Let's take a look at the main financial aspects of the quarter. As usual, we start with the results list, an IFRS, where the revenues and costs of the projects meet the results of the delivery of the housing to our customers. We delivered 77 homes in the quarter, where only one of them was from collaborative projects. The main contributions in the quarter are from our projects in Lørenskog at Skåreløka and Lørenskog station town. The average price was about 4.5 million kroner. We received a total income of 356 million kroner, including 14 million kroner in other income, which comes from fractured project management in collaboration projects. and the operation of the PLUS service center. As Sverre mentioned, the revenues are down from last quarter, and this is of course due to the fact that we have significantly fewer deliveries. We delivered 124 units last quarter. The project revenue reached 253 million, We deliver enough a quarter with good cost control and costs well within budget, which means that we manage to deliver good margins in a quarter isolated, even with few year deliveries. Other costs came in at 49 million, down from 57 million in the previous quarter, or the existing quarter last year. This is due to lower consultant costs and lower sales and marketing costs in the quarter. We report an adjusted EBITDA of 61 million. Here we have corrected the 9 million in financial costs, which is included in the project costs according to IFRS. This gives her a more pure EBITDA. Adjusted EBITDA margin of 17% per quarter. At the bottom, we report a result per share of 40 euros. compared to 82 hours in the previous period, which we were talking about. Of course, now it's lower, because we have fewer finishes. Let's move on to segment reporting, which follows Norwegian travel regulations. This reflects better the value creation that happens to companies every time. This is followed by the running calculation method, where the sales grade is multiplied by the performance grade in the projects, which gives us an output grade. This means that we then take out revenue and results in the project's execution time. In this regime, we apply a revenue of 758 million, and a margin of 14%. This is after overhead costs, which means that we still deliver good project margins. If we look at the rolling turnover of 12 months, it is 3.2 billion, about the same speed as before, and a rolling margin of 15%. Then we look at the cash law. We entered the quarter with 527 million in cash. We have negative cash law from the operational side, due to the construction of warehouses. A lot of activity, few finishes. We have positive cash flow from investments. This is exchanges from cooperating companies, which we have received in the quarter. We also have positive cash flow from financing, with a net increase in building loans. We have high accuracy, a lot of start-ups in the last two quarters, and few finishes, which means that we are pulling up the building loans. We then bring out a net increase of 167 million, and then a total of 694 million in cash at the beginning of the quarter. Let's take a look at the balance sheet. There are no major changes in the balance sheet. We have a solid ECO rate of 41% and a bookkeeping ECO per share of 26.50 kroner. It is important to note that the exchange rate is 3 kroner. A total of 281 million is not reflected in this balance. This first hits the balance at the time of payment in the second quarter, which was in May. If this had happened, we would have had a lower economic share. The stock market has increased by 285 million. That comes back to it. Otherwise, lower returns in cash increased by 167 million. And then we have this share from our customers of 237 million, which is included in another short-term share. And this is on the same level as previous quarters and previous quarters. If we look at the stock market, it is slightly up from the previous quarter. The cash flow is down by 26 million. This is because we are starting to build. Then the share is in the stock market. Stock market up by 327 million. This is due to the fact that we build warehouses with high activity, increase housing production and have few furnishings. Then the warehouses go up. The finished warehouses are down by 16 million. This means that we have sold and delivered previously furnished units. At the beginning of the quarter, we had only 19 homes that had been furnished unsold. This is at a very low and comfortable level. If we look at the yield, the total revenue yield is 2.6 billion kroner, where the building loan is the largest, with about 1.6 billion kroner. Then we have the yield for urban property at 751 million kroner, which includes sales credits and repurchase agreements. This is increased, because we have bought back property and increased sales credits from last quarter. And then we have something to do with the properties that are in our balance, which were not sold to Urban Property. A total of 242 million. Then there is no change in the conditions of these loans, the same as last time, and we have also not pulled up any of our top facilities. In total, the net interest rate is 1.9 billion, starting quarter, which is now up from 1.6 billion by the end of the year. Let's take a look at the return on income. This is calculated with a 12-month rolling result after tax, and is divided by the incoming income at the beginning of the period. Here we deliver 466 million in the last 12 months, and an ECO return of 19%. Then, unfortunately, we will continue with an update on the market.

Yes, we are starting to look at, as usual, the balance or imbalance between supply and demand on the new housing market, starting in Oslo. Here it has been completed around 3,000 units in the last 15 years on average. A little less from 2020-2021. And then you see how little it will be this year, down to 1,500 units. This is a new prognosis for future needs. Last quarter, it was over 4,000. It is adjusted to 3,700. But there is still a huge gap between the prognosticated need for housing in Oslo and what the market offers. A record high, actually. And that is worrying, and that is what drives the prices in the entire eastern region, among other things. If we look at the facts here, we can see that This is not a quick fix. This is actually regulated housing from Plan & Bygg's own tables from last year. They regulated 1,000 homes. 1,000, and the need is 3,700 in a medium case. Of course, that is not a reasonable amount of housing. It will not be a good mental health index of that kind. So of course it is a fourth of what should be regulated, even if you were in balance at the starting point. Since it is in addition unbalanced at the starting point, you should have regulated much more. than these 3,700. For information, just as a little curiosity, if you take the train to Gothenburg and get to the station, it says that last year we regulated 5,600 homes. Gothenburg is quite comparable in size to Oslo, just to put it into perspective. So this is a problem. If we look at the old Akershus, that is to say Oslo, ex-Buskerud and Østfold, There is a picture showing that we have completed more than 3,900 in total. The demand is 4.5. Here we have built the minimum demand. I believe that the surplus demand is exported from what belongs at home in Oslo. So the sum of these two markets has been satisfactory in a way. That is to say, Akershus has taken away from what has not been achieved in Oslo. But also here we see now that the supply side is lower than the need in the future. If you look at the sum of Akershus and Oslo, this will be quite critical in the future. In relation to price development. If we take a closer look at the details, you can see it even more clearly here. At the end of the year, there were 1,000 houses on the outskirts of Oslo. 517 houses were sold this year, or until the beginning of April. More than what was sold, and now there are a record low of 800 houses on the market in a city with 700,000 inhabitants. By the way, these two markets have been as big as Ballpark. I have worked with them for many years. In the first 10-15 years, they were pretty much the same. And now you can see the difference between Akershus and Oslo. In Akershus it was 3,600. We made 1,300. Sold more there than what was put out. So here the supply side also goes down, even though it is still good in Akershus. 3,500 is quite normal in that market. Bergen is almost unchanged from the year shift. Trondheim is down, and Stavanger is very low. I don't know why Stavanger is so low, but it could be a consequence of the building costs increasing, because the builders can't calculate it again. There's no other logical explanation for it, because Stavanger is very regulated, and there's more to be said than what this picture indicates. So if you look at this illustration here, which shows how this has developed over the last four years in April, you can see that in Oslo it is dramatic. It comes from, remember, a low level four years ago, down to now an extremely low level. Akershus is quite balanced. Bergen is somewhat declining, but still quite balanced. Trondheim is very balanced. In Trondheim, you are on the same line as Kristiansand, very good at regulating, and have regulated a lot of property up and down, so there is a balance in the market. There are 936 new homes for sale in Trondheim, and 794 in Oslo, so there are more in Trondheim, where there are 200,000 people, compared to Oslo with 700, so that's quite a lot. And as I said, there are some in the Stavanger region. I think it's too early to conclude what the reason is. It's not because it's not regulated enough, at least. If you look at the numbers that show how bad it is, if you look at the numbers, how many new homes are for sale per thousand people in these cities, you can see the skew. It is now approaching 1 per 1,000. It is 1,1 new residents per 1,000 in Oslo, while it is 4,7 in Akershuset. As I said, it should be quite similar. It should be much more even. So this picture says quite a lot about how it is in the eastern region, and it is what will be involved in driving the prices and keeping the market in Oslo, in any case, despite the increase in interest and other things that are happening. Yes, this is the same picture, but if you look at the other hand market, you can see here how a market must work. Here there is much more balance between these regions. That is to say, someone who sells a house buys a house. So there will of course be much more balance, but also here the supply side begins to shrink. or it is much less for sale also on the used housing market. And here it has been almost confirmed as a fact that this is due to changes in the amendment law. That excuse has now been used up. There has not been any It is not due to this change in the repayment law. It is for the longest time absorbed, so it is a low supply side now. And what does that do with the prices? We see that the price growth that has been in Oslo from a high level is at 7%. at prices that originally were at 90 or 1000 per meter. That is a lot in kroner. Compared to Stavanger, for example, where you have 9 percent, they come from a level that is perhaps of an incoming value of 45-ish, or whatever it is, 3, 2, 43. So there is a very high price increase in kroner in Oslo. There has also been a high price increase in Bergen, and Trondheim is also a good price increase. so far this year. So what do we think about this? This is really what I have focused most on. It is the supply chain in Oslo that... which makes it attractive in the new housing market. And that, without taking into account that more and more of the younger generation, who do not want to clean up themselves and do not have the ability to clean up themselves, will have new housing. It is actually yet another squeeze in the market as it is. It increases, the proportion increases from year to year, depending on how many who want to buy new housing have used it. So there are imbalances, especially in the eastern region. Five times revenue still trumps the loan opportunity for our customers, for those who buy a apartment. Not the ability to serve the loan, despite the fact that it has now gone a little up, but of course at a very low level. Many of those who do not get to buy a house because of five times income, they rent maybe even the same house, or the corresponding house from someone who has bought it, and then pay a lot more per month, so it is not profitable for them so far. We also have a lot of work to do, not just in Oslo, we have a lot in Oslo as well, but we have little in Oslo. We are still struggling with our regulation in our large projects in Bjerke for example, but we have a lot around Oslo and the other regions we operate in. As long as the market is there, we will have the opportunity to sell well, and we believe that the market will be there. We also believe that it will be balanced on the cost side now, and that the top of many of these materials, such as steel and concrete, may already be reached. If not, it is close to being reached. In summary, we had a good quarter, sold well, over 200 units for over 1 billion. which is good, given the circumstances. We had a good result, taking into account a few failures, deliveries. Up to over 7 billion in pipeline, which is cost-safe, and sold 73%. So there is good visibility and predictability in what we do in the future. It will be exciting to see what happens with the cost development and inflation in the future. That was actually what we had. By the way, we have now been on the stock market for ten years in June, as a little information.

This is from Simen Mortensen in DNB. How much have the building costs increased year on year, as you perceive the market?

The building costs have probably increased. For our part, we contract all the time, but we still contract under 50,000 kroner. So we say the building costs have probably increased. Now I'm going to give you a ballpark. What we can contract is about 10%. That was it.

One more question. The supply of housing in Sweden and Stockholm is rising rapidly now, and ValueGuard wrote last Thursday that prices are falling 2% in May. Most of the prices were down here in the media, for example in today's industry. How do you perceive the Swedish market, and how do you see your investments?

We perceive the Swedish market as, first of all, very large and exciting. We have only made market recommendations. Stockholm stad, which is very profitable, and several of them, we have won at lower prices than our competitors have been willing to pay. We look very positive at the Swedish market. In addition, we build our plus concept on these projects. This is something that is very much in demand, so we are very little concerned that it is something that is struggling right now.

How will your financing costs be affected, RF Urban Property, when the funding in Nibor increases? Have you secured anything here with fixed interest?

We have a funding with Urban Property at 375 plus Nibor, so it will increase with Nibor.

What do you think about the småhusplan in Oslo? How can this affect Storoslo?

The småhusplan, for our part, the housing part itself, affects the fact that the offer is further reduced and that the prices go up on our apartments that have a good size. Because the supply side is getting more and more squished. For our part, it's a positive thing. It's more difficult to get new homes, big homes for people who want a single home. But that's the consequence for our part. Vi har jo ikke småhus. Vi har no småhus på utsiden. Vi har i Bærum og Gjertsrud-Stensrud, når det omsider kommer. Ellers har vi ikke småhus i Oslo.

Var det ikke flere spørsmål på Q&A?

Nei. Da takker vi for følge. Så ses vi 17. august.