Selvaag Bolig ASA

Good morning and welcome to the second quarter's presentation of results for Selvåg Bolig. My name is Sverre Mollvik and I will, together with Kristoffer Brunvold, go through today's agenda. We start by looking at the highlights from the quarter and the half year, then we look at the operational, then Kristoffer takes us through the financial part, and then we look at the market and some future prospects and some questions at the end. The second quarter was a good quarter in terms of results. We had good deliveries combined with good margins. A good result. We also had a good sale. A satisfying sale, I would say, especially given the difficult market situation and the world situation. We therefore delivered a very good top line in the first half of the year compared to the same period last year. And the result for the first half year is that we pay an exchange rate of 2 kroner per share for the first half year. On the key figures, we had a turnover of a tiny billion in the quarter, with a adjusted EBITDA of 24% after IFRS. 1,3% in the first half year, with a margin of over 22%. Løpende avregning snæver 800 millioner og 13,2, og 1,5 drøye og 13,6 etter løpende avregning. Det kommer Kristoffer nærmere inn på i finansgjennomgangen til nøkkeltallene. Looking at the business, I've had quite a few questions in the last six months, around building costs, or perhaps the last couple of years. There has been a strong growth in building costs, first as a consequence of corona. We went from 33,000-34,000 per square meter to over 40,000 in a short time. And now, after the start of the war, the prices have gone quite strongly further, as a consequence of the increase in supply, especially in steel. Thank you very much. The positive in what is happening now is that we see that it has gone down quite a bit from before the holiday to now. If we look at steel prices, wood prices. Unfortunately, the Moelven had to permit 80 people earlier this week, and that is a consequence of the fact that the construction has stopped very much, especially in rural areas, due to, of course, high material costs. When it comes to total enterprise prices, it is a little different, especially in big cities, so we can still start building and calculate things at home, while you come to smaller places where sales prices are lower, since everything that is under 70-75,000 per square meter, you struggle to get started with for so long. This has led to very few initiatives in the industry. In June, there were record low numbers. This, of course, leads to low demand after Steel and wood, which means that steel and wood prices are going down, and we have seen that. And we see that the trend continues, and that the total price-to-cost already has topped out and is on its way down. So we'll see how long it takes before it normalizes again. When that is said, we have our principles. We do not start a sale project before we have contracted and have a satisfactory baseline in our projects. Then we first lay it out for sale. And what we have under construction is contracted fixed price. And we have sold 75% of everything we have under construction. So it is not dependent on inflation. Yes. When we look at the other operations, sales were satisfactory. We sold 120 units in the quarter, which is more than we had expected in relation to the market situation. We sold 321 in the first half of the year in our hand. Compared to last year, it is worse, but it is better than in 2020. 12 months in a row at 3,566. We start building 190 units in the quarter, while we finish 210, so we reduce our pipeline a little bit, down to 6.8 billion, which is 19 units less in production than in the previous quarter. But more than in both Q4 and Q3. So we hold good speed. 75% of this was sold, and 76% of it is in Storoslo, the Østlandsregion, and the rest is in the Stavanger, Bergen and Trondheim regions. Kristoffer? Kristoffer? Kristoffer? Kristoffer?

Good morning. I will go through the main financial aspects. I will start as usual with the official results of the IFRS, where the outcomes and costs of the projects meet the results of the annual delivery of the housing to our customers. We delivered 217 units in the quarter. 69 of these were from collaboration projects, mainly projects we have together with Fair Deignom on Enskjø. Total revenue of 966 million, including 18 million in other revenues, which comes from the operation plus service centers, and factored project revenue to collaboration projects. The project costs will be 804 million. We have skilled project managers who control the project with strict cost control and deliver a quarter with project costs within budget, which of course contributes to good margins in the quarter. Other costs up to 60 million, slightly higher from the previous period, are due to increased wages and operating costs. I repeat, an adjusted EBITDA of 233 million. Here we have excluded these 27 million, which are the financial costs, and which are part of the project costs for IFRS. The adjusted EBITDA margin is 24% for the quarter. We report a result per share of 1.90 kroner, which is up from the start of last year, where it was 60 kroner. This is of course due to the fact that we have many more deliveries this quarter. Let's take a look at a form of result management for the quarter. We have a number of collaboration projects in our portfolio, and these are reported on their own line in the official result management. Here we have created a brutified result, where we take in our share of the income and costs in these projects. In this calculation, we see that we have a turnover of 1.4 billion, and an adjusted EBITDA margin of 19%, in comparison with 645 million and 17% in Q2 2021. The same result at the bottom, at 1.90 kroner per share. We also made the corresponding pro forma calculations for half a year. and delivered 294 units. which gave you a turnover of 1.8 billion. Adjusted EBITDA to 335 million, until you had a margin of 19%. This is comparable to the first half of 2021, where you had a turnover of 1.3 billion, and also a margin of 19%. This gives a more comparable picture, quarter by quarter, when we have a number of delivered units, which are collaboration projects. At the bottom, we report a result per share for the first half of the year at 2.30 kroner, which is up from 1.42 kroner in the corresponding period last year. Those who are interested in more information about these pro forma rules can take a look at their own notes in the quarterly report. Then we can look at the operating reporting, or segment reporting, which follows Norwegian rules. This gives a better picture of the value creation that happens in the company every time. We have then used a continuous calculation method. You take all projects in production, you take sales degree times completion degree, which gives an output degree, which means that we continuously take out revenue and results in the project's lifetime. In this regime, we have a turnover of 784 million kroner per quarter and a margin of 13%. This is to be noted after the overhead costs, so we still have good project margins in the portfolios in production. If we look at the 12-month rolling turnover, it is 3.1 billion kroner and a rolling margin of 14%. Let's take a look at the Cash Loan. We entered the quarter with 694 million in cash. Let's look at the main points. The cash loan from Drift is a total of 297 million. And the second main point is that we have negative cash law from financing, since we have just paid off a building loan and paid out an exchange rate of 280 million. So we have a net increase in cash of 15 million, and then it goes out of the quarter with 709 million in banking. Now we will look at the balance sheet. There is no change in the sum of this. We have a solid income share of 40%. It is now down from last quarter. This is due to the fact that the exchange rate is at 280 million, which was paid out in May. It has been reimbursed in this balance. But the exchange rate of 2 kroner, which I know will be paid out later in August, has not been reimbursed. Then we would have had a lower income share. Booked in capital is 25 kroner and 50 øre per share. The stock market is down by 235 million, and we'll get back to that. The supply is up by 54 million. This is because we have a lot of overloading that happens at the end of June. So we get the money out of the budget first the following month, in July. The cash we were talking about is up to 15 million, and then we have these contributions from our customers, which are included in the second quarter, at 203 million. Looking at the warehouse, it is now down from last quarter. Booked empty bundling is down by 159 million, and that is due to the fact that we have a good number of start-ups in the quarter. In terms of goods and labor, down by 45 million. This is due to the fact that we have sold out a lot of goods and labor. At the same time, we have a lot of construction work to do, but the factoring hasn't been going well, so we expect an increase in goods and labor next quarter. In terms of finished goods and labor, down by 31 million. This is due to the fact that we have previously completed and unsold units, and we have per start of the quarter only 13 completed and unsold units in the portfolio, which is on a low and comfortable level. Let's look at the yield. There are no changes in the compensation of Gjeld. The total interest rate of Gjeld is 2.5 billion kroner. The biggest is the building loan, of course, at 1.7 billion kroner. We also have Gjeld Tournament Property at 616 million kroner, which includes sales credits and repurchase agreements. In addition, we have some empty loans on the properties that are still in our own balance, which were not sold to Urban Property, at 240 million. No changes in the conditions on these loans from last quarter, and we have also not pulled up any of our top facilities at the beginning of the quarter. has a net revenue of 1.8 billion, which is on the same level as last quarter. Then we will look at the exchange rate. Since the Børs-notification 10 years ago, we have always prioritized exchange rates for shareholders. We have an exchange rate policy that says that we will pay 60% of the result. And this can happen twice a year. Here in the figure on the left, we see the results per share and the last exchange rate. Back to 2017, where we have always prioritized high exchange rates. And now delivers 2.30 kroner in the first half of 2022. And we know that there is an exchange rate of 2 kroner per share. This makes up about 87% of the value creation in the half year. If we look at the accumulated, we have delivered a result per share of 51 kroner since 2012. This includes these 22 kroner profits from the Urban Populi transaction. We have a result of 55 kroner and a paid output of 51 kroner, which makes up 92% of the value creation. Our goal is to continue to give good direct rejection to our shareholders in the future. Finally, we will look at This is calculated as a 12-month ruling result, and divided by the income in the incoming 12-month period. We have a result of 586 million, corresponding to an income of 26 percent. Through the financial part, we will move on to the market.

Yes, I'm starting to look at the situation in Oslo as usual. First of all, when it comes to the future estimates, we have replaced the supplier. The previous estimates have been a bit lower compared to the previous estimates. The red circles are where we have replaced the supplier. The reason for this is that earlier we did not have any more projects which was at less than 10 units. The previous supplier did not have more projects under 10 units, i.e. small houses of that kind. Now they are with the estimates, so there will most likely be a much better hit security on these estimates on delivery in the future, completion in the future. In the last 15 years, 2,900 units have been completed on average in Oslo, which has on average been lower than the need. And it is still the case. Now an estimated need of 3,300 units is ahead, but some are down from last time. There have been new estimates. Det er estimert færdigstilt 2,54 i år, 2,9 neste år og 2,58 som er fortsatt vesentlig lavere enn behovet. Det her er jo årsaken til alle disse overskriftene og alt det dere leser om, hvor stor skvis det er i Oslo og hvor lav tilbudstiden er i forhold til etterspørselen. In comparison, we often see Oslo as a market. Since we don't get to do things in Oslo, we build a lot around it. That's what we do now. We build a lot in Lørneskog and in the old Akershus. There, a lot has been taken away from what Oslo has not managed to regulate. It has gone away in Akershus, as you can see in the volumes here. There is a need for 5,400 units this year, estimated in the future. And it is built on the trend after the need, perhaps even a little more. But combined with Oslo, there is a low supply side in relation to the demand. This is the same story that I have had for many quarters. The incoming balance or incoming offer for new homes in Oslo was 1,100 units at the end of the year. We put out 1,345 and sold something more than that, so it is around 1,000 units that we have made in a few years. It is too low, as I have said before. These two markets have been quite the same. If you go back to 2012-2013-2014, the markets were quite the same. At the end of the year, there were 3,500 units in the year, and it is sold about as much as has been put out. There is a good volume, and a well-functioning market in Akershus is selling very fast. There is still a good supply side, but again, put together, it is too low in relation to the demand. In Bergen, there is also a relatively low supply side. This is also due to slow regulation. They struggle to have the same tendencies. Thank you. The trend you see in Trondheim and Stavanger is that it is not laid out, that it is not laid out more. I am quite sure it is because of what I said initially, that the building costs are too high. So very many places in Stavanger, the Sannes region, for example, it is too low income to be able to build with total enterprises in today's market. Similarly in Trondheim. If you look at the supply side again in the areas we operate in, the trend is still there. In comparison with Folketalet, you can see how catastrophically low the supply side is in Oslo. One and a half units per thousand people. Akershus is again a good supply, but together it is still too low in the region. Bergen is also quite low, it is at two. And Trondheim is better, 3.7. And then you have Stavanger, but you see the trend down here. As I said, it's probably not because of lack of projects. It's because they can't contract it and count it back in today's market. The second-hand market is much more evenly distributed, of course, since you often exchange housing in the same market. But here we also see a fairly low decline in both Bergen, Trondheim and Stavanger. We also see Oslo here. There will be speculation, but I think it can have something to do with the increase in interest rates. There has been more uncertainty in connection with the war and inflation. I guess that is the reason compared to previous years. There is no other reason for it to go down. If you look at the price development, then it is Oslo again, as compared to previous years. If you look at the price growth so far this year, it stands out, and that of course has a connection between supply and demand. Skvisen gjør at det blir press på prisene. Bergen ligger mer eller lite lavere enn de siste par års utvikling. Samme i Trondheim og Stavanger, men fortsatt bra vekst så langt i år, selv om det har gått litt ned i de siste par månedene. Oslo, for eksempel, når vi ser på slutten av året, kommer til å holde seg sterk. Bergen også. If you look at the future prospects, Then again, the market situation in Oslo, which means that the prices and markets will remain strong in the eastern region. We see positively that steel prices and wood prices are at full speed down, so that the total enterprise costs will be better in the future than they were. I think they peaked for our part in June-July, when it was already down. We see that the interest rates that are up at the starting point are not positive, but it is still the housing loan termination that trumps our customers. It is five times the income, which is what is decisive, and not the very ability to serve. At the same time, the rental prices have gone up, so that one piece is still very profitable in terms of buying against renting. Vi har en god pipeline. Vi har mye varer i hyllene klare til å selge, gitt at markedet tar unna. We also continue to work with ESG. We now run climate, gas and rain control in all our projects. We work with setting emissions targets, that is to say we use reference projects. We take good time to do this properly. There are many in the industry that do greenwashing, and that does not have much to do with it. So we like to set proper tasks so that it becomes something real out of it. We report on behalf of the Global Reporting Initiative. We also apply the EU taxonomy, which will be a requirement in the future, as well as the Openness Act. We work a lot with these things, and there are more and more requirements for companies like us when it comes to ESG. So, in summary, it was a good quarter for Selvo Bolig. Strong result. We had a good sale in comparison with our peers and given the market situation. We had a strong growth in revenue in the first half of the year in comparison with the first half of the year last year. And we paid an exchange rate of 2 kroner per share based on the results of the first half of the year. That was what we had. Are you ready for some questions, if there are any?

There was a question on the web. Rasime Mortensen. NGAP margin is falling a lot and is at the lowest level since 2013. How do you see this in the future? How much is the cost of building versus UP versus ANET?

It falls a lot in comparison to what Simen was thinking of. It falls a lot less than what we actually guided when we did the UP transaction. When we sold Tomtene to UP, it was a repricing of Tomtene, which means that all newly started projects that are bought back from UP would give a margin of 10%, is what we said. So it is much higher than I had expected. Of course, a small part of that is also affected by higher building costs. But we have the smallest requirement for rejection or margin in the projects we start in order to start sales, as I said initially. So how large the proportion is, of course, is a part of it. The building costs are several thousand kroner more per square meter than they were a year ago. At the same time, the revenues have gone up. It depends on starting housing in all markets. We have to start something at a lower percentage than 20%, for example, as we have had a tendency to do before. Vanskelig å si hvor stor andelen er, men marginen har ikke falt mer enn forventet, eller enn guidet, den har falt mindre.

Hvordan er reguleringssituasjonen i Oslo kommune for dere? Får dere ut noe til salg i Oslo i nær fremtid?

The regulation situation in the Oslo municipality is far from good. It is really terrible. We have big projects like Bjerke, which we have now under regulation, and which we have received a message that should be prioritized. It is going terribly wrong. We have several projects also on Saturday. I don't dare to say on behalf of the politicians and the PBE when they will be able to regulate these actions. We do what we can. Normal regulation time has gone from two years in 2013 to over six years now. It is very difficult to say that for our part. We would like to get it out as soon as possible at least.

Hvordan reagerer dere nå i Stockholmsmarkedet, nå som prisene faller raskt?

Ja, prisene faller raskt. Vi har tomter med gode betalingsbetingelser. Det vi gjør nå naturligvis er jo å avvente salgstarter til markedet bedres. Det er jo det enkle svaret. Vi har jo egentlig et prosjekt som vi skal ut med, som vi har tenkt å legge ut i høst, som vi kommer til å vente med å legge ut til nyåret.

A question from Øivind Henriksen. What can you say about sales so far in Q3? Do you have any guidance on sales? And how do sellers work with the now somewhat heavier market? Price, discount on selection, etc.? ?

Vi har solgt bra gjennom ferien, eller bedre enn det jeg hadde forventet. Vi har solgt noen av 20 enheter i juli, som er bra. Det er roligere naturligvis enn så lenge. Men det tikker og går hjemt og trutt, litt samme takten som det vi hadde i Q2. Otherwise, when it comes to campaigns, we run campaigns depending on what happens macroeconomically. It can happen that we run campaigns for 100,000 kroner in advance instead of 10%. We can run white package campaigns. We can run advertising campaigns. It's the same thing we do. And we do that independently. We do that to accelerate, for example, to achieve a construction start earlier than it would otherwise have been. It's the same thing we do elsewhere as well. We don't have any special campaigns outside of that. It's not that there's no demand for our homes. It's important to add that we've cut prices for most of our projects in Central and Eastern Norway throughout this period. It's a special situation, because a lot of what was contracted and built started on much lower or better levels than is possible today. Ergo, it will not be put out anymore, so you get a kind of strange situation where there will be a supply crash as a consequence of high building costs. Ergo, it will be less to choose from for the customers, so the prices will stay the same. We have not given discounts either in Stavanger, Bergen or Trondheim either. So it's a bit of an absurd situation. This is actually a situation where the market suddenly stops quite strongly because the building costs have accelerated so violently. That is the long answer.

Aren't there any more questions from the web?

Yes. Da sier vi takk for idag, og så ses vi igjen i 10. november.