Selvaag Bolig ASA

Good morning and welcome to the third quarter's results presentation for Selvåg Bolig. My name is Sverre Målvik and I am the managing director. I will, together with Kristoffer Brunvold, financial director Kristoffer Brunvold, go through today's agenda. We start by looking at some highlights from the quarter, then we take the operational, then Kristoffer takes us through the financial, and then we look at the market, future prospects and some Q&A at the end. We had several good sales starts in the quarter. Given the circumstances, it was surprisingly good. We had five sales starts, so I'll go a little closer to them afterwards. But several of them were good, and as if the market was normal. We have sold well in the quarter, given the market circumstances, and also had a good result in relation to delivered units. Our margins are good. We do that because we always have a fixed total interest rate, including interest and price increase, which we should be very happy about. If we hadn't had that, then there would have been bad interest rates in the agreed units. Building costs continue to fall, as we can see through the quarter. As we have said since February, we have expected building costs to fall this year. That means that we have sold projects without deducting the enterprise cost. We are starting to include enterprise costs at the end of the year. That plan looks to succeed. If you look at the numbers, we had a turnover of 437 million, and a margin of 10% after IFRS. A relatively low turnover, but we still have a good margin, as I said earlier, because we have fixed our costs. The current calculation is 451, 8.3%. Low revenue, relatively low revenue and margin is due to the fact that we have sold relatively little in units during production. And then the current calculation method gets a negative effect. Kristoffer will come back to that in a moment. Looking at the operational side, as I said, we are now in the third quarter. We have changed our business model, as we did initially this year. That is, we take precautions for our customers on some of our projects, both in sales, which we usually do, but we also take precautions that we include An appropriate, satisfying total enterprise. We have taken that on several projects. We have already entered, among other things, a contract on Ballerud. No, not on Ballerud. On Ski. A project that we are starting to build. It's called Solberg. I'm sorry. In Solberg, we have entered a contract, sold earlier this year, which shows that we succeed in our strategy. And without discussing it, we also see that in several of the projects that are in the process of entering a total enterprise contract. That is, the total enterprises are much lower now than they were earlier this year. Yes, and we have several processes, as I said. We also had five sales starts in September. A series project, among other things, or two projects in Lønnskog, one in Bærum, one in Stavanger and one in Stockholm. In Stavanger, we sold very well. We have sold 30-40% of what has already been put out. In a project in Lørenskog, we have sold 14 of 18. We have sold more than we usually do. We have sold enough to start building in a very short time. We have sold used parts at Mathildetunet in Lørenskog, 13 of about 40 units, and at Ballerud we have sold 11 of about 40 units, apartment buildings and apartments. We have a good interest in these projects. In Stockholm, we have sold 7 of 45 contracts. Many are interested. The Swedish model is a bit slower. You have a delay and a longer deadline before you sign a contract. All in all, very good in relation to my expectations, and very good in relation to the market conditions. The sales we had in September with record high interest rates and geotechnical challenges that we have in today's market. I have received some questions in the last year or two. There are still some requests that we should go through the Urban Property Deal again. So I thought we would talk a little about how it works again, to do a little refreshment. Urban Property is a bank company that we sold large parts of our bank to four years ago. It is an exclusive collaboration between Selvåg Bolig and Urban Property. Urban Property is largely owned by the pension fund, OPF Equinor, with 70%. Selvåg Family and Reitan are the rest. Urban Property has an exclusive right to buy the tomtes we find. If they buy it, it will be stored in the tomtebank, and we take it out when the project is finished. And then we pay 375 plus NIBOR in annual option premium to take it out. Plus a transaction fee of 0.5% in and 2% out, one-time fee. What this does for us is eliminate the need for self-managed housing for self-sufficient capital. The need for self-sufficient capital in a developer like us is 90% self-sufficient capital, and the rest of the development costs, in other words, the main reason for the need for self-sufficient capital is in connection with self-sufficient capital. If you look at this, it is well illustrated. It is not true that we buy back the entire ton at the start of construction, but the buyer pays back 50% of the ton at the start of construction, and 50% after completion. That is the smartness of this collaboration between us and Bolie. Plus that the price of 375 plus Nibor is far better than the weighted average cost of capital of Vekken in the company in total. In addition, there are covenants in this collaboration, so that we dance in rhythm. There are covenants on eco, leverage and accumulation on option premiums. All of these are in the quarterly report for those who are interested. We have good headroom on all of these covenants. There is no danger of any break in today's situation. It is also an option. The housing company itself can say no to buying back an empty house. But then we have to pay a four-year option bonus as a break fee. But there is still a downside hedge. That is to say that you get capped the downside of these houses with a four-year option bonus. Back to the quarter, sales. We sold houses for 479 million, 77 houses. The value is higher than in the same quarter last year. 272 houses so far this year. As I have said several times, we are at about one house a day net. It is not so bad in relation to the market situation. We will continue in Q4 at the same pace. We will probably end up with something over 360 houses. We'll see. In the 12-month period, we are up to 1.8 billion. The unit price is higher. 6.2 million is due to the fact that we have sold a number of warehouses, as I mentioned, both in Ballerud and Lørensko. The unit price is higher than it usually is. So there is nothing to read into. There is nothing to do with price growth. We build up to 57 units per quarter. That's the Solberg project. And we're finishing at 90. That means we have 5.3 billion in annual reserves. 985 units. 69% of that was sold at the start of the quarter, and more now. The completion for this year will be 744 units, same as last year. 85% of that was sold at the beginning of the quarter, and more now. If we look at the guidance for 2024, it will be 515 units completed in 2024. That was...

Good morning. We'll go through the financial highlights. We'll start with the results of the IFRS, where the revenue and costs- as usual, come in as a result of the overhaul of the homes for our customers. We managed 74 units online, and only one unit was in collaboration projects, so most of it is consolidated here. The main deliveries this quarter were two projects in Lørenskog, one at Skårerbyen Plus and one at Lørenskogs Stasjonsby. We got revenues of 437 million, including our other revenues, which is the factored project management for collaboration projects, and the service services at the plus service centers. A total of 17 million. We deliver project costs of 346 million. As Sverre mentioned, we have fixed-price contracts, which means that we deliver enough in a quarter with costs well within budget. We have good project managers who manage the projects with good cost control. So even with a low volume, we manage to deliver a positive baseline. Other costs come in at 62 million, up from 55 million last year. This is mainly due to increased sales and market performance costs to boost sales in a long-term market. And of course, we have placed behind us a salary issue, which is also an increased salary cost from last year. We are reporting an adjusted EBITDA of 44 million. We have adjusted these 18 million in interest costs, which are in the stock costs of IFRS, to get a clean EBITDA. This means an EBITDA margin of 10%. This is a good deal down from the same quarter last year. We had twice as many deliveries, and also projects with a better margin. So with winning volume in this year, and fixed costs at the bottom, the margin drops to 10%, as expected. In total, we deliver a result per share of 21 euros, down from 85 euros in the corresponding quarter last year. There are no more proforma figures this time. This is in the note, but since there are no particularly exaggerated units from the cooperating companies, the figures are relatively the same in the isolated quarter. Then we move on to segment reporting, which follows these Norwegian rules of management, that is, the running calculation method. The running calculation is that you take sales degree times finish degree, which gives you a degree in all the projects that are under production, which means that we run out of revenue and results through the project's lifetime. Here we see a drop in the turnover, down to 451 million, and a margin of 8%. This drop is due to the fact that the sales level has developed late in this period, which means that you get a lower turnover. and volume to cover fixed costs at the bottom. We still have a good project margin. If we had had a normal sale, this margin would have been up to 10%. We have kept a floating two-digit number. Still good speed, or it is a falling speed. 12 months of rolling turnover of 2.1 billion, and a rolling margin of 11%. We continue to sell, and in Q4, Q4 will also contribute some pressure on the margin, since the sales plan develops at the same pace as in Q3. Then we look at the cash flow. We entered the quarter with 392 million. We have positive cash flow from DRIFT at 244 million, which is driven by invoicing and customer orders. We had a lot of annual units at the end of last quarter, which was on Meggler's account. This has now entered Q3. Then we have just paid off our building loans at 312 million, and we have paid off an exchange rate of 94 million in the quarter, so then we have a negative cash flow of 433 million from financing. This brings us to a starting balance at the end of the quarter of 193 million. Let's look at the balance. No major changes in the balance sheet. Total balance of 5.4 billion. A solid income share of 40%, corresponding to about 23 kroner per share in book value. The change from Q2 is that the warehouse is now up by 72 million. The customer order is down by 206 million, as a result of the fact that we have received orders from Megler's account. We were through with the cash, so it was down by 109 million. The revenue from our customers is now at 65 million, and is included in the second quarter. This is a bit lower than a year ago, but it is related to the fact that we take in less revenue from our customers. Let's look at the goods storage. Book for empty bundling is on the same level. The goods in work is down by just under 13 million. This is due to the fact that we have relatively few start-ups in the quarter. And we have a fair share of more than new start-ups, so that's okay. A little down. The finished goods warehouse is up with 78 million. This is due to an increase in finished and unsold goods. We are now at 60 units at the beginning of the quarter, which is finished and unsold. We have already sold some of these in the quarter, and we expect that they tick and sell in the following quarter. These are finished new houses with good conditions, so we are not worried about that. Let's look at the total interest rate of about 2.2 billion kroner. The building loan is of course large, with about 1.5 billion kroner. We also have interest, as usual, in Urban Property, which includes sales loans and other return on loan payments. Portfolio B has 491 million kroner. And then we have some interest loans again, on the interest we have in our own balance, of 200 million kroner. There are no changes in the terms of these loans, and we have two top facilities in DNB that are not included in the quarter. In total, we report a net interest rate of 2 billion, which is the same level as last quarter. In the end, we will look at the discount on the income tax. This is the 12-month ruling result after the tax, divided by the income and balance of the income tax. This falls now down to 182 million results in the last 12 months, and a discount of 8%. We expect this to rise in the next quarter, where we have a lot of overlays. Then we will finish with 331 homes. Then we will get a very positive result, as we saw in this calculation. Yes. Now we are through with the financial part. Now we will move on to the market.

I'm starting to look at the Oslo market as usual. Here it is a prescribed need, so-called, for 3,300 homes this year. This prescription is calculated as a consequence of what has been completed in previous years, and not what is actually in demand. So it has gone up and down. Back in 2019, the loan was 5,500, just to illustrate that it is a number you have to take with a pinch of salt. But there are 3,300 homes anyway, which is the estimated need in Oslo in the next three years per year. And then it will be less than that. This year 3,200 slabs, next year less than that, 2,600 slabs and even less in 2025. If you look at Akershus, which has as many people as in Oslo, the need is 5,400 units, which is larger than in Oslo. This is due to the same method being used. It is estimated based on how many have completed the previous years. There it is built and completed something more than what is needed. In 2025 and 2024, on the other hand, the total will also be, if you look at Oslo and Akershus together, there will be an undercovering of facilities in relation to the so-called need. I think the need is at least as big in Oslo as it is in Akershus, so it's a much bigger undercut than the numbers would suggest. We can see that in relation to what the offer side is. If we look at the year shift, you were out to 1200 homes in Oslo. It has released 740 homes in Oslo so far or up to the first eleventh. So it has sold a little more than it has released, and there are about 1100 homes in the market now. Akershus, a much more healthy offer, about 3,500 in our shift. Sold out in 1900, a little more than what was sold out, and a healthy offer again in Akershus. It should have been the same in Oslo, probably around 3,500. In Bergen, there is also a delay in regulation, which means that there is also little out there. At the turn of the year, 656, put out very little this year. Sold twice as much as what has been put out so far. So a low offer of 461 new homes there and now. In Trondheim we see a little increase, where sales are lower than expected. And a pretty strong increase in the supply side again. More buyer's market there than in Bergen and Oslo. And in Stavanger sales are a little lower than expected. In the meantime, they have put out quite a lot. It is a market that works very well, as I said initially. We have, among other things, had a very good sales start, and I know that some of our competitors have also had it. So it is perhaps the market in Norway today, in addition to Oslo, that works best. If we look at the population, we see that Oslo and Akershus have the same number of people. The supply side of Akershus is three times that of Oslo. It should be around 5 per 1,000 capitals, probably healthy. 1.5, 1.6 is too low. We'll have to wait and see. The offer side is low compared to the same period in the last three years. The offer side is lower in all areas except Trondheim. Stavanger is also coming down to a healthy level, in combination with high demand and many new jobs being created. This is a market that we look positively at in the future. If you look at the consumer market, as you have probably seen in the newspapers, it is inflated as if it is a huge supply side. And it is an increased supply side, largely in all regions, apart from one in the Stavanger area. That is largely due to the fact that the customers go from buying first to selling first. Among other things, because the banks also require it, because they get a little low tax on the housing they have. Plus that they do not get peace in their stomachs. If they take the chance, they would like to secure themselves and sell their home before they buy a new one. And rather have a flexible and long turnover. So I think that's a big effect of this increased supply side. It will be exciting to see how it will be in the future. It will probably sink beyond our part, I think. We can see how the imbalance of supply and demand affects prices. The price has increased in Oslo by 3% year-to-date. That's fascinating to think about, given the increase in interest rates. Bergen is also high. Trondheim is starting to decline. Probably due to higher supply side. We also see Stavanger, where there is a low supply side, both for new and used, and network and transportation, a lot of workplaces. I guess Stavanger will be the winner of the areas we look at here, at least in Norway, when we have talked about it at the end of the year. I'm pretty sure it will end in positive terrain for the year. I also think Oslo and Bergen will do it. We'll see how it goes with the rest. Yes, let's look at some of the projects we have in progress. We have a lot in production at Lørenskog. At Lørenskog station town we have a new project we are coming up with now. There is a lot going on, and we are going out with a new project there now. Apart from what we are starting to build now, some row houses, we are going out with a plus project there in the new year. The first quarter, probably. Or the second quarter. Skårebyen will have a project out now, Søstermatilde. There we have 400 units of the 1100 that we regulated in 2019. It has gone very fast. We will probably start building that in a few months. And put out more as the market goes away. Landås will be regulated in these days. I've said that before, but now it's really a matter of law. There will be both a new plus project and ordinary housing. Kalnes has 250 units in the next field under regulation. There will be a new plus project there, which is very central to the waterfront and right by the beach. We'll deal with that if things go as planned. Already, probably, the second half of next year. We're starting Ringve. We're just putting it out there because the market is moving away. We're probably coming up with a new project. We're almost done with what's going on. We have Nabotomta, which we're now coming up with a new project for the new year. It will also be regulated in these days. Lervik Brygge is the project I mentioned. We will lay out a trend now in September. We will lay out the following trend, as the market is moving away. Solbergskogen Plus is the only building trend we have started now. The first building trend in Q3. We will also lay out a new trend in the new year, and will sell successively, as we usually do. Since we sell 60% on one trend, we lay out a new one, and so on. It looks like we will finally be able to get through the Lørnvang. The development of the land deck shows that. We have been working for eight years with something that should have taken two years. We hope to get through that in the first six months. It is now in Rådhuset. We hope to get through that before Christmas. Fredrikstad is a large collaboration project we have with Jotten Eiendom on a couple of thousand units. It will also be regulated in the course of six months, six to nine months. It looks very positive. It is one of the projects ... The Nabo project is one of the projects that has been blown up in the media, which has sold very well. Sold to 70 percent at the start of sales a couple of weeks ago, to 88,000 per meter. So it looks very bright in Fredrikstad, so to speak. Lille has another project with regulation that we plan to release this year. Forenebu will be in 2025, according to the plan. Bjerke will be in 2026. It's a large area. We hope it will go faster than that. I hope so. We have been allowed a so-called express treatment. We haven't noticed it for a long time, but we hope it will be something else with a new city council. And then we have projects in Stockholm that we mentioned a bit in the previous quarter. Hornsberg is a city project that is located in central Stockholm. We have knocked out the slaughterhouse area and several landmarks in Sweden that are exciting. Exciting in the future. This is just a selection of projects. We have many more in the pipeline that we can publish. And many more that I haven't mentioned. There are a lot of access possibilities today, so we are working on that, both in Sweden and Norway. So if we look at future prospects, as it says here, the Oslo area is still on a low supply side. There is also very little construction going on, which will make it difficult to finish in the end of 2024 and the beginning of 2025, which makes us see very positive price development in the future. It's not just about Oslo, but also Bergen and Stavanger. It's about the new housing market in the cities in general, where it's regulated a little less, especially in those three areas. We think that we are very close to a rate peak, if it is not already reached. It is experiential, so that something happens with the new housing market once the rate peak is reached, or it is communicated, topped out. So we look forward to that. That, in combination with not having a high level of employment, and the fact that the building costs have dropped a lot, and hopefully will go down even more, is a good sign that we will be able to start good, profitable projects in the future, and that there will be improvement. But of course it depends on whether the interest rates go up or not. That means that people get funding to maintain their jobs, and if the interest rates don't go up, it will be lightened up in the future, I think. When that is said, we have to expect a lot of employment in the construction industry, of course, in relation to the fact that construction has started very, very little compared to what it normally does. We have a lot in the market. We have good people on display. We think we will be able to sell well in the future. And we have a lot in the basket ready to be put out, both on projects that are in progress and new projects. So if the market is there, we should be there. And then we can get a very quick recovery in that way in volume. So, to sum up the quarter, we had good start-ups, very few other builders who were out and start-up now. We took the chance, and we succeeded. So it remains to be seen when we sell enough to start-up these projects. One of them we sold enough to at once, so the start-up is up. Yes, good results and sales in total in the quarter, and actually in total year-to-date, a little over one volume a day. That is better than I had feared in relation to the market. And we see positive development for us. The development of the building costs is positive, that is to say it is falling. And that is very important for us to be able to start profitable projects and launch new projects. That's what I was going to say, so we'll have to take some questions, if there are any.

There's a few questions from the web. You can answer briefly. That's something you've answered as well. Simen Mortensen. There's a record for unsold finished housing in Q3 with 60 units, and the sales rate is only 69%, which is also low in historical context. Can you give some comments on how you think this will affect you in the future? Starts and so on.

We look at the total sales of the production units and plan every time based on that. 60 finished products are not a large volume for us, and it is a conscious action because it is divided over many projects. This is something we do consciously, and if we haven't sold it, it's because it's not finished yet. Many of them are showing properties. It's a conscious action. We have a plan for every single project on how we are going to sell it and how long it will take. For individual projects, for example, it is more profitable to sell them in the spring, because there is a convenience in the vicinity of the park and that kind of thing, which makes it more attractive. And that it is not a finished outdoor area, for example. So it is a conscious action, it is not a large volume.

The sales rate is 69%. Do you have any comments on that?

We have had sales fluctuating between 66 and 78 percent in the nine years I have been doing this. It is not particularly low in relation to that. It has gone far within the covenants of the year.

Can you give some comments on the segment margin, a gap that falls to 8.3 percent?

Yes, that's what we were talking about. It's the volume that's falling. The sales rate is developing weaker than normal, and then there's less volume to share fixed costs on. As I said, if we had normal sales, the margin would have been higher than 8%.

Many sales start in Q4. Can you give an update on how sales have gone so far in Q4? Better below or on the line with the market in recent times?

As I mentioned, it is in line with what we have been doing lately. I have said that we sell a home throughout the day, and we also do that in the quarter. The sales started in Q3.

Can you tell us more about the development in building costs? Do you have any examples?

Yes, we have examples of total enterprise, including salary and wage, at 47,000. That is, total enterprise costs, as we talk about it, at 445. And lower than that in Sweden. So the building costs are down 15-20% from the top.

If you were to quantify how much UPUR hits the margin with the current interest, measured against your old history, how much would you estimate this to?

In a normal project, it hits very, very little. As indicated earlier, with a normal Nibor, it hits about 1%. If you look at the prospect of UP from 2020. Now Nibor has increased quite a bit. It hits 0.5%. But on the other hand, it is difficult to say, because you would probably get more expensive mortgages, also in today's market, as the delta would be lower, between 375 and Nibor, compared to mortgages, which traditionally were between 2.5 and 2.7. Maybe today the bank wouldn't give us better conditions than 3 plus Nibor. So I'm not sure there would have been any difference.

It is also important to say that the income side and the construction side hit much more than that on the margin.

You are talking about the supply of new buildings, but how do you see the supply of used housing and how does this affect the market, as well as how do you think about the shadow side of the new building supply, that is, the units that have held back due to the market situation today?

The shadow side, when it comes to projects that are in the box, there are many of them in some areas. There are not many of them, or probably none of them, in Oslo or Stavanger, for example, but there are many of them I think I would have made several of them, for example in Trondheim. There are probably many of those who would not have the right to live before the construction costs have fallen very much more, or that the prices are rising in those areas. But that is the reason why it is in the closet. When it comes to the consumer market and how it affects, it affects in the sense that there are many who want to buy a new home today, who do not get satisfactory tax and security for the value of the home they are going to sell, because the consumer market has fallen. In this way, it negatively affects the decision-making ability of the people who want to go from used to new, and that is largely the case. The market works a little otherwise independent of the new housing market, apart from the fact that the difference in the new housing price per square meter used cannot be too large. But it is not. It is, on the other hand, perhaps a little less than it should be, given the environment, fuel costs, etc. in new homes versus used ones.

Question from Petter Nilsen. Can you say anything about the expected margins in Stockholm on Barkarby against Storoslo? I see that you have put out three block sales in Barkarby. Is that a total sale on all three that determines if the building starts, or is it important to start building block by block?

The Swedish model is very advantageous in many ways. The margin picture in Stockholm will be close to what it is in Norway. It can also be lower, but there you also have a... Or higher. But the structure is very advantageous. You don't take regulatory risks, so you actually get... It will be a real-capital transfer that will be very, very good. and safe on the Swedish model. But of course it depends on the climate change. If you enter a market announcement in bad times and you sell it in normal times, you will get a very high discount, a high coverage rate. And if you enter bad contracts, it goes the other way. When that is said, Stockholm City is very flexible at the time of action, and they listen to common sense when it comes to negotiations. We have put out three blocks. The project we have put out is on 223 units, and we do not put out the entire project in the market at once. It is in Stockholm so that it is a whole quarter that will be finished with streets and courtyards and so on. So it's not like in Norway where you can build one block. So here we're going to sell quite a lot before we're going to build. So we're not just going to start building two blocks. We're going to start building half of it, at least 110. So we're going to sell Ballpark 50-60 at least before we start building anything.

A question from Nasir Iftikar. What does it cost on average to build a block?

Um... Approximately 50,000 per square meter. As I mentioned, we have received an offer of 47,000, including the wage and price. But a place between 45,000 and 50,000 per square meter can be multiplied by sales per square meter. Including parking and outside.

The last question is from Newell Kleiven. The cost of construction, now we've topped it out. How high was it then, and how high is it now?

It topped out in June, July of last year. It's very difficult to say how high it was, because we couldn't lock it completely, but it was perhaps up to 60,000 for those who signed the contract. It was an unrealistic peak. Now it's... As I said, it will vary a lot where you are, and how little the entrepreneurs who are in the competition have to do. But I would think that it is somewhere between 45,000 and 50,000 in Norway, on a normal block, as I described. At the same time, if you build small apartments, many small, then it becomes much more expensive, many large, then it is cheaper, because there will be fewer bathrooms and kitchens per square meter. It's very difficult to answer that. It's affected by a lot of things. Like now, the euro has suddenly become irritatingly strong again. It affects the import of glass, steel and other things. Cement, which makes it fluctuate. But as I said, it's the imbalance between supply and demand. That is to say that the entrepreneur has too little to do, which is the big effect of the decline in construction costs now. That is to say, the margins for the entire chain from the materials under the entrepreneurs and the entrepreneurs.

Last question from Simen Mortensen. What have you seen of the prices of tomatoes in recent times?

The prices of tomatoes vary a lot, or where you are. What has been sold in Oslo this year has been sold at very, very high prices, higher than last year. But we see now, of course, that it's starting to drop in general for many. And it's not that easy if you don't have many projects going on and have a solid economy. So it's clear that the prices are down. And it's certainly a lot of people who have to sell now. That's what we see. So the prices are down.

Then there were no more questions from the web.