11/7/2024

speaker
Sverre Mollvik
Chief Executive Officer

Good morning, and welcome to the third quarter's results presentation for Selvo Boli. My name is Sverre Mollvik, and I will, together with Kristoffer Brunvold, go through today's agenda. We'll start by looking at highlights, then we'll take the operational, then Kristoffer will go through the financial, and then we'll take the market and future prospects in the end. The third quarter was okay, sales-wise. We sold 100 units, a little worse than in the second quarter, but good in terms of that July month is with us, and as it stands, low interest rates and a heavy market in general. We have sold 446 homes in the first nine months, which we are very pleased with in terms of the market situation. Resultatene i kvartalet isolert sett ble jo prega at vi hadde veldig få feilestilser. Så hadde vi en del usolte feilestilte som vi fikk overlevert i kvartalet, slik at vi fikk egentlig berga et brukbart resultat likevel. Selv om det er litt på den negative siden, så er det bra i forhold til få overleverte enheter. Vi har økt antall enheter under produksjon. Also increased order reserves in the company, through the quarter, because we have completed fewer homes, or started building more homes than we have completed. The numbers, a little quickly, only 225 million revenues after IFRS, as a result of few deliveries, as I mentioned. 1.6% EBITDA margin. This is of course due to the fact that we have fixed costs at the bottom, so it is simply a bit too low an income to cover them. After the current calculation, 516 million and a margin of 6%. A bit of the same there, a bit of low volume and a bit of pressure margins, of course, due to high building costs, but also a bit of poor sales on unit production, which makes the fixed costs lower the margin. If we look at the operational side, the building costs are of course problematic, or they are called irritating high, and that is due to the weak crown that preserves. But they are stable, and we manage to contract on levels that make it possible to start building in several places now, compared to what we did two years ago. So that's positive. We have written a lot of contracts in the quarter and have several negotiations now that will be signed in the course of a short time. I just want to say again that we have this fixed price regime of ours, that is, we negotiate in interest and price increase. If we hadn't done that as a policy over the last three years, we would have probably lost money the last two years, instead of making good money. Så det er veldig viktig å fokusere på, særlig når vi har hatt så kraftig inflation. Når det gjelder tomtebanken vår, så det er jo et marked nå hvor det er muligheter til å kjøpe tomter, og vi har... I've been given two new market announcements in Stockholm, in the north of Djurgården, by the town of Østermalm. Now, one on the terrace, which is in the north of Djurgården, as I said, a very nice property. I'm building a plus project there, and also one on Kålkajen. The one on the terrace was signed now in Q4. There are several items under negotiation. både i Sverige og Norge. Så det er jo et godt marked for oss, sånn sett, motkonjunktur, å kunne kjøpe og fylle opp tomtebanken. Vi har jo veldig god kapasitet i UP, siden vi ikke har kjøpt noe særlig gjennom disse kalde høykondukturtidene. Ja, så vi ser på salget i kvartalet, så har vi solgt 100 enheter, som sagt. Det er bra i forhold til, altså, juli vanligvis pleier å være rolig. Nå var So that's really good. More than one a day. Sold apartments for almost 700 million in the quarter. Much better than in the same period last year. We have sold 446 units so far this year, or in the first nine months. More than now, over 500 now. Last year we sold 360 on our hand the whole year, so we're It will be much, much better than last year, and it will be the best sale since 2021, which is positive, even though it is not back to normal levels, it is a good volume in relation to the market in general. Årsfarten oppe i 3,3 milliarder drøye, nesten 3,4. Så det er positivt. Byggestartet litt flere enn det vi ferdestiller. Vi ferdestillte jo bare noen rekkes oppe i Trondheim i kvartalet. Byggestartet 43, og vi kunne ha byggestartet mye mer, hvis det ikke hadde vært så slitsomt å få gjennom prosjekter og få tillatelser i det offentlige. Det tar... We could have built much more in this quarter if we had got the permits we are looking for. But that is a slow process, unfortunately. It will come, but it may come in Q4 or Q1 next year. Increased speed, as I mentioned. We now have 700 units under production. Tine, that's 4.5 billion. The third quarter now with a little second quarter with growth since the bottom. This is positive, and we are better off in terms of what I feared that we would come to the bottom of. So that's good. So now it's about building up the speed again, can you say, and getting up the volume to... It takes some time, of course, in a market with today's building costs and limited purchasing power so far. We hope for interest rates, as the Norwegian Bank has guided on what is happening, so it will probably help quickly. 67% of these 4.5 billion was sold at the beginning of 2020. The quarter, 85% of what is finished this year was sold out in the quarter. And then we see the guide now on next year, or 2025, on 374 deliveries in total. This we have worked with to ensure, so we have actually secured in many ways now the results already in 2025, and now we are working with 2026 and 2027 to ensure enough. Yes, good morning.

speaker
Kristoffer Brunvold
Chief Financial Officer

Let's take a look at the financial highlights. The results of the ITFRS, where the revenue and costs of the projects meet the results of the delivery of housing units to our customers. We delivered 54 units, including 16 units from collaboration projects. This is down from 74 units last year. We have only completed a number house project in Trondheim with five units in the quarter. The rest that has been delivered here are previously completed projects that have been completed unsold, which means that we are up to 54 units. The average price of what we have delivered and consolidated in the quarter was 5.3 million. This gives us total revenues of 225 million, which is included by 18 million in other income, which comes from the factored project management and Drifta plus our service centers. The project cost is 169 million. As I mentioned, we have fixed price contracts, which means that we keep the cost within the budget, and we have good project managers who control the projects well with good cost control. This means that we have good results from projects that are isolated. But we also have fixed cost base, which lowers the result when we have low volume. Other costs came in at 60 million, which is now down from the same quarter last year. We have a fixed cost base with a relatively fixed number of employees. We have succeeded in cutting some operating costs compared to last year, since we have a wage increase in the RO, so we are pleased with that. We report a adjusted EBITDA of 4 million. Down from 44 million last quarter, we have excluded these interest costs of 14 million, which are in the goods cost after IFRS to get a clean EBITDA. Omsetning 225 million som var innom og 2% margin sammenlignet med 437 millioner og 10% margin tammet samme periode i fjor. Igen, lavere volum fra prosjektene bidrar til lavere marginer til å dekke opp faste kostnader i bund. Helt nederst rapporterer vi et lite negativt resultat på 5 øre per aksje mot 21 øre per aksje tilsvarende periode i fjor. As usual, within a pro-forma result strategy, where we include income and costs from the co-operative projects that are not consolidated in the official strategy, this comes on its own line after tax. You do not get what we call the brutified. Here we get the income and costs. Then we have total income of 332 million, margin 2%, turnover of 441 million per year, 11%, adjusted EBITDA of 19 million, compared to 47 million last year. The same result at the bottom at minus 5 euros per share. More information on this we have in our own notes in the quarterly report for those who are interested. Then we will look at the segment reporting that follows Norwegian accountants and this running calculation method. And that is that you take all the projects in production, take sales degree times completion degree, which gives an output degree, which means that we are gradually taking out the value creation in the project's lifetime. Here we have a turnover of 516 million, which is down from 603 million last quarter, and a margin of 6%. Here you can see after overhead costs. The margin has come under pressure in the last quarter. This is due to the volume we have in production. We used to have 1,500 homes in production for a few years. Now we are down to 700. At the same time as we have fixed costs at the bottom, the margin comes under pressure. The projects that start building also have higher building costs, so the margin comes under pressure as a result. If we look at the 12-month rolling, then we are up in 2.2, increasing a little from the previous quarter, 2.2 billion, and a rolling margin of 7%. So we have created a new slide here now that goes on proforma on NGAP as well. This is because in the official NGAP results, the results from the TS are also below the EBITDA range. So here we have lifted it up, that is to say that you get our share of revenue costs in the co-operative projects, lift it up in the EBITDA. If we look at this regime, we have revenues of 689 million and a margin of 7%. The 12-month turnover is 2.9 billion, and the margin is 9%. This picture gives a more accurate picture of what is happening in the value creation in the company in total, with our share of the collaboration projects, which is essential. More information about this will also be released in the notes for those who are interested. Let's look at cash law. We went into the quarter with 199 million in the bank. We have negative cash law from drift at 101 million, which is due to the construction of goods. We also have negative cash law from investment, which follows that we have loaned out a lot of money to the co-operative projects for development costs. We also have positive cash law from financing, which is due to the opening and extraction of new building loans at 116 million. This brings us a net change of 10 million, and we have 189 million in the bank with the start of the quarter. Let's look at the balance. There is no big change in the sum of this from the previous quarter. We have a total balance of about 4.8 billion. where the share price ratio is 49.4%. This is down from the previous quarter, because we have increased activity and a higher total balance. Booked share price is about 25 kroner per share in the beginning of the quarter. The stock market has increased by 173 million, and we'll get back to that. Smaller changes are down by 3 million, due to customers' payments. The cash is down by 10, which we were through. And then we have this revenue from our customers, which is now at 28 million, and it is included in other short-term yields. This is at a much lower level now. We take in less revenue from customers, and we have less housing production. If we look at the stock market, it is slightly up from last quarter. Bookkeeping and retail sales are on the same level. The value of our work has increased by 386 million, and this is due to the start-ups we have had in the last two quarters, where we have received offers to increase the price costs and increase the cost of building the warehouse. We see that the finished warehouse is down by 218 million. We have reduced the number of unsold units. We have sold a lot. We have reduced this warehouse by 32 units. We were well over 100. in the previous quarter, and now we are down to 87 ready-to-sell units sold per 39. We have also sold 23 ready-to-sell units, but they are handed over in Q1 and Q4, so that gives us more deliveries in these quarters. We are comfortable with the level we have got the ready-to-sell warehouses on now, so given the offer of new housing in these areas where these are located, we expect these to be quickly sold in the coming quarters. If we look at the interest rate, we have a total interest rate of 1.4 billion kroner, where the building loan is 924 million kroner. We have a total interest rate of 397 million kroner, which is added to the sales credits and to the purchase agreements. And then we have a bit of a turnaround on something that is in our own balance, which is 34 million kroner. No changes in the conditions of these loans. And we have also not pulled up any of our top facilities. We have a net income of 1.2 billion. This is now up from 1 billion last quarter, but it is due to more activity. The return on one capital is calculated as a net profit of 12 months, divided by the return on one capital at the beginning of these 12 months. Then we have delivered 239 million kroner after tax, corresponding to a return on one capital of 11% in the last 12 months. Finally, we will talk a bit about... Covenants against Erlen Properly. We have had dialogue with Erlen Properly throughout 2024, and we have seen that there is a need for some adjustments in these. And then we have specifically been covenant number 3 here, which is the interest rate covenant, where you previously have calculated this on IFRS-stall. And we know that IFRS-stall jumps and spreads a lot, depending on what is delivered. So what we have received as a proposal for now is that we change it to follow NGAP. In other words, the results will be measured against the net yield. In these talks, we have agreed to change the second confidence as well. Summing up, from 1.1.2025, the following confidence will apply. The income tax will be a minimum of 1.8 billion. The net yield rate, max 40%. We have this new net yield over 12 months of rolling results before tax and before depreciation will be below 3. Number four is the same as before, a maximum of two and a half years in advance of the unpaid option premium. We will have a minimum of 500 housing production at this time, and the sales rate on this will be a minimum of 60%. And the last component is that the sales credit will not be more than 50% of total equity instead of housing, and the total equity is now 2.350 billion. The consequences of the break are still the same. If we break with these covenants, then UP will be able to approve possible exchange payments. That is the consequence. And if we are in a break for a long time, then we get a margin increase on the option premium at 0.25. We are very pleased with the agreement with UP, and we have had good news about this, and we will be putting in a lot more accounts here in the coming year. So this looks positive, and we have landed a new agreement with UP around covenants. And more information about this can be found in the note in the quarterly report.

speaker
Sverre Mollvik
Chief Executive Officer

Yes, we are starting to look at the usual situation in Oslo. The imbalance between supply and demand has been... It's been called the tone indicator for many years. There is an estimated need for 3,300 homes annually in the next three years. It will be completed in the year 2100. Next year 1650 and estimated 1925 in 1926. So there is a gap that is significant, and this estimated need is also based on history, that is, how much is completed. I would think that there are probably more than 3,300 residents who will move into Oslo. It is stated here that if you look at Akershus, there are twice as many who want to live in Akershus as in Oslo. I don't think so. I think maybe there are less than as many who want to live in Oslo. But that's the way it is. But at least this is connected. Storoslo is connected. So Akershus, there is an estimated need for 5,700 units. And here, as well, are the finishings and housing buildings falling forward. So the estimates here now have come down to 4,800 for the year, 4,750 next year, and so on, falling. There are several reasons for that, but municipalities such as Lørenskog have had a very high population growth in recent years, and they can no longer keep up with school building and other development of kindergartens and so on. So they cut down on regulation, so there is less production there, which is a consequence of the fact that there are too many single municipalities and almost nothing in Oslo. If you look at the total, there is a big gap between the supply and demand in this region. Of course, that will be price-driven. Supply and demand or imbalance is what naturally controls price. It is elementary economics. There is a big gap between the estimated need and the achievements both this year and the coming years. Of course, that is part of it, and already this year, of course, to keep the prices so high and to have the powerful price growth that we have had. We will come back to that. Looking closer at Oslo, this has been the same, for those of you who have been with us and heard about this several times, it is the same picture, it is around 1,000 in Oslo, so it is probably a threshold volume. I don't know if it will be any lower than that, but it is very low. Akershus fluctuates a bit. It has sold a little less this quarter than it has put out, but the offer side is on a pretty healthy offer side in Akershus, at 3600 yen. It would have been very well balanced, and it should have been the same offer in Oslo, actually. It is at 3.5 in both places, so there would have been more balance between the offer and the question. Bergen has also increased a little, but there are low levels. So there is also a low supply side. Trondheim has a very good supply side, the buyer's market. Stavanger has also increased a bit. Summing up here, in relation to the population in these cities, there are 1.3 new homes per 1,000 people in Oslo, which is low. It is also low in Bergen, 1.8. 3,5 Stavanger is relatively low too, while in Trondheim and Akershus it is more of a buyer's market. In Akershus it is not such a buyer's market, because you have to see in connection with Oslo that there is a greater willingness to pay. Therefore, the prices are relatively high in Akershus. While in Trondheim it is more balanced. There you can buy a house for not so much more than the building cost. But at the same time, it is still possible to make good money on development. And Bergen. In the previous quarter, I mentioned that these red columns were much higher than the gray ones. That is to say that there was a higher supply side in Q2 than in previous periods. And then we guided on that this was going to happen. Now it has eaten away very much of the used storage. It has sold a lot of used housing. So the supply side has become much lower now than it was before, or even than it was last year. Some areas, Stavanger for example, have been much lower than they have been in recent years. That will cause a squeeze again and a price increase in use, which again will help us to sell our unsold finished products in competition with the used market. The price of used products increases, and it is easier to sell what is new and finished. I think this is going to strengthen itself even more, especially now that what the Norwegian Bank has guided is happening, that there will be a rent reduction that will come in the future, which we believe in. Then people in the used market will begin to buy to a greater extent before they sell again. Now people have for a long time sold first before they buy, which has meant that there will be a big shift in the supply side of used. I think there will be a shift so that there will be a middle and lower supply side again now. If you look at the price growth so far this year, it is abnormally high. This is a market with high interest rates. Usually the prices go down. We have increased strongly, 5.9% in Oslo. This is from already high levels. It is close to 100,000 kroner meters in Oslo. In Bergen 12.5%, very strong. There has also been a low supply side used as well. Stavanger is also very strong, while Trondheim is more balanced. The month of October is isolated, so you have to be careful not to put too much in, but there is at least quite a strong development in Oslo and Bergen, especially Trondheim, while it is a little weak in Stavanger. So there is a relatively strong price development there. in the country, and of course they want to continue, they want to strengthen themselves strongly, given that the interest rate is going down, I think. Especially since you can't play with several new homes in the market, then you become a swiss. If we look at some of the projects we have in production now, we have Snøbyn, which is a large area in Lønnskog, Lønnskog station. There we have about 2,000 homes, we have a little over 700. There we made a plus project quite recently, and we are going to start building it now. In these days, sold enough on the first try to start building it. It happens in a week's time. We have several projects in Skåresletta, several projects out in the market, and it seems to be going well. We are putting out new trains every now and then, which we sell directly to the existing trains. In Landås we have sold enough to start building a couple of construction trains. We are struggling with... statsforvalter som ikke har gitt oss godkjenning ennå på grunn av en påstått bekk. Det er mye rart som skjer i det vi holder på med her, men det er en av, det er veldig vanskelig og treg materie å få prosjekter igjennom. Så det er, den kommer forhåpentligvis før jul, eller så blir det i verste fall ikke byggestart der før neste år. Kallnes har vi 500 enheter under Utvikling som kommer i løpet av neste år. Der har vi ikke noe i salg akkurat nå. Sandsli i Bergen byggestartet et prosjekt i går. Og kommer til å legge ut et nytt prosjekt om en måned eller to. Eller vi venter vel til januar. Solheimsvannet la vi ut et prosjekt. Det ble regulert for en uke siden. Vi la det ut i markedet samme dag som det ble regulert. Der er det veldig stor interesse. Så der har vi også... We sell enough in a couple of weeks to start building, but then we have to get the frame first before we start building. In Solbærskogen we have started building a couple of lines, and we are just putting out more lines as we sell away. In Stockholm it has been very slow. We have a project out in the market. Very, very slow in Stockholm. On the other hand, the interest rate has started to go down, so there are a lot of people who are showing up now compared to earlier. And then there is an interest rate meeting there now in a little hour. So it will be interesting to see if they reduce the interest rate by 50 or 25 points there. It will come down, at least. And in Sweden, they will also revise what they have. They have a land permit there as well, which is most likely to be revised, which we see as positive. So I'm pretty sure that the market there will come now, whether it does it this year or until next year, but that it will come to a building start next year, I'm pretty sure of that. Lervik in Stavanger we have in Tikkertøy and Gård. There will also be a new project as soon as we get it approved. Then there will be a project that I have talked about many times, but now these Oslo projects will hopefully come. A couple of them, at least Lillakeveien and Lørenvangen. Lørenvangen is something we have been doing for ten years now, more or less. It will hopefully come now. It is in Rådhuset now, so it will either come at the end of the year or until next year. Fredrikstad has regulated 1,300 of these 2,000 units, so we are only 19 development agreements away before we start sales. That will come in the course of the year, but I don't know when. It can be a bit annoying to get such development agreements every now and then. Fornebu is out, we start sales after the plan next year, at the end of the year. Mindemyren Torg is a new project next to the one we have. We have sold enough of what we have at the moment. Bjerke in Oslo also has a plan for what to expect. We want to get it regulated in one of the fields, so we can start selling it next year. We have a number of projects in Stockholm. More are coming. There we have, among other things, the Terrassen project we have now. It will probably already come in 26. But we have several exciting projects that will come in 27 and probably something in 26. Among other things, the first city project that we have not been allowed to build in Norway. It will probably come in Stockholm, in the inner city. We have a lot, and many more projects than this, but we have at least enough goods in the shelves to meet the demand that will come in the real estate market for Norges Bank, which will give a very boost, and we hope that it will come. That's what I think, personally. If we look at the future prospects, then it is... Yes, it is an offer, and demand controls everything. As long as you don't have enough offers, and someone wants to have it, then it will be a good market in Storoslo. I think a lot of it will not be. Then something unexpected has to happen. The same in Bergen, there is also a slow regulation, so you don't get enough offers out in the market, and there is demand to live both in Bergen, Oslo and Akershus. And other places, such as Stockholm, of course. But in these areas, it is very little regulated. We have a good benchmark for filling in products, as long as this demand or when it comes. I personally think that the interest rates will fall, and I still believe that they will fall in December. Donald Trump will not come to power before January, so there is no reason to fear that he will create some quick inflation overnight. There are other things that dictate that in that case. We... Yes. We expect to increase the speed of the construction in the future, and to work it up to the old volumes as quickly as possible, but without taking too much risk. We are the buyer of Tomtyr, and we have a very good capacity in urban property, and will buy a lot of property in the future. Of course, we will not be able to afford it, There are much greater opportunities now than there have been for a long time. Of course, because of the difficult times. In summary, we sold well in the quarter. All taken into account. Sold very well in the first nine months. In relation to the market. We have poor profitability for IFRS in the quarter, in isolation. But good so far this year. And it will be fine in Q4. And we have increased the price in the market. And see that we will continue to do so in the future. And that's what we work with every day. That's what we had today, so if there are any questions.

speaker
Moderator
Q&A Moderator

A question from the internet, from Eivind Rørvik. Can you start more new projects because of the price increase?

speaker
Sverre Mollvik
Chief Executive Officer

Yes. We start projects when we have a profitability that is acceptable in it, and we have achieved a pre-sale. So, of course, price increase in isolation means that it increases. Everything else is the same, so if prices increase, then the probability increases, yes.

speaker
Moderator
Q&A Moderator

Petter Nilsen, those who have signed a contract in Barkarby have an exit possibility at the beginning of the year, since it is not decided to start building. What do you think?

speaker
Sverre Mollvik
Chief Executive Officer

Petter Nilsen, he bought the apartment as well, is that it?

speaker
Moderator
Q&A Moderator

No, question. From Petter Nilsen. Can you repeat? The Swedish customers have an exit possibility if we don't build soon.

speaker
Sverre Mollvik
Chief Executive Officer

No, the Swedish customers have been extended and have had the opportunity to withdraw and have written new contracts that will be released next year. So no one can withdraw now. They have had the opportunity to withdraw in connection with the fact that we had to What do you think about a decision to start building within the deadline in Sweden?

speaker
Moderator
Q&A Moderator

That is very positive.

speaker
Sverre Mollvik
Chief Executive Officer

The deadline is at the end of next year. So we'll see how it goes. In Sweden, the unemployment rate is at around 8%, while the interest rate falls like a stone. The inflation rate is at 1.6% for October. That's because the economy is stimulated by lower interest rates, and then they want to come back. They want to make a profit by buying apartments with us, instead of renting next door. So I guess that will happen. They usually do that.

speaker
Moderator
Q&A Moderator

Thank you for today.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-