Selvaag Bolig ASA

Good morning and welcome to the second quarter's presentation of the results for Selvåg Bolig. My name is Sverre Måhlvik, I am the Director of Management. Together with Christoffer Brunvold, who is the CEO, I will go through today's agenda. We start by looking at some highlights from the quarter to the half of the year, and then we take the operational, we also look at the financial, then we take the market and some future prospects and Q&A at the end. The second quarter was actually a satisfactory result, given that we only delivered 40 units, which is actually very good. We are very pleased with that. This is due to the fact that we have a good cost control, both when it comes to overhead costs and not least project building costs in general. In the first half of the year, we sold more than 2 billion houses. The first quarter was strong, the second quarter calmer, but still good sales, year-to-date, in relation to the market in general, with the lack of leverances from the Norwegian Bank in relation to the promise of a cut in interest in March, The political unrest in general has caused the second quarter to start slowly, but we have sold 106 units, which is always good in relation to the market. We have also sold a lot of our unsold finished goods warehouse in relation to a year ago. We have sold about 400 million of that. The good sales have meant that we have managed to start building much more than we have done in the quarter. We have completed very few units and started building more than 170 units, so we now have an order reserve of 8.2 billion, which is strong in relation to the market, and will ensure results in a few years at least. We have bought tomatoes, about 800 units in our hand in the quarter in the Storoslo area. And we have decided, or the board has decided, that we will not pay the exchange rate for the first six months, just as we did last year, because of the macroeconomic and global conditions in general. It is better to be on the conservative side. It does not go beyond the total for the year. It will be on the same level anyway. There will be a periodization of the exchange rate. The policy is unchanged. Quickly on the figures, we are now delivering these pro forma figures, that is, including the shares of cooperating companies, which then illustrates the much better value creation generally in the company. In the first or second quarter, we sold and sold very few units, which gives IFRS turnover of only 350 million. But then, as I mentioned, with a positive bottom line, which I am very pleased with, with a few units delivered. The first half of the year 5.43 and a 3% margin, a little negative on the EPS. Brunvold will come back to this later. The current calculation is 839 in the quarter and a 12.2% margin, which is a project margin of around 16%, which we are very pleased with, given the cost picture and the fact that we have not written down any volumes. So good margins for what we are starting to build. In the first half of the year, it is 1.6 billion and 11% margin. I thought I would just go through a little bit more about the operational side of things, how we manage to deliver such good results in a difficult time with very high costs. The first thing is that we are good at having cost-effective and drawing the right sizes on the apartments, so that we get a good price per square meter for a two-room, a three-room and a four-room. So we don't throw away unnecessary areas that the customer is not willing to pay for. For example, a two-room for 42 square meters can get the same price as if it were a 48-50 square meter. then you save a lot of money when it costs 60,000 plus to build each square meter. We also include the contracts at a time that is best suited, that is, when we see that we get the best possible competition. So if we, for example, are going to start building a project or start selling a project, then it is not allowed for the entrepreneurs We have capacity right then, so we take precautions to enter the contract after we have started the sale. It is a model that we have worked on, so we have flexibility. As it is now, we generally enter the enterprise contract before we start the sale, but on some projects we wait until, for example, close to the start of the building. As I said, depending on the market, so that we get the most out of the competitive effect in the enterprise market. As usual, we have fixed-price contracts, including wages and wage increases. As I mentioned before, if we hadn't had that over the past three years, we wouldn't have had such a large number. We have also managed to maintain stable overhead costs. We have managed to maintain it at a support level, and we have also managed to maintain the employees, who are dependent on us to be able to create these results. We have managed to balance this well, and that is much of the reason that we have managed to do so well. When it comes to sales, we see now at the end of the quarter, we notice quite a big difference after the so-called surprising interest rate decline. After the big disappointment in March, the interest rate decline comes in June, which is a big surprise for many, but it has helped, and we notice a lot of interest now, especially at the end of the quarter. It will be exciting to see what the market will be like now in the future and after the holidays. It has also been good in July, which is usually a very calm month. We have sold quite a few units in the first half of the year, with success as a result of a lot of start-ups. We plan to get 450 start-ups now in the second half of the year. Call it less, so we can see how much of what we managed to start-up is completely dependent on. what is happening in the market with interest rates and macro in general, both globally and locally. We have many things to get back to, and we have bought two tomatoes. One in Oppegård, one in Samarbeidsselskap, and one in Drammen in Kvartalet. As I said, we have been buying a lot in the last few years. We will continue to do so as long as there is a good capacity in UP to look at things. There is much more available now than there has been before. Yes, 106 units in isolation is not very impressive considering last year's record sales. They doubled quite a lot in Q2 last year, but that was also a record quarter with many sales starts on projects that were especially attractive with a lot of interest. So 106 is not bad, it is for example much better than in 2023. So it's not that bad, but of course we had hoped for a better second quarter. But when the rent decline came out, plus what happened politically in Overdammen, it was difficult. People became more sceptical. But 275 units year-to-date, and a 12-month rolling sale of over 3 billion, is going down quite a lot, because in this 12-month view, the large bulk of last year goes out, and then a quarter with a half-part of the sale comes in, therefore it goes down. There is a lot of faith that they will be able to maintain that level in the future. What is very positive is that we are starting to build 171 units, while we are only finishing a small number of projects in the 18th quarter. This means that we have over 8.2 billion in reserve. 1165 units. In nominal numbers, it is the most we have ever had. Not in units, but in nominal kroner. Inflation-wise, it is about 1 billion below the top, if we inflation-wise adjust the previous top in 2019. 62% of this was sold at the beginning of the quarter, and more now. So we have good control over this, good conditions. I am very pleased to be able to speed things up so much in this difficult market. In terms of orders, we have the same as we have agreed on, 393 units in the quarter. Of that, 88% was sold in the initial quarter, and more now. That's actually what I was going to say about that. Brynjold, do you...

Good morning. Let's take a look at the financial highlights. We start as usual with the results, with 10 out of 10, where we introduce housing at annual level to our customers. Here we focus on our proforma figures, where we include half of the collaboration projects, brutto, in revenue and costs, and not net and after taxes, as it is in the official forecast. This gives a better picture of our collection over time, reflects the overall picture of our business. We delivered 40 units in the quarter, five of which were from co-operative projects. We have only completed one project in the quarter, the 18th warehouse in Lønnskog. The rest of the deliveries come from previously completed units around a project for our portfolio. We got a total revenue of 349 million, including other revenues of 19 million, which is the factored project management in the collaboration projects, and the operation of our service centers. The project cost came in at 276 million. As usual, we have strict cost control with fixed price contracts. and good project managers who follow our projects. This means that we manage to deliver good margins in the quarter. This Rekkhuset project, among other things, has over 20% margin. So, there will be good results on over-delivery in isolation, and then we have overhead costs that also drag the results down in isolation in the quarter. Other costs came in at 72 million, the same level as last year. A stable number of employees and able to keep the costs down, at the same level as last year. It reports an adjusted EBITDA of 25 million, in response to the margin of 7%. This is then exclusive to these 22 million in financial costs, which are in the stock price after IFRS. These financial costs are then option premiums, building loan interest rates, and yes, mainly that. In comparison with last year, we had 979 million in revenue and 17% margin. The decline is due to the fact that we delivered 107 units last year against 40 this year. On the downside, we report an EPS of 2 euros per share, which we are pleased with, giving only 40 deliveries, down from 85 euros last year, where we had 127 units delivered. Then we have the corresponding result for half a year, which yielded 74 units, which gave us revenue of 543 million. Also a big decline from the corresponding period last year, where we had 306 units yielded, and a turnover of 1.8 billion. The project costs are the same picture here. We managed to keep the cost base under control, with 431 million in costs, and adjusted EBITDA to 17 million, until we had a margin of 3%, down from the margin of 17% in the first half of last year. Again, there are significantly fewer delivered units. At the bottom, a result per share on minus 20 euros compared to 1.45 euros in half a year last year. Then we move on to segment reporting, which follows the Norwegian travel regulations. Here we also focus on pro forma, where we include gross revenue and costs for our share of the collaboration projects. This follows the ongoing calculation method, where we take all the projects in production, take sales degree times sales degree, which then gives an output degree on turnover and results, running through the project's lifetime. In this regime, we live 839 million in turnover and a margin of 12% after overhead costs. This means that we still have a very good margin on the projects, around 15-16% on what is in production. If we look at the 12-month rolling, it is at 3.3 billion, and a margin of 11%. If we look at the cash flow, we went into the quarter with 319 million, so we have negative cash flow from sales at 345 million, and this is due to the fact that we build a lot and build goods. We have a positive cash flow from investment of 13 million, which is the repayment of loans to co-operative projects. And then we have positive cash flow from financing, and that is mainly due to a solid increase in construction loans of 396 million. This is used to finance this warehouse, the construction of the warehouse. And then we have paid the exchange rate of 117 million in the quarter. There is a decline of 55 million, bringing us out of the quarter with 264 million in the bank. Let's look at the balance. There are no major changes in the balance sheet, but the balance is growing to 6.5 billion. where the net capital accounts for 35% of this, corresponding to 24 kroner per share in recorded value. Here, we have paid off the exchange rate in the quarter, which pulls the net capital down, while we have built a lot of stockpiles. Our stockpile has increased by 425 million. We'll get back to that. Our demands have increased by 14 million. This is due to an over-delivery at the end of the quarter, where the results will come in July. We went through the cash flow with a decline of 55 million, and then we have the results from our customers, which are now at 55 million, which is included in the second short-term yield, and this is now at a much higher level than we had on the previous period last year. This is due to a good sale in the last 12 months. If we look at the goods warehouse, the goods volume increased by 425 million from last quarter. And if we look at the components here, we have that the storage is down by 143 million. This is due to construction starts in the quarter. And then we have a solid increase in goods and labor by 656 million. And this is due to many construction starts, the factoring of enterprise costs, and generally much higher activity in the company. And then we look at the finished goods storage, which is down by 91 million. We now have 40 unsold units in the portfolio, which are unsold at the beginning of the quarter. This is significantly down from 12 months ago. Then it was 119 units. So we have succeeded with our strategy to sell this at a good price throughout the year and not We have been working hard for a year to get this warehouse down, so we are very pleased with the development. In addition, we have 11 sold units that will be delivered in the next few quarters. We are comfortable with where these shipments are and expect a good sale here in the coming quarters to get this down further. If we look at the yield, we have a solid increase in total revenue per annum to 3.1 billion, where the building loan is the big one with 2.3 billion. In addition, we have Yield Urban Property at 782 million, which is sales credits and other repurchase agreements. In addition, a small loan of 33 million, owned by Egen Balance, which is not sold over to Urban Property. We have no changes in the margin picture on these loans, and we have not pulled up any of our top facilities that we have flying around. In total, the net profit margin is 2.8 billion, which is significantly higher than 2.3 billion in the previous quarter. This is mainly due to the contribution of construction money. Let's look at the exchange rate. We have an ambition to pay good exchanges to our shareholders. The exchange policy is that we will pay 60%, at least 60% of the annual results. Here we see a table of what we have produced from earnings per share and exchanges from the exchange rate. We have delivered a result per share of about 61 kroner and divided 56 kroner of this exchange rate. This of course includes 22 kroner from the Urban Property transaction in 2020. The exchange rate for 2024 was 1.25 kroner, corresponding to 66% of the annual result. Given the disturbing world picture we see, and the ongoing macroeconomic uncertainty, we wish to evaluate the exchange rate as an annual assessment, corresponding to last year, which will be taken in February, when we have the annual results and have changed the clear picture of the future prospects. There is no change in the exchange policy, and we have as our goal to continue to give a good, direct response to our shareholders. So, the return on equity capital is calculated as the result of the last 12 months, divided by the incoming balance of the equity capital in this period. This falls quite strongly now, down to 22 million in the last 12 months, corresponding to a return of 1%. This is of course due to the fact that we had a strong decline in sales in 2022 and 2023, as a result of a very challenging new bull market. This means that sales in the last 12 months have dropped significantly, with correspondingly low results. We expect this to turn now in the second half of the year, when we get to 375 sales, and then this will be the beginning. Now we are through with the financial part, and then we will continue with the market update.

If we look at the market, we start by looking at the supply and demand side as usual. If we look at Oslo, there is an estimated need for 3,800 vacancies this year. And as we can see, it is far below that. It has been the case in recent years as well. And 2025 will be a record-breaking year, with 1,267 vacancies estimated. which is low. In terms of experience, by the way, the numbers tend to be conservative at the top, so they are usually even lower when you count up to the end than what we guide on. So there are at least very few fairs in Oslo, which is unfortunate, of course, for the housing buyer, and actually a bit unfortunate for us, who are major actors in the Storoslo region. It will be available in 2026 as well, and there is an estimate in 2027, which of course depends on what is being built this year. Akershus is also new in the last few quarters. There are far fewer retail stores in Akershus, of course, due to weak sales a couple of years ago, which makes it smaller. In addition, there are some municipalities that have stopped regulation, for example Lørnskov, which has been the big engine in Akershus. And that will probably mean that there will be fewer in the future and far below the need I also think that 2026 seems a bit high, but we'll have to see what the result will be. 2027 is quite uncertain and very dependent on what is being sold now. So, in total, it is a record gap this year, where about half of the demand is produced in the Storoslo region. This will of course contribute to an increased pressure on prices throughout the region. And then it will of course be affected, as probably many have noticed, because of what is called Wrong tax policy, I think, that makes rental portfolios be sold for a large amount of money, make them available for sale, which makes Oslo receive a larger supply on the user side, but which makes it necessary for people to live in the city, because rental prices are rising violently. We'll get back to that. Bergen has the same trend. It has been regulated very little. The supply side is also much lower than the need. This is also reflected in the price development. Stavanger also has a need of 1,700 units this year. This need is calculated, among other things, on the basis of what has been finished earlier this year, and has no real connection to what the actual demand is. Of course, for many years in the Stavanger region, very little has been produced due to the oil crisis. If we look at the years before 2016, it was produced quite evenly and roughly around 2,000 units. It is natural, I think, unless there is a new oil crisis, the level will probably be able to meet the 2,000 units that will be completed in the future. If you look at what has been sold and put out so far this year, then in Oslo it has actually been put out 1,200 units so far this year, and sold a little less, so it has increased a little bit, but still at a low level. I think the whole difference is due to one of our major competition projects that they have put out without pre-sale up in Amreup at a couple of hundred units. So it is a single project with a very low level. Akershus has sold more than what has been put out so far this year. We are down to 3300 units and have been quite evenly between 3.3 and 3.6 in Akershus for a long time now. In Bergen, the supply side is low and sells more than what is put out. In Trondheim, it has also been sold more than what is put out. In Stavanger, too. If we look at the population in these cities, in Oslo, there is a weak increase in the supply side, or in relation to the population. It is up to 1.5 per capita, which is very low. In Akershus it has gone down to 4.5 and has been around 5-5.5 before. Bergen 2, low level, very good supply side in Trondheim, which has also been in many quarters. And in Stavanger it fits a little low supply in relation to the population. And then we can look at Brugt. Something that I guided on in the Q4 report, that the red columns were going to be lower compared to previous years. Then came Q1, and then the red columns were far higher, that is a lot that has been put out, and a lot has been sold. So now we see the trend that I still think will be strengthened in the future, that its supply will be lower in the future, or that it will be sold more than what is sold, with the exception of Oslo, because of what I mentioned, with outlay portfolios that a couple of big players sell out, and a lot of promising people sell out, turn them into housing and sell. There are actually a lot of hundreds of units that go that way. It is not a big deal for us in relation to the new housing market, because it is so little that is left out. But in the same way, it will affect the price development in the used market, of course, when the supply side gets bigger. The advantage of many of these apartments that are small is that it makes it easier for some to get into the housing market, while making it much worse for those who are going to rent. So it will be exciting to see if there will be any political changes around this with the valuation of secondary housing and public housing, to try to turn that trend so that people at least have the ability to rent in the city. Exciting to see. The price development is affected by the monthly development. If you look at the nominal, the price in Oslo has fallen by 0.7. It is not that dramatic for July to be. If you adjust the season, it is about 1% up. But down in July in Bergen it is up with 0.7, a very strong price development in Bergen. Stavanger also relatively strong compared to previous years, as you can see, especially seasonally adjusted. Trondheim weaker, there you have a large supply side to have had over time. So, year-to-date, there is a 2.9% increase in Oslo, 9% in Bergen and 11.5% in Stavanger. But this is from relatively low levels. If we look at the square meter price, the square meter price, Bergen has now come close to 70,000 kroner per square meter used, from low levels. is rising with a high price-to-use rate in Bergen. Oslo is around 100, Trondheim 57 and Stavanger 51. In Stavanger there is a very large difference in use and new, very low square meter prices in use and is also due to the fact that there are many large units. So if we look at the portfolio, what we have in the market, some examples of that, we have a lot out in Lønnskog. We have put out a new trend in the quarter as well, and sell well. We have put out another trend on Skogsletta and sell well. But we also have some unsold finished products, but we have good offers in Lønnskog in general. In Skårebyen as well, in Snøbyen, we have also put out a new plus project, a new trend in the quarter that sells Selling is fine. In Landås we will soon come up with a new plus project, also a new trend. In Kallnes we will also come up with a plus. In Bergen we will come back to that, I have my own slide. And in Solbergskogen it has gone very well, there is also a very large interest, and it is a plus concept, and it appeals to be less conjecture-sensitive, it seems, than ordinary projects. Yes, you can see a bit of Bergen. We are the one who sells the most in Bergen, of all the actors. There we also have a combination of plus concepts and ordinary apartments. We have sold these plus projects in just about 6-7 months and are starting with 160 plus units here, which is fine to sell at very good prices. We also have two projects at Sandsli. We have Sandsli Håsen Hageby, which we launched last year, and is in full production, between 58 units. A nice project, a mix between apartment buildings and apartments. We bought a project nine months ago from a competitor at Sandsli, and we have been building it for nine months, so we are very pleased with that. It will be a very nice project for 72 units. And in Bergen, there is, as I said, little regulation, high demand and low supply side, although we have things regulated, which is an advantage. So we are looking forward to putting out new lines, both on mind and sensibility there, and looking at new topics, of course. The new projects that are coming, we have now finally had the Lørnvagn regulated, which I will come back to. We have Rådhus Hagener Ski coming in the course of the year, Terrassekvartalet in Stockholm we are putting out in the new year, I think. And then we have Fårneby, which is under regulation now. We expect to get it regulated in the year-to-year shift, and put it on our part, the first step. Fredrikstad, there are some education agreements that are missing before we are in place and out in the market, but it is fully regulated in the first 13 months of the units. Lilleakre, a project that we hope to get regulated in the fall. If we push Bjerke, then maybe in 2026, but I don't think it was before 2027, there will be several projects in Stockholm when the market is even more mature there. Let's take a look at a few examples of what will happen in the fall. The Lørnvagn will finally be regulated. Ten years of regulation. That's crazy, but at least now it's regulated. We're laying out a couple of hundred units there in the fall. There are a lot of interests, of course, since the supply side is so low, as I mentioned earlier. Then we have this terrace, the Terrasskvarteren in the north of Djurgården in Stockholm, which we managed to regulate surprisingly quickly. It is already approved and regulated. We draw out The project is finally there now, and it will be published either in Q4 or early next year. And with a wild interest, with over 2,000 people interested already, based on a simple teaser that we have put out. It will be exciting. The Røde Djurgårdstad is an eastern malm, a nice, expensive area. If we look ahead and try to believe in the future, we see that the same thing is happening here. We have a low supply side in most of the regions we work in. There is a need for payment due to the low supply side, and the interest rate is falling. So we see very positively that we will be able to increase sales, or at least keep it at the level it is now. It is the same in Sweden. Now the interest rate in Sweden is 2%, that is, below half of the government interest rate in Norway. But employment is real in Sweden, in contrast to Norway, so it is heavy and slow so far. Apart from the inner city, it is starting to solve well and get growth, so we see positive things in the future. We have a good portfolio, we have good regulated projects, so we can take away where the market would come back to. So we look positively at that, and we buy tomatoes as much as we can get on the market today, at the right price, so that we can manage to carry out profitable, good projects also in the future. All in all, we are pleased with the quarter and what we have achieved so far this year. We kept the costs down and managed to earn a little bit of money in the quarter with very few repairs or deliveries. Good sales, especially given the market situation and the new housing sales in Norway. So we have taken market shares. Got down the finished goods storage well, down to very safe and comfortable levels. And we have increased the annual reserve to over 8.2 billion, which is very important to maintain good speed in the scooters. And as I said, we bought tomatoes at affordable prices on a different level than the levels we had in the high-end industry. And we, I call it a reasonable and expected exchange rate. We have a better overview, as we did last year, given that there is so much uncertainty in the world and Norway in general. That was what we had. If there are any questions, we can take them. Yes.

Lengt Jonasson, ABG. Maybe some comments on the two buyouts, Folvo and Drammen. As a timetable, capital binding from your side, that kind of thing.

Yes, we have bought two tomatoes. It is a collaboration project, Glassverket in Drammen. A large part of it is pre-regulated. We are still going through a re-regulation, because the regulation plan is irrelevant there, so you change it a bit, so there will be a less significant regulation change. If we are to build a plus there, then estimated, it can be in sales best case at the end of 26, worst case out in 27, I think. There is a great interest for PLUS out there. It has already been a project. It is not very controversial to make these less essential regulations. When it comes to the total volume, the first 250 units are regulated. For the next part, there are a number of requirements, so it is difficult to say exactly, but we have estimated 550 or 600 units. It can be more, it can be less, and it can take up to the last part, but the first 250 is at least a small risk. The second project is at 525-550 units in Oppegård. It is about 600-700 meters from Kolbotn station. It is a nice unit that fits very well to Selvåg. It will become something of a plus, a row house, some ordinary apartments. It is an apartment that we have bought from Storoslo. It is capital-bound, it is bought in, it is in urban property. The other apartment is a collaboration model where you We don't have any capital bond to talk about at all. You're talking about Drammen, right? Yes. There's PESYKH, which we often do with cooperating companies, that you pay on the way when you're at the start of construction.

Yes.

From Simen Mortensen, what is the status of the government and the covenant situation in the UP portfolio? What are the prospects that interest rates can again be capitalized in its entirety?

Regulation, I did not understand the first part, you have to repeat it one more time.

Regulation of... How is the status of rolling and the Covenant situation in the UP portfolio?

UP Covenant is included in the quarterly report. There is no break in these and I do not expect any break in the future. Option premiums are capitalized as usual and half of it is paid quarterly.

Next question is from Simen Mortensen. Given the significant increase in housing under construction from 661 to 1,165 units year-on-year, how do you assess the balance between the pace of implementation and sales level in the future, especially considering that the sales level in ongoing projects has dropped to 62%?

We have a basic rule that we have to have a sales requirement of 60% before we start building. And when you start building from a very small unit, if you have an average of 60% as a pre-sale requirement and 100% is sold out by completion, If you have a flat development, it should be 80 percent. If you build up, the sales rate will be lower than 80 percent. If you build down, the sales rate will be higher than 80 percent. Everything else is the same according to the business model. We have very good control over what we have started building now. It is very important, as Simon points out, that we have a relatively low sales rate. But it is conscious to build up, as I said, and that combined with good market position in the projects, plus good margin, makes us very comfortable with it.

Question from Simen Mortensen again. How do you assess the housing market in the autumn after the cut in interest from Norges Bank in June? Have you seen signs of improvement in sales dynamics in July and August, and how does this affect the plans for new start-ups?

We are looking positively at the market in the fall. July has been on average. We have sold 20-ish in July. That is better than the worst years and slightly worse than the best years. But July is generally quite calm. What is unfortunate, as I have mentioned earlier, is that it becomes unpredictable, and the guidance that Norway's Bank comes with now after the meeting in August will be quite worthless, since they did not manage to keep the provisions in March. Of course, it would help a lot if the interest rate was lowered in September, so it is very difficult to say how autumn will be. I think it will be much better because the interest rate, despite everything, was lowered in June. But we are optimistic and believe that it will be better than than a normal year, since the interest rate is where it is. But it is about the control of expectations and a lot of psychology in the market, so it can also be flat, very difficult to say. Especially again, because the guiding to the Norwegian Bank has been, or there has been a lack of visibility around how the interest rate has developed in relation to the guiding.

Last question in English from Pedro Cristobal. Will there be investments in Kristiansand?

No, there will not be any investments in Kristiansand, and we've been in Kristiansand years back, and we're not coming back anytime soon.

Thank you for today. It's the third quarter, November 16th. Thank you.