Lumo Kodit Oyj

Good morning, ladies and gentlemen, and welcome to Koyamo's full year results news conference. My name is Niina Sarttu and I'm Group Treasurer and Head of Investor Relations. Today, the presentation will be given by CEO Jani Nieminen and CFO Erik Hjelt. After the presentation, we have time for some questions. We'll take first questions from the phone lines and then from the chat. But let's begin. Jani, welcome.

Good morning, everybody. It's nice to be here and provide some color on what's been going on in Kojama last year. So providing color as a summary of last year, it's easy to say that we have made steady progress in implementing our strategy and we've been able to create profitable growth in spite of the challenging circumstances. Our numbers are solid and we had a strong growth in the fair value of investment properties due to our investments and lower yield requirements in the market. So going forward and providing some color concerning the operating environment on page four, the Finnish economy is expected to grow driven by domestic demand, and the overall view of the economy is stable despite of the COVID-19. But the pandemic has had an impact concerning urbanization. I would call it a temporary impact, especially here in Helsinki region. If we look at the numbers concerning Residential startups, it seems that towards the year end, there was an increase concerning the estimates, and as it now seems, the estimate is that 44,000 apartments were started. mostly because of the fact that construction companies feel that there's a lack of supply for home buyers, and they have a limited number of unsold apartments, so more and more construction companies are focusing towards build-to-sell projects for home buyers. Construction increases were, according to statistics, 3.5 percent. We do feel that they've been increasing a bit more than 3.5. It's good to keep in mind that actually these construction increases have no impact for our ongoing new development projects as all our projects do have fixed prices. GDP growth was positive, 3.4 is quite a strong figure. The vaccination level here in Finland is really strong. Of course, we have had this phenomenon of COVID-19 and Omicron variant providing a lot of new cases and restrictions and creating uncertainty. Moving forward, it's good to keep in mind that even though there's been a temporary impact towards urbanization, long-term drivers for demand for rental apartments in the biggest cities are still valid. So, Finland is still lagging behind the rest of Europe concerning urbanization. according to all the estimates, urbanization will continue after COVID-19, and especially the uncertainty related to possible restrictions coming in or out, will be removed, we feel that then traveling will pick up speed, people will start moving towards the biggest cities again, as new work opportunities are available, and that will create again a lot of demand for new homes. It's still a fact that we have an increasing number of small households, meaning one and two percent households here in Finland, and there's been a swift in people's values towards ownership. So especially, for example, cities like Helsinki, Turku and Tampere, actually more households today live in rental apartments than in owner occupied homes. Moving forward, as we've been saying, we feel that It's a temporary impact created by COVID-19 towards urbanization. On the left-hand upper corner, it's clear to see that, the population growth here in capital region has been low. Some have been talking about whether there's oversupply situation in the market. I wouldn't call it oversupply situation in the market. I would call it a temporary under-demand situation in the market, which will pass by once people start moving towards Helsinki region again. I would say the construction increases have made it a bit more challenging for us to find suitable new development projects according to our parameters. And actually that means that we just have to work a bit harder and scan more projects in order to find suitable ones for us. Construction companies providing increasing volumes for home buyers, I do believe that it's based on the fact that they do have a limited number of unsold apartments, but as well that they do believe that they are able to transfer the increasing construction cost to home buyers as all the estimates indicate that home prices are still increasing and will increase this year. On the other hand, if they are not able to transfer the cost increases for home buyers, they do have quite a lot of projects to be started, and they may end up in a situation again, which actually opens up a window for Kojamo in order to buy more projects. Moving forward to key figures, as I said, our numbers were solid. According to our estimates, no surprises there. We were able to actually increase the total revenue. The increase there against the corresponding year was 2%. Of course, it's always a combination that we've been investing a lot and completing new homes, both 2021 and 2020. As well, we will be completing this year. And then there's a like-for-like growth aspect as well. We were able as well to increase both the net rental income and funds from the operations. There is a combination, as we've been providing information already last year, that last year the winter was cold, provided a lot of snow. There was an impact because of the pandemic. People spent more time at home, consumed more water. On the other hand, we were able to achieve some savings, for example, in SDI expenses, and we were able to optimize some renovations. The fair value of investment properties today, 8.3 billion euros, included a strong positive impact, but at the end of the day, our strategy has been all the time to grow and invest in new homes. So, the strong development gains, It's a combination. Of course, there's a lot of interest towards the Finnish resi business. We have seen quite aggressive yields done in the market, and that provided an impact towards valuation yields. But on the other hand, we've been saying all the time that we do get strong development gains as we are completing new homes. Then we did have an improving net rental income, income and at the end of the day we still have apartments where restrictions are ending and we are changing the valuation methodology that provides uplifts cross investments roughly 357 million euros basically new development projects we did not buy anything last year because we didn't find suitable portfolios for us A strong number in profit excluding changes in value, 173 million euros. Improvement there's 4.7% against the corresponding year. And then as we combine the changes in fair values, With the profit excluding changes, we did have a really strong number with profit before taxes, close to 1.3 billion euros last year. For Koyama, it's all the time important that we are able to grow by using multiple sources. Last year, the focus has been new development projects. We did start the construction of a bit more than 1300 apartments, and we do have a record high number of new development projects under construction, providing 2675 apartments. most of the projects here in Helsinki region. One project now located in Tampere region. That will provide us the future growth. We still are able to convert premises into apartments. There's a big potential in so-called metropolia properties, providing additional 1,000 apartments in Helsinki region. And then, of course, we are scanning the market all the time, in order to find suitable portfolios for us. We are already willing and able to move fast if we find something appealing enough. As I said, All the projects, except one new development project in Tampere, are located here in Helsinki region. Those projects have an excellent micro location along with public transportation. The net initial yield in all the new development projects is 4%, or above 4%, actually meaning that we are gaining strong development gains once those projects will be completed. All the projects at the moment are proceeding in a normal manner. This year, we will be completing roughly 1,300 apartments. 2023, we are completing 1,800 apartments. Today, we are working on the numbers, providing completed homes 2024 and onwards. Metropolia case is proceeding. The last parts of the zoning will be completed. The first projects, the conversion will be started during this spring. And as I said, it's good to keep in mind that these ongoing projects do have fixed pricing, they are turnkey projects. We have binding agreements with construction companies providing roughly 600 apartments. In those projects, basically, most of them do have fixed pricing, they are turnkey projects, so these cost increases have no impact towards our net initial yields. We've been fine tuning the Luma brand as well. For us, it's important that we are able to create exceptionally good customer experience, providing added value for our customers, meaning easy, effortless living. It's a combination of apartments, communal spaces, so we do typically own the whole building, provide different premises, providing services for incoming tenants, existing tenants, both digital and physical services. We are happy to say that, for example, the Digital Net Promoter Score was 64 last year. 70% of our tenants today use MyLuma application. And to pick up one example of the services, we have a bit more than 700 cars available for our customers in the sharing car system. Moving to page 11, providing some color and sustainability work. For us, it's a part of our company DNA. We've been working on ESG issues on a daily basis all the time. We aim to be a company using carbon neutral energy by 2030. We do have a roadmap in place. We are proceeding as planned. We have a clear vision, and we've been succeeding in improving our Grespi figures. We will be providing more color on ESG in our annual report, which will be soon published, and we will keep on working on a daily basis in order to achieve our targets concerning ESG issues. At this point, I would move to Erik, and Erik will provide more detailed color.

Thank you, Jani, and good morning, everybody from my side as well. So, page 13, our total revenue growth was 2%, and that's €7.8 million. And during Q4 last year, the growth was €2.5 million, and the total revenue landed in Q4, €99.6 million. Like for like rental growth was a negative 0.3%, and the growth was mainly driven by the growing portfolio, meaning the completed apartments, 2020 and 2021. Net rental income growth was whole year 4.7 million euros, growth was 1.7 million euros, during Q4 landed at 65.5 million euros. The whole year figure, the growth in maintenance cost was 6.4 million euros, mainly driven by the harsh winter that we had here in Finland, especially during Q1 and Q4, so impact for whole year maintenance cost during Q1 was 2.8 million euros and 1.6 million euros during Q4. And repairs was a negative figure there, so some savings there, 3.4 million euros. Page 14. The profit on fair value on investment properties, whole year figure, 1.1 billion euros, 621 million euros during Q4. If you look at the Q4 value chains, so the yield compression accounted 68% of the total value chains, development gains, 7% net rental income increases provided 24% of that growth, and ending restrictions played a minor role in Q4. Our development gain has been north of 30%. Yield requirements came down by 24 basis bonds from Q3 to Q4, on the whole portfolio level. FFO growth there was 1.7 million euros, of course, Net rental income growth contributed there 4.7 million euros, SGA expenses, we achieved there some savings, 1.1 million euros, finance expenses up by 3.9 million euros, given the fact that the underlying loan portfolio was much bigger than in corresponding year, and cash taxes up by 0.5 million euros. Page 15, so the financial occupancy rate pretty much flat compared to Q3, and the drivers there and reasons behind that pretty much the same as after Q3. So, the Omicron variant and the restriction based on that still plays a role, especially here in Helsinki region, and hopefully now we are moving towards removing those existing restrictions. Page 16, like-for-like rental income. Total figure 0.3, negative, but good to note that the impact of rents and water charges was a positive figure, 2.2%, so we've been increasing the rents pretty much in a normal manner, and the negative figure, 2.5, was an impact of occupancy rate. Page 17, investments, mostly development investments, 339.5 million euros, monetization investments, 11.9 million euros, and capitalized borrowing costs, 5.4 million euros. Modernization investments and repairs down by 3.4 million euros, as already said, and modernization investments 15.2 million euros less than in corresponding period. The reason is decrease in modernization investments was related to timing of process, so no bigger modernization investment projects started 2020. Page 18, fair value of investment properties. So, the profit on fair value of investment properties, 1.1 million euros, and investments, 356.9 million euros. We still have 2039 apartments, where the restrictions regarding the valuation, and the uplift in the valuation, and these restrictions gradually end by 2024, will be somewhere between 130 and 150 million euros, and that is back-weighted, so half of that most likely is coming through 2024. Page 19, our ongoing developments and binding agreements and land plots. Euro-wise, so almost 400 million euros already invested in these ongoing developments. 267 million euros. to be invested in order to complete these 2,675 apartments. We still have under binding agreements apartments 636, and to complete those, we will invest 123 million euros. Metropolia case, providing additional 1,000 apartments, 8 million euros in our balance sheet, and then the real land bank, if you like, so pure land and land where we have existing building, and idea is to demolish existing building to provide net 300 additional apartments, so worth of 51 million euros. We estimate that investments in developments This year, 2022, will be somewhere between 310 and 360 million euros. Page 20, our loan-to-value and equity ratio figures, actually very, very strong. So, we have set the target for equity ratio to be about 40% and loan-to-value to be below 50, and we have quite sizable buffer against these levels. EPRA NRV per share 22.04, driven by the value chains, and the FFO, of course, the growth from Q3 was 2.72 euros per share. And actually, I have noticed that in most of the times in 2020 and 2021, Koyama shares has traded above a premium on this EPRA NRV. Page 22, our key financial figures, strong figures, no major changes there, actually. Cost of debt on average 1.8%, including the cost of derivatives, and we are quite conservative when it comes to interest rate hedging, so hedging ratio was 92%. average loan maturity and average fixed interest rate period above four years. We have 300 million euros credit lines in place, committed, unused, 250 million euros commercial paper program, 50 million euros outstanding commercial papers, and we are quite cash rich, so more than 300 million euros in cash and cash equivalents, as well as in financial assets. Page 23, couple notes for the strategic KPIs. Growth 2%. Our long-term target is to be somewhere between 4% and 5% annual investments. The target there is to invest between 200 and 400 million euros per year. We were on the upper end of that range. Profitability side of the KPIs, so FFO against total revenue, our target is to be above 36%, more than we were above 39%, so very strong figures there as well. and the risk management angle, if you like, so along the value-equity ratio, quite sizable buffer against these target levels. Net promoter score target is 40. We were at 20, so it's good to know that digital NPS was 64, and this NPS, net promoter score figures seems to, they have went down during COVID-19, and that's quite a universal phenomenon. And it goes on different industries as well. And our interpretation there is that people are still simply, sick and tired for COVID-19, and that's why they are unsatisfied. Because in our service, all these customer satisfaction KPIs have been improving even during 2021. Our outlook, we estimate that the top line growth will be between 3% and 6% year on year, and we estimate that FFO 2022 will be somewhere between 153 and 165 million euros. And this outlook doesn't take into account the impact of potential acquisitions or disposals. Then if you look what assumptions we have behind this outlook, so the top line first, so if you look the upper end of that trait, so six percent, that's actually divided two parts. First of all, half of that to achieve this six percent will come to the like for like rental and water charges increases, and improving occupancy. And half of that will come through completed developments. And of course, those developments that are completed in 2021, and those that will be completed in 2022, will have a positive impact for Topline. This FFO guidance that actually reflects the top-line guidance, and on top of that, of course, it requires to have so-called normal weather. Last year, the weather was very, very tough, and we had to spend more money. because of that also in this kindness, we expect the winter to be a normal level. We expect some cost inflations there, but we estimate that we should be able to save some costs as well. dividend policy, no changes there, and the board proposal for AGM, 0.38 euros per share. And now I hand it over to Jani.