Kojamo Plc

Good morning and welcome. This is Koyamo's Harvey Results News Conference. I'm Niina Sarto from Investor Relations. Today I have with me CEO Jani Nieminen and CFO Erik Hjelt. They will shortly present the first six months figures and the outlook for the whole year. Also, Jani will tell us about the market situation. Please send us questions via chat throughout the presentation. In the Q&A, we will also open the phone line for live questions. So in case you want to ask the question yourself, you can click the hand sign on the screen and then wait for your turn in the queue. Now it's time for the presentation. Jani, welcome.

Thank you, Nina, and good morning, everybody. We will provide today, of course, color on the operational environment, then on key financial figures, and then more detailed color on the financial development by our CFO, Erik Hjelte, and then, of course, go through the outlook and the financial targets at the end. I will start by covering the operational environment and then the key figures. As a summary, if you think about what's been going on during the first six months this year, we have been able to increase the total revenue and net rental income against the comparison period. On the other hand, financial occupancy rate decreased from comparison period. There, as we've been saying, we have seen a typical seasonality on the other hand, still that occupancy tends to go down towards the summer and then they tend to pick up speed. On the other hand, The correction of oversupply situation in the market has been delayed. There's still plenty of supply and intense competition throughout the market. On the other hand then if we look forward we do see things changing as there will be a very limited number of new supply coming to the market from new development projects. funds from operations decreased due to finance expenses and maintenance expenses of course then it's good to keep in mind that last year we had a positive impact 8.9 million from the repurchase of barns on the maintenance side one big fact was that the winter was very harsh until the end of april and that impacted the special heating costs Saving program is progressing according to the plan, so all the measures have already been taken and all things are progressing without any surprises there. Balance sheet is strong and our financial key figures and liquidity situation have remained good. Good to keep in mind that all the maturing loans 2024-2025 are already covered. In the transaction market, there's been only a handful of transactions. It's still kind of muted. We don't see a lot of activities there. We made a change in yield requirements and there was an uplift of 10 basis points to meet the transactions which have been made in the market. On the other hand, we do see that the decrease in interest rates reduces the pressure to change yield requirements towards the future. So let's see what's going to happen, but that's how we see it at the moment. Then moving to page five and the bigger picture operational environment, the outlook for the global economy is improving as inflation is slowing and real incomes are growing. Here in Finland, the economy is not expected to grow this year on an annual level. On the other hand, we estimate that economic growth is expected to start this year. Because of this situation, the employment will decrease slightly this year but will grow from next year, backed by increased demand and government measures. On the chart on the right-hand side, typical figures would say that housing trade volumes are still muted. Estimates what's going to happen with the home prices, transaction prices where people buy homes. are quite flattish. It seems that the price is still under pressure for home buyers to start buying homes and most likely we do see prices going down during this year. Rents are quite flat in the market as the competition is intense. We see only slight increases throughout the market in some of the places. A big impact towards our operational environment comes from housing production and residential startups plummeted last year and are estimated to decline this year as well. On right hand side bottom corner I would focus on the dark blue color. We used to have more than 20 000 startups with non-subsidized block of flats and those projects are still to be completed to the market some of those started 2021 2022 on the other hand only 3 000 apartments were started 23 and the estimate for this year is 2 000 so now looking forward not many commercial block of flats will come to the market 2025-2026, and most likely the same will remain 2027. And that's going to impact our market looking forward. Of course, if we think about the light of blue color, I met the question of what does it include? So it includes subsidized housing, single family houses and raw houses. The government measure has been to back construction business in that sense that the estimate now is that the light blue color is a bit taller, a higher number this year, so we most likely see about 1,000 more units subsidized homes to be started this year according to the latest estimates. On the other hand, looking forward, supply entering the market will be very limited. On the other hand, the correction has not yet started and there's still oversupply in the market. But if we combine these two factors and we know that the cities are growing, urbanization is continuing, the supply will decline sharply looking forward. Home sizes, household sizes are backing up the demand. So we do have an increasing number of one and two person households. Mega trends are still valid. People moving towards the biggest cities. We do see a healthy, strong population growth in cities like Helsinki, Espoo, Vantaa, Tampere and Turku. And there, for example, in Helsinki, of course, net immigration plays an important role. In the city of Helsinki, during the last 12 months, 75% of the population growth comes from immigration. So immigration is a strong factor at the moment. And we do see still an increasing number or share households renting the apartments. That will improve the market for us looking forward. Moving to page eight. Our key figures, total revenue 225.6 million against comparison year, the growth was 3.9%, driven mainly by apartments completed to the market. Yes, we did have a slight like-for-like growth as well, but mainly driven by the completed apartments. Net rental income, 142.7 million, increased against comparison year by 3%. Of course, total revenue growth helped. On the other hand, if we think about the cost side, amount of euro spending repairs was now 2.4 million euros less than a year ago. On the other hand, maintenance expenses grew by 6.7 million euros, impacted mainly by, I would say, three factors. One is the portfolio growth, impacted a bit more than 2 million euros. Then the harsh winter, provided increase in water and heating, roughly 3 million euros, and then property taxes a bit more than 1 million euros. Then FFO, finance from operations, 68.2 million euros. Of course there's been an increase in financial costs and that's been impacting FFO. Then fair value of investment properties, 7.9 billion euros. As said, there's now during Q3 a change in yield requirements, 10 basis points, and that impacted the fair values as well. According to the saving program, we're not making any new investment decisions. We are not starting new modernization investments and that's impacting strongly the volumes in our gross investments. Now only 19.3 million euros so far this year. Of that 19.3 million euros new development investments 11.8 million euros and modernization investments 7.5 and as said after June we don't have any projects under construction at the moment. Profit excluding changes in value 73.9 million euros. Of course that result was impacted by increase in financial cost and maintenance cost. Then profit loss before taxes, there is good to keep in mind that the fair value changes now was minus 138.5 million euros and the comparison year, the figure was positive 5.1 million euros. So that made the biggest difference there. A couple of words. What's LUMA? Our approach has been for several years the same since we created LOMO brand a decade ago. We want to provide easy, effortless living for our clients. Our aim is to provide added value. by combining apartments, common spaces and services, both physical and digital. The Net Promoter Score at the moment was 53. I'm happy with that. Of course, I do believe that we are still able to improve the figure. And as digitalization plays an important role in services, I'm happy to say that at the moment 87% of all our tenants use myeloma services, so it's well used, well accepted, provides value for the customers. On page 10, carbon neutrality, sustainability, I always say that sustainability is part of our company's DNA. It has always played an important role for us. It's embedded in all our operations. And we are committed to carbon neutral energy use in our properties by 2030. The annual target is to reduce 5%. until the end of 2025. So far, we've been all the time ahead of our targets. We are progressing well. And if we look at the chart on the bottom, we're halfway through already. I think one thing I have not been mentioning that we've been able to cut down our carbon dioxide emissions by half without spending any additional capex. And of course, all our property electricity is carbon neutral. So how to reduce carbon dioxide and reach our target is a combination of four angles. Of course, consumer behavior, how to change that. We are close to our tenants with our property management, our personal, our communications. Then how to utilize technology. As said, a good example has been our AI technology in optimizing heating. We've been able to transfer data into a currency, so we are giving data to Vantaa Energy, and they are providing carbon-free district heating without additional cost. Of course, measures by our partners play an important role. Happy to see that the district heating companies share the common target to be carbon neutral, and that's helping us a lot. And then of course our other own measures, whether they are thermal heating, solar panels, or for example, next to zero energy buildings, which we started already seven, eight years ago. So good progress there. And now if our CFO, Erik, would come and provide color on the detailed figures. Thank you.

Thank you, Joani, and good morning everybody from my side as well. So page 12, the top line growth was 8.5 million euros during the H1 from the corresponding period, and Q2 part of that was 3.4 million euros. By far the biggest portion of that growth came through the completed apartments, 2024 completed, and especially 2023 completed apartments. Like for lack of rental growth was still positive, slight contribution there as well, so 0.9% and increase in rents and water charges contributed 0.9% and occupancy positive on 0.2% and then on a negative side other items 0.2%. Net rental income side, so the growth was 4.2 million euros during the H1 and Q2 part of that was 3.1 million euros. So that underlines the fact that maintenance expenses were impacted for the HUS winter, especially during Q1. So maintenance expenses grew 6.7 million euros and 2.4 million euros during Q2. And repairs were down by 2.4 million euros as part of the saving program. So the main growth items in maintenance expenses were growing the portfolio, of course, 2.2 million euros, property taxes, 1.1 million euros, and then heating and water together, 3 million euros. So page 13 on the right-hand side, FFO, down by €12.3 million. Of course, top line contributed a positive €8.5 million. And SDA decreased €2.4 million. Maintenance up by €6.7 million, as said. and the biggest growing item on the expenses side was financial expenses, up by 21.2 million euros. In the corresponding period, we revert to a bond contributing 8.9 million euros positive So if we exclude that from the finance cost on the corresponding period, then the increase in finance expenses was 12.3 million euros. And the biggest driver there, of course, is the average interest rate in our portfolio went up to 3.2 from 2.4 from the corresponding period because of refinancing. So the refinancing is made on a higher level compared to those ones that are paid back. So, financial occupancy, as Jani mentioned, down slightly because of the oversupply in the market, especially, and down by 0.5% from the corresponding period and 1.3% from year end, and then a turnover slightly up 0.8%. I think, like for rental income, we already covered. So on page 16, the saving program proceeding as planned, as Janina already mentioned. On the investment side, 19.3 million euros, by far the biggest portion of that was the only ongoing development that was completed at the end of June. 113 apartments. And as we speak, we don't have any ongoing developments. We do have one binding agreement. And on the modernization investment repairs side, so the modernization investments are down by 10.3 million euros from the corresponding period and repairs 2.4 million euros from the corresponding periods as planned as part of the saving program. Page 17, Jani mentioned that we slightly increased the yield requirement. There were actually limited amount of transactions in the market, and most of them are sellerware, open and resi funds, so highly motivated transactions. And these yields that we applied at the end of H1 are now reflecting all transactions, whether they are really comparable or not, but all completed transactions are now reflected in this yield requirement. And going forward, of course, interest rates already came down, but expectations in the market is that going forward, the interest rates will come down further. And of course, that takes away or helps the pressure of chasing yield requirement going forward. There was on the positive side 34.3 million euros impact and by far the biggest portion of that came through from ending restrictions. So apartments came out of the restrictions. We still have 404 apartments where there are restrictions regarding the valuations and those restrictions will gradually end by the end of this year, contributing 20 to 40 million euros uplift in values. Equity ratio loan-to-value, still the balance sheet remains strong, is the key message here. And then page 19, loan maturities. So the key here is that 2024-2025 maturing loans are all covered. And there's two big reasons behind that statement. One is that at the end of H1, we had 328 million euros cash or cash equivalent items. And as part of the saving program, we don't have any major investments going on. And then the FFO is left to be used to pay back loans. So these two items covers all loans maturing 2024 and 2025. On the right hand side, the interest bearing liability is a little more than 3.8 billion euros. It's good to note that that's gross. So if you look net debt, so that came down to 3.561 million euros, if to take into account the cash and cash equivalent items. We didn't do any real new loan agreements during Q2, but several activities there otherwise. So in January, we issued this 200 million euros bond. In March, we made 250 million euros. loan that was drawn and then we draw the 425 million euros syndicated loan made already last year but it was drawn this year and we paid back this 434.5 million euros bond in June. equity per share, EEPRA NRV, not major changes from the year-end figures, and then page 22, our outlook. So we reiterated the outlook we issued in mid-July. Now we estimate that top line growth this year will be between 2 and 4%. And if we take the midpoint of that range, so completed apartments will contribute 3%-ish growth, and then we expect in the midpoint of this guidance that the occupancy will improve moderately during the H2, but still be below the level in corresponding period. Then on FFO guidance side, 142, 152 million euros, the midpoint in that FFO guidance reflects the midpoint of the top-line growth guidance, and then we took into account that no new financing arrangement will be done during this year, normal weather during the second half of this year, and the saving program proceeding as planned. And then the lower end of that FFO range reflects the lower end of the topline growth guidance. And again, the upper end of the FFO guidance reflects the upper end of the topline growth guidance. A couple notes regarding our strategic KPIs, so top line growth 3.9%, annual investments down by 19.3% as part of the saving program, FFO against total revenue 30.2 million euros, Note that the whole ES property taxes are booked during Q1, and that was 15 million euros in total. Loan-to-value equity ratio, as said, still strong, and net promoter score high level, 53%. And now back to Jani.