Kojamo Plc

Very good morning and welcome. This is Koyamos Haavio Result webcast. I'm Niina Sarko. I'm from Investor Relations. Today we have two presenters, namely our new CEO, Reima Klytsölä. He starts the presentation with the highlights for the review period, and he also discusses the operating environment. Then CFO Erikelt continues with financial figures and the outlook for this year. As usual, we have Q&A after the presentation and there we take questions via chat. And then we also open the phone line for live questions. So I guess we are now ready for the presentation.

Thank you, Niina, and very good morning on behalf of myself as well. I'm excited to be here for my first quarterly release I calculated that it's roughly 12 years ago since I was last on this side of the table on investment, meeting investment community. I was then in Pohjola Bank PLC's division head of banking and also last 12 years been sitting on another side of the table, your side of the table, but very happy to be here. And it has been kind of a very positive start for me. It has been kind of great to notice that Koimo people are very energized and competent and even though the market conditions haven't been that great in last two years, but hopefully getting better. So as Nina said that I recently started, so started on 1st of June, or actually 2nd of June, Monday, and obviously 2 3rd of the quarter has already done at that stage, but happy to present the main key points of the quarterly result. I think the highlight of our first half year has been that we have been improving significantly our occupancy rate and that has been really kind of a positive development. both the revenue and net rental income increased and there was obviously due to some leakage from gross revenue to net rental income and that was mainly due to one of allocations but of course some of the effects were also in inflation still affecting the the maintenance and repair costs, but we assume that those costs overall will be around about same level this year than they were previous year. FFO decreased mainly due to higher financial costs. Maintenance and repair expenses caused some decline of FFO, but as I said, the majority of the impact came from financial costs. As I told on very beginning, the occupancy rate development has been really good and it has been kind of a very conscious strategy so that we were lacking in our occupancy rate and we have worked really hard and made some changes in our processes, especially pricing and sales process as such so that we have been able to achieve a very good development Market hasn't helped that much in that respect and there's still oversupply in the market, especially in the capital area. But at least it looks like so that, how to say, growth of oversupply has stalled now and you might expect that at some point it will turn around. We also signed in June and closed the deal in July the 1944 apartment sale and as we already have earlier communicated the proceeds of sale will be used reducing debt and starting the share buyback program and of course this transaction and usage of proceeds will kind of strengthen our balance sheet and also with the buyback we aim to also kind of neutralize the FFO effect for the shareholders and through that kind of give a better kind of a chance for value creation. Our financing position is very strong and both in June and actually this month we have closed over 200 million bank loans refinancing and and next refinancing arrangements will focus on loans that are maturing in 2027 and then of course starting those refinancing operations next year so it's very solid base for do the business where we are Operating environment, I think many of us who follow the kind of global economy and indicators are somewhat confused at what's going on. There has been a lot of hassle around tariffs and their effects on global economy. It certainly brings some uncertainty. still even though there's the expectation that the US economy will slow down a bit but there's still some kind of a positive upbeat in the expectations of a euro area growth and Finland has been forecasted as well that the growth will be better this year. Inflation in Finland is very modest and I think it's fair to say that given the circumstances, our own growth prospects in Finland and inflation, so the monetary policy as such is tighter than the Finnish economy would required and some might argue that there's a room to cut rates further is also from euro area perspective but anyhow the kind of a rate cut the expectations have if not vanished but at least the expectations are definitely not there in that extent that they were some months ago. Even though the macroeconomic outlook is not as boosting as we all would hope, I would say that the megatrends are still there when talking about housing and and two main drivers of that this is of course the startups of a new residential and then the kind of a population growth in major cities and if you look at this graph of how basically housing starts so it's very kind of low level at the moment and even the expectation of a residential startups this year 20 000 I would say that it's probably on optimistic side and for example today this morning it was in a Finnish newspaper Helsingin Sanomat article of a of legislation changes concerning the subsidized apartment building and if that will be cut as well so given the fact that it has been estimated that the kind of a need for a new apartment is roughly 35 000 a year in Finland so and the current level is 20 000 or less than 20 000 so and it has been already for a couple of years underneath the 20 000 so that's obvious that it will affect the supply And at the same time, the population growth in major cities in Finland has even picked up. And for example, Helsinki just posted that over 700,000 inhabitants in Helsinki, and also the kind of overall the capital area is growing. Of course the big driver in that sense is immigration and even though the trend of decreasing average household size is still there, But immigration as such is a little bit kind of affecting that trend, kind of slowing down, because it seems to be the case that many immigrants are living more intense in apartments than the Finnish ones. But overall, the urbanization megatrend, I think, is definitely there. And the biggest cities like Helsinki Capital Region and Tampere-Turku are the ones who are the clear winners in that sense. And then if you look at the kind of, I'll give a glance for our own portfolio, Kojamos portfolio, so it's very well fit to that trend and roughly 87% of our fair value of our real estate is in Helsinki region, Tampere and Turku. So I would say that it's a very good strategic fit in that sense. ESG as such has kind of, if not faded away from investors' interests, but at least the significance is not there in that extent as it used to be a couple of years ago. But we still think that it's a super important topic. and we keep on doing constant work for achieving carbon neutrality in 2030. We are well in time in that schedule. and for us it's of course also kind of a matter of profitability so to say so more energy efficient than we are so we can cut down our maintenance costs and and even though we speak about the scope 2 here so it's good to notice that actually heating is included in our figures so it's in that sense relatively comprehensive scope 2 so to say Of course, we all know that the last mile is the most difficult here, but there's still some room to develop different technologies as well, which could enable achieving carbon neutrality in that sense. I would say overall very solid first half year and as I said that the most positive point is to picking up the occupancy rate and create the revenue growth even though the development in rent levels muted or even in negative territory some locations but one thing that I would like to highlight here as well in this screen is the Net Promoter Score which is 58 for us and it's all-time high and the customer experience and developing customer experiences will be kind of a key factor for us in the future as well and we truly believe that put the customer in the center we can create the service and kind of a clue for our customer relationships that in the future we even able to kind of improve our rent premium hopefully. I think this is pretty much the part that I should cover, and I would like to now hand over to Eerik to go to financial development, and then we will take together with the Q&A. So thank you very much.

Thank you, Reema, and good morning, everybody, from my side as well. So, page 12, if we first look at the total revenue growth, first half of this year compared to first half last year was 4.3 million euros, and Q2 was 3.3 million euros up compared to Q2 last year. And you may say that growth came entirely thanks to improved occupancy. On the net rental income side, H1, the growth was 2.9 million euros and Q2, 2.7 million euros. On the maintenance side, the cost increase was 0.8 million euros in the first half, and on the repair side it was 0.6 million euros. In the maintenance expenses, there are both positive and negative figures, so on the positive side, heating 1.5 million euros below last year's figures, mainly came through during the Q1 this year. So electricity down by 0.4 million euros and credit losses 0.5 million euros. So on the other side, there's water that went up 0.9 million euros. That's actually quite logic when you have more customers, they spend more water. So maintenance up by 0.7 million euros and outdoor maintenance up by 0.6 million euros. As Reema already mentioned, there are some allocations in the cost side and we still expect the whole year maintenance expenses and repairs to be brought in line last year figures. Page 13, if you first look left-hand side, profit and loss before taxes, I come to the change in values later, so the profit excluding change in values, so it's down by 12.3 million euros. Net rental income contributed 2.9 million euros, as said. SGI expenses increased by 0.2 million euros, financial expenses up by 8.8 million euros and then depreciations 7.3 million euros. I come to that figure later when discussing value changes. On the right hand side, FFO down by 6.2 million euros. Most of the items are same as in profit calculations, so net rental income, SGA and finance expenses. And then in FFO calculations, current tax is up by 1.7 million euros. So page 14, as Reimo mentioned, there was a strong growth in our occupancy rate and that our focus has been quite a long time already to improve the occupancy. There has been discussions whether we should release quarterly figures as well now they are here so this 93.6 is a cumulative figure year to date but you can of course always calculate the quarterly figures as well but now it's released here so the Q2 occupancy rate was already 94.4 and in June alone it was 94.8 So quarter on quarter the growth was 1.6 percentage point and if you compare Q4 to Q2 this year, so the growth was 3.3 percentage point. At the same time our tenant turnover came down by 1.9 percentage point. With 15 like-for-like calculations, this is backward-looking calculations, because we compare latest 12 months against the previous 12 months period, and in a turnaround situation where we clearly are at the moment, this is clearly lagging behind, and this is especially true if you look at the occupancy rate, because in this type of calculations, you have the tail of previous quarters. So in these calculations Q3 you compare actually Q3 2024 against Q3 2023. So that's why it's really backward looking. Of course rents and water charges are better representative. We are still increasing the rents for existing customers, the rent increases. on average are between somewhere between 1.2-1.3 percentage and some of that is eaten if you like because we are now we've been more flexible what comes to the renting but in total in these calculations we are still the impact of rents and water charges on positive side. Investments remained at the low level We have only one ongoing development, 119 apartments, one process to be completed January, February 26. And for the time being, we are not making any new investment decisions as part of the saving progress. anymore talking about saving program as such, but we are still in the mode that we are at the moment, we are not making any investment decisions. And of course, the disposal site, almost 2000 apartments completed after a review period, but the agreement was signed during the period. Modernization investments now are up to 10.4 million euros and we estimate that the modernization investments this year will grow from last year estimates are around 30 million euros because we have started few larger modernization projects. And as I said, repairs expected to be in line with last year figures. Page 17, fair value investment properties. There hasn't been any changes in calculation parameters, no changes what comes to the yield requirements. All transactions, small or bigger ones, they are taken into account in these calculations, and those ones completed after the review period are pretty much in line with these parameters. During the second quarter this year, the fair value change was negative 48 million euros. Biggest portion of that 33.8 million euros is related to value change in non-yielding assets, particular metropolitan properties, and we estimate that this will not have any impact for valuation or values of apartments. On top of that, there's an impairment loss of 7.3 million euros due to the write-down of our own office premises, so head office here in Helsinki where we currently are, but that is booked on a different line or that's a change in fair value investment properties. Loan-to-value equity ratio, quite stable. On loan-to-value side, 44.4. That includes the non-current assets held for sale. Now, biggest portion of that already sold, as we speak. Page 19, next financing arrangement needed for us is to refinance 2027 maturing loans, so no need to do any additional financing arrangement in the short term. Our interest rate came down to 3.2%. We have made two different agreements, one during the review period and one after that, so they were actually both extending existing loans, so in that sense no new financial agreements. Net debt came down and our financial key figures are strong. equity per share and EPRA NRV quite stable this quarter and then page 21 our outlook so when we released the closing of the divestment we updated our outlook and we restate that outlook so compared to that no changes so we estimated that the total revenue growth for this year is going to be zero to two percent and then FFO to be between 135 to 141 million euros. Why we made the update in Outlook in connection with the disposal, so always our outlook is given excluding the potential impact of potential transactions, so that's why linked to the transaction we updated our outlook. And it's good to keep in mind that the outlook doesn't take into account taxes resulting from the transactions, because they are considered to be non-recurring items. But then a couple of notes regarding the outlook. So if we take the midpoint of the top line outlook, so there we estimated that the occupancy will improve even going forward. We estimated that the rent increases are going to be moderate and we are flexible in rents. and we don't expect any support from the market. It may happen that the market is going to be more supportive going forward, but in this guidance we haven't anticipated any support from the market. And then the midpoint of the range for FFO, that of course reflects the range for top-line outlook. And in the midpoint of this FFO guidance, we expect, we hope in St. Pennsylvania, that the repairs and SD expenses are going to be brought in line with last year's figures, maintenance expenses brought in line with last year's figures, as already discussed, and then average weather, the remaining part of this year. So at this point, back to Reimo.