Bonava AB (publ)

Good morning everyone and welcome to Bonava's Q4 report for 2021. My name is Anna Falk Fyrlund and I am the new head of investor relations here at Bonava. And with me here today I have our CEO Peter Wallin and our CFO Lars Granlöf and they will take you through the highlights of this report. And we will end this session by a Q&A. And you will today be able to ask questions over the phone and you will also be able to post them online. So with that short introduction, I leave the word over to you, Peter.

Thank you very much, Anna. Thank you. And good morning, everyone. Happy to stand here and present my first report for the full year. So continuing and starting then with the market conditions. We are still seeing a high demand and a strong interest in our markets. So we have stable and favorable market conditions. We can also see that the price level is stable across our markets and we are actually seeing an increase of prices even though the rate of increase has abated somewhat as expected compared to the beginning of the year. We are seeing a strong interest across the board. That means from both private customers as well as from investors. Moving into the profit and loss. We are seeing net sales and EBIT down compared to the fourth quarter of 2020. That is because 2020 was very backloaded. On a full year basis, we are improving the operating income, the EBIT, and the margin. So we are moving up by 10%, excluding items affecting comparability for the full year. And that is also increasing the margin because of the net sales being lower. So we moved up the operating margin from 6.6% to 8%. I would like to point out that the major business unit has improved the result and I'm very happy to see the improvement from Germany bouncing back to 12.6%. We are seeing increased margins in both our consumer and our investor part. So that is also very promising. One of the prerequisites for our revised strategy is growing the land bank. And over the years, we have shown that we have grown the building right portfolio by 11% or 3,500 units. And that is despite the fact that we, during the fourth quarter, divested the land bank in Denmark and that accounted for 500 units. So despite that, up by 3,500. Closing the year, we are also closing with an even stronger financial position. And on the back of all of this, the board are proposing a dividend of 350 up from 325 last year. Coming into the number of units. As you have seen from our numbers, we are not reaching the guidance of starts that we have mentioned in our reports. And we are missing it and actually seeing a decrease of starts. And these starts is actually a postponement and where we're closing into year end and they are moving into the other part of year and we are seeing that the Omicron spread during the last part of 2021 impacted the permitting situation in across our markets. Another part which is extremely important to mention is the fact that the profitability is in focus when we start starting a project. Profitability and customer promise. So that means that we have to have the right team in place, we have to verify our cost estimates and we have to verify the sales and market status. So all of that is more important sometimes to have in place. So even if we have a building permit, we will actually not start until we have these three prerequisites in place. So the projects are moving into 2022. And our guidance now for starts is looking at 6,000 starts in 2022, which is an increase by 20%. So a chunk of it is, of course, the movement of projects into 2022. And we are still sort of very much tracking what we have stated in the revised strategy and business plan. Two of the projects I would like to mention is one project in Bergen in Norway, where we have started a swan and eco-labeled houses with a fantastic view over the ocean, Klepekollen. And then another great project in Riga, Latvia, where we started 120 units. So you can follow and track all the projects we are starting on our website. So this is part of our business. We are going to create many happy neighborhoods continuously. So the focus for me as a new CEO in this first year has of course of landing the review of the business and the strategy review. We have launched this full-fledged during the fourth quarter. We executed and completed the divestment of the land bank in Denmark. And we are rolling out now the strategy locally in the whole group and in the various business units. So I'm seeing a very strong and positive reaction from the organization. And lastly, as you saw in the beginning of the week, we are also reshuffling a little bit on the leadership part in order to secure the fruition of the business plan. So with that, I would like to hand over the word to our CFO, Lars.

Thank you, Peter. Good morning, everyone. As always, I would like to start with taking you through the bridge of the recognized units compared to how we were guiding in the Q3 report for the fourth quarter. We said that 2150 units we were estimating to complete during the fourth quarter. We actually managed to complete 69 more than that. So out of the 2,219 completed units, 49 were unsold by the end of the fourth quarter. And we have then managed to sell out of the stock of completed unsold from previous periods 53 units. And a major factor outside the number of completed in the period is, as we were speaking about in the Q3 report, that we actually then are recognizing units that have been completed and sold in the prior periods, in particular in St. Petersburg, which was also part of our guidance in the third quarter. So 2,352 units in the fourth quarter completed. And then moving over to the full income statement, as Peter was mentioning, we had a very backloaded quarter, fourth quarter last year. And as you know, we are very conservative in the way that we are accounting for our sales and profit based on a completed contract methodology, which is then creating a lot of seasonality in our reporting. And the fourth quarters are normally the strongest ones. So even though we had a good quarter in 2021, we could not compare that to the fourth quarter of 2020, where a lot of activities and completions were actually delayed into the fourth quarter, the first year of the COVID pandemic. Lower sales level in the fourth quarter, of course, creating less in absolute terms in terms of margin. Slightly lower gross margin in the quarter due to a mix effect. But on the full year basis, even though we have a lower volume in sales, we actually managed to create a gross profit increasing over the prior year as well as the margin. A slight increase in our selling and admin expenses in the quarter. We are comparing again to a COVID year where everything was sort of locked down and the cost was coming down to a minimum level. Now we see increases in particular in recruitment and starting to build our organization again. But then we're delivering almost 10% EBIT margin in the fourth quarter, a slight reduction from the 12% in the prior year. But on a full year basis, we are on 8% level compared to the 6.6% level that we were posting in 2020. I come back to the items affecting comparability in the next slide. So I jump that and we go all the way down to our EBT or profit loss before tax. We are on for a full year basis on 1 billion 20 adding back the items affecting comparability. We are on 1.1 billion level, i.e. 100 million up over 2020. the 2020. And the final thing I would like to mention here is that you see a rather low tax. Our underlying tax percent is still in the 26% level, but in the fourth quarter, the sale of the land bank in Denmark was made significantly as a sale of a company and therefore that is tax exempt and that is done creating a lower tax in the quarter. Coming back to the items affecting comparability, in the quarter we guided for 150 to 200 million in charges downstream the Static Review and it came out at 188 in charges and we also had a plus from the sale of the land bank that was reported already in the beginning of the quarter. So if we try to divide the 188, you see 44 is in Sweden. It's mainly write-down of land, write-down of intangible assets, and some sunk costs in projects that we have to sort of reshape and restructure to make that in accordance with the new strategy. And we also have some staff-related expenses there. In the Nordic, the 140 is, of course, a mix of the 226 in capital gain from the divestment of land in Denmark. Minus 86 million is basically write-down of land in the Nordic segment. And then we have the parent company part, which is basically write-down of assets, capitalized development cost in prior periods. And some relating to organization as well in the parent company. So that's all in all a positive done in the fourth quarter of 38 and the full year. We have a minus 80 because we have the cost for the wind down of Denmark that we announced in the second quarter. Let's move over to our business segment starting with Germany. Here you can see from the graph that we have lower recognized units both in the quarter as well as for the full year. Mainly coming from a lower activity level in the investor segment in the B2B segment. We have an improvement in profitability both in the quarter as well as in full year. And we are very happy to see that we are having good margins, good margin improvements for the full year on the EBIT margin, 12.6 versus 10.1 percent in the per year. Looking at the starts and sold units, here we are affected, of course, as we have been reporting before, from the delay of getting building rights, building permits. So the reduction in starts is very much coming from the delays and thereby we also have a lower volume of sold units in the German market. Still high demand, stable sales development in Germany. And what we are seeing are, of course, shifts of starts into the next year. So it's not something that we lost. It will be coming later on. And as you see, we have a lower activity in the investor area. But there was one project on Solon started in Dusseldorf during the period. Moving over to Sweden, we actually see higher volumes of recognized units, both in the quarter and for the full year. And a lot of that is coming from the investor area. So that is typically an area where we have slightly lower profitability and that's impacting the margins, of course. More in the quarter than in the full year because we had, as we were reporting in Q3, rather decent margins in the investor segment that we recognized at that point in time. And items affecting comparability I've been speaking about earlier on. Looking at starts and sold units, we have a slight improvement here and coming both in the consumer segment as well as in the investor segment. So there is a strong demand and sales development and a stable price level now in Sweden. There is strong interest in the market, in the investor market, and we have one project sold and started in Umeå up north in Sweden during the fourth quarter. The Nordic segment is a bit of a mixture, as you have seen. We have less recognized units than in the prior year. And it's also so in particular, if we look at the fourth quarter, we had some projects, in particular one project with very strong margins recognized in that period. Nothing comparable in this fourth quarter. On the other hand, instead, we have in particular B2B investor projects with very low margins recognized impacting us significantly. And we are still building up of course the Norwegian business unit on a standalone basis from the Danish unit that is creating additional cost in this segment. And here we have the most significant part of the items affecting comparability of course. Looking at starts and sold units, you see that we are lagging in terms of starts and thereby we are also lagging in terms of sold units. So that will of course be the focus for our business in the Nordic segment going forward. We see a strong underlying demand in all of our markets in the Nordic segment. And here we have taken part of the starts that we are lacking in the fourth quarter. It's due to that, as Peter was mentioning, that we are purposely delaying when we haven't got all the prerequisites in place and this segment is of course the one that we need to stabilize and we should not start projects until we have the prerequisites in place. It's very interesting to see that we have a strong investor market in Finland in particular. Four projects sold and started in Finland during the period. And as you probably saw, we also released just the other day that we have added one more investor project here. St. Petersburg Baltics, here we have a product mix that is affecting profitability. We have a stable level of recognized units but a higher level coming from the investor segment which is impacting both the level of sales as well as the profitability. So from a very strong level of profitability, we are on a slightly lower level in the fourth quarter and also for the full year in this segment. Looking at starts and sold units, we have a lower level of starter units. And as you see, the main reason for this is that we have then experienced delays in building permits also in St. Petersburg during this period. And that is affecting also the potential of selling more units. Continuous high demand, good market conditions. We have, of course, a geopolitical situation that we are following, but there is no impact, as we can see, short term in this segment. And it's very interesting to see that we now have the two first projects for the built-to-hold segment started in the Baltics in this period. And we are reporting them as investor deals until we actually make the transaction when we have finalized the buildings and moving that over to the asset management segment. Okay, going from the segment over to a quick view of our balance sheet. You see that our assets have increased over the year, and this is mainly coming from the ongoing housing projects. And you see also that we have strengthened our financial position even further. We have now an equity assets ratio that is exceeding 35%, well above our 30% threshold level that we are going for. Looking at our building right portfolio, Peter was mentioning the increase in our building right portfolio. Still, the book value of our building right portfolio is on the same level as in the prior year. The increase is mainly coming from off-balance sheet building rights that have been added to the portfolio. And you see that we have an increase in Q421 over Q420 in three out of four of our segments. It's the Nordic that is lower. And that is then due to, of course, that 500 units have been divested in Denmark. And then we have started new projects, of course, for the other part of it. And for those of you that were following us on the Kaplan Markets Day, we started then to add more of reporting of building rights. And this is how it looked like now by the end of 2021. We have 35,300 building rights in total, 18,400 of them on balance and the rest off balance. And off balance means that we have option agreements or we have conditional agreements where we are in control of the situation, when to execute, and most of them we can execute rather swiftly if we want to do that. And you see that the signed agreement, about 50% of our agreements are signed in 2020 and 2021, but 25% actually before 2018. Looking at how are we planning to utilize this, almost 60% of the Bill & Write portfolio we're estimating to use for starts in 2022-2024. So we have secured a land bank for our starts 2022-2024 basically. And if we then look at the starts, the 59%, 20,750 building rights, most of them are going to be utilized for multifamily houses. But then also we should be aware of that we are not producing single-family houses in more than Germany, Sweden, and Norway. So you cannot apply that on the whole portfolio. So in those markets, those segments, that will be a higher proportion, of course. And right now, we have a B2C of 84%, B2B of 16%. And that can, of course, change over time if we think that it's more advantage, better for us to move from one area to the other. Return on capital employed. This is probably the last time that we're going to have a slide for return on capital employed since we are now moving into other financial targets. But it's very good to see that we are still on the level of about 10% even though we have increased actual capital employed return has increased over the prior year significantly. Looking at the cash flow, again going back to the seasonality that we see in our business, of course the fourth quarter we see most of the handovers, i.e. most of the payments that we're receiving on the handovers are coming in the fourth quarter. Very strong fourth quarter last year, a strong fourth quarter this year as well. But as you see, we have not handed over that much in relation to what we have invested in housing project as we did in the prior year. But the most significant impact on our cash flow, if we compare the two years, 3 billion less cash flow from before financing than 2020 on a full year basis. It's due to timing differences in advances, in particular in Germany with the payment system that the market is operating there. The timing has not been the same as in the prior year and hence we have not received as much advances in 2021. If you look at our net debt, we see that we are exactly on the same level as one year ago. We have, however, received about half a billion Swedish crowns, of course, in the fourth quarter for the divestiture of the land bank. So everything else, there is an increase, underlying increase. And that is, of course, due to that we have a higher volume of ongoing projects by the end of 2021 compared to 2020. And then I'm rounding off just with the information that you have in the report, i.e. these completion graphs that we are putting in there to guide you for what are our expectations for the coming quarters in terms of completions. You see that we have added about 1,400 units coming from Q4 starts that we start to complete from Q4 2022 and ongoing. You also see that we have added 64 more to the Q4 2021 and that is primarily then coming from earlier completions of what we were estimating in Q1 2022. And you see that we also have some delays Q4, Q22 and Q1, Q23 that is then moved more into the Q2, Q3, Q23. And same for the investor segment. Here we see that we have five more units than we were estimating. There is a change then between the Q1 and Q2 being delayed 40 units. And we have a similar mix, similar change between Q4 22 and Q1 23. And here we have added some 600 units from starts in Q4 that we start to complete then in Q1 23. So by that, I give the word back to Peter.

Thank you very much, Lars, for a crisp and clear description of our numbers. So let me just summarize what we have been talking about. We still have favorable market fundamentals and we are also seeing an improved profitability in Bonava. And of course, with that, we are also looking into and tracking the profitability in the ongoing project to be reported going forward. So the project margins is what we refer to then. That's very important for us to look at that. We are giving you an outlook of the production starts in 2022. We believe in a balanced forecast for 2022 is around 6,000 units, representing an increase by 20%. Lastly, I would also like to thank all the Bonava employees for the very hard work during challenging conditions in 2021. But we are acting with the strength from a great offer we have in the marketplace and a great brand. So let's not forget what we are talking about and what we're aiming for, because I really look forward to now working with the team executing on the business plan. For 2024, we are aiming to hit at least $1.6 billion in earnings before tax. And in 2026, that number is going to be at least $2.2 billion. The sold units we will continue to increase as we start more projects. So 7,000 in 24 and up to 8,000 in 26. So with that we have a great task in front of us and I'm also very much looking forward to continue to work with the team of executing this. So with that, Anna, I would like to hand back to you again.

Yes. Thank you both for a very good presentation. And we will now open up for questions. So you will be able to post them online and you can also give them over the phone. So with that said, operator, please, if you have the first question.

Yes, we have the first question from Stefan Henderson from SEB Bank. Please go ahead.

Thank you. A couple of questions from me, and maybe, I hope I didn't miss that in your comment earlier, but I noticed that you mentioned the delay due to zoning and planning permits, building permits being postponed, but you also mentioned that you chose not to start projects because the RIFE The right conditions were not in place. Maybe if you could just explain what you mean by that. When I read it, my impression would be that you haven't had the pre-sale level you wanted to, but I guess there could be something else as well.

Thank you very much, Stefan. So the delay in starts, we are talking about projects not evaporated. It's being pushed into the beginning of 2022 instead of the end of 2021. And the prerequisites, just to repeat them, is the right team, the right cost estimates, and it's the right sales conditions. And it's not only the pre-sale condition, but that is one of the three that must be met in order to start. And let me also elaborate a little bit on that the major part on where we have pulled sort of and postponed the start of projects had been in the Nordic region. And if you don't sort of remember when we launched the strategy, we put the two remaining countries in the Nordic part, Finland and Norway, into the stabilized part. We put Sweden in the improved performance and profitability, and we put the rest of the business units, the Germany, St. Pete and Baltics into the growth part. Coming back then to Norway and Finland, it's extremely important. And I also think it's a very good sign that we are not starting projects because we're just going to hit the start number. But we are starting the project because we want to hit the right conditions for profitability going forward.

Good, thank you. And then when it comes to your 6,000 that you guide for to start this year, I fully have full respect for the complication of getting permits in place. So my question would be, if you look at those 6,000, I'm trying to understand the risk of postponements into next year again, how big portion roughly would you say permits are already in place and how big portion of that is projects where where you still have some uncertainty built in?

We are just completing 21, it feels like, and we are one month into 22. So I don't actually have the number. The majority of the 6000 is somewhere where we are not meeting the three conditions, internal and or the building permits, of course. So I can't give you an exact information about that. But we're trying to give a balanced view given how we see it pan through over the markets. And I also believe that by giving the 6,000, we are not sort of overstretching ourselves.

Okay, and then my final question is, given the accounting method that you have, of course, the... results that you are guiding for. And targeting is very dependent on the starts that you are doing. And when you have the delay here, I notice you've not changed your target. How have you handled that? Are you going to catch up? Or has there been a little bit of a buffer in your target since before so you can handle the delay?

I'm going to hand over the tough questions to our CFO.

Thank you, Peter. Stefan, the delay we are talking about here, is it the 31st of December or are the starts happening in early January or in the first quarter? I think that is something that we can handle within the project and that should not have a significant impact on our numbers going forward but of course coming into specific quarters there can be something slipping just over the edge and coming into the next period.

And then building on what Lars just stated, we have not given an earning statement and forecast for 2022-2023. It's for 2024. So I think it's much easier then to balance that from our strategic plan. So that is why our focus is on the continuous improvements of the project margins that we are mentioning over and over again.

Perfect. Thank you. Sorry if I slip in one more question. I don't know how close you are to the operations out there. As we entered 2022, we've seen interest rates coming up and the stock market is fluctuating a little bit. Have you seen any change in behavior from the end market? I fully understand it is early days. Just a little bit curious about your feeling there.

It's a very good question. It's something which we keep track on. Number one, I'm very close to the businesses and that is one part of the changing culture to be very close and on top of the business. run by very good and expertise people. We have so far not seen sort of any sort of demand abating. However, keep in mind that January normally is a quite slow month. So it's far too short to have any sort of clear, to talk about any trends or anything like that. But we're still seeing an interest in our projects and a demand out there.

Perfect. Thank you so very much.

So we have another question from Simon Martinsen from D&B Markets. Please go ahead, sir.

Yes, thank you. I actually had some of the exact same questions which were just asked by the previous questionnaire analyst. But just one other question.

I just noticed in the report also on Swedish land plots in the footnotes, it just also says that the operational margin excluding profits from land plots would be actually higher than what you have reported in the quarter. Does that mean you have sold the plot this time in this quarter with a loss, or could you please elaborate on that comment, please?

Yes, even in this quarter, due to unfavorable conditions, we have taken the decision that now moving into the new strategy, that is the right thing to do, even though it has come with a small loss in the quarter.

And if I can build on that, I also think that part of the explanation there, Simon, is also the fact that after we have sold some lands, we get extraordinary sort of cost relating to the project development of the area, which comes from the municipalities. So that also comes into the explanation, and that is also one of the parts why

uh we were uh guiding for a weaker margin in sweden and we have actually seen sort of some sort of some more costs coming in there impacting the gross margin in the swedish business and how much luck should we expect of that going forward because it looks better when we take out these kind of losses which we can do backwards calculations there how much of these losses can we expect will be there like in 2022

I think, I mean, we are not aiming, sorry. No, no, come on. Okay. No, we are not planning for that, of course. One thing is that now during 21, we have revised the strategy going forward, so we have taken certain decisions. However, as Peter was adding, I mean, we cannot control what the municipalities and the authorities are doing. in Sweden or in the other segments. So if there are changes in the way that we can utilize the plots that we have been planning for utilizing for a B2C or B2B project based on our building systems, making it efficient, that can of course create such a situation, but we are not planning for it.

The profitability will go up. That's the aim, of course. Absolutely.

Yeah.

Thank you.

Also, in terms of those 6,000 units, a lot of those questions in the start were asked. But these few delays, I also noticed that the order... or the SEC value of the units sold in Q4 was $5.5 billion, looking quite good. But the delays in those starts in Germany and other markets you talked about, how impacting has that, you feel, been for sales, actually? Because the sales levels, in terms of SEC, seem to be a better one, significantly what I expected. It seems also better than what my colleagues have been expecting. But could you please elaborate on how much inventory do you actually have ready for sale and to what extent low inventory of homes or sales have impacted your performance in your kind of assessments, if you can give any details on that, of what you have ready to sell in the local markets, because the sales looks quite decent actually, but the starts aren't that good.

One thing is the ongoing production, of course. If I remember it correctly, we have a 71% sales rate in ongoing production. It came down slightly from the previous quarter, but it's of course due to that we have handed over a lot of units during the quarter. So that is on a rather high level, but there is still possibility, of course, to sell out of the ongoing production. And then we have, of course, the completed unsold stock of units from the past. That came down just slightly, but by four units on a net basis. So we are on 122 units when we're now closing the year. It has been coming down from about 400 or just over 400 units in the prior year. So that has added, of course, a lot to sole units during the year, not as much maybe in the four quarters earlier on. And as you saw in my bridge, hopefully we have added more units to complete it. And so but we have also then been selling of earlier units. So that balance is newer than it was in the past. And 122 units, about half of that is actually showrooms. And of course, we are going to sell showrooms as well if the demand is there.

But we need something to show as well, right? So the short answer to that question is that it hasn't impacted the sales to any great extent.

thank you so um thank you thank you my other questions have been offered already thank you thank you i will take some questions from the web and we had from david flemish from nordea he has three questions so i will start with the first one can you please elaborate a bit on your targeted gross margin range for started units per geographical market

So it's six different guidance parts. So we're not going to give that guidance part because we are talking about us as a group. We are the listed company as a group. So in the targets and in the capital markets, we have elaborated what we should perform as a group. Then from time to time, the mix between various products and various markets will make this fluctuate. But for sure, if we're going to head into a double-digit territory, With the EBIT margin, we need to improve the gross margin. So when we talk about gross margin, when we talk about project margin, that is going to be the main focus. And we can elaborate on that sort of each quarter, but we will not sort of give that kind of reference now.

And then he asks, the margin difference between consumer and investor segment.

Yeah, I mean, in general, the consumer segment has a better profitability. But, of course, we are standing a higher risk, particularly in the financing area, because the investor segment, we have normally forward funding. So it's fully funded when we're doing that. But we have seen in most of our markets that the difference in profitability margin between B2B and B2C has shrunk significantly. So there is not a huge difference any longer. And going back to my comment about the land bank and utilizing as B2C or B2B, I think we will have more of discussions now going on whether there should be movements between the two due to the sort of the compression of the gap.

And the last question from David is, are there any extraordinary costs in Q4 in Nordics or Sweden that you have not been able to include in terms of affecting comparabilities?

There are always things happening. We saw some additional charges in Sweden by the end of the fourth quarter that is not classified as items affecting comparability. But all of a sudden, authorities are changing their mind, and we have been working and we're capitalizing some costs, and we have to write it off. And that happened in the fourth quarter. We have other costs as well in the other markets. But Since they are coming sort of frequently, it's part of the ongoing business.

Thank you. Operator, any more questions on the phone?

Yes, we have another question from John Irfeld from Kepler. Please go ahead.

Okay, thanks. I actually have a couple of questions. The first one I would just like to add on the latest question here with your And you mentioned here in the CEO wording that you have had higher costs in the Nordics, extra costs, and guarantee costs. So as you mentioned in this particular, could you just elaborate to the magnitude of these items that you are referring to?

Sure. I mean, as we're not stated the numbers as such, they are not sort of on a group level huge, but they're impacting profitability in a segment like the Nordic with a Maybe up to a percentage or something like that of a margin due to these costs that have been taken. And also, it's not that we have been sort of adding from prior periods. It's also where we have been closing projects early on during 2021, where we have taken some additional charges that were not provided for when we closed the projects.

Yes, sir.

Okay.

And also there's of course cost inflation on raw materials as we have seen during 2021. Could you just elaborate about how you see what happened in 2021 and what you expect for 2022 in terms of cost inflation for

That's a very good question. And that is, of course, one thing that we're looking into. We saw the rate of increase in costs abating towards the back end of 2021. There are still pockets where we see lack of resource within the construction part, for example. We see there are some kinds difficult to get the hands of material and inputs with larger technological content. So it's quite iffy in terms of how it's panning out. And the way we need to deal with it is that is one of the reasons why I emphasize this, verifying these three various topics before we start a project where the cost part is one of them. And that is also making sure that we have... a good visibility in terms of how we are getting access and the pricing that we are including in our cost estimate. So we should sort of, we are expecting a continuous increase in the prices. We are not sort of awaiting sort of a slump or a decrease in these prices. So it's top of mind right now.

Okay, and a final one also on cost, but maybe more on wages, etc. If we will have a higher inflation going forward, would that to any extent risk your long-term targets on this 1.6 and 2.0 targets? profit that you are expecting in the future.

We have just announced the targets in the business plan and I'm not standing one month later and revising those numbers on the back of wage increases. I think that all of it comes down to what happens to the interest rate, what happens to all kinds of supports into the marketplace and the disposable income. So there is a lot of moving parts here explaining how it will pan through. The most important part here is to empower the local business to make sure that they can make the right decisions when they need to take it.

Okay, thanks for taking my questions.

Questions that has come online and Morten is wondering what is the contingent liability associated with off-balance sheet units in the land bank?

If there is a contingent liability, it's part of our contingent liabilities that we are reporting. I haven't got a figure for what that can be separately, but it's definitely included at them.

And Olof Nyström wonders, hi, what yield on cost do you think that you can get on the rental units you are starting in the Baltics?

Yield on costs, I think that what we're seeing in the Baltics is that they are, in the Baltics, when we are talking about rentals, we are specifically talking about Latvia and Estonia, not Lithuania. And we are seeing sort of a high 6% of the yield right now.

Thank you. Operator?

So we have no further questions for the moment, but ladies and gentlemen, I remind you that if you wish to ask a question, please press zero and one on your telephone keypad.

Then I think we will end this session. And thank you all for listening. And if you have any further questions, please don't hesitate to contact me. Have a good day. Goodbye.