Samhällsbyggnadsbolaget i Norden AB (publ)

Welcome to SBB Q2 Earnings Call 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to Treasury Director Sebastian Westberg. Please go ahead.

Good morning, everyone, and thank you for listening in to our presentation of the second quarter of 2026. My name is Sebastian Westberg. I'm the treasury director and head of IR at SVB. Here with me today, I have our CEO, Leif Synnes, who will walk you through the highlights of the quarter, assets and strategy, the financials, and finally, the key investment highlights of SVB. Myself and our finance director, Daniel Tellberg, will join Leif in the Q&A session after the presentation to answer any and all questions that you might have. With that said, I would now like to hand over to Leif. Please go ahead.

Thank you very much, Sebastian. And good morning, everyone, and welcome. I am Leif Synnes, CEO of SBB. Today, I will walk you through the second quarter. a quarter where we continue to strengthen our core holdings, simplify the structure and execute the transactions that will build long-term value. Nothing new. That is what we have been doing the last years. SBB today is a Nordic social infrastructure investment company. Core holdings are Sveafastheter, Public Property Invest and Nordicus. These entities represent the majority of our value. They are all market leaders in their respective segments, and this is an achievement to be proud about. E-fastigheter is Sweden's largest listed residential company. Public Property West is Europe's largest listed social infrastructure company. And Nordicus is Europe's largest educational infrastructure company. These platforms have strong assets, access to investment-grade funding, strong demand from tenants, and growing cash flows. The companies are young and they still are improving every quarter at the moment. Non-core assets that SBB hold is good, but they will over time be divested in order to support stronger financials and to enable more resources to be put into the market leading platforms. One example is SBB Residential that will be moved into Svea Fasteter. in line with the ambition to decrease non-core holding and increase core holdings. We for sure continue to walk the talk. Independent of the business cycle, we can try to improve the things we can control. This has been done the previous years and much so also during the second quarter. For Sveafastheter, the second quarter was a transformational quarter with major strategic value creation. Sveafastheter grows 60% by margin with Klarabo and SBB Residential. I will come back to this later in the presentation. Sveafastheter also started to divest newly produced residential assets during the quarter. These assets are sought after by investors and Svea Fastete can buy the investing realized 20% plus in development margin. The capital received can be recycled into new projects or used to be re-pursuing shares. If we go over to PPI, PPI is scaling fast, strengthening margin and expanding its Nordic leadership. Public property invest delivered many strategic improvements during the quarter, demonstrating both operational momentum and financial strength. During the spring, PPI successfully integrated SBB's property management and a large part of the central administration. This was a major structural step that strengthens efficiency, margins and platform scalability. The company also completed its primary listing on Nasdaq Stockholm, further increasing access to capital. Finally, PPI continued to execute on the funding part. The company secured 3.6 billion five-year bank financing and issued €200 million in five-year bonds, both at very attractive terms. This shows confidence in PPI from lenders and investors. It is also an evidence that SBB's strategy with moving assets into strong companies leads to enhanced access to funding. Operationally, PPI is expanding its footprints with disciplined, high quality acquisitions. During the second quarter, the company acquired two healthcare projects in Finland for Euro 33 million. They add long duration that supports stable cash flow and profitability. With a scalable platform, investment-grade rating, and long nieces, and a diversified Nordic portfolio, BPI is positioned to continue consolidating the social infrastructure market. The company enters the second half of the year from a position of strength, stability, and strategic momentum. And now on to Nordicus. The company's platform is becoming increasingly robust, scalable and strategically important in the Nordic social infrastructure landscape. Portfolio activity is good in Nordicus. Nordicus successfully integrated previously acquired educational properties in Stockholm and Gothenburg that were acquired for 1.8 billion SEK. These assets strengthen the company's presence in two of Sweden's most attractive educational markets. And they contribute to a scalable and robust earning base. During the quarter, Nordica signed a 15-year lease with Kunskapsskolan for a new school in Sweden, adding high-quality long-duration income. Nordicus has low financial risk with long-term financing averaging more than 10 years and a strong investment grade rating. And together, it can be said that Nordicus has a very solid financial structure. In short, Nordicus is currently strengthening its Nordic platform and is delivering predictable long-term cash flow based on long leases, essential social infrastructure and long-term funding. And now on to SBB development. SBB development shows that focus delivers results. During 2025, SBB put properties which needed more attention into a specialized company, which we named SBB Development. One year after its creation, SBB Development is delivering clear results. Net leasing reached close to 13 million during the quarter, showing strong momentum. One example is a new 10-year lease with Saab for a 9,000 square meter in a previously vacant property. This is also a strong confirmation of the potential in urban development assets and show organizational skills to enter agreement with professional counterparts. SBB Development showed property sales totalling 500 million, 12% above fair value. Including the signed sale to Klarabo, the balance sheet has decreased by 20% to 5 billion during the year. I believe that more value creating processes are on the way, which we hope to be able to present to you in later reports. The Sveafastheter, Klara Bo and SBB residential merger is a transformational step. Prior to the merger, SBB had become the largest owners in all three entities with a clear ambition to make all three entities stronger by a merger. The outcome of the merger will be a more robust and scalable platform, a stronger credit profile, more interesting for investors and a more stable and predictable cash flow platform. And it creates a company with 47 billion SEK in combined property value, which is an increase of 60% for Svea Fastigheten. And we will be able to get 120 million SEK in annual synergies and regarding the benefit for SBB. SBB will gain a 20% earnings uplift due to improved cost of funds. This is a clear example of how SBB actively builds up market leading platforms and improves capital allocation. Sveafasthet is now positioned as a clear market leader among listed entities in a regulated residential housing market in Sweden. A sector with strong demand, resilient valuations and profitable growth. And due to the transaction, SPB capital structure will be more transparent and more cost efficient with less administration. evidence of the reduced cost we hope to be able to present in the later financial reports. This page illustrates the assets posted Sve Fastigheter, Klara Bo and SBB Residential transaction. Our core holdings have become even stronger and more clearly defined. and there is a reduction in non-core holdings. It's even more clear that we now hold three Nordic market leading platforms within social infrastructure, educational infrastructure and multifamily residential. Each platform is scaled with 42 to 52 billion SEK in size resilient with low downside risk in revenues, and backed by investment-grade funding, and also located in geographies with positive economic and demographic trends. This structure gives us a balanced transparent foundation for long-term value creation. This page illustrates the build-up of net asset value in SBB. First we have the core holdings, then the non-core holdings, and then we have the debt in the parent. The majority of the gross asset value comes from Nordicus, Public Property Invest, and Sveafastheten. rather even position in each company with 9-10 billion SEK in each company. The position in Svea Fastigheter will be larger once the merger with Klara Boen SBB Residential is complete. The number of holdings will be gradually reduced and more and more focus is solely put on developing the core holdings. The net assets is SEK 14 billion or 7.94 per share, a slight decrease since year end. Property valuations across our holdings are stable. For Svea Fasteter, there is a slight lower required yield in the best location, and the company has carried out sales at fair value, a clear signal of where the transaction market is. Nordicus har haft några isolerade förändringar i några avgörande som förbryter värderingen. Samma sak gäller för SPB utvecklingen, som har blivit pågående i utvecklingsgränserna. För PPI har de högre intressraterna i Norge haft en negativ effekt på transaktionsmarknaden och därför värderingarna. Men som ett helt område har vi en stabla situation om tillgängligheten. And if we move over to the financials of the quarter. The net operating income was stable. This basically is a result of a growth in Sveafarlstater and lower income in SPV development due to divestments. The like for like net operating income is up, which is the key long term. The results from the associated companies and joint ventures came in at 91 million. This is a figure that will be much higher in the future when property values have a normal growth pace. Negative foreign exchange effects on currency affect the result negatively with 728 million. This is an effect of the debt in the parent being in Euro and due to the stronger Euro during this year. All in all, a negative result, but we have good hope to turn this around during the second half of the year. And now we come to the liquidity position. And this has been much improved during the last years. And we have now a clear and well-defined path for managing upcoming debt maturities. We have funds for all maturing debt during 2026. For 2027, we have several options for managing the maturities and plenty of time on our side. One clear possibility is monetizing the SEC 5 billion claim that we hold on Nordicus. The market value of our listed holdings add further flexibility from a financial standpoint. And overall, we have a strong confidence in our ability to navigate the maturity profile in a disciplined and controlled manner. Financial results for the period were negatively affected by adverse currency movements, which reduced net asset value and have an impact on reporting earnings. These effects are temporary and no cash. Operationally, the business remains strong and we continue to deliver strategic improvements which support long-term results. The property exposure increased mainly due to the growth in core holdings. This growth is expected to continue during the upcoming year. The interest coverage ratio is lower due to lower income from receivables from joint ventures. We expect to lower the debt in the parent and will also benefit from a larger Sveafas theater, which is consolidated. So we are confident to maintain a good debt coverage in the future. Loan-to-value remains at the manageable level at 54%, but we have a clear ambition to lower the financial risk. This is expected to be done by good development in core holdings and divestments of non-core holdings. Let me summarize where SBB stands. SBB is a Nordic social infrastructure company. Our strategy is clear and consistent. Build and develop the market leading players in social infrastructure. These platforms benefit from strong market position, access to financing and a streamlined organizations. We continue to strengthen our companies through strategic transactions including the Sveafastheter merger and through liquidity generating investments that reinforce the balance sheet. Our corporate structure is now significantly simplified with focused platform and reduced central administration. Core holdings are retained long term while non-core assets are monetized to create value and support for lower leverage. This model positioned us for net asset growth and long-term value creation. Thank you for listening in and we will now move over to the Q&A session.

if you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad the next question comes from Rebecca Clements from JP Morgan Asset Management please go ahead good morning thanks for taking my questions I have a couple

The first one is related to some comments this morning on the Svea Fosketter call talking about capital allocation and share repurchase was mentioned. Do you have a preference as to whether or not if they do actually deploy cash for shareholder purposes, do you have a preference for share repurchase versus dividend? And what would share buyback mean or the liquidity of the shares, I would think that that would be a bit of a drag on the shares given that you hold a large proportion of those. So that's my first question.

Okay, I think we will try to increase the dividend received from our core holdings. and at the moment we don't receive dividends from Sveafastheter and we hope to be doing so in the future. And we are receiving dividends from Nordicus and PPI as of today.

Right, but they were asked about from a capital allocation perspective. I was personally surprised given I know they haven't been paying dividends. I was surprised that they were asked about share repurchases. But would your preference be, you know, if it were up to you, would your preference be to receive dividends as opposed to a share repurchase efforts on their part?

Yes, Sveafas Teater is like an independent company, but I think we from our position would welcome that the company start to give dividend. And this can, of course, share buybacks could, of course, be a compliment to that. That is our view.

Okay. Okay, and then what will be the pro forma stake that you hold in Svea Foskater post the Klerabu transaction?

57, 58% if I remember correctly. What percentage?

58. 58, okay. Thank you. And then the 657 million receivable from PPI, will that actually end up being cash to SBB and when do you expect to receive that?

We expect to receive it tomorrow and it will be in cash.

Great. And then that leads into my last question. You mentioned that you had your 2026 maturities covered with existing liquidity, but it exceeds your reported cash balance as of the second quarter. So what will be the what will fund the remainder there.

Good question. That's correct that the liquidity on the balance sheet is not enough, but we have our own facility and we have our own definition of liquidity where we add liquidity and unused facilities in the term. And together that amount is larger than the maturing debt.

Okay, so we should assume that you would use your credit facilities to fund any sort of remaining portion that isn't covered by existing cash. I mean, presumably you want to hang on to some existing cash as well. And then the receivable from PPI is the differential then you expect to draw that on the credit facilities?

That is correct.

Okay. And what would be, just last question, what would be the minimum cash that you would want to maintain on your balance sheet, your reported balance sheet?

It's a good question. Usually we would like to be in a place where we cover at least one year of debt maturities or like capital need in line with the requirement to be an investment grade company. And so that is like the ambition to have that amount of cash. And that amount can of course be larger if we have larger maturities ahead, if the maturities are lower and we can hold a smaller amount of cash, but usually not less than 1 billion, I would say, given the current operations.

Okay, and if you use, will you just use your credit facility then for that if you end up just looking at the 4.1 billion of maturities that you have on your slide and the 1.8 billion of cash, the 3.5 billion of credit facility that isn't drawn. Would you use your credit facility to make sure that you have enough cash on balance sheet or would you do something else or source that cash elsewhere?

In a normal situation, we would like The liquidity on the balance sheet plus the unrolled facilities to be larger than the debt maturities within one year. And it's not always that we have been able to have that in the last years, but that is our ambition to have in the future. And we will improve the financials. That is our ambition, so we can always hold that on long term. I think in the short term, it's likely that we will hold a little bit less liquidity if we combine the cash on the balance sheet plus the standalone facilities, the maturities, due to that we have a little bit of weak financial position and large bond maturities. And also the cost of that is a bit high for us at the moment. But we will continue to improve the liquidity position in years to come. So we will always be having a liquidity position that the market appreciates.

Okay, and then just given that it's lower than, you know, obviously you would ideally like, given the maturities, Have you engaged in any discussions about perhaps selling the Nordiquus receivable or some other transaction potentially with Brookfield?

Yes, we have been discussing the loan to Nordicus with Brookville in the past, but we have also discussed it with a lot of accounts in London. And there is a great appetite to provide liquidity to us. So far we have shows not to monetize that loan, partly due to the cost of doing so. And that we have found that other sources of capital have been better to use. But we know that we, within a short notice, can borrow on that claim. So we're not worried. And that is also one reason why we could have a little bit lower liquidity then the maturity is in the, let's say in 27 because we know that we have that ability. And we also have the ability if we would like to pledge shares or diverse shares or other kinds of solutions. So we have a lot of ways to create liquidity which we didn't have in the past. So from like a financial flexibility has to be as much stronger today than it was just one or two years ago.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Othman El Araki from Fidelity International. Please go ahead.

Yes, hi guys. Thanks for the call. Just a couple of maybe follow-ups from Rebecca's questions. Just in terms of liquidity needs, does your kind of SBB development stake need any kind of outflow from SBB to spend capex, et cetera, on some projects? That's my first question.

Yes, that's a good question. And when we want to do like a project in social infrastructure in a property that lies in SBB development, then we are looking for a long lease with a stable counterpart. And that That product then become like you can say a liquid product in the market. So if we don't have in-house liquidity, we could either like borrow on that assets and we could also sell the assets to another counterpart that have a different financial situation than SBB. For example, one or two years ago, we sold a property to Intea, and then we sold the property based on the project, where we had a long lease in Västerås. So if we don't have the internal proceeds, we can create the project, find the tenants, and then sell the projects. And if we, let's say we have some proceeds, we can use that proceeds and do the project ourselves. And then we can instead sell the property when the project is finished. And then the return on that is a little bit higher than selling the property before the project is completed. And then in SBB development there is, if I remember correctly now, it's 91 assets. And then usually so we can sell one or two assets each quarter and that bring in cash flow to the remaining properties that need investments. So it's not so that we need to... invest in all properties at the same time or we need to hold on to all properties at the same time. So we are rather confident that we will not need to put in much new equity into SBB development. We have many solutions to work with this.

Thank you very much. My second question really is on the on, you know, you said you have many options for the 2027 maturities. I think you discussed the Nordicus shareholder loan. But looking at, again, looking at your non-core assets, would you say, I mean, do you think it's realistic that you sell a big chunk of those you know, development, you know, before, you know, within a year or, or you think, you know, you will probably wait to, you know, to finish, you know, all the construction, et cetera, before you, before you sell. How do you look at this part of your portfolio?

I think we can be open to discuss a larger deal regarding SBB development if we find a party that is interesting in the whole package. At this point, it may be more realistic that we divest parts of it during the next quarter, so the end result will be the same, but it will take a little bit more time.

Okay, great. And my last question really is on the ICR, which is a bit weaker. Do we expect, you know, with DEFA and Clarabo, when the deal is done in September, that actually your ICR will improve from here? Because it's quite close to, I think, to the ICR level on Eurobonds.

So just wondering if you expect this to improve a bit? Yes, we believe that the results in, as I mentioned during the call, the result in Svea Fasteter due to the combined portfolios, which has to be residential and Klara Bo. And that big entity will be consolating the figures so we can benefit from the cash flow. And also Klara Bo has a higher cash flow than Svea Fasteter has. So we will benefit from that and also we will benefit from a lower debt level. We will, of course, within a month or so amortize on the 26 bond, bringing down the debt level. So those two effects will help the debt coverage going forward. And also for maybe all listeners, maybe not all are like, experts in covenants. So I can just mention that the risk we have with the covenants in our bonds is very low due to the fact that they are written in an issue-friendly language and also incurrence-based. So we see no or very little risk for the company. regarding the loan-to-value or the interest coverage going forward which is like a quite opposite situation if you look back just the one or two years when we have the dispute. I think the covenants now is very friendly for us.

Okay, that's understood. Thank you very much. Thank you. That's it for me.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you all for listening and I think it was very good questions and I hope to be seeing you in a quarter when we present the next interim report. Thank you all.