Company presentation Baard Schumann, CEO Sverre Molvik, CFO - - PowerPoint PPT Presentation

Company presentation

Baard Schumann, CEO Sverre Molvik, CFO November 2014

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Selvaag Bolig is a residential developer that provides targeted housing concepts to suit aspirations of different households in and around the main cities: Oslo, Stavanger, Bergen and Trondheim

Tromsø 155 units Trondheim 332 units Stockholm 103 units Greater-Oslo 7 667 units Bergen 156 units Stavanger 1 803 units

Norway’s leading homebuilder

¡ Sales in Q3: 259 units ¡ Industrial approach to homebuilding ¡ Land bank for 10 500 homes ¡ Housing concepts tailored to house buyer requirements

Other 310 units

Note: The numbers represent the size of the land portfolio as at 30. September 2014. All numbers are adjusted for Selvaag Bolig’s share in joint ventures. 1) Greater Oslo area: Oslo, Akershus, Buskerud, Vestfold and Østfold, 2) 260 units at Stord (Hordaland county) and 50 units at Alfaz Del Sol (Spain), 3) The residential property development portfolio consists of land plots that are to be paid for when planning permission is received. These have a development potential of ~3 700 residential units, whereof the company has purchasing obligations for ~3 200 and purchasing options for ~500. units.

4 The Ekeberg House Industrial production Veitvet district Løren district Terraced buildings The Gullhaug House Modular construction

2003 1999 2000 1988 1958 1951 1948

Pluss: Housing with extra service Housing for all

2012 2011 2013

Defjned housing concepts 50 000 homes completed Listed at Oslo Børs

«It is better to build 30 000 homes for 15 000 kroner than 15 000 homes for 30 000 kroner»

Olav Selvaag

Housing for all

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Value creation in Selvaag Bolig

Construction

6 – 36 MONTHS 6 – 12 MONTHS 12 – 24 MONTHS 3 – 9 MONTHS Zoning

§ Buy (i) options on unzoned land, or (ii) ready to build land § Lever acquired land to improve ROE § Fixed price contracts with reputable and solid counterpart § Construction costs financed with construction loans § Target 100% sale at delivery § Target 60% pre-sale before start-up (irrevocable purchase contracts) § Prices on remaining 40% increased gradually during sell out phase

Value creation Sales start Construction start Deliveries

§ Plan and prepare for construction

Acquire and refine land for development Project design Marketing and sale

Residential development Project

• ptimization

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Norwegian housing market

¡ Good demand for new homes and persistent population growth in urban areas ¡ Low risk for housebuilders

¡ Advance sales: banks require that 50-70% of homes are sold before construction starts ¡ Binding offers: offer to purchase is a binding sales contract, and requires a 10% minimum cash deposit

¡ High level of home ownership

¡ 85% (one of the world’s highest)

¡ Economic benefits for home owners

¡ 27% of mortgage loan interest payments are tax-deductible ¡ Transfer stamp duty for new houses is lower than for second hand homes

¡ Attractive market outlook

¡ Strong population growth ¡ High level of purchasing power ¡ Favourable macro-economic climate and low interest rates

Source: Source Selvaag Bolig and Eurostat

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Selvaag Bolig – value proposition

Selvaag Bolig ASA is a Norwegian residential property developer with no in-house construction arm, which controls the entire value chain from the acquisition of land to the sale of homes.

¡ Proven low-cost strategy

¡ Very competitive prices ensure a broad customer base

¡ No in-house construction arm

¡ low building costs ¡ fixed construction price ¡ reduced risk ¡ smaller exposure to market fluctuations

¡ Defined housing concepts

¡ Aimed at broad consumer categories ¡ Profit maximisation in all projects

¡ Large land bank

¡ Several thousand homes under development in Norway’s four fastest growing urban regions

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Three well defined and robust concepts

§ Affordable apartments based on a "no frills" model § Low cost land plots situated in fringe zones of large cities § Mostly modular based construction § Young people in the start-up phase § Apartments/small houses situated in high density areas § Established housing solutions, solid quality and well planned living environment § Modular and on site construction § Single people/couples in all ages, with/without children § Apartments with attractive, central location in large cities § High quality standard coupled with a service concept § On site construction § Affluent customers who value comfort and convenience

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Risk profile at start of project De-risking in key stages of projects

§ Purchase and payment of land takes place after zoning plan approval. If this is not obtained, the purchase is cancelled § SBO is in charge of the zoning process

1 - Land purchase conditional on zoning approval 2 - Land purchase price based on market value at time of zoning approval 3 – Minimum sales rate of 60% before construction 4 – Fixed price construction contract

§ Purchase price is decided by a land appraisal made by three external consultants at the time of zoning approval § The median valuation is used as purchase price § Pre-sales of minimum 60% secures the majority of revenue before construction § 10% of purchase price paid by the buyer at point

• f sale, and proof of financing for the remaining

amount is required § Construction contracts with solid counterparties are made with fixed price § Project costs are secured before construction starts § Selvaag’s equity investment in the project and project margin bring the remaining project cost down to 74%-78% § With minimum 60% pre-sale, there is limited remaining project risk § 76% of units in production are sold per Q2’14

100 % 74%-78% 60 % 10 % 12%-16% 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % Sales price Equity investment Project margin Remaining project cost Minimum pre-sale

Low-risk business model

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Industrial approach

¡ Modular construction

¡ Sub-contractors in Estonia and Poland ¡ Modern factories ¡ 14 years of experience

¡ Profitable

¡ Lower construction costs ¡ Higher project margins ¡ Sensible house prices

¡ High quality

¡ Reduced risk of faults ¡ Technically better homes ¡ Energy efficient homes

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Strong sales development

OPERATIONAL UPDATE

Residential units sold Total sales value and value per sold unit

Units NOKm

Note: All numbers are adjusted for Selvaag Bolig’s ownership in joint ventures. * Includes 95 student residences with an average value of NOK 0.7 million (dotted area)

625 246 483 856 915 2,6 4,0 3,5 3,4 3,5 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 649 1 011 740 653 2011 2012 2013 2014 Q1 Q2 Q3 Q4 * *

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Sales development per quarter

OPERATIONAL UPDATE

Units sold per quarter

No of units 236* 255 259 Q3 13 Q2 14 Q3 14

Total value of units sold per quarter

Note: All numbers are adjusted for Selvaag Bolig’s ownership in joint ventures.

625* 856 915 Q3 13 Q2 14 Q3 14 MNOK

* Includes 95 student residences with an average value of NOK 700 000 (shaded area)

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Income statement highlights Q3 2014 (NGAAP)

FINANCIAL UPDATE

Revenues and EBITDA margin (NGAAP)*

* Construction costs are exclusive of financial expenses in the segment reporting (NGAAP)

NOKm 614 755 688 830 724 17 % 11 % 18 % 15 % 17 % Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Operating revenues EBITDA margin 2 891 2 600 2 650 2 888 2 997 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

12 months rolling revenues (NGAAP)*

NOKm

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Income statement highlights Q3 2014 (IFRS)

¡ Delivery of 279 units (187) ¡ Revenues NOK 765 million (677)

¡ Including 95 student residences with an average value of NOK 0.7 million

¡ Project costs NOK 628 million (536) ¡ Other costs NOK 47 million (56) ¡ EBITDA NOK 95 million (91) ¡ EBITDA adjusted 125 million

¡ Adjusted for financial expenses included in project costs

¡ Earnings per share NOK 0.65

¡ Earnings per share year-to-date NOK 1.33

FINANCIAL UPDATE

Revenues and EBITDA margin (IFRS)

677 376 245 810 765 13 % 0 % 4 % 12 % 12 % Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Operating revenues EBITDA margin NOKm

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Cash and cash equivalents at 30 June 2014 Profit (loss) before income taxes Depreciation and amortisation Share of profits/ (losses) from associated companies Changes in inventories (property) Changes in trade receivables Other changes in working capital CF from investment activities Net change in borrowings Cash and cash equivalents at 30 September 2014

Cash flow development Q3 2014

FINANCIAL UPDATE

¡ Positive cash flow from

• perating activities

¡ Dividends from JV in Stockholm

• f NOK 27 million

¡ Continued high activity in projects under construction Condensed cash flow

NOKm 754 84 5 (1) 51 (48) (36) 23 (57) 777

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1 000 2 000 3 000 4 000 5 000 6 000 7 000 Assets Equity and Liabilities

Balance sheet highlights Q3 2014

¡ Book value per share NOK 24.7

¡ NOK 24.0 in Q2 2014

¡ Changes since Q2 2014:

¡ Trade receivables increased by NOK 48 million ¡ Inventories reduced by NOK 32 million ¡ Net reduction of NOK 57 million in interest-bearing liabilities

¡ Prepayments from customers count for NOK 326 million of other current non interest-bearing liabilities

FINANCIAL UPDATE

Balance sheet composition

NOKm Current assets Cash Non-current assets Non-current liabilities Current liabilities Equity

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Inventories (property) Q3 2014

1 778 1 753 1 721 1 654 1 673 1 882 2 399 2 841 2 791 2 728 205 132 99 138 149

• 1 000

2 000 3 000 4 000 5 000 Q3 2013 Q4 2014 Q1 20134 Q2 2014 Q3 2014 Land (undeveloped) Work in progress Finished projects

FINANCIAL UPDATE

NOKm

Inventory value development

¡ Land value increased NOK 20 million from last quarter

¡ Acquisition of land at Stabekk for NOK 16.5 million

¡ Work in progress decreased by NOK 63 million from last quarter

¡ Due to increase in units delivered

¡ Finished goods increased by NOK 12 million from last quarter

¡ Due to increase in completed undelivered units (the majority is sold)

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491 1 082 1 450 Top-up loan Land Loan Construction loan

Sound debt structure

FINANCIAL UPDATE

Loan facility Drawn per 30 Sep (NOKm) Interest rate margin 1 NOK 500 million senior unsecured bond loan maturing in 2018 500 4.75% 2 NOK 150 million revolving credit facility from DNB maturing in 2015 2.50% 3 NOK 150 million working capital facility from DNB maturing in 2015 2.00% 4 Land loan facilities from a range

• f Nordic credit institutions

1 082 2.20% - 2.50% 5 Construction loan facilities from a range of Nordic credit institutions 1 450 2.00% - 2.50%

Interest bearing debt as at 30 Sep 2014

Note: Bond loan of NOK 500m differs form the summed up top up loan in the pie chart (NOK 491m). The difference is due to NOK -9m in amortized cost which is not actual debt.

NOK

3 023

million

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Continued high production activity

¡ Sales value of units under construction NOK 5 159 million ¡ 61% of production volume in Greater Oslo ¡ 76% of the units are sold

OPERATIONAL UPDATE

Note: Projects are included when construction is decided. All numbers are adjusted for Selvaag Bolig’s ownership share in joint ventures. Selvaag Bolig currently has 1 379 residential units under construction including joint venture projects.

Development units under construction

Units 42 % 58 % Module On-site

Production split

1 347

Units

1 279 1 474 1 474 1 418 1 347 4 657 5 421 5 547 5 238 5 159 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Number of units under construction Sales value (NOK million) NOK million

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100 200 300 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

COMPANY OUTLOOK

¡ Good sales development for all players this quarter ¡ Particularly strong sales for Selvaag Bolig ¡ Company strategy support market position:

¡ Low-cost strategy: ¡ Selvaag Bolig average price 9M 2014*: NOK 3.5m ¡ Total market average price 9M 2014*: flats NOK 3.6m, terraced NOK 4.1m, semi- detached NOK 4.3m ¡ No in-house construction arm ¡ Defined housing concepts ¡ Large land bank

Strong number one position

Sales activity vs. peers

Units

* Selected markets: Oslo, Akershus, Hordaland, Rogaland, Troms and Sør-Trønderlag Housing types Selvaag Bolig: flats, semi-detached and terraced homes Source: Selvaag Bolig and Eiendomsverdi

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1279 1123 714 848 1474 1133 749 749 1474 1086 838 537 1418 861 515 456 1347 967 487 462 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

Overall construction activity back on good levels

COMPANY OUTLOOK

Units under construction vs. peers

No of units

Construction starts increasing

Construction starts vs. peers

No of units

COMPANY OUTLOOK

335 59 131 46 296 138 51 100 77 38 89 19 197 75 66 75 203 248 35 34 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

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High level of completions compared to market

Completed units vs. peers

No of units

COMPANY OUTLOOK

188 37 105 12 101 128 16 199 77 85 231 253 300 289 156 274 142 24 28 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

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COMPANY OUTLOOK

Oslo and Akershus, October 2007-2014

Units

Rogaland, October 2007-2014

Units

Source: Eiendomsverdi Selected areas: Oslo, Lørenskog, Ski ,Oppgård, Bærum, Asker Selected areas: Stavanger, Sola, Randaberg, Sandnes

Second-hand market:

Sound market in Oslo, challenging in Rogaland

1500 3000 4500 6000 7500 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 31 October 2014 Sold units October 2014 200 400 600 800 1000 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 31 October 2014 Sold units October 2014

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Appendix

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Income statement IFRS

(figures in NOK million) Q3 2014 Q3 2013 9M 2014 9M 2013 2013 Total operating revenues 764.7 676.7 1 818.8 1 821.4 2 197.0 Project expenses (628.3) (535.7) (1 507.2) (1 393.5) (1 709.6) Other operating expenses (41.6) (50.6) (135.1) (151.0) (208.8) Other gains (loss) 0.0 0.1 0.0 0.1 (0.4) Associated companies and joint ventures 0.5 0.5 28.0 10.5 10.9 EBITDA 95.3 91.0 204.5 287.5 289.1 Depreciation and amortisation (5.1) (5.5) (15.5) (16.7) (22.1) EBIT 90.1 85.5 189.0 270.7 267.0 Net financial expenses (5.9) (6.1) (16.7) (27.1) (30.0) Profit/(loss) before taxes 84.3 79.4 172.3 243.6 237.0 Income taxes (23.4) (20.3) (46.7) (64.3) (51.4) Net income 60.9 59.1 125.6 179.3 185.6 Net income for the period attributable to: Non-controlling interests 0.1 9.0 1.2 16.7 21.4 Shareholders in Selvaag Bolig ASA 60.8 50.0 124.4 162.5 164.1

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Cash Flow statement

(figures in NOK million) Q3 2014 Q3 2013 9M 2014 9M 2013 2013 Net cash flow from operating activities 56.6 (215.1) 16.1 256.8 104.0 Net cash flow from investment activities 23.1 13.3 30.2 51.3 48.8 Net cash flow from financing activities (56.7) 47.8 143.6 (313.2) (123.7) Net change in cash and cash equivalents 23.0 (154.1) 189.9 (5.1) 29.1 Cash and cash equivalents at start of period 754.0 707.0 587.0 558.0 558.0 Cash and cash equivalents at end of period 777.0 552.9 777.0 552.9 587.0

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(figures in NOK million) Q3 2014 Q2 2014 Q3 2013 2013 Intangible assets 420.3 425.0 439.3 434.5 Property, plant and equipment 7.9 4.0 5.3 4.9 Investments in associated companies and joint ventures 144.0 170.9 143.5 150.7 Other non-current assets 125.5 172.5 166.1 166.6 Total non-current assets 697.7 772.4 754.3 756.7 Inventories (property) 4 550.1 4 582.0 3 865.2 4 283.9

• Land

1 673.4 1 653.7 1 778.4 1 753.4

• Work in progress

2 740.6 2 790.8 1 881.6 2 398.8

• Finished goods

136.0 137.5 205.2 131.6 Other current receivables 291.9 257.1 531.0 342.3 Cash and cash equivalents 777.0 754.0 552.9 587.0 Total current assets 5 618.9 5 593.1 4 949.1 5 213.2

TOTAL ASSETS 6 316.6 6 365.5 5 703.4 5 969.8

Equity attributed to shareholders in Selvaag Bolig ASA* 2 313.8 2 253.0 2 234.7 2 236.3 Non-controlling interests 23.9 23.8 27.0 22.7 Total equity 2 337.7 2 276.8 2 261.7 2 259.0 Non-current interest-bearing liabilities 2 295.0 2 470.0 1 831.2 2 116.2 Other non-current non interest-bearing liabilities 302.9 279.3 283.3 258.1 Total non-current liabilities 2 598.0 2 749.4 2 114.5 2 374.3 Current interest-bearing liabilities 728.1 595.8 755.5 669.0 Other current non interest-bearing liabilities 652.8 743.5 571.7 667.5 Total current liabilities 1 380.9 1 339.3 1 327.2 1 336.6 TOTAL EQUITY AND LIABILITIES 6 316.6 6 365.5 5 703.4 5 969.8

Balance sheet

* Corresponding to a book value of NOK 24.7 per share

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Operational highlights – key operating figures

(number of residential units, unless otherwise stated) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Number of units sold 236 61 139 255 259 Number of construction starts 335 296 77 197 203 Number of units completed 188 101 77 253 274 Number of units delivered 187 118 80 236 279 Number of units under construction 1 279 1 474 1 474 1 418 1 347 Proportion of sold units under construction 80% 75% 76% 76% 76% Number of completed unsold units 22 8 8 17 18 Sales value of units under construction (NOK million) 4 657 5 421 5 547 5 238 5 159 Number of employees 97 98 99 100 100

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1753 690 2443 Booked value 31.12.13 Added value Valuation Akershus Eiendom

¡ Independent land valuation, by Akershus Eiendom. ¡ Valuation is mainly based on a calculated profit from sales of fully developed housing units

¡ For projects under development, remaining costs are split on developer and buyer, affecting value distribution

¡ DCF valuation method is applied on residents for lease

Land bank valuation

FINANCIAL UPDATE

NOKm

External valuation vs. booked value

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Substantial portfolio for development

FINANCIAL UPDATE

Total land bank portfolio at 30. September

No of units

32

Underlying demand remains strong

¡ Favourable macro environment ¡ Continued low interest rates ¡ Low unemployment ¡ Income growth ¡ Favourable demographic conditions ¡ High population growth, high immigration ¡ More small households ¡ More young adults, more elders ¡ Substantial housing need ¡ Supply outpaced by population growth ¡ Demand in cities dampened by high prices ¡ Strong sales in suburbs

38 000 27 000 11 000 No of units

Housing shortage in Norway - annualized forecast as of Q2

Housing need Housing construction Housing shortage

32

Source: Prognosesenteret

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Concepts are complementary when creating new urban neighbourhoods

Løren (Oslo) Lervig Brygge (Stavanger)

Hageby Start

No of apartments 36

Sjøkvartalet

No of apartments 67

Lervig Brygge Pluss

No of apartments 188

Løren Start

No of apartments 88

Lørenpynten

No of apartments 127

Løren Torg

No of apartments 108

• 1224 flats delivered to customers
• 127 flats under construction
• 56 flats where sale has started
• Addition 235 units at Løren 5 and 171 units at Lørenvangen 64
• 185 flats delivered to customers
• 188 flats under construction
• Addition 500 units in phase II

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Land bank - Løvholmen

PROJECT PORTFOLIO AND LAND BANK

Location of plot at Løvholmen

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Norway: A robust economy

Source: IMF, Statistics Norway, Statistics Sweden, Statistics France, Statistics Germany, Statistics UK, Eurostat

GDP growth 2004 - 2015e Unemployment 2004 - 2015e

Germany

• 5.0%

France 8.0% UK 12.0% Sweden 12.0% Norway 23.0%

Population growth 2011 - 2030e Public net debt/GDP 2004 - 2015e

• 6%
• 4%
• 2%

0% 2% 4% 6% 2015e 2014e 2013e 2012e 2011 2010 2009 2008 2007 2006 2005 2004

• 200%
• 150%
• 100%
• 50%

0% 50% 100% 2015e 2012e 2014e 2013e 2011 2010 2009 2008 2007 2006 2005 2004 UK Sweden Norway Germany France UK Sweden Norway Germany France 0% 2% 4% 6% 8% 10% 12% 2015e 2014e 2013e 2012e 2011 2010 2009 2008 2007 2006 2005 2004 UK Sweden Norway Germany France

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Price increase deflated by purchasing power

MARKET OUTLOOK

¡ High gap between nominal and real price development past ten years ¡ Price increase since 1985:

¡ Nominal: 6.3x ¡ Adjusted for CPI: 3.0x ¡ Adjusted for disposable income: 1.5x

¡ The increase in purchasing power explains much of the nominal growth in housing prices

Housing price development in Norway

Index

Source: Norges Bank

100 200 300 400 500 600 700 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Nominal prices CPI adjusted prices Prices adjusted for disposable income per capita

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Purchase power stronger than ten year average

0 % 10 % 20 % 30 % 40 % 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Single Young couple Established couple

Household interest payments after tax as a proportion of post-tax earned income

21 % Single 12 % Young couple

7 %

Established couple

Source: Statistics Norway

2013

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Housing completions and population growth

10000 20000 30000 40000 50000 60000 70000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Housing completions Population growth

Source: Statistics Norway

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Population growth 2013 - 2024

50000 100000 150000 200000 250000 300000 350000 400000 450000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Low High Medium

Source: Statistics Norway

40

Breakdown for medium population growth

50000 100000 150000 200000 250000 300000 350000 400000 450000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Immigration Other growth

Source: Statistics Norway

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Origin of current Norwegian immigrants

52 % 11 % 31 % 3 % 3 % 0 % Europe Africa Asia North America South America Oceania

¡ There are 655 000 first or second generation immigrants in Norway ¡ Immigrants account for 13 per cent of the population ¡ Most represented countries are Poland and Sweden ¡ Labour immigrants settle in and around the Major cities

Source: Statistics Norway