Company presentation Baard Schumann, CEO Haavard Rnning, CFO May - - PowerPoint PPT Presentation

Company presentation

Baard Schumann, CEO Haavard Rønning, CFO May 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

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Tromsø 155 units Trondheim 323 units Stockholm 79 units Greater-Oslo 8 319 units Bergen 163 units Stavanger 1 849 units

Norway’s leading homebuilder

¡ Sales in Q1: 139 units ¡ Industrial approach to homebuilding ¡ Land bank for 11 200 homes ¡ Housing concepts tailored to house buyer requirements

Other 310 units

Note: The numbers represent the size of the land portfolio as at 31. March 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 ~3 900 residential units, whereof the company has purchasing obligations for ~3 400 and purchasing options for ~500. units.

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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

5 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

• 50 000 homes

completed Listed at Oslo Børs

«You can't criticise things unless you can simultaneously present an alternative or a solution which is better than the one you're criticizing»

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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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 Q1’14

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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Improved sales pace

OPERATIONAL UPDATE

Residential units sold Total sales value and value per sold unit

Units NOKm 897 722 625 246 483 3,7 3,6 2,6 4,0 3,5 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 649 1 011 740 139 2011 2012 2013 2014 Q1 Q2 Q3 Q4

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Income statement highlights Q1 2014 (IFRS)

¡ Revenues NOK 245 million (524) ¡ Delivery of 80 units (170) ¡ Project costs NOK 193 million (378) ¡ Low Sales & Marketing costs ¡ NOK 8.1 million (7.3)

FINANCIAL UPDATE

Revenue and EBITDA margin (IFRS)

524 621 677 376 245 20 % 15 % 13 % 0 % 4 % Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Operating revenues EBITDA margin NOKm

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Income statement highlights Q1 2014 (NGAAP)

¡ High production ¡ Good margins in projects under construction

FINANCIAL UPDATE

Revenue and EBITDA margin (NGAAP)*

* Construction cost are exclusive of financial expenses in the segment reporting

NOKm 638 593 614 755 688 23 % 15 % 17 % 11 % 18 % Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Operating revenues EBITDA margin

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Cash and cash equivalents at 31 December 2013 Profit (loss) before income taxes Depreciation and amortisation 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 31 March 2014

Cash flow development Q1 2014

FINANCIAL UPDATE

¡ Payments for majority of residential units delivered in Q1 2014 will be received in later quarters ¡ High activity in projects under construction

Condensed cash flow

NOKm 587

• 3

5

• 361
• 90

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• 3

416 586

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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 Q1 2014

¡ Book value per share NOK 23.8 ¡ Trade receivables increased NOK 90 million ¡ Inventory increased NOK 378 million ¡ Net increase NOK 215 million in non current interest-bearing liabilities ¡ Net increase NOK 218 million in current interest-bearing liabilities ¡ Prepayments from customers count for NOK 328 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)

1 917 1 871 1 778 1 753 1 721 1 830 1 895 1 882 2 399 2 841 106 149 205 132 99

• 1 000

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

FINANCIAL UPDATE

NOKm

Inventory value development

¡ Land value decreased

¡ Due to construction starts

¡ Work in progress increased by NOK 442 million

¡ High activity in projects under construction

¡ Finished goods decreased by NOK 32 million

¡ Delivered units finalized in previous quarters

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489 1 175 1 554 Top-up loan Land Loan Construction loan

Sound debt structure

FINANCIAL UPDATE

Loan facility Drawn per 31 Mar (NOKm) Interest rate margin 1 NOK 500 million senior unsecured bond loan 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 2014 2.50% 4 Land loan facilities from a range

• f Nordic credit institutions

1 175 2.20% - 3.15% 5 Construction loan facilities from a range of Nordic credit institutions 1 554 2.20% - 3.00%

Interest bearing debt as at 31 Mar 2014

Note: Bond loan of NOK 500m differs form the summed up top up loan in the table (NOK 489m). The difference is due to NOK -11m in amortized cost which is not actual debt.

NOK

3 218

Million

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Sales

243 210 109 121 95 61 122 113 51 35 139 167 68 45 42 50 100 150 200 250 300 Selvaag Bolig BWG Norge JM Norge Skanska Norge Veidekke Norge Q1 2013 Q4 2013 Q1 2014

COMPETITION

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Second-hand market:

Positive sales and inventory development

MARKET OUTLOOK

¡ Improved market conditions

¡ Price increase ¡ Strengthened sales (affected negatively by Easter in April) ¡ Market inventory at moderate levels (historically)

¡ Financial macro more probable market driver than psychology going forward

¡ Low interest rates ¡ Banks increasing lending to private households ¡ Stable low unemployment rates Norway, total market, April 2007-2014

No of units

Source: Eiendomsverdi

5 000 10 000 15 000 20 000 25 000 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 30 April 2014 Sold units April 2014

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MARKET OUTLOOK

Oslo and Akershus, April 2007-2014

No of units

Rogaland, April 2007-2014

No of units

Source: Eiendomsverdi

1 500 3 000 4 500 6 000 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 30 April 2014 Sold units April 2014

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

200 400 600 800 1 000 1 200 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 30 April 2014 Sold units April 2014

Second-hand market:

Positive sales and inventory development

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Appendix

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Organisation

Selvaag Bolig CEO Sales and marketing Property investment Portfolio management SBO Rogaland SBO Vestfold Customer support Selvaag Bolig Modulbygg Selvaag Pluss Service Administration Finance and accounting Core business

Employees: 82

SBO Trondheim

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Income statement IFRS

FINANCIAL UPDATE

(figures in NOK million) Q1 2014 Q1 2013 2013 Total operating revenues 244.6 523.8 2 197.0 Project expenses (193.1) (377.9) (1 709.6) Other operating expenses (41.3) (43.6) (208.8) Other gains (loss)

• - (0.4)

Associated companies and joint ventures (1.2) (0.2) 10.9 EBITDA 9.0 102.2 289.1 Depreciation and amortisation (5.2) (5.5) (22.1) EBIT 3.8 96.7 267.0 Net financial expenses (6.3) (14.6) (30.0) Profit/(loss) before taxes (2.5) 82.1 237.0 Income taxes 0.7 (20.6) (51.4) Net income (1.9) 61.5 185.6 Net income for the period attributable to: Non-controlling interests 1.1 5.0 21.4 Shareholders in Selvaag Bolig ASA (3.0) 56.5 164.1

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Cash Flow statement

FINANCIAL UPDATE

(figures in NOK million) Q1 2014 Q1 2013 2013 Net cash flow from operating activities (413.7) 319.5 104.0 Net cash flow from investment activities (2.6) 20.3 48.8 Net cash flow from financing activities 415.8 (321.9) (123.7) Net change in cash and cash equivalents (0.4) 17.9 29.1 Cash and cash equivalents at start of period 587.0 558.0 558.0 Cash and cash equivalents at end of period 586.6 575.9 587.0

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(figures in NOK million) Q1 2014 Q1 2013 2013 Intangible assets 429.8 454.8 434.5 Property, plant and equipment 4.4 6.3 4.9 Investments in associated companies and joint ventures 152.1 150.7 150.7 Other non-current assets 170.7 143.8 166.6 Total non-current assets 756.9 755.5 756.7 Inventories (property) 4 661.3 3 853.4 4 283.9

• Land

1 720.7 1 917.0 1 753.4

• Work in progress

2 841.2 1 830.0 2 398.8

• Finished goods

99.4 106.4 131.6 Other current receivables 444.1 287.7 342.3 Cash and cash equivalents 586.6 575.9 587.0 Total current assets 5 692.1 4 716.9 5 213.2 TOTAL ASSETS 6 449.0 5 472.5 5 969.8 Equity attributed to shareholders in Selvaag Bolig ASA* 2 233.3 2 128.7 2 236.3 Non-controlling interests 23.8 24.6 22.7 Total equity 2 257.1 2 153.3 2 259.0 Non-current interest-bearing liabilities 2 330.7 1 452.0 2 116.2 Other non-current non interest-bearing liabilities 265.1 233.7 258.1 Total non-current liabilities 2 595.8 1 685.6 2 374.3 Current interest-bearing liabilities 887.0 1 111.3 669.0 Other current non interest-bearing liabilities 709.0 522.2 667.5 Total current liabilities 1 596.1 1 633.5 1 336.6 TOTAL EQUITY AND LIABILITIES 6 449.0 5 472.5 5 969.8

Balance sheet

FINANCIAL UPDATE

* Corresponding to a book value of NOK 23.8 per share

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Increase in sales starts

¡ Sales starts on four projects

¡ Løren ¡ Kornmoenga ¡ Sjøsia (two construction stages)

¡ Stage I “Start” and stage II “Hjem” (see slide 27 for sales development)

¡ Aase Gård ¡ Clear signs of market improvement

OPERATIONAL UPDATE

Sales starts per quarter

No of units 227 291 343 9 154 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

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Construction starts in Q1 2014

¡ Construction starts in five projects

¡ Bjørnåsen Nord ¡ Kaldnes ¡ Kornmo ¡ Bo Emmaus ¡ Aase Gård

OPERATIONAL UPDATE

Housing starts per quarter

No of units 168 284 335 296 77 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

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Steady production activity

¡ Sales value of units in production NOK 5 547 million ¡ 78% of production volume in Greater Oslo ¡ 76% of the units are sold

OPERATIONAL UPDATE

Note: All numbers are adjusted for Selvaag Bolig’s ownership in joint ventures. Measure point: decision of construction start. Selvaag Bolig has two joint venture projects under

• construction. The joint venture partners’ share amount to 71 residential units, implying that

Selvaag Bolig currently manages 1545 residential units under construction

Quarterly development units in production

No of units 1 058 1 131 1 279 1 474 1 474 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 30 % 70 % Module On-site

Production split

1 474

Units

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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

Total land bank portfolio as of 31 December 2013

No of units

10 650 500 2 800 1 500 450 5 400 Total Land bank Option Obligation to acquire In production JV Land bank included in the balance sheet

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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

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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 were sale has started § Addition 235 units at Løren 5 and 171 units at Lørenvangen 64 § 185 flats delivered to customers § 162 flats under construction § 26 flats were sale has started § 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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Market inventory at 30 April – Norway

SECOND HAND MARKET

Market inventory: Homes for sale, not sold the last nine months Source: Eiendomsverdi Units

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Market inventory at 30 April – Oslo

SECOND HAND MARKET

Units Market inventory: Homes for sale, not sold the last nine months Source: Eiendomsverdi

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Market inventory at 30 April – Akershus

SECOND HAND MARKET

Units Market inventory: Homes for sale, not sold the last nine months Source: Eiendomsverdi

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Market inventory at 30 April – Rogaland

SECOND HAND MARKET

Units Market inventory: Homes for sale, not sold the last nine months Source: Eiendomsverdi

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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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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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Housing need derived from immigration by 2020

5000 10000 15000 20000 25000 30000 35000 40000 45000 Akershus Oslo Rogaland Hordaland Average for Norway Medium Low High

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

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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

• r 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

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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