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

Company presentation

Baard Schumann, CEO Haavard Rønning, CFO February 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 212 units Stockholm 79 units Greater-Oslo 7873 units Bergen 163 units Stavanger 1 854 units

Norway’s leading homebuilder

¡ Sales in Q4: 61 units ¡ Sales as of Q4: 740 units ¡ Industrial approach to homebuilding ¡ Land bank for 10 650 homes ¡ Housing concepts tailored to house buyer requirements

Other 310 units

Note: The numbers represent the size of the land portfolio as at 31. December 2013. 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 ~3 300 residential units, whereof the company has purchasing obligations for ~2 800 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 § 86% of units in production are sold per Q1’13

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 ¡ 13 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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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 highlights Q4 2013 (IFRS)

¡ Revenues of NOK 376 million (1 252)

¡ Delivery of 118 units (309) ¡ Sale of properties NOK 70 million (213)

¡ Project cost of NOK 316 million (968) ¡ Other OPEX NOK 63 million (75)

¡ Bonus for 2013 booked in Q3 13. Bonus for 2012 booked in Q4 2012

FINANCIAL UPDATE

Revenue and EBITDA margin (IFRS)

NOKm 1 252 524 621 677 376 18 % 20 % 15 % 13 % 0 % Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Operating revenues EBITDA margin NOKm

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¡ Revenues of NOK 2 197 million (2 812)

¡ Delivery of 687 units (776) ¡ Net contribution from sale of properties NOK 33 million (124)

¡ Project cost of NOK 1 710 million (2 141) ¡ Other OPEX was NOK 231 million (236)

FINANCIAL UPDATE

Revenue and EBITDA margin (IFRS)

NOKm 2 812 2 197 18 % 13 % 2012 2013 Operating revenues EBITDA margin

Income statement highlights FY 2013 (IFRS)

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Income statement highlights Q4 2013 (NGAAP)

¡ Margin negatively affected by low sales in q4 2013 ¡ High production ¡ Good margins in projects under construction

¡ EBITDA-margin in Q4 adjusted for sales of plots and one-offs was 13.2%

¡ Q4 2012 positively affected by a gain

• f NOK 57.0 million from sale of land

to the Oslo Municipality

FINANCIAL UPDATE

Revenue and EBITDA margin (NGAAP)*

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

NOKm 1 047 638 593 614 755 17 % 23 % 15 % 17 % 11 % Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Operating revenues EBITDA margin

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553 587 5 338

• 199
• 7
• 489

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• 9

Cash and cash equivalents at 30 September Profit (loss) before income taxes Depreciation and amortisation Changes in trade receivables Other changes in working capital CF from investment activities Net change in borrowings Payment of profit sharing and dividends Cash and cash equivalents at 31 December

¡ Payment for residential units delivered in Q3 2013

¡ Løren 7 (NOK 120m) ¡ Nesttun (NOK 120m) ¡ Lervik Brygge (NOK 98m)

¡ Increased volume of units under construction ¡ Less units delivered

Cash flow development

FINANCIAL UPDATE

Condensed cash flow

NOKm

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488 1 177 1 120 Top-up loan Land Loan Construction loan

Sound debt structure

FINANCIAL UPDATE

Loan facility Drawn per 31 Dec (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 NOK 500 million long term land loan from DNB 236 2.25% 5 Land loan facilities from a range

• f Nordic credit institutions

942 2.20% - 3.15% 6 Construction loan facilities from a range of Nordic credit institutions 1 120 2.20% - 3.00%

Interest bearing debt as at 31 Dec 2013

Note: Bond loan of NOK 500m differs form the summed up top up loan in the table (NOK 488m). The difference is due to NOK -12m in amortized cost which is not actual debt.

NOK

2 785

Million

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Appendix

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Income statement IFRS

FINANCIAL UPDATE

(figures in NOK million) Q4 2013 Q4 2012 2013 2012 Total operating revenues 375.6 1 252.1 2 197.0 2 812.0 Project expenses (316.1) (967.7) (1 709.6) (2 141.3) Other operating expenses (57.7) (68.3) (208.8) (212.7) Other gains (loss) (0.5) (0.0) (0.4) 0.1 Associated companies and joint ventures 0.4 13.2 10.9 53.4 EBITDA 1.6 229.2 289.1 511.5 Depreciation and amortisation (5.3) (7.0) (22.1) (21.9) EBIT (3.7) 222.2 267.0 489.6 Net financial expenses (2.8) (2.3) (30.0) (41.5) Profit/(loss) before taxes (6.6) 219.9 237.0 448.1 Income taxes 14.1 (55.6) (50.2) (101.8) Net income 7.5 164.3 186.8 346.3 Net income for the period attributable to: Minority interests 4.7 26.0 21.4 68.0 Shareholders in Selvaag Bolig ASA (majority interests) 2.8 138.3 165.3 278.4

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Cash Flow statement

FINANCIAL UPDATE

(figures in NOK million) Q4 2013 Q4 2012 2013 2012 Net cash flow from operating activities (152.9) 715.4 104.0 464.3 Net cash flow from investment activities (2.6) 6.1 48.8 18.0 Net cash flow from financing activities 189.5 (589.2) (123.7) (319.5) Net change in cash and cash equivalents 34.1 132.3 29.1 162.8 Cash and cash equivalents at start of period 552.9 425.7 558.0 395.2 Cash and cash equivalents at end of period 587.0 558.0 587.0 558.0

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(figures in NOK million) 2013 2012 Intangible assets 434.5 459.6 Property, plant and equipment 4.9 6.5 Investments in associated companies and joint ventures 150.7 158.4 Other non-current assets 166.6 152.4 Total non-current assets 756.7 776.8 Inventories (property) 4 283.9 3 910.7

• Land

1 753.4 1 961.0

• Work in progress

2 398.8 1 831.7

• Finished goods

131.6 118.0 Other current receivables 342.3 489.3 Cash and cash equivalents 587.0 558.0 Total current assets 5 213.2 4 958.0 TOTAL ASSETS 5 969.8 5 734.9 Equity attributed to shareholders in Selvaag Bolig ASA* 2 237.5 2 072.2 Non-controlling interests 22.7 74.4 Total equity 2 260.2 2 146.6 Non-current interest-bearing liabilities 2 116.2 1 461.5 Other non-current non interest-bearing liabilities 257.3 213.1 Total non-current liabilities 2 373.5 1 674.6 Current interest-bearing liabilities 669.0 1 368.8 Other current non interest-bearing liabilities 667.1 544.8 Total current liabilities 1 336.1 1 913.7 TOTAL EQUITY AND LIABILITIES 5 969.8 5 734.9

Balance sheet

FINANCIAL UPDATE

* Corresponding to a book value of NOK 23.9 per share

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Inventories (property)

1 961 1 917 1 871 1 778 1 753 1 832 1 830 1 895 1 882 2 399 118 106 149 205 132 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 20132 Land (undeveloped) Work in progress Finished projects

FINANCIAL UPDATE

NOKm

Inventory value development ¡ Land value decreased

¡ Acquisition at Løren completed in Q4 ¡ Disposal of plot in Tromsø completed in Q4

¡ Work in progress increased

¡ High activity in projects under construction

¡ Finished goods decreased by NOK 73 million

¡ Due to sale of commercial property at Løren and units been finalized in previous quarters being delivered to buyers

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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

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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Only one sales start due to market conditions

¡ Sales start postponed due to market conditions ¡ Sales start on one project

¡ Terraced homes in Greater Oslo – 9 units

OPERATIONAL UPDATE

Sales starts per quarter

No of units 293 227 291 343 9 Q4 12 Q1 13 Q2 13 Q3 13 Q413

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Sales pace slowing down

OPERATIONAL UPDATE

Residential units sold Total sales value and value per sold unit

No of units NOKm 388 649 1 011 740 2010 2011 2012 2013 Q1 Q2 Q3 Q4 820 897 722 625 246 3,7 3,7 3,6 2,6 4,0 Q4 12 Q1 13 Q2 13 Q3 13 Q413

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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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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