K-Fast Holding AB (publ): Interim report January-June 2021

2021-07-29 18:00:00

Financial ratios for the period 1 January-30 June 2021

+----------------+---------+---------+---------+---------+--------+
|  Financial |    2021 |    2020 |   2021 |    2020 |   2020 |
|ratios | Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun |Jan-Dec |
+----------------+---------+---------+---------+---------+--------+
|  Rental income,| 63.0 |  49.0 | 122.5 |  96.8 |  203.9 |
|SEK million | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Profit from |  25.1 |  19.5 | 44.6 |  35.0 | 75.3 |
|property | | | | | |
|management, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Comprehensive |  200.7 |  111.3 | 372.6 |  203.6 |  473.1 |
|income for the | | | | | |
|period, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Investment | 8,043.6 | 5,751.5 | 8,043.6 | 5,751.5 |6,853.5 |
|properties, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Long-term net | 4,190.0 | 2,818.0 | 4,190.0 | 2,818.0 |3,661.2 |
|asset value | | | | | |
|(NAV), SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+--------+
| | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Number of | 2,305 | 1,865 | 2,305 |  1,865 | 2,237 |
|apartments under| | | | | |
|management | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Number of | 160| 389 | 456 | 619 | 912 |
|construction | | | | | |
|starts, | | | | | |
|apartments | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Number of |  1,699 |  1,249 |  1,699 |  1,249 | 1,311 |
|apartments under| | | | | |
|construction | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Number of |  5,522 |  2,888 |  5,522 |  2,888 | 3,880 |
|apartments under| | | | | |
|project | | | | | |
|development | | | | | |
+----------------+---------+---------+---------+---------+--------+
| | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Interest |  2.8 |  2.7 |  2.7 |  2.6 |  2.6 |
|coverage ratio, | | | | | |
|multiple | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Equity/assets |  37.2% |  38.9% |  37.2% |  38.9% |  41.9% |
|ratio, % | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Loan-to-value | 54.8% | 53.4% |  54.8% |  53.4% |  46.7% |
|ratio, % | | | | | |
+----------------+---------+---------+---------+---------+--------+
| | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Profit from |  0.12 |  0.10 |  0.21 | 0.17 |  0.36 |
|property | | | | | |
|management, SEK | | | | | |
|per share* | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Growth in | 21.3% |  -13.8% | 20.1% | -7.0% |  6.3% |
|profit from | | | | | |
|property | | | | | |
|management per | | | | | |
|share, % | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Long-term net | 19.46 |  13.86 | 19.46 |  13.86 | 17.00 |
|asset value | | | | | |
|(NAV), SEK per | | | | | |
|share* | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Growth in long|  6.9% |  5.6% | 14.4% |  10.9% | 36.1% |
|-term net asset | | | | | |
|value (NAV), per| | | | | |
|share, % | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Earnings per | 0.94 |  0.55 |  1.72 |  1.00 |   2.29 |
|share, SEK* | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Number of |  215.3 |  203.3 |  215.3 |  203.3 |  215.3 |
|shares | | | | | |
|outstanding at | | | | | |
|the end of the | | | | | |
|period, | | | | | |
|millions* | | | | | |
+----------------+---------+---------+---------+---------+--------+
|  Average number| 215.3 |  203.3 |   215.3 |  203.3 |  207.5 |
|of shares | | | | | |
|outstanding | | | | | |
|during the | | | | | |
|period, | | | | | |
|millions* | | | | | |
+----------------+---------+---------+---------+---------+--------+

*Adjusted for 6:1 share split on 7 June 2021.

 

A Message from the CEO

We started the year by taking possession of the shares in Finja Prefab AB which comprises our fourth business area, Prefab, alongside our production plants for lightweight external wall units in wood and the new acquisition of Kilen Prefab in Strängnäs. We are now resting on a stable foundation of four cornerstones with positive cash flow and profit, together creating a unique business model and adding value to the Group. We are so much more than a traditional property company. In the first half-year, project development, construction and prefab generated as much as 60 percent of profit. Property management generated 40 percent. I believe that financial and environmental sustainability cannot be secured until you own the entire process throughout the value chain.

Group profit for the first half-year was SEK 371.1 million, an increase of as much as 82 percent year-on-year. NAV per share increased by 14 percent in the first half-year, which should be seen in relation to our financial target of average NAV growth of 20 percent per share and financial year. The growth rate is high and will remain so. We are well positioned for meeting our financial and partially updated operational targets. In the first six months of the year, rental income and profit from property management increased by 27 percent respectively year-on-year.

We had an eventful second quarter where we extended our collaboration with BoKlok in a portfolio transaction encompassing building rights for just over 260 apartments, of which BoKlok will construct 100. Construction has already started on 40 of the apartments, located in Uppsala. The joint target with BoKlok aims to generate transactions relating to 1,000 apartments over three years, which we are now half way towards meeting.

In the second quarter, we also entered into an agreement relating to the acquisition of 25 percent of the shares in Mjöbäcks Entreprenad AB, a very well-run company that constructs around 300 residential units per year, equally distributed between single-family houses and tenant-owner apartments, and which has a proprietary production plant in Mjöbäck. We have known and collaborated with Mjöbäck for a long time and view the ownership as a good opportunity to develop the collaboration further. Alongside Mjöbäck, K-Fastigheter's develops rental apartments that allow municipalities and other partners to offer complete solutions for multi-family dwellings with rental and tenant-owner title formats, as well as freehold ownership of single-family homes. Together, we can develop larger land parcels and building right portfolios, which creates synergies.

Our Project Development business area is well prepared and the high transaction rate for attractive building rights in strategic locations continued in the quarter. At the end of the period, the total building and project portfolio encompassed 7,221 apartments, an increase of 75 percent year-on-year. In the Construction business area, we started three projects in the second quarter and completed one project. We have worked hard to reach the new operational target of starting construction of 1,300 apartments annually by 2023, and this year we are already set to achieve our operational goal for 2023 of starting construction of 1,000 apartments per year. The total acquisition value of proprietary ongoing production corresponds to 71 percent of market value on completion, based on external market valuations as of the end of the second quarter. A KPI that we term "PTV" (production to value) indicates a margin on new construction of as much as 29 percent.

We recognize this margin as unrealized value changes in line with projects being completed. This margin should be viewed as our gross margin on project development and construction, as it is directly attributable to the cost efficiency of our projects. This is not to be mistaken for unrealized value changes in our holding of completed investment properties, although both items are recognized on the same line for accounting purposes. This is one of K-Fastigheter's growth engines which accelerates as ongoing production increases. This means that it is particularly pleasing that the number of apartments in ongoing production increased to all of 1,699 in the period, corresponding to 36 percent year-on-year. We have established a completely new level in terms of recognizing unrealized value changes in our new production.

The new business area Prefab has fallen into step with the rest of the Group. At the end of the period, we had already added five internal projects of 413 residential units to the order books, including our project in Vallensbæk outside Copenhagen which is now in full swing. Our longterm strategy is to continue our external market deliveries to the same extent as before, and where K-Fastigheter's internal projects are additional to Prefab's pre-existing volumes. For Prefab, this implies volume growth of 50 percent. In 2022, we expect to suborder all K-Fastigheter's projects from Prefab. Prefab benefits significantly from increased volumes. The large volume increase will generate economies of scale, as it does not generate a corresponding increase in internal expenses. Now that we are easing off the brakes in order to expand the business area, we are set to significantly increase the efficiency of K-Fastigheter's internal production.

Prefab, which is subject to normal seasonal variations, reported gross profit of SEK 34.9 million for the first half-year, in line with our expectations that 2021 will be a normal year with results equivalent to pre-pandemic outturns. Prefab is working hard to reduce its CO\2\ footprint by 50 percent over a three-year period and is more than half way to achieving this outcome. Prefab is currently alone in being able to offer climate-positive concrete frames. Prefab has felt the effect of rising raw materials prices, mainly on steel for reinforcement bars. The effect is relatively limited as purchasing of reinforcement bars only comprises one eighth of the total costs. However, our increasing volumes within Prefab create the opportunity to offset these cost increases. The costs can largely be offset by increased volumes. Information presented after the end of the quarter about increased uncertainty regarding the supply of cement from Cementa's factory in Slite on Gotland is of more concern, however. Although we have good relations with other cement suppliers, we expect prices to increase. The overall effect will be very negative for the Swedish construction industry.

In the first half-year, we worked hard to reduce the vacancies in Växjö, which were due to the completion of a large volume of apartments in a short period of time. I am pleased to announce that these vacancies, which affected our financial letting ratio and surplus ratio negatively, have now been almost entirely filled, and our financial letting ratio was 96.2 percent at the end of the second quarter.

The letting ratio is high in the project portfolio, and we achieved a new record in the number of apartments let in not yet completed projects for two of the months in the second quarter. The net letting ratio is well over 100 apartments per month in the project portfolio, which is pleasing considering future projects that are in the process of being completed.

I remain grateful for the confidence shown in me by all shareholders and will do my utmost to live up to this confidence. The share price has made positive progress, and had increased by 41 percent compared to the start of the year as of 30 June. We completed a 6:1 share split in the second quarter, and the new number of shares now amounts to 192,831,168 Class B shares ad 22,500,000 Class A shares. Finally, the K-Fastigheter share was included in EPRA's index series, FTSE EPRA Nareit Global Developed Index, from 21 June onwards. EPRA index is a leading global index for listed property investments consisting of some 500 property companies.

I feel positive about summing up the first half of 2021. I am proud of our incredible employees who have delivered unprecedented growth for K-Fastigheter despite nearly 18 months in a pandemic and with many new conditions. To succeed you need to be able to think outside the box and be innovative, both of which being characteristics of K-Fastigheter's approach.
Jacob Karlsson, July 2021
A complete Interim report January-June 2021 is attached and also published on the Group's website, under the heading Financial reports (https://k-fastigheter.com/en/investors/financial-reports).
For further information, please contact:
Jacob Karlsson, CEO, K-Fast Holding AB, e-mail: jacob.karlsson@k-fastigheter.se,telephone: +46 738 219 626
Martin Larsson, Deputy CEO/CFO, e-mail: martin.larsson@k-fastigheter.se,telephone: +46 703 533 160
Anders Antonsson, Head of Investor Relations, e-mail: anders.antonsson@k-fastigheter.se,telephone: +46 708 730 900
This information is such that K-Fast Holding AB is obliged to disclose in accordance with the EU's Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 6:00 p.m. CEST on 29 July 2021.
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In a recorded presentation, to be published at 8:30 a.m. CEST on Friday 30 July 2021, K-Fastigheter's President and CEO, Jacob Karlsson, and CFO, Martin Larsson, are commenting on the Group's Interim report January - June 2021. The presentation is held in Swedish. Link to the presentation: www.k-fastigheter.se/en/investors/presentations.  (https://k-fastigheter.com/en/investors/presentations)Questions may be addressed in writing to ir@k-fastigheter.sewith answers being compiled on an ongoing basis during the day and being published on www.k-fastigheter.com/en (http://www.k-fastigheter.se/en). (https://k-fastigheter.com/en/investors/presentations)

This disclosure contains information that K-Fast Holding AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014) and the Swedish Securities Markets Act (2007:528). The information was submitted for publication, through the agency of the contact person, on 29-07-2021 18:00 CET.

Cision