ALM Equity AB (publ): Year-end Report January - December October - December 2016

Transcription

1 ALM Equity AB (publ): Year-end Report 2016 Stockholm, 24 February 2017 January - December 2016 According to segment reporting* revenue amounted to MSEK 1,132.9 (934.4) and operating profit amounted to MSEK (191.8). Profit after taxes was MSEK (161.4) equivalent to SEK (12.98) per common share. According to conversion to IFRS revenue amounted to MSEK 1,448.2 (1,701.2) and operating profit amounted to MSEK (233.6). Profit after taxes was MSEK (259.2) equivalent to SEK (9.17) per common share. At the end of the period equity amounted to MSEK 1,045.8 (781.7), equivalent to SEK (19.89) per common share. During the period construction was started on 786 (503) residences in projects, in which ALM Equity s share was 539 (335) residences. During the period 263 (951) residences in projects were sold, of which ALM Equity s share was 248 (575) residences. October - December 2016 According to segment reporting* revenue amounted to MSEK (229.7) and operating profit was MSEK 39.8 (41.6). Profit after taxes was MSEK 28.0 (33.9) equivalent to SEK 2.01 (2.60) per common share. According to conversion to IFRS revenue amounted to MSEK (429.7) and operating profit was SEK (80.1). Profit after taxes was MSEK (88.4) equivalent to SEK (3.36) per common share. During the period construction was started on 230 (113) residences in projects, in which ALM Equity s share was 230 (33) residences. During the period 184 (89) residences in projects were sold, of which ALM Equity s share was 175 (32) residences. Project Telegrafberget in Nacka with approximately 7,280 m 2 of development rights was acquired (50 percent ownership share). Sale of 60 percent of project Kista Square Garden to investors. * Segment reporting provides the fairest picture of ALM Equity s operations and is consistent with the Company s internal reporting and the accounting policies applied by the Company before the transition to IFRS.

2 Significant events after the period under review The Company has signed an agreement with JM AB, HSB Produktion AB and the employees of Småa AB to acquire 100 percent of the shares outstanding Småa AB. The purchase price amounts to MSEK 870 to be financed by a loan from Nordea in the amount of MSEK 600 and approximately 2.5 million preferred shares. An extra general meeting of shareholders has been called for 24 February with the intention of giving the Board of Directors mandate to issue 3.5 million preferred shares. On 12 January 2017 the detailed zoning plan for Timotejen 19 and 28 at Telefonplan, Stockholm, gained legal force which means that possession will be taken during the first quarter of ALM Equity s share is just over 50 percent. Properties totalling 10,000 m 2 of commercial space in central Enköping were acquired for MSEK 95. ALM Equity ownership share is 50 percent. The intention is to develop the Enköping downtown area with new and attractive residential and retailing environments. Listing of the Company s bonds issued during 2016 has been switched from First North to Nasdaq Stockholm. In connection therewith the Company has switched to reporting according to IFRS. The Board of Directors proposes a dividend of 1 preferred share per 100 common share in the form of a bonus issue in lieu of a cash dividend. This is equivalent to a redemption value of SEK 1.20 (1.20) per common share. The Board of Directors further proposes a cash dividend of SEK 8.40 (8.40) per preferred share payable in a quarterly amounts of SEK 2.10 (2.10). 2

3 President s statement With the acquisition of Småa AB, ALM Equity virtually doubles its business based on revenue numbers for Småa has been active in the Stockholm region since In recent years, production has switched gradually from the single-family home market to production of tenant owner s right flats. Småa s development right portfolio consists largely of multidwelling buildings. The similarities with ALM Equity are apparent, but as the map demonstrates, it is easy to see that the companies complement each other. Geographically and in terms of operations we are a good match. Much like ALM Equity, Småa has a sizeable portfolio of development rights for future production, as well as a project portfolio that is being developed internally into object ready for construction. We are similar in a multitude of ways and with closer co-operation between the organisations in matters such as planning, procurement and sales, we are expecting improvements in our offer to the customers as well as in profitability. During last year we expended much effort into analysing and evaluating Småa. There were some forty projects at different stages to be assessed and evaluated. In recent years the company has generated stable earnings growth, from MSEK 40 in 2012 to almost MSEK 80 in At the time of writing the result for 2016 is expected to be MSEK 60 before taxes. It is with great confidence we will now tackle the process of integrating the business in Småa with our own operations. For ALM Equity itself 2016 represented continued increase in the number of homes in production. Construction began on a number of large projects during the second half of the year. The effects thereof will be seen in the form of future earnings. The full-year result was at the same level as last year and should be regarded as a middling year of consolidation at a high level. Residential projects Total ALM's share Jan-Dec Jan-Dec Jan-Dec Jan-Dec Development rights of which development rights in the residential portfolio of which development rights in the planning portfolio Construction started Residential units sold Residential units in production at end of period Selling rate in production 89% 82% 87% 86% Homes delivered to the market One reason for the year s slightly lower operating margin is the multitude of development right acquisitions not yet in production but in a concept phase, with construction expected to begin during The acquisition of Småa also required major efforts and involved extra costs. A large portion of these extra costs were borne in 2016, whereas the revenue will be seen for many years to come. With the inclusion of Småa, ALM Equity will command a project portfolio of approximately 10,600 development rights, a volume sufficient for many years at the current level of sales. I extend a warm welcome to Småa and I am looking forward to a new year with new and exciting challenges. Joakim Alm 3

4 BUSINESS Residential projects detail-planned properties allowing construction of housing As of 31 December 2016 the residential portfolio contained 22 (20) residential projects with development rights totalling approximately 196,900 (126,200) m 2, of which ALM Equity s share was approximately 129,800 (88,100) m 2. This is equivalent to 3,479 (2,627) residences, of which ALM Equity s share is 2,371 (1,865) residential units. The portfolio includes 2,400 m 2, of which ALM Equity s share is 1,200 m 2 of areas acquired but not yet carried in the balance sheet. At the end of the period 10 (9) projects were in production, covering 1,204 (718) residential units. ALM Equity s share is 840 (454) residential units. Of these, 1,089 residential units are new production, while 115 units are created through conversion of existing buildings. The total selling rate of units in production was 89 (82) percent at the end of the quarter. Project Telegrafberget in Nacka was acquired during the fourth quarter (ownership share 50 percent), with approximately 7,280 m 2 of development rights. Possession was taken by buyers at Mälarutsikten with 127 residential units (ownership 100 percent) and Linbanan 3 in Enköping with 70 residential units (ownership 50 percent) during the quarter. At the end of the fourth quarter of 2016, our residential projects were distributed as follows: As of 30 September 8 (10) residential units were held in inventory, carried at a value of MSEK 14.7 (27.8), equivalent to production costs. During the fourth quarter 0 (1) residential units was sold for MSEK 0 (3.9) from ALM Equity s own inventory. At the end of the fourth quarter ALM Equity guaranteed the purchase of 126 (96) residential units in production-started projects for a total of MSEK (120.0). The guarantee relates to any unsold residential units where construction is completed. 4

5 Plan projects - raw land or zoned properties where the detailed zoning plan may be amended At the end of the period the project the portfolio contained 15 (12) plan projects where the plan is to develop 4,816 (4,337) residential units, primarily located in the Greater Stockholm Metropolitan Area. ALM Equity s share is 2,719 (1,935) residential units. As of 31 December the plan portfolio contained 268,800 (244,300) m 2 of planned residential projects, of which ALM Equity s share was 151,300 (160,500) m 2. ALM Equity s share decreased during the fourth quarter due to the sale of Kista Square Garden to investors. The plan portfolio includes 180,000 m 2, of which ALM Equity s share is 119,000 m 2, which has been acquired but possession has not yet been taken. At the end of the fourth quarter 2016, our plan projects with estimated development rights were distributed as follows: 5

6 FINANCIAL POSITION Result for the period January - December 2016 Net revenue according to segment reporting, which is consistent with ALM Equity s internal reporting and previous accounting policies, amounted to MSEK 1,132.9 (934.4), operating profit was MSEK (191.8), the operating margin to 18.1 (20.5) percent, and the period s profit after taxes was MSEK (161.4). The Group s operations are seen as one single segment: Residential development. Restated according to IFRS, net revenue amounted to MSEK 1,448.2 (1,701.2), operating profit was MSEK (233.6), the operating margin was 15.0 (13.7) percent and profit after taxes amounted to MSEK (259.2). The main differences between segment reporting and IFRS are as follows: - With segment reporting parts of the income statement and balance sheet are proportioned according to ownership share, whereas according to IFRS part ownership is recognized in the form of minority interest. - ALM Equity s model for gradual profit recognition, step 1 and step 2, is applied, while according to IFRS results are reported upon completion of projects when the tenant owner s rights associations are no longer controlled by ALM Equity. Control of the associations is manifested by the composition of the boards of directors. During 2016 a combination of the two methods was applied since both types of boards existed. - Interest in projects is capitalised according to IFRS. In segment reporting interest is expensed. - Interest hedging, so-called interest swaps, are valued at fair value according to IFRS. According to segment reporting the cost of interest swaps are expensed in accordance as a consequence of hedge accounting. Result for the period October - December 2016 (3 months) Net revenue according to segment reporting amounted to MSEK (229.7), the operating profit was MSEK 39.8 (41.6), the operating margin 14.8 (18.1) percent and the period s profit after taxes amounted to MSEK 28.0 (33.9). Restated according to IFRS, net revenue amounted to MSEK (429.7), operating profit was MSEK (80.1), the operating margin was 17.2 (18.6) percent and profit after taxes amounted to MSEK (88.4). The difference in fourth quarter outcome is due primarily to taking possession of project Mälarutsikten, where according to segment reporting profit was recognised gradually and according to IFRS upon completion of the project. Balance sheet as of 31 December 2016 The balance sheet total was MSEK 3,471 (2,247). Among assets at the end of the period, development properties constitute the largest item at MSEK 2,106 (795). On the liability side, interest-bearing loans from credit institutions amounted to MSEK 817 (836) and other shortterm, non-interest bearing liabilities to MSEK 746 (333). Equity amounted to MSEK 1,046 (782). At year-end the equity ratio stood at 30.1 (34.8) percent and according to segment reporting at 36.0 (46.0) percent. The externally infused capital in the project companies, which at the end of the period amounted to MSEK 178.8, is repaid upon completion of the relative project. In the event a project reports a deficit, the repayment is reduced by such deficit. 6

7 Liquidity, cash flow and financing The Group s cash and cash equivalents amounted to MSEK (220.0). Cash flow for the year was MSEK (114.3). Projects are financed primarily by a combination of bank loans, construction loans and shareholder contributions based on acquisition and project estimates. All project financing is currently on a short-term basis. The interest rate on bank loan liabilities was in the range percent as of 31 December, with an average interest rate of 2.48 percent. A 4-year unsecured bond loan was floated during in a total amount of MSEK 600 during the year under a MSEK 600 credit line intended for project financing. ALM Equity has invested MSEK 46 of its own funds in the issue. The bond carries variable interest at a rate of STIBOR 3m percent (quarterly payment). The due date is March The bonds were listed on First North Bond Market for institutional trading during the second quarter of The bonds are listed on Nasdaq OMX Stockholm since 22 February Significant events after the period under review The Company has agreed with JM AB, HSB Produktion AB and the employees of Småa to purchase 100 percent of the shares outstanding in Småa AB. The total purchase price amounts to MSEK 870. Payment and transfer of ownership is expected to take place in March The acquisition will be financed by a bank loan in the amount of MSEK 600 from Nordea and approximately 2.5 million preferred shares. The exact number of preferred shares to be paid will be determined by the average market price of the preferred share during the period 8 February and 5 March. ALM Equity and Småa together will have a project portfolio of 10,600 residential units in Stockholm and the Greater Stockholm Metropolitan Area. An extra general meeting of shareholders is scheduled for 24 February with the intention of giving the Board of Directors a mandate to issue 3.5 million preferred shares. The detailed zoning plan for Timotejen 19 and 28 at Telefonplan gained legal force on 12 January. The effect hereof is that the area around Ericsson s former head office will be vitalized. ALM Equity (with a stake of just over 50 percent) and its partners will take possession of the properties during the first quarter of 2017 with the intention to create approximately 1,000 new residential units. Properties with 10,000 m 2 of commercial space in central Enköping were acquired for MSEK 95, (50 percent ownership). The intention is to develop the Enköping downtown area with new and attractive residential and retailing environments. Plan approval for housing has been obtained. Listing of the Company s bonds issued during 2016 has been switched from First North to Nasdaq Stockholm. In connection therewith the Company has switched to reporting according to IFRS. The first day of listing was 23 February. The Board of Directors proposes a dividend of one (1) preferred share per 100 common shares in the form of a bonus issue in lieu of a cash dividend, equivalent to a redemption value of SEK 1.20 (1.20) per common share. The Board of Directors further proposes a cash dividend of SEK 8.40 (8.40) per preferred share payable in quarterly amounts of SEK 2.10 (2.10). 7

8 Parent Company Parent Company ALM Equity AB s result for the period amounted to MSEK 9.4 (94.1) and at the end of the period the Company had at its disposal cash and cash equivalents in an amount of MSEK (84.9). Guarantees for bank loans for project companies amounted to MSEK (360.9). Equity amounted to MSEK 509 (546). The equity ratio on the balance sheet date was 46.5 (95.6) percent. Risks and uncertainty factors During 2016 the Parent Company issued a bond loan in the amount of MSEK 600 at STIBOR percent. This raises the financing/liquidity risk in the Company. The Company carries MSEK 46 of the loan on its own books. The Company analyses its liquidity situation on an ongoing basis on a short-term as well as a long-term basis using its own models to handle these risks. ALM Equity s significant risks and uncertainty factors are described in the 2015 Annual Report on pages Transactions with closely related parties Transactions with closely related parties during the period are similar during the period to the ones in prior years. For further information refer to the IFRS report 2015 on the Company s website under the heading reports, note 28. 8

9 CONSOLIDATED REPORT OF COMPREHENSIVE RESULT Amounts in SEK thousand Oct-Dec Oct-Dec Jan-Dec Jan-Dec Net revenue Production and operating expenses Gross profit Selling and administration expenses Result from shares in associated companies Operating profit Financial income Financial expense Change in value of derivative instruments Profit before taxes Taxes Net profit for the period Other comprehensive result for the period Other comprehensive result Other comprehensive reslt for the period Comprehensive result for the period Oprofit for the year attributable to The Parent Company's equity holders Holdings without controlling influence Comprehensive result for the year attributable to The Parent Company's equity holders Holdings without controlling influence Earnings per share Earnings per common share before dilution (SEK) 11,57 3,36 13,05 9,17 Earnings per common share after dilution (SEK) 11,45 3,33 12,92 9,08 Earnings per preferred share (SEK) 2,10 2,10 8,40 8,40 Average number of common shares outstanding before dilution (thousands) Average number of common shares outstanding after dilution (thousands) Average number of preferred shares outstanding (thousands)

10 SUMMARY CONSOLIDATED BALANCE SHEET Amounts in SEK thousand ASSETS Non-current assets Machinery and equipment Shares according to the equity method Deferred tax asset Total non-current assets Current assets Development properties Residential projects in progress Inventory shares in tenant owner s associations Other short-term receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Long-term liabilities Long-term interest-bearing loans Derivative instruments Deferred tax liability Total long-term liabilities Short-term interest-bearing loans from credit institutions Subordinated interest-bearing debenture loans Other current liabilities, non-interest bearing Total current liabilities Total liabilities and equity

11 SUMMARY CONSOLIDATED REPORT ON CHANGES IN EQUITY Am ounts in SEK thousand Jan-Dec Jan-Dec Equity at beginning of period Net profit for the period Other comprehensive result 0 0 Net comprehensive result for the period Transactions with owners: Dividend paid Option premiums New issue Issuing costs Unconditional shareholder contributions Transactions with holdings without controlling influence* Total transactions with owners Equity at end of period SUMMARY CONSOLIDATED CASH FLOW STATEMENT Am ounts in SEK thousand Jan-Dec Jan-Dec Operating profit Financial items Items not affecting cash and cash equivalents Cash flow before changes in working capital Capital expenditures/sale of development properties Capital expenditures/sale of residential projects in progress Capital exenditures/sale of inventory shares in tenant owner's associations Other changes in working capital Cash flow from operating activities Capital ependitures/sale of tangible and financial non-current assets Cash flow from investment activities Bonds Dividend Shareholder contributions Loans raised/repaid New issue/warrants inluding fees Transactions Holdings without controlling influence Cash flow from financing activities Cash flow for the period Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

12 SUMMARY PARENT COMPANY INCOME STATEMENT Am ounts in SEK thousand Jan-Dec Oct-Dec Jan-Dec Jan-Dec Net revenue Selling and administrative expenses Operating result Group company profit Net finance items Result after finance items Year-end appropriations Result before taxes Taxes Net result for the period SUMMARY PARENT COMPANY BALANCE SHEET Am ounts in SEK thousand ASSETS Machinery and quipment Shares in associated companies Shares in Group companies Total non-current assets Current liabilities, etc Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Bond loan Total long-term liabilities Short-term interest-bearing loans from credit institutions 0 0 Other short-term non-interest-bearing liabilities Total current liabilities Total liabilities and equity

13 Key financial indicators and per-share data Group Oct-Dec Oct-Dec Jan-Dec Jan-Dec Operating margin (%) 17% 19% 15% 14% Operating margin according to segment reporting 15% 18% 18% 21% Profit after taxes (MSEK) 121,2 88,4 192,3 259,2 Profit after taxes according to segment reporting (MSEK) 28,0 33,9 159,2 161,4 Earnings per common share before dilution (SEK) 11,57 3,36 13,05 9,17 Earnings per common share before dilution according to segment reporting (SEK) 2,01 2,60 12,80 12,98 Return on equity (%) % 50% Equity ratio (%) 30% 35% 30% 35% Equity ratio acccording to sement reporting (%) 36% 46% 36% 46% Equity per common share (SEK) 32,77 19,89 32,77 19,89 Selling rate in production (%) 89% 82% 89% 82% Number of residential units sold (gross) Nuber of construction-started residential units (gross) Number of residential units under construction (gross) Residential project development rights (gross sqm) Planning project estimated development rights (gross sqm) Definitions and key financial indicators Unless otherwise specifically stated key financial indicators are calculated in accordance with IFRS. In certain cases key financial indicators are based on segment reporting. The equity ratio is calculated based on segment accounting since the covenants for the bond loans issued during 2016 stipulate this method of calculation. The Company is of the opinion that segment reporting provides the fairest picture of ALM Equity s operations and is consistent with the Company s internal reporting and the accounting policies applied by the Company before the transition to IFRS. Definitions Return on equity Profit after taxes, not including interest of the minority, less the preferred share dividend in percent of average equity attributable to the Parent Company s equity holders, less the preferred share capital. Equity per common share Equity at the end of the period relative to the number of common shares outstanding at the end of the period after taking the preferred share capital and minority interest into account. Earnings per preferred share The preferred share s proportion of the profit, equivalent to the period s accumulated proportion of annual dividend of SEK 8.40 per preferred share. Earnings per common share Profit for the period attributable to the Parent Company s equity holders in relation to average number of common shares outstanding after accounting for the preferred shares proportion of profit for the period. Operating margin Operating profit in percent of revenue. Equity ratio The sum total of equity in percent of total assets. 13

14 NOTES TO YEAR-END REPORT Note 1 Accounting policies ALM Equity applies International Financial Reporting Standards (IFRS) as adopted by the EU. This year-end report was prepared in compliance with IAS 34 Interim Financial Reporting and applicable parts of the Swedish Annual Accounts Acts. The accounting policies applied and the methods of calculation used are consistent with those applied in the financial reports according to IFRS for 2015 published on the Company s website on 14 February IFRS is applied from 1 January 2015 with a transition date of 1 January A description of the transition to IFRS and its effect on interim information for the fourth quarter is presented in Note 6 Effects of the transition to IFRS. The Parent Company s year-end report is prepared in accordance with the Swedish Annual Accounts Act. The same accounting policies and methods of calculation are applied as in the financial reports published 14 February 2017 in connection with issuance of a bond prospectus. As a consequence of the Group s transition to IFRS, the Parent Company applies the Swedish Annual Accounts Act and RFR 2 Accounting for Legal Entities. A description of the transition to RFR 2 and its effect on interim information for the fourth quarter is presented in Note 6 Effects of the transition to RFR 2. Not 2 Segment reporting ALM Equity does not split its operations into separate segments. Instead the Group s operations are seen as one single segment, residential development. The most significant difference compared to IFRS is the method of profit recognition. The Company applies profit recognition in two steps as described below, whereas according to IFRS the entire profit is recognised when the customers take possession. Gradual profit recognition according to IFRS is applied in cases where the tenant owner s association are not controlled by ALM Equity, in which case profit recognition is from the start of construction. Profit recognition in step 1 is applied when there is a detailed zoning plan that has gained legal force, when the legal structure with a final tenant owner s association for the project has been established and the has had its financial plan/cost calculation approved by the relevant authority with a reliable economic forecast. Stage 1: (Initial purchase value/prognosticated total realisable value) X prognosticated project profit The profit recognition status for stage 1 projects is assessed every quarter by the Company s management. In cases when a project has not evolved from stage 1 to stage 2 within a twoyear period from the first profit recognition, the variables included in the stage 1 profit recognition must be adjusted taking current market conditions into consideration. In cases where a project is reconceptualised the values included in stage 1 of the profit recognition must be adjusted to new values. In stage 2 of the gradual profit recognition the remaining profit in the project is recognised in accordance with the following formula: Stage 2: (Selling rate of project X the percentage completion of the construction contract) X prognosticated project profit 14

15 A more accurate view of financial performance is achieved according to the Company when the above model is used. It is extremely important, however, that the Company s profit forecast is adjusted continually to reflect actual or expected events that affect profit. With segment reporting parts of the income statement and balance sheet are proportioned according to ownership share. According to IFRS the share of the minority is recognized in the form of minority interest. Interest in projects is capitalised according to IFRS. In segment reporting interest is expensed. Other significant accounting policies in segment reporting relates to accounting for interest derivatives, which are not valued at market value I n segment reporting. Differences between segment reporting and IFRS are shown below in the column "Reconciliation to IFRS". Inome Statement Jan-Dec Residential development Segment Reconciliation IFRS Residential delopment according to IFRS Net revenue Operating expenses Operating profit Net finance items Change in value of derivative instruments Profit before taxes Taxes Net profit for the period Balance sheet excerpts Development properties Residential projects in progress Equity Balance sheet total Equity ratio 36% -6% 30% 15

16 Income Statement Jan-Mar Residential development Segment Reconciliation IFRS Residential delopment according to IFRS Net revenue Operating expenses Operating profit Net finance items Change in value of derivative instruments Profit before taxes Taxes Net profit for the period Balance sheet excerpts Development properties Residential projects in progress Equity Balance sheet total Equity ratio 46% -11% 35% Note 3 - Financial instruments - fair value Reported value Fair value Amounts in SEK thousand Dec Dec Dec Dec Interest derivatives Bond loan The valuation hierarchy The levels of the valuation hierarchy are defined as follows: - Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. - Level 2: Other observable market data for the asset or liability than quoted prices in level 1, either directly (i.e. price quotations) or indirectly (i.e. derived from price quotations). - Level 3: Input data for the asset or liability not based on observable market data (i.e. non-observable input data). ALM Equity s financial instruments routinely valued at fair value, or where information on fair value is provided, consist of interest derivatives and long-term interest-bearing liabilities (bond loans) valued at fair value in accordance with level 2 of the above valuation hierarchy. Interest derivatives The fair value of interest rate swaps is based on market valuation on the balance sheet date provided by Swedbank. Interest rate swaps are valued by discounting estimated future cash flows to present value. Bond loan For the bond loan the Company has decided that the credit margin is the same as when the bond loan was issued, which means that its fair value corresponds to the carrying amount. 16

17 Note 4 Pledged assets and contingent liabilities Pledged Assets and Contingent Liabilities Group Parent Pledged Assets Legal Charges over Real Estate Interests in Real Estate Co-Operatives Net Assets in Group Entities Currents Assets in Pledged Accounts* Contingent Liabilities Guarantees for Group Entities *Relates to deposits paid by buyers of units in Co-Operatives in current developments Note 5 Effects of the transition to IFRS ALM Equity has previously published the first financial reports using IFRS for the 2015 financial year, with comparative data for 2014, as well as a report showing the opening financial position for the period as of 1 January The Group previously applied BFNAR 2012: 1 Annual Accounts and Consolidated Financial Statements (K3). This financial report shows the effects of transition to IFRS in the consolidated report on comprehensive profit for the fourth quarter of CONSOLIDATED REPORT OF COMPREHENSIVE RESULT FOR THE FOURTH QUARTER 2015 Note According to previous principles Adjustment IFRS According to IFRS Net revenue A,C Production and operating expenses A,C,E Gross profit Selling and administrative expenses A Result from shares in associated companies A Operating profit Financial income A Financial expense A,D Change in value of derivative instruments B Profit before taxes Taxes A,B,D,E,F Net profit for the period Other comprehensive result for the period Other comprehensive result Other comprehensive result for the period Comprehensive result for the period

18 A. Reclassification According to previous principles some holdings were classified as joint ventures, which were carried in accordance with ownership interest in the Group. An examination has been carried out of all holdings in Group companies and ALM Equity has made the judgment that the Group has a controlling influence over virtually all holdings. This means that these companies will be consolidated as subsidiaries, taking holdings without a controlling influence on equity into consideration. This change makes a difference in the way the Consolidated Report on Comprehensive Result is presented and in the balance sheet since the reporting is on a gross basis rather than carrying only ALM Equity s ownership share. After the transition to IFRS the development property item contains all projects at early stages until start of construction. Projects where construction has started and where ALM Equity exercises control over the tenant owner s association will be found under the heading Residential projects in progress where they will remain until buyers take possession, at which time the profit in its entirety will be recognised. Projects where construction has started, but where ALM Equity does not exercise control over the tenant owner s association, earned project value will be found under the heading Receivables from residential projects in progress. B. Interest derivatives ALM Equity holds derivatives in the form interest swaps. These are not carried in the balance sheet in accordance with previous principles. According to IFRS the fair value of the derivatives is carried in the balance sheet and unrealized changes in value are shown in the income statement. The change in value in the Consolidated Report on Comprehensive Result for the fourth quarter 2015 amounted to KSEK 5,717. Deferred taxes were reported for these unrealized changes in value. C. Construction contracts and gradual profit recognition Gradual profit recognition was applied to all residential projects according to previous accounting policies. For every new residential project a tenant owner s association is established, over which ALM Equity exercises control during the project s lifetime. This means that gradual profit recognition cannot be applied in its present form. ALM Equity will instead not recognize project profit until the buyer has taken possession of the home. This will reduce fourth quarter 2015 results by KSEK 70,047 relating to profit recognition according to the previously applied method. D. Loan expenses Loan expenses attributable to the construction of qualified assets are not reported in the balance sheet according to previous principles. Such costs are expensed directly. In accordance with IFRS, loan expenses directly attributable to the construction of qualified assets are reported as a part of the acquisition value of the asset. An adjustment of financial expenses for the fourth quarter 2015 has been made in the amount of KSEK 7,698. Deferred taxes are reported accordingly. E. Transactions in connection with borrowing An adjustment has been made relating to transaction expenses in connection with borrowing. According to IFRS expenses incurred in connection with raising loans should be seen as an expense that reduces the initial value of the loan. These costs were previously expensed. An adjustment has been made in the Consolidated Report on Comprehensive Result in the amount of KSEK 264 for the fourth quarter of Deferred taxes are reported accordingly. F. Deferred taxes Adjustments of deferred taxes consists of the effects on deferred taxes caused by the transition to IFRS. Deferred taxes were adjusted upwards by KSEK 536 in the Consolidated Report on Comprehensive Result. 18

19 Note 6 Effects of the transition to RFR 2 ALM Equity has previously published the first financial reports for the Parent Company using RFR 2 for the 2015 financial year, with comparative data for 2014, as well as a report showing the opening financial position for the period as of 1 January The Group previously applied BFNAR 2012: 1 Annual Accounts and Consolidated Financial Statements (K3). According to previous principles, some of the holdings in Group companies were classified as joint ventures and associated companies. A review has been performed of all holdings in Group companies and ALM Equity has made the judgement that virtually all holdings should be classified as subsidiaries. This change makes a difference in the way the Parent Company s income statement and balance sheet are presented. For the fourth quarter of 2015 the reclassification has meant that the result from shares in Group companies increased by KSEK 4,403 and the result from shares in associated companies was reduced by an equivalent amount. 19

20 This report has not been reviewed by the Company s auditors. Stockholm, 24 February 2017 ALM Equity AB (publ) Board of Directors For additional information, contact: Joakim Alm, telephone About ALM Equity More information is available at Reporting schedule: 23 May Annual General Meeting 23 May 2017 Interim Report January March August 2017 Semi-annual Report November 2017 Interim Report January - September