Quarterly report 2017

Transcription

1 Q3 Quarterly report 2017

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3 SOLON EIENDOM THIRD QUARTER 2017, PAGE 1 Highlights Total segment revenue increased to NOK 248 million in Q compared to NOK 198 million in Q Total segment EBITDA increased to NOK 47 million in Q compared to NOK 44 million in Q A total of 305 (266) units under construction at September 30, with 87% (73%) of these sold at a combined sales value of NOK million (NOK million) 23 units sold (38) and sales starts for 15 units 46 units completed (57) and 46 delivered (56) 99 % of expected completions in 2017 and 86 % of expected completions in 2018 are sold (Numbers in parentheses are for the equivalent period last year) Units Units refers to the number of apartments or houses Units sold Units delivered Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Amounts in NOK thousand unless otherwise stated IFRS reporting Q Q M M Revenue EBITDA Profit before tax Equity ratio 22 % 13 % 22 % 13 % 28 % Segment reporting Residential real estate development Revenue EBITDA EBITDA margin 19 % 22 % 19 % 18 % 16 % Project margin 25 % 26 % 25 % 23 % 20 % Key figures Number of units sold Number of construction starts Number of units delivered Number of units completed

4 SOLON EIENDOM THIRD QUARTER 2017, PAGE 2 Operational and Market update Sales and operations During the first nine months of 2017, Solon Eiendom sold 149 units with a sales value of NOK million representing an increase of 34 % in number of units and 96 % increase in sales value compared to the same period last year. The average sales price per unit for the first nine months of 2017 was NOK 9 million compared to NOK 6 million in Q Value of units sold (NOK mill) At the end of Q Solon Eiendom has a total of NOK 2.8 billion in sales value of projects under development consisting of 349 units. 85% of the units and 80% of the total sales value have already been sold. Units under construction #of units #of units #of units 58 Geographical split of sales 9M 2017 #of units #of units 23 Q3 16 Q4 16 Q1 17 Q2 17 Q % sold Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 At the end of Q3 2017, Solon Eiendom had 305 units under construction. The units under construction are mainly Kolbotn Hage (121 units), Skaret (61 units), Jessheim (40 units), and Kollentunet (33 units). The number of construction starts in Q amounted to 94 units. 49% 51% Geographical split of units under construction 19% Greater Oslo Central Oslo 81% Of the 149 units sold during the first nine months of 2017, 76 units are in the Greater Oslo area and 73 units in Central Oslo. Greater Oslo Central Oslo During the first nine months of 2017, 77 units were completed and 76 were delivered to the end customer of which 46 units were delivered in Q3. Of the 305 units in construction at the end of the third quarter 247 are in the Greater Oslo area and 58 in Central Oslo.

5 SOLON EIENDOM THIRD QUARTER 2017, PAGE 3 The company expects to complete 126 units for the full year 2017 and 99% of these units have already been sold. Expected completions per quarter (units) The current projects in the pipeline include Ski, Nesodden and Lier where there has been relatively little new construction and as such we expect a strong demand for the type of projects Solon Eiendom delivers The Company continues to see attractive opportunities to acquire new properties. As a result, of the current market dynamics, we are selective in our acquisitions maintaining an opportunistic approach. Solon Eiendom has invested strategically and the current land bank is sufficient to achieve our currents goals for the period to come. Q Q Q Q Q Solon Eiendom expects to complete 194 units over the next five quarters compared to 141 units completed the past five quarters. During Q3 2017, 30 units have been moved from Q to Q Land bank acquisitions Investments in the Land Bank in the first nine months of 2017 amounted to NOK 301 million, compared to NOK 209 million invested for the same period last year. In summary, sales for the first nine months of 2017 were positive and the number of units completed and delivered were according to plan. Activity on projects under development is satisfactory and there has been attractive land bank acquisitions. Risk Factors Solon Eiendom is exposed to various forms of market, operational and financial risks that could affect performance, the ability to meet strategic goals and the company s reputation. Financial results are affected by project execution, customer behavior and market developments, including fluctuations in housing and property prices. Results are also impacted by costs, both the company s own and those charged by suppliers, as well as customers ability to pay. The company is also exposed to financial market risks, including changes in interest rates, tax and counterparty risks, as well as risks associated with access to and terms of financing. Solon Eiendom has policies and procedures that identify, evaluate and respond to risks actively and systematically. The annual report for 2016 provides more information on risks and uncertainties. Outlook As expected, housing sales slowed down in Q3 compared to Q2, especially in Oslo. As of September 30, Solon has sold a majority of the current projects in Oslo and do not plan on starting new projects in Oslo before late 2018 at the earliest. Going forward the outlook for new building sales in Oslo are uncertain as the market is in a period of transition and certain players are delaying building projects. We have not delayed any projects and believe that during this transition, Solon is well positioned and that the market for new housing will be more differentiated which will support the continued demand for the projects Solon Eiendom delivers with high quality and unique architecture.

6 Financial review Q Revenue Revenue was NOK 286 million in Q compared to NOK 272 million in Q The increase in revenue was driven by higher unit prices in the Residential Real Estate Development segment. The number of delivered units decreased from 56 units in Q to 46 in Q Revenue for the first nine months of 2017 was NOK 589 million, representing a decrease of NOK 30 million compared to the same period last year. The decrease in revenue was mainly due to the Residential Real Estate Development segment as the number of delivered units decreased from 105 units in the first nine months of 2016 to 76 in the first nine months of Operating expenses Total operating expenses amounted to NOK 260 million in Q3 2017, up from NOK 234 million in Q The increase is due to the increase in revenues and an increase in cost of goods sold and employee benefit expenses. Total operating expenses amounted to NOK 503 million for the first nine months of 2017, down from NOK 539 million for the same period in The decrease is due to the reduction in revenues as discussed above. Cost of goods sold Costs of goods sold consist mainly of project expenses/ construction costs. The costs of goods sold for Q was NOK 243 million compared to NOK 232 million for Q The increase is due to higher costs per unit delivered compared to the same period last year. Employee benefit expenses Employee benefit expenses amounted to NOK 14 million in Q compared to NOK 1 million in the same period last year. The increase is mainly due to an increase in bonus accruals and increase in the number of employees compared to Employee benefit expenses amounted to NOK 30 million for the first nine months of 2017 compared to NOK 6 million for the same period last year. The increase is mainly due to an increase in bonus accruals and increase in the number of employees compared to Other operating expenses Other operating expenses amounted to NOK 3 million in Q compared to NOK 3 million in the same period last year. For the first nine months of 2017 other operating expenses amounted to NOK 12 million compared to NOK 11 million for the same period last year. Operating profit The reported operating profit amounted to NOK 27 million in Q compared to an operating profit of NOK 38 million in Q The decrease in operating profit compared to Q is due mainly to the increase in employee benefit expense. The reported operating profit amounted to NOK 79 million for the first nine months of 2017 compared to an operating profit of NOK 67 million for the first nine months of The increase in operating profit compared to nine months 2016 is due mainly to improved margins on completed units. Financial items Financial income in Q amounted to NOK 3 million compared to NOK 0 million for the same period in Financial income for the nine months of 2017 amounted to NOK 4 million compared to NOK 1 million for the same period in The increase from 2016 is mainly due to the realization of shares. Financial expense consists mainly of interest expense to financial institutions. Interest expense related to land is capitalized as inventory from the date where a detailed zoning plan is in place. In addition, interest expense is capitalized as inventory during the construction period. Financial expense amounted to NOK 2 million in Q compared to NOK 6 million for the same period in Financial expense amounted to NOK 12 million for the nine first months of 2017 compared to NOK 18 million for the same period in The main reason for the decrease is due to a decrease in interest bearing liabilities related to unregulated land.

7 SOLON EIENDOM THIRD QUARTER 2017, PAGE 5 Cash flow Cash flow from operating activities was NOK 56 million in Q compared to cash flow from operating activities of NOK 254 million in Q The decrease in cash flow from operating activities is mainly attributable to the sale of Holmen Eiendomsutvikling AS in Q For the first nine months 2017 cash flow used in operating activities was NOK -179 million compared to cash flow from operating activities of NOK 194 million for the same period last year, mainly caused by the sale of Holmen Eiendomsutvikling AS in Q Tax The income tax expense for the quarter was NOK 7 million compared to a tax expense of NOK 5 million in Q The income tax expense for the first nine months of 2017 was NOK 16 million compared to NOK 10 million for the same period last year. Funding The Group had a total interest bearing debt totaling 1000 million, of which land loans amounted to NOK 554 million at September 30, 2017 compared to NOK 423 million at September 30, These are normally converted to construction loans in connection with the start of construction. Interest-bearing debt at 30 Sep (NOK mill) 446 Land 554 Construction The Group had construction loans totaling NOK 446 million at September 30, 2017 compared to NOK 275 million at September 30, Undrawn and committed long-term bank overdraft credit facility was NOK 50 million at end of Q3. The weighted average interest rate on the interest bearing debt is 3 %. The Net Interest Bearing Debt (NIBD) was NOK 788 million on September 30, See Definitions and Abbreviations for calculation of NIBD.

8 SOLON EIENDOM THIRD QUARTER 2017, PAGE 6 Operating segments Residential real estate development Revenue in Q from the residential real estate segment amounted to NOK 248 million, compared to NOK 198 million in Q The increase in revenue compared to same quarter last year is due to a higher sales value per unit. The weighted average percentage of completion in Q was 64 % vs 73 % in Q In addition, the weighted average sales rate was 91 % in both Q and in Q Revenue for the first nine months of 2017 from the residential real estate segment amounted to NOK 775 million, compared to NOK 557 million in the first nine months of The Segment EBITDA increased from NOK 44 million in Q to NOK 47 million in Q The increase in segment EBITDA is due to increased revenue in Q vs Q The Segment EBITDA increased from NOK 102 million in the first nine months of 2016 to NOK 148 million in the first nine months of Investments in the Land Bank in Q amounted to NOK 66 million, compared to NOK 25 million invested for the same period last year. Investments in the Land Bank in the first nine months of 2017 amounted to NOK 301 million, compared to NOK 209 million invested for the same period last year. Q Q Q Q Q Number of units sold: Number of units sold (under construction) Number of units sold (not under construction) Sales value of units sold (000) Number of units started construction Number of units completed construction Number of units delivered Number of units under construction Units under construction, sold Units under construction, % sold 87 % 88 % 87 % 82 % 73 % Average sales price sold units (000) *The figures above are 100% and are not adjusted for Solon ownership

9 SOLON EIENDOM THIRD QUARTER 2017, PAGE 7 CONDENSED STATEMENT OF COMPREHENSIVE INCOME Amounts in NOK thousand Notes Q Q M M Revenue Total revenue Cost of goods sold Employee benefit expense Depreciation and amortization expense Other operating expense Other (gains)& losses (1 770) (153) Total operating expenses Loss investment property Operating profit Financial income Financial expense (1 668) (6 123) (11 793) (17 594) (38 076) Net financial items (6 123) (7 406) (16 851) (36 346) Profit before tax Income tax expense (7 033) (4 926) (15 739) (9 808) (9 935) Profit for the period from continuing operations Discontinued operations Loss after tax for the period from discontinued operations 6 (195) - ( ) - (1 220) Profit/(loss) for the period (85 431) Other comprehensive income Total comprehensive income/(loss) for the period (85 431) Profit for the period is attributable to: - Owners of the parent (97 584) Non-controlling interests Earnings per share Earnings (loss) per share (NOK) basic: 0,408 0,544 (2,023) 0,402 0,702 Earnings (loss) per share (NOK) diluted: 0,408 0,544 (2,023) 0,402 0,656 Earnings per share for continuing operations Earnings (loss) per share (NOK) basic: 0,412 0,790 0,898 1,193 0,702 Earnings (loss) per share (NOK) diluted: 0,412 0,790 0,898 1,193 0,656

10 SOLON EIENDOM THIRD QUARTER 2017, PAGE 8 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Amounts in NOK thousand Notes Sept 30, 2017 Sept 30, 2016 Dec 31, 2016 Non -current assets Assets from discontinued operations Deferred tax assets Investment properties Property, plant and equipment Investments in associated companies and joint ventures Other non-current receivables Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Share capital Retained earnings ( ) Equity attributable to the owners of the Company Non-controlling interests Total equity Deferred tax Interest bearing liabilities to financial institutions Other long term interest bearing debt Total non-current liabilities Interest bearing liabilities to financial institutions Trade payables Tax payable Public duties payable Derivatives Prepayments from customers Other short-term liabilities Total current liabilities Total liabilities Total equity and liabilities

11 SOLON EIENDOM THIRD QUARTER 2017, PAGE 9 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Q Share capital Share premium Other equity Retained earnings Total Total equity Amounts in NOK thousand Balance at January 1, ( ) Profit /(loss) for the period (97 584) (97 584) (85 431) Other comprehensive income Total Comprehensive income for the period (97 584) Share issue (repair issue) Transaction costs issue of share capital - (4 186) - - (4 186) - (4 186) Capital reduction ( ) Transactions with non-controlling interests* (59 433) (59 433) (567) (60 000) Dividend to non-controlling interests - (50 000) - - (50 000) (13 712) (63 712) Equity transactions for the period (59 433) (13 619) (14 279) Balance at September 30, ( ) *Purchase of the remaining 30% shares in Ski Næring & Boligutvikling AS. As Ski Bolig & Næringsutvikling AS has been consolidated in the groups financial statements, the acqusition cost of the shares was recorded as a reduction of equity. Q Share capital Share premium Attributable to owners of Solon Eiendom Group: Attributable to owners of Solon Eiendom Group: Other equity Retained earnings Total Total equity Amounts in NOK thousand Bionor Pharma ASA balance January 1, ( ) Adjustment of equity in reverse acquisition (62 228) ( ) (5 539) Balance at January 1, Profit for the period Other comprehensive income Total Comprehensive income for the period Balance at September 30, Share capital Share premium Attributable to owners of Solon Eiendom Group: Other equity Retained earnings Total Noncontrolling interests Noncontrolling interests Noncontrolling interests Total equity Amounts in NOK thousand Bionor Pharma ASA balance 1 January ( ) Adjustment of equity in reverse acquisition (62 228) ( ) (5 539) Balance at 1 January Profit for the period Other comprehensive income Total Comprehensive income for the period Dividend (50 000) (50 000) - (50 000) Business combination reverse acquisition ( ) Private placements Transaction costs issue of share capital - (12 892) - - (12 892) - (12 892) Equity transactions for the period ( ) Balance at 31 December ( )

12 SOLON EIENDOM THIRD QUARTER 2017, PAGE 10 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Amounts in NOK thousand Notes Q Q M M Cash flow from operating activities Profit before tax Paid taxes (130) Depreciation and impairment Profit (-)/loss (+) sale of shares - (2 950) Unrealized gain (-)/loss (+) on derivatives - (2 369) Realised loss on investment property Realised gain sale of company (2 947) - (2 947) - - Unrealized gain (-)/loss (+) on investment property Change in inventory ( ) (91 084) Change in receivable (6 809) Change in trade payables Change in other accruals (39 270) (52 407) (22 534) (24 207) Net cash flow from operations (continuing) ( ) Net cash flow from operations of discontinued operations (2 871) - (18 117) - - Net cash flow from operating activities ( ) Cash flow from investments Purchase of fixed assets - (688) - (15 113) (15 113) Proceeds from sale of business Proceeds from sale of shares Purchase of business (net) Transactions with non-controlling interest - - (60 000) - - Purchases of shares (3 505) (1 256) (33 681) (16 262) (16 262) Repayment loans to third parties - (15 251) - (12 207) 152 Loans to third parties (4 066) - (12 207) Net cash flow from investments of continuing operations (17 196) (19 585) (43 583) (30 886) Net cash flow from investments of discontinued operations Net cash flow from investments (17 196) (19 585) (43 583) Cash flow from financing Repayments borrowings ( ) ( ) ( ) ( ) ( ) Proceeds borrowings Dividends to minority interests - - (13 712) - - Dividends to owners - - (50 000) (50 000) (50 000) Capital increase Net cash flow from financing of continuing operations (15 539) ( ) ( ) Net cash flow from financing of discontinued operations Net cash flow from financing (15 539) ( ) ( ) Net Change in Cash and Cash Equivalents (26 704) (14 414) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

13 SOLON EIENDOM THIRD QUARTER 2017, PAGE 11 SELECTED NOTES TO THE ACCOUNTS 1. General information and basis for preparation Solon Eiendom ASA (the "company") and its subsidiaries (together the group ) is a property development group, involved in the construction of residential property for sale in the ordinary course of business. The condensed consolidated interim financial information consists of the group and the group s interest in associated companies and jointly controlled entities. The group's consolidated financial information have been prepared in accordance with IAS 34 Interim Financial Reporting. The report does not include all the information and disclosures required for annual financial statements and should be read in conjunction with the group s consolidated financial statements for The accounting policies applied in preparing these interim condensed consolidated financial statements are consistent with those applied in the group s consolidated financial statements for the year ended December 31, Group management has not yet evaluated the impact of implementing new, revised and amended standards with a later date of adoption. 2. Accounting judgements, estimates and assumptions The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting principles and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing this consolidated interim financial information, the significant judgements made by management in applying the group s accounting policies and the key sources of estimation uncertainty were largely the same as those that applied in the consolidated financial statements for the year ended December 31, Segment information The main segment is defined as Property development. The group utilizes the percentage of completion method in its internal reporting for which the degree of completion is estimated based on expenses incurred relative to total estimated costs and sales rate. Operating profit (loss) under the percentage of completion method also includes an estimated profit element. The group consolidated income statement is based on the completed contract method, in which revenue is recognized at the time of transfer of risk and control, being the point of delivery of the property. A reconciliation of this effect (from percentage of completion to completed contract) can be found in the segment reporting.

14 SOLON EIENDOM THIRD QUARTER 2017, PAGE 12 Note 2 Segment information Management has determined the operating segments based on reports reviewed by the CEO and management group who make investment decisions, allocates the Group s resources and reviews the internal reporting in order to assess performance. The financial information below was reported to the CEO and the management group at the end of the reporting period. The main segment is defined as Residential Real Estate Development. In addition we have the unallocated segment which consist of items not directly related to real estate development. The Group uses the percentage of completion in the internal reporting where completion is determined considering costs incurred in relation to total estimated costs of sales and sales rate. Revenues also includes an estimated profit element for sold units. The Group management assesses the profit/(loss) from the segments based on EBITDA where percentage of completion method is used. The measurement method is defined as earnings before "Depreciation and amortization", "Other gains & losses" and "Share of profit from associates." In the consolidated income statement, revenue is recognized in accordance with IAS 18, where the recognition of revenue occurs at the time of transfer of risk and control, which is the date the units are delivered to the end customer. Q Residential real estate Unallocated adjustments IFRIC 15 adjustment Total Amounts in NOK thousand development Revenue (3 684) Project expenses Other operating expenses Depreciation and amortisation EBITDA (4 911) (15 387) EBITDA margin 18,91 % Project margin* 25,40 % Units in production Delivered units Units sold Total assets (56 063) (61 237) *See Definitions and Abbreviations for calculation of project margin. Q Residential real estate Unallocated adjustments IFRIC 15 adjustment Total Amounts in NOK thousand development Revenue Project expenses Other operating expenses (4 467) Depreciation and amortisation 275 (118) EBITDA (11 228) EBITDA margin 22,14 % Project margin* 25,63 % Units in production Delivered units Units sold Total assets (21 958)

15 SOLON EIENDOM THIRD QUARTER 2017, PAGE 13 Note 2 Segment information (continued) 9M 2017 Residential real estate Unallocated adjustments IFRIC 15 adjustment Total Amounts in NOK thousand development Revenue (866) ( ) Project expenses ( ) Other operating expenses Depreciation and amortisation EBITDA (7 710) (61 237) EBITDA margin 19,08 % Project margin* 24,85 % Units in production Delivered units Units sold Total assets (56 063) (61 237) M 2016 Residential real estate Unallocated adjustments IFRIC 15 adjustment Total Amounts in NOK thousand development Revenue Project expenses Other operating expenses Depreciation and amortisation 920 (448) EBITDA (12 687) (21 958) EBITDA margin 18,40 % Project margin* 23,06 % Units in production Delivered units Units sold Total assets (21 958) Note 3 Inventories The Group has land and buildings which are intended for sale in ordinary course of business or which are under construction or development for such sale. Inventories thus includes land, property for resale, property under development and construction. Inventories are valued at the lower of cost and net realizable value. Amounts in NOK thousand Sept 30, 2017 Sept 30, 2016 December 31, 2016 Land Construction under development Total

16 SOLON EIENDOM THIRD QUARTER 2017, PAGE 14 Note 4 Interest-bearing liabilities Total interest bearing liabilities The fair value of the liability is consider equal to its book value according to the amortized cost as shown above. Covenants The company s term loan facilities with various financial institutions contain standard market terms and covenants. The main covenants relate to minimum equity of NOK 400 million at December 31, minimum percentage of production sold of 67,5%, and a minimum liquidity requirement of NOK 50 million. In addition, there are covenants related to standard information requirements related to changes in ownership, share capital reductions, sale of business areas and dividends. Note 5 Related party transactions During the first nine months of the financial year 2017, there has been one related party transaction with material effect on the financial position of the group. In February 2017, Solon Eiendom AS acquired 30 shares in Ski Bolig & Næringsutvikling AS representing 30% of the share capital from Mr. Edvin Austbø, a board member of Solon Eiendom ASA for a total consideration of NOK 60 million. As Ski Bolig & Næringsutvikling AS has been consolidated in the groups financial statements, the acquisition cost of the shares was recorded as a reduction of equity in the consolidated statement of financial position. Post transaction, Solon Eiendom AS owns 100% of Ski Bolig & Næringsutvikling AS. Note 6 Discontinued operations Sept 30, 2017 Sept 30, 2016 December 31, 2016 Amounts in NOK thousand Non- current liabilities due > 1 year Land Bank Property Under Construction Commercial Other Total non- current interest bearing liabilites Current liabilities due within one year Land Bank Property Under Construction Commercial Other Total current interest bearing liabilities Amounts in NOK thousand Q YTD Q Write-down of intangible assets Restructuring accrual (2 499) Loss from operating activities Total

17 SOLON EIENDOM THIRD QUARTER 2017, PAGE 15 Definitions and abbreviations Definitions Units Units refers to the number of apartments or houses Abbreviations EBITDA Earnings before Interest, Taxes, Depreciation and Amortization NIBD Net Interest Bearing Debt Amounts in NOK thousand unless otherwise stated Q Q M M Equity ratio Total equity Total equity and liabilities Equity ratio 22 % 13 % 22 % 13 % 28 % EBITDA segment reporting Revenue Operating profit Depreciation and amortisation expense EBITDA EBITDA margin 19 % 22 % 19 % 18 % 16 % EBITDA Revenue Operating profit Depreciation and amortisation expense EBITDA Net interest bearing debt Interest bearing debt Cash Net interest bearing debt Profit from projects - segment reporting Revenue Cost of goods sold Profit from projects Project margin - segment reporting Profit from projects Revenue from projects Project margin 25 % 26 % 25 % 23 % 20 %

18 SOLON EIENDOM THIRD QUARTER 2017, PAGE 16 For further information, please contact: Andreas Martinussen, CEO Solon Eiendom ASA Telephone: , Scott Danielsen, CFO Solon Eiendom ASA Telephone: , About Solon Eiendom Solon Eiendom is a Norwegian residential real estate development company focusing on the Oslo and Akershus region.