THE LEADING SWEDISH RESIDENTIAL DEVELOPER WITHIN SMART & AFFORDABLE HOUSING CAPITAL MARKETS DAY 2017

Transcription

1 THE LEADING SWEDISH RESIDENTIAL DEVELOPER WITHIN SMART & AFFORDABLE HOUSING CAPITAL MARKETS DAY 2017

2 THE LEADING SWEDISH RESIDENTIAL DEVELOPER WITHIN SMART & AFFORDABLE HOUSING CAPITAL MARKETS DAY 2017 Stockholm, Telefonplan November 15, 2017

3 WELCOME TO SSM S CAPITAL MARKETS DAY AGENDA Time Topic Speaker 12:15 Introduction Mattias Roos 12:20 Highlights Q Interim Report Mattias Roos 12:30 Strategy for continued profitable growth Mattias Roos & Casper Tamm Q&A 14:00 Coffee break 14:15 Operational excellence Johan Ellertson & Susanne Blomberg Q&A 15:00 JV strategy & presentation of Partners Group Mattias Roos & Mike Bryant 15:20 Concluding remarks Mattias Roos 15:30 Presentation of Tellus Towers & prototype apartment Mattias Roos & Magnus Caspi

4 TODAY S SPEAKERS Mattias Roos President & CEO Casper Tamm Director of Finance Susanne Blomberg Chief Sales & Marketing Officer Johan Ellertson Head of Project Department Mike Bryant Managing Director Private Real Estate Partners Group Moderator Tobias Kaj Lead Analyst ABG Sundal Collier Ann-Charlotte Johansson Chief Communications & IR Officer Magnus Caspi Project Manager Tellus Towers

5 Mattias Roos President & CEO HIGHLIGHTS Q INTERIM REPORT

6 Q3 HIGHLIGHTS Strong operating profit in a cautious market An eventful quarter Strategic JV with Partners Group, project valued at 7.6 SEKbn High interest in our projects 1,100 sales starts to mid-nov % more units sold in first 9 months 97.1% sales rate in projects in production end-q3 Solid financial profile, well above financial targets Debt/equity ratio of 57.8% Highly equipped for continued growth and earnings performance

7 INCREASE IN KEY RATIOS EBIT MSEK (63.1) EBIT margin 120.0% (33.3%) Earnings per share 2.95 SEK (1.52)

8 WELL ABOVE OUR FINANCIAL TARGETS EBIT margin Return on equity Equity ratio Interest coverage ratio >20% >25% >30% >2x Outcome Q LTM 34.2% 31.7% 57.8% 5.3x

9 STRATEGY FOR CONTINUED PROFITABLE GROWTH

10 25 YEARS OF EXPERIENCE & PROVEN TRACK RECORD Real estate management Project development New collaboration and expansion

11 IMPRESSIVE GROWTH IN LAST 5 YEARS Building rights in production Building rights EBIT, MSEK 228 1,414 6, Q3 LTM

12 A LEADING RESIDENTIAL DEVELOPER IN AN ATTRACTIVE & GROWING NICHE MARKET Affordable Peripheral Peripheral & affordable Affordable & central Central Peripheral & exclusive Exclusive & central Exclusive

13 A COMPANY WITH A CLEAR PURPOSE Vision To open the housing market to as many people as possible. Mission To acquire, develop, sell and build homes based on customer needs. Value proposition Smaller spaces. Larger living.

14 STRATEGY CREATING VALUE FOR ALL STAKEHOLDERS Value-driven culture Innovative & sustainable product First choice for urbanites of tomorrow Operational excellence Outperforming the market

15 FIRST CHOICE FOR THE URBANITES OF TOMORROW Haven t started families yet, age person households Prioritize more than just housing Opt to live urban lifestyle outside the city center

16 AVERAGE CUSTOMER IS +30 & ALREADY LIVES IN STOCKHOLM 70% of buyers age % plan to live with partner

17 MOST IMPORTANT CRITERIA FOR URBANITES WHEN CHOOSING THEIR NEXT HOME Urban environment Close to public transport Affordable housing costs

18 PORTFOLIO FULLY ALIGNED WITH TARGET GROUP PREFERENCES % of apartments near public transport

19 AFFORDABLE & MODERN PRODUCT FOR URBANITES Shared Sustainable Multi room apartments m 2 units areas & functions social integration & environmentally friendly use of space

20 MULTI-USE OF SPACE

21 WITH ATTRACTIVE SHARED SPACES & HIGH FUNCTIONALITY

22 AND A SOCIALLY- SUSTAINABLE PROFILE Cost-effective housing that more people can afford Cooperative association with sustainable finances Well-integrated in existing residential community Designed for optimal comfort and security Shared spaces and functions that make it easy to interact with neighbours

23 TOGETHER WITH AN ENVIRONMENTAL FOCUS Materials Construction Product Follow Basta system Focus on recycling Sustainable homes

24 STUDENT LIVING AT ITS BEST SSM in JV with Student Hill AB to create greater diversity and meet market needs Rental and cooperative units Affordable and based on student loan requirements Twin House (28 cooperative units, completed 2016) Tentafabriken (76 cooperative units, sales start October 26) The Loft (120 rental units)

25 VALUE-DRIVEN CULTURE SUPPORTS OUR BUSINESS Energy Engagement Inspiration Innovation Joy

26 MOST EMPLOYEES PART OF PROJECT ORGANIZATION Department Manager Project Managers Department Manager Project Managers Department Manager Project Managers Business Development Sales & Marketing Procurement Finance HR

27 TRAINING & TALENT PROGRAM "YES" Internal program (Yngre Engagerade SSM:are) Develop skills of younger team members Networking Training Sharing experiences

28 OPERATIONAL EXCELLENCE Acquisition Sales Purchasing SSM Concept

29 RISK PROFILE OVER PROJECT LIFE CYCLE Exploitation risk City plan Sales risk Construction risk Project value Financial risk Investment sourcing Project development Design Potential divestment Apartment sales Divestment to tenant association Construction Handover & property services Property management

30 SUCCESSFUL MULTI-CHANNEL ACQUISITION STRATEGY Private property owners Municipalities Off market Direct negotiations 66% of portfolio Direct land allotments 22% of portfolio 88% Auction process Opportunities from brokers 6% of portfolio Land allotments via competitions 6% of portfolio 12% Split based on portfolio as per November 15, 2017.

31 MANAGED ENTIRELY BY SSM ON SITE Division Manager Project Manager Concept Site Manager Construction Manager Construction Manager Chief Planner Construction Manager ~ 20 sub-contractors 10 with framework agreements

32 STRATEGIC PURCHASING Long-term relationships with suppliers Standardized production High degree of prefabrication Best-in-class logistics

33 DIGITAL SALES PROCESS BOOSTS CUSTOMER SATISFACTION & LOWERS SALES RISK Market analysis Planning of sales start Marketing of project Sales start The digital apartment selector opens Pre-purchase agreement (binding) Grant agreement Booking agreement Get keys

34 OUTPERFORMING THE MARKET

35 HIGHLY SATISFIED CUSTOMERS

36 ATTRACTIVE EMPLOYER WITH HIGHLY-ENGAGED TEAM MEMBERS Total Trust Index 77% 84% 87% Great Place To Work survey

37 SUSTAINABLE FOOTPRINT All projects meet criteria for Sweden Green Building Council Silver certification One project to meet Gold certification New CSR strategy in progress New targets to focus on Social integration Gender equality

38 HIGHEST SALES RATIO IN THE INDUSTRY, LTM Besqab JM Bonava SSM 100% 80% 60% 40% Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3

39 STRONG FINANCIAL PERFORMANCE, LTM EBIT margin Return on equity 45% Besqab JM Bonava Oscar SSM 90% Besqab JM Bonava Oscar SSM 40% 80% 35% 70% 30% 60% 25% 50% 20% 40% 15% 30% 10% 20% 5% 10% 0% Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 0% Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3

40 STRONG FINANCIAL PERFORMANCE Equity ratio Interest coverage ratio LTM 80% Besqab JM Bonava 18 Bonava Oscar SSM 70% 16 60% 14 50% 40% 30% % 4 10% 2 0% Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 0 Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3

41 DRIVERS FOR PROFITABLE GROWTH

42 ESTIMATED DEVELOPMENT OF PROJECT PORTFOLIO POTENTIAL CONSTRUCTION STARTS No. of apartments ~1,800 ~1,

43 RENTAL UNITS & STUDENT HOUSING TO HAVE LARGER SHARE OF TARGET MIX Project portfolio, % Student Rental Cooporative Current portfolio mix Target mix Portfolio split as per November 15, 2017.

44 PILLARS OF PROFITABLE GROWTH Market demand Focused acquisitions Product development Efficiency improvements

45 POPULATION GROWTH Index 1.3 Growth in European capitals since ,000 Growth in Greater Stockholm Oslo Greater Stockholm London Helsinki Greater Copenhagen 30,000 20,000 10,000 3 Net migration Net births

46 LARGE & GROWING CUSTOMER BASE Stockholm: 2,287,950 inhabitants of which age 20 44: 818,955 living in key municipalities: 671,559

47 THE AVERAGE SWEDE MOVES TIMES IN THEIR LIFETIME 60,000 50,000 40,000 SSM s target group Move most often between ,000 20,000 10, years old 100+

48 HIGH DEMAND FOR SMALLER SPACE-EFFICIENT APARTMENTS IN GREATER STOCKHOLM 70% of Stockholm s households consist of 1 2 people 40,000 apartments sold annually 55% have one or two rooms

49 SSM HAS A CLEAR FOCUS ON 1 2 PERSON APARTMENTS 3-4 persons 1-2 persons 79% 84% 21% 16% Q3 Portfolio split as per November 15, 2017.

50 FOCUSED ACQUISITION STRATEGY Urban environment Close to public transport Affordable housing costs

51 ACQUIRED BUILDING RIGHTS AS PER NOVEMBER 15, 2017 Building rights Municipality Acquired Täby Turf 180 Täby Q1 Täby Market 90 Täby Q1 Bromma Boardwalk 260 Stockholm Q1 East Side Spånga 250 Stockholm Q2 Akalla City 175 Stockholm Q2 Spånga Studios 60 Stockholm Q2 Ritsalen, Rotebro 150 Sollentuna Q3 Riddarplatsen, Jakobsberg 370 Järfälla Q3 Hägersten 250 Stockholm Q4 Managed entirely by SSM Municipality Off market

52 SOLID PORTFOLIO PROVIDES CONFIDENCE IN LONG-TERM STABLE GROWTH No. of building rights

53 58% OF PORTFOLIO IN STOCKHOLM MUNICIPALITY Jakobsberg Sundbyberg Sollentuna Täby Solna 6,677 Stockholm Nacka Portfolio split by municipality in Greater Stockholm as per November 15, Bromma Boardwalk

54 STRONG PIPELINE & PLATFORM WITH POTENTIAL FOR FURTHER GROWTH No. of building rights and units in construction Bulding rights in construction phase Building rights in planning phase % sold apartments under construction 8, % 6,000 80% 4,000 2,000 0 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 5,013 1,414 60% 40% 20% 0%

55 PRODUCT DEVELOPMENT

56 25 PERCENT OF DISTRIBUTED RENTAL APARTMENTS WERE NEW PRODUCTION 556,000 people on Stockholm Housing Agency s list ,000 actively seeking 5+ apartments per year 11 year wait on average 12,000 apartments distributed in 2016

57 STOCKHOLM ACCOMMODATES ABOUT 35,000 NEW STUDENTS EACH YEAR 500,000 Rest of Sweden Stockholm New university students, Stockholm New university students, Gothenburg New university students, Uppsala 50, ,000 40, ,000 30, ,000 20, ,000 10, / / / / / / /2017 0

58 HIGH DEMAND & NEED FOR ADAPTED STUDENT HOUSING 4-year wait Housing a greater share of students' disposable income Rental & cooperative student housing to meet demand

59 NEW FORMS OF HOUSING

60 SMALLER SPACES NEED BIGGER THINKING Multi-use of space New functions

61 MEGATRENDS CREATE GREATER DEMAND FOR SHARED SERVICES TIED TO HOUSING Reduce monthly costs for customers Sharing economy access without needing to own Example of service concept Car and bike pool Room service Concierge service Home cleaning service Webshop for extra furniture, etc. Private spaces for tenants Storage service Other functions for sharing economy

62 FURTHER IMPROVEMENTS IN EFFICIENCY & COSTS Efficiency Costs

63 Repeatable business model Further development of purchasing Scalable organization

64 PILLARS OF PROFITABLE GROWTH Market demand Focused acquisitions Product development Efficiency improvements

65 Casper Tamm Director of Finance FINANCIAL UPDATE

66 SOLID FINANCIAL PROFILE Attractive project portfolio Flexible cost structure Strong capital base

67 Q Net sales MSEK (189.7) Gross margin 4.6% (28.1%)

68 IMPACT OF JV WITH PARTNERS GROUP IN Q MSEK First reversal of profit elimination recognized in the balance sheet totaling 10.3 MSEK

69 Q EBIT MSEK (63.1) EBIT margin 120.0% (33.3%) Earnings per share SEK 2.95 (1.52)

70 SOLID DEVELOPMENT OVER A LONGER TIME PERIOD REVENUES, LTM MSEK 1,600 Revenue in joint ventures Group revenue JV revenue % of total revenue 80% 1,600 Building rights in construction phase 1,400 70% 1,400 1,200 60% 1,200 1,000 50% 1, % % % % Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 0% 0 Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3

71 SOLID DEVELOPMENT OVER LONGER PERIOD, LTM MSEK EBIT EBIT margin Gross margin JV revenue % of total revenue % 90% % 80% 70% % 60% 50% % 40% 30% 50 10% 20% 10% - Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 0% 0% Q Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 1

72 STABLE EARNINGS INCOME STATEMENT MSEK 2017 Q3 LTM Net sales Expenses for production and management Gross profit Sales and administration expenses Participations in joint ventures Other income Operating profit Financial income Financial expenses Net financial items Pre-tax profit Tax Earnings for the period

73 GROUP COST TIED TO OPERATIONS MSEK Items affecting comparability Financial expenses Sales and administration expenses 299 Expenses for production and management Q3 LTM

74 FLEXIBLE COST BASE Development of city plan can be adjusted to suit SSM's planning Mainly variable production costs Outsourced labour only Low fixed costs

75 BALANCE SHEET OVERVIEW Assets, MSEK Holdings in joint ventures Receivables from joint ventures Other long-term receivables Total financial assets Other fixed assets Total fixed assets Project properties Total inventories Accounts receivable Recognized, non-invoiced revenue Other receivables Prepaid costs and accrued income Liquid funds Total current assets Total assets 1, ,

76 CAPITAL TIED UP IN PROJECTS MSEK Other assets Receivables on projects in production Joint ventures Project properties Q3

77 FLEXIBLE PROJECT PORTFOLIO 5,263 apartments sales started or under development 22% designated as rental units Possibility to convert additional 18% into rental units

78 LOW LEVEL OF UNSOLD APARTMENTS FOR PROJECTS IN PRODUCTION Value of unsold apartments in production Q MSEK 55.5 MSEK 89.3 MSEK

79 BALANCE SHEET OVERVIEW Liabilities and equity, MSEK Shareholders equity Share capital Paid-up capital Profit brought forward including profit for the year Equity attributable to Parent Company shareholders Minority interest Total equity Long-term liabilities Bond issues Liabilities to credit institutions Provisions Other long-term liabilities Total long-term liabilities Current liabilities Accounts payable trade Other liabilities Total current liabilities Total liabilities and equity 1, ,

80 RETURN ON EQUITY & EQUITY RATIO, LTM 100% Equity ratio LTM return on equity 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2014 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3

81 STRONG FINANCING PROFILE MSEK 1,600 1,400 1,200 1, Shareholders' equity Bond Bank debt Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3

82 CASH FLOW IMPACTED BY INCREASE IN BUILDING RIGHTS MSEK 2017 Q3 LTM Cash flow before changes in operating capital Cash flow from changes in operating capital Increase/decrease in project properties Increase/decrease in accounts receivable Increase/decrease in other current receivables Increase/decrease in supplier liabilities Increase/decrease in current liabilities Total change in operating capital Cash flow from current activities Cash flow from investment activities Cash flow from financing activities Increase/decrease in liquid funds Liquid funds, opening balance Liquid funds at end of the period

83 FINANCIAL TARGETS EBIT margin Return on equity Equity ratio Interest coverage ratio >20% >25% >30% >2x Outcome Q LTM 34.2% 31.7% 57.8% 5.3x

84 DIVIDEND POLICY Dividend >30% of earnings after taxes

85 SOLID FINANCIAL PROFILE Attractive project portfolio Flexible cost structure Strong capital base

86 A MARKET LEADER SET FOR CONTINUED PROFITABLE GROWTH Market demand Focused acquisitions Product development Efficiency improvements

87 ssmlivinggroup.com ssmliving.se