Klövern AB (publ): Interim Report January – September 2019
»» Income increased by 14 per cent to SEK 2,738 million (2,397).
»» The operating surplus increased by 15 per cent to SEK 1,894 million (1,646).»» Profit from property management increased by 10 per cent to SEK 1,149 million (1,047).»» Profit before tax amounted to SEK 2,140 million (1,888) and net profit, attributable to the parent company’s shareholders, totalled SEK 1,688 million (1,779), corresponding to SEK 1.75 (1.78) per ordinary share.»» Changes in value of properties totalled SEK 1,097 million (817).»» Project development, including development of building rights, contributed to increases in value of properties of SEK 241 million (209).»» After taking possession of 3 properties for SEK 959 million, transfer of possession of 34 properties for SEK 1,867 million and investments of SEK 958 million, the value of the property portfolio amounted to SEK 54,153 million.»» The interest coverage ratio amounted to 2.7 (2.9) and the adjusted equity ratio to 39.6 per cent.»» EPRA NAV amounted to SEK 18.43.
Statement by the CEOAnother good quarterKlövern is reporting strong earnings for the third quarter of 2019. This is driven by, among other things, a continued positive net moving-in, an increasingly streamlined portfolio and efficient cost control. All of Klövern’s geographic markets have performed well during the period.After the summer, property management has been focused on a number of completed projects and moving-in at the same time as the level of transactions has continued to be high. Among other things, 21 properties were divested for SEK 1,570 million, primarily in Örebro, with transfer of possession at the end of August. During the third quarter, a contract was signed to divest seven properties, mainly premises for warehouse and logistics, for SEK 622 million, followed by another contract in October to divest Klövern’s entire property portfolio in Karlstad for a total underlying property value of SEK 2,610 million. This makes a further contribution to Klövern’s streamlining, both in terms of location and type of product. The propertyportfolio is characterized to an increasing extent by modern offices, a development which can be seen in the average rental income as well as value per square metre for the portfolio. Project operations continue at the same time to create a good return and contribute to developing our own properties and local areas.STRONG EARNINGS DEVELOPMENT
During the third quarter, income increased by 13 per cent to SEK 921 million. The operating surplus improved by 12 per cent to SEK 651 million at the same time as the operating surplus for a comparable portfolio, i.e. properties owned during the whole of 2018 and 2019, increased by as much as 7 per cent. Profit from property management amounted to SEK 395 million and positive changes in value of properties totalling SEK 327 million contributed to an improvement in profit before tax to SEK 727 million. Net moving-in amounted to SEK 17 million during the quarter and SEK 115 million during the first nine months of the year. Among the largest moving-ins
during the quarter are Samsung with around 5,000 sq.m. in Kista and SKF with around 3,500 sq.m. in Gothenburg.FAVOURABLE MARKET CONDITIONS
Although macro statistics indicate a slowdown in the economy, market conditions in the real estate industry are favourable. All of Klövern’s geographic markets are developing well and rent development is strongest in the metropolitan regions. The weight of properties in metropolitan regions continues to rise in Klövern’s property portfolio. Regions with over a million inhabitants – in Klövern’s case Stockholm/Uppsala, Gothenburg, Copenhagen/Malmö and New York – now account for as much as 70 per cent of the total property value.PROJECT DEVELOPMENT ORGANIZATION STRENGTHENED
Klövern has created a new separate business area for project development. Project development is an important part of Klövern’s business model and the new business area has a key role in Klövern’s role as long-term city developer. Project development, including development of building rights, contributed to increases in value of properties of SEK 45 million during the third quarter. As part of Klövern’s international expansion, we have started construction of a new project in New York, at the intersection of 28th Street and 7th Avenue. In all, we expect Klövern’s annual project volume to be around SEK 2 billion going forward.FOCUS ON SUSTAINABILITY
Klövern’s long-term work of ensuring a low impact on the climate is being continued by focusing on efficient property management and low energy consumption together with increased production of solar electricity. In Malmö, an additional property roof has been covered by solar panels and the property Travbanan 3 (Åby Arena) in Gothenburg obtained the environmental certification Miljöbyggnad Silver during the third quarter. In connection with the establishment of a new business area for project development, Klövern is now assuming an even clearer role as a leading sustainable city developer of innovative environments for the future.FINANCIAL STRENGTH
Klövern’s financial strength continues to be very good. The adjusted equity ratio improved during the quarter to 39.6 per cent, not far from the long-term goal of 40 per cent. The average period of tied-up capital amounted to 4.1 years at the end of the quarter while the average period of fixed interest was 2.3 years and the share of credit volume that is hedged or at a fixed rate amounted to as much as 85 per cent.GOOD VALUE GROWTH
Klövern’s overall objective is to generate good value growth for the shareholders in a long-term sustainable way. The net asset value per share (EPRA NAV) is developing well and amounted as at 30 September to SEK 18.43, corresponding to an increase of 4 per cent since the turn of the year and 20 per cent during the past 12 months. At the same time, we can note that the number of shareholders in Klövern is continuing to grow and passed the 50,000 level during the third quarter, which is very gratifying.CONTINUED STABLE DEVELOPMENT
In conclusion, the business is developing positively with continued high net moving-in and strong improvement in a comparable portfolio at the same time as the streamlining of the property portfolio is continuing. I am looking forward to a hectic and eventful finish of 2019.Rutger Arnhult, CEO Klövern
Klövern AB (publ)AttachmentRead the interim report here (pdf)