INTERIM REPORT January – June 2019

January–June 2019*

• Rental income increased 16 percent on the basis of a growing property portfolio. The increase for the comparable portfolio was 4.2 percent.
• Net operating income increased 19 percent, of which just under 5 percent in the comparable portfolio.
• The surplus ratio was strengthened by nearly two percentage points. This was largely attributable to effects from acquired properties, but also to a higher surplus ratio in the comparable portfolio.
• Profit from property management increased 26 percent, primarily driven by increased rental income.
• Unrealised changes in value amounted to MSEK 725, which corresponds to an increase of 2.0 percent, of which 1.2 percent arose in the second quarter.
• Profit after tax rose 13 percent, with the increase in the second quarter amounting to 19 percent.
• The property value increased 8 percent.
• Net asset value (EPRA NAV) increased to slightly more than SEK 81 per share.
• On the balance-sheet date, earnings capacity amounted to MSEK 1,438, compared with MSEK 1,360 at year-end.

*Comparative figures for income items refer to value for the period January-June 2018 and for balance sheet items as of December 31, 2018.

SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER

• Acquisitions were completed in Sweden and Finland: 
            - In Eskilstuna, Sweden, possession was taken in June of three properties including schools and public-sector offices with an underlying property value of MSEK 650.
            - In Mariestad, Sweden, possession was taken in June of a property comprising 25 buildings, primarily used for schools and adapted housing, with an underlying property value of MSEK 274. 
            - In Espoo, Finland, possession was taken in June of a school with an underlying property value of MSEK 245. 
            - In Espoo and Helsinki, Finland, possession was taken in July of a portfolio of four public-sector offices. The underlying property value is MSEK 465.
• A non-cash issue of 1,760,000 ordinary shares was conducted at the beginning of July, when a retirement home in Nacka was acquired from ICA-handlarnas Förbund with an underlying property value of MSEK 156.
• Henrik Melder is the new country head of Hemfosa’s operations in Norway, where he will focus on realizing the development potential in the existing portfolio.
• Essi Sten was employed as the new country head of Hemfosa’s operations in Finland to enable more rapid growth.
• A three-year green bond loan in an amount of SEK 1.3 billion was issued in June at a margin of 240 bps.

COMMENTS FROM THE CEO
– High activity level

We maintained a high level of activity at Hemfosa during the quarter, completing several attractive acquisitions in all three markets. At the same time, our talented property management organization is working to take care of our important tenants and to welcome the new ones we have received through our acquisitions. We continued to strengthen the organization and recruited new country heads for our Norwegian and Finnish operations, as well as a business development head. With the right team structure in place, higher earnings capacity and a stable financial position, we are well positioned for continued profitable growth.

During the spring and summer, we completed acquisitions at a high pace in Sweden, Norway and Finland. The properties we acquired complement our portfolio well, with prime locations and stable community players as tenants. Several of the properties include potential future projects in the form of extensions and new builds on associated land – completely in line with our strategy to create value through acquisitions, improvements and projects.

Intensified collaboration
In Norway, the acquisition in the Oslo region entails synergies with the existing portfolio and intensified collaboration with parties that include NAV (Norwegian Labor and Welfare Administration), one of Hemfosa’s larger tenants.

In Sweden, through acquisitions in such locations as Eskilstuna, Mariestad, Motala and Nacka, we have expanded our collaboration with municipalities and county councils, as well as major private community players, such as Vardaga. For Hemfosa, it is important to establish relations with parties such as these, since we know that our tenants are keen to deepen collaboration that works well. We have many examples of how Hemfosa has been able to grow further with its tenants when they have chosen to expand their operations, much thanks to our skilled, local property management organization.

Against this background, we are particularly pleased that the acquisitions in Finland have led to the establishment of collaboration with the major municipalities of Espoo and Helsinki, as well as pre-school operator Touhula. With the acquisitions in recent months of an amount corresponding to slightly more than MSEK 750, we have significantly strengthened Hemfosa’s Finnish portfolio, bringing its total value to nearly SEK 3 billion.

Team structure complete
In Hemfosa’s growth strategy, we have an explicit focus on growth in Finland, where we foresee favourable opportunities for further acquisitions. With a country head in place in Finland after the summer, we will be able to gear up the business further. An anticipated increase in the transfer of ownership of community service properties from government and municipalities to private operators will create opportunities for further transactions in the Finnish market.

We have also recruited a new country head in Norway, who will take over when Simon Venemyr Ottersland’s consultancy contract expires. With our new country head in place, we will strengthen competence related to early phases and projects, something that will greatly benefit us in our Norwegian operations, where we foresee major development potential in our existing portfolio. In conjunction with these changes, we have also acquired Simon’s minority participations in the Norwegian business. During the quarter, we also recruited a new business development head, who will be a major force in accelerating the work with municipalities and concepts. With these employees on board, together with our existing staff, we have established the team structure that we need to further develop Hemfosa and achieve our goals.

Healthy acquisition capacity
During the quarter, we took the step of strengthening our financing capacity to enable further acquisitions. In May, Hemfosa issued a green bond of SEK 1.3 billion, which attracted a large amount of interest among investors. This is a type of financing that is appropriate for Hemfosa’s operations within community service properties and is an effective complement to our other financing.

I am very satisfied with Hemfosa’s performance during the first half of 2019. We have a clear direction on our journey of profitable growth, with our sights set on a property portfolio of SEK 50 billion within five years. And with the successful transactions we have completed so far this year, we are taking important steps toward this goal. We also have a healthy breadth in our project business, with several exciting projects in the planning phase and in progress, as well as a good pipeline moving forward. There is tremendous energy and commitment in the organization and we are looking forward to an equally exciting second half of 2019.

Caroline Arehult, CEO

Caroline Arehult, CEO
Tel: +46 70 553 80 26 E-mail: caroline.arehult@hemfosa.se

Peter Anderson, CFO
Tel: +46 70 690 65 75 E-mail: peter.anderson@hemfosa.se

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