INTERIM REPORT January–March 2019
• Rental income increased 21 percent year-on-year as a result of profitable acquisitions and projects.
• The surplus ratio clearly exceeded the year-earlier level. A milder winter and lower maintenance costs contributed to this.
• Profit from property management was 27 percent higher than in the year-earlier period, primarily as a result of increased rental income.
• Changes in value were somewhat lower year-on-year, amounting to 0.7 percent of the opening value. The valuation yields were essentially unchanged.
• Profit after tax was 5 percent higher than in the year-earlier period. To some extent, lower value appreciation offset the effects of the increase in profit from property management.
• The property value at the end of the period was SEK 37 billion, compared with SEK 45 billion at year-end 2018.
• Net asset value increased to SEK 80 per share, compared with SEK 75 per share at year-end.
• The equity/assets ratio increased to 36 percent, compared with 35 percent at year-end.
• On the balance sheet date, earnings capacity amounted to MSEK 1,382, compared with MSEK 1,360 at year-end.
SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER
• Acquisitions were completed in all three markets:
– In Oulu, Finland, possession was taken in February of four preschools with an underlying property value of MSEK 46.
– In Sarpsborg, Norway, possession was taken in April of a public-sector office with an underlying property value of MSEK 71.
– In Helsingborg, Sweden, possession was taken in March of an LSS home with an underlying property value of MSEK 23.
– In April, an agreement was concluded concerning the acquisition of a portfolio of four properties in Motala, Sweden, which house schools, public-sector offices and commercial office space. Possession will be taken in June. The underlying property value is MSEK 116.
• An updated strategy and new financial targets were presented in January. The overriding objective is for the property portfolio to grow to SEK 50 billion within five years, at the same time as distributable earnings per share will increase on average by a minimum of 10 percent per year.
COMMENTS FROM THE CEO
-ON OUR WAY
The first quarter of 2019 was an active period for Hemfosa. With the decisions made in January on an updated strategy and new financial targets, we staked out the course for our journey into the future. Following successful recruitments, we have now strengthened the organization to be able to realize our objectives. We completed acquisitions in all of our three markets and a number of projects were driven forward in various phases. The operations performed well and in line with our plan. The journey has started.
Our transaction team is now complete and we have thus been able to up the tempo of our transaction activities. Lately, we have completed acquisitions in Sweden, Norway and Finland with a total underlying property value of about MSEK 575. The properties we have acquired favorably complement our portfolio; the acquisitions in both Sweden and Norway are in locations where we already have a presence and the two properties in the Oslo region also have potential for development. We are also pleased to be able to enter a new and attractive region for us in Finland, with the acquisition of modern preschool properties with long leases in the rapidly growing Oulu region.
As we have previously described, the need for community service properties in our markets is considerable, both from a growing population and from a higher share of older and younger citizens who require schools, health and care services. Population growth is particularly concentrated to large and midsize municipalities, locations where Hemfosa has an extensive presence. Viewed as a whole, this development is creating pressure for increased floor space, in the form of both new builds and conversions of properties for community service operations, something that Hemfosa can contribute in all of our markets.
Not unexpectedly, community service properties are attracting increasing numbers of players and the competition for objects is intense. However, I feel secure with Hemfosa’s position in this market situation. Our size, expertise and local presence give us a competitive edge. We received proof of this when competing for Socialtjänstens Hus in Västerås, which Hemfosa’s proposal won and where one of the grounds was our expertise and customer orientation, something that the City of Västerås is well positioned to judge, since it is already one of our tenants.
We continued to strengthen our organization in the first quarter, in line with our our plan. With, among others, a Head of Business Development about to join us, we will be able to increase the intensity of work with municipalities and concepts. In the recruitment processes, we have noted that Hemfosa has a strong brand and that many are attracted by the opportunity to become part of our expansive and exciting journey ahead.
Our ambition is to maintain a high tempo, with our sights set on our new growth target of a property portfolio of SEK 50 billion within five years. With a number of exclusive processes under way, we expect more acquisitions in the months ahead. The pace of activity in our project operations is also high, with a number of zoning plans in various phases. We see great potential for project development in the existing portfolio, particularly in Norway. During the robust expansion of the property portfolio there, we have acquired properties with major potential, whose value we are now working hard to realize.
Together with my colleagues, I feel highly committed to our mission: to develop fantastic properties for important community service operations while realizing Hemfosa’s profitability and growth targets.
Caroline Arehult, CEO
For further information, please contact:
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