K-Fast Holding AB (publ): Interim report January–March 2022

Financial ratios for the period 1 January–31 March 2022
(corresponding period in 2021, unless otherwise stated)

• Rental income: SEK 79.3 million (59.5)
• Profit from property management: SEK 26.0 million (19.5)
• Profit for the period: SEK 328.2 million (168.2)
• Net investments in investment properties: SEK 707.4 million (414.9)
• Investment properties: SEK 10,552.9 million (31 Dec 2021: 9,603.7)
• Long-term net asset value (NAV): SEK 5,225.7 million (31 Dec 2021: 4,976.1)
• Number of apartments under management: 3,050 (2,277)
• Number of construction starts, apartments: 244 (296)
• Number of apartments under construction: 1,880 (1,567)
• Number of apartments under project development: 5,347 (5,281)
• Interest coverage ratio, R12m: 3.0 multiple (2.7)
• Equity/assets ratio: 35.8% (37.8)
• Debt-to-equity ratio: 52.9% (48.6)
• Profit from property management per share: SEK 0.12 per share (0.09)
• Long-term net asset value (NAV) per share: SEK 24.27 per share (18.19)
• Growth in profit from property management per share: 33.6% (18.5)
• Growth in long-term net asset value (NAV) per share: 5.0% (7.0)
• Earnings per share*: SEK 1.52 per share (0.78)
  
  * There are no potential shares (e.g. convertibles in the company, and accordingly no dilution effect).

A message from the CEO
High activity and a unique business model secured

K-Fastigheter ended 2021 as a stronger and better organization than ever. We started 2022 at a high pace, with expectations to continue to deliver on a high level despite market uncertainty and geopolitical factors. This is only achievable due to our unique business model, which together with clear goals and competent employees provides the foundation to win market shares despite global headwinds.

The property sector has for several years delivered record results, mainly due to the unrealized value which has become visible with descending return requirements.  The uniqueness of K-Fastigheter’s business model is that the majority of our unrealized value does not originate from descending return requirements but from our progressive revenue recognition methodology in project development and construction, which for the quarter amounted to SEK 171.6 million.  Under this methodology we recognize the difference between cost and market value progressively in line with the completion of the construction, which we internally regard as our project development gross margin. We believe this growth engine will continue to deliver at the same rate, if not even higher, in a climate of stagnant values and increased volumes. This is one of the unique qualities that makes me feel comfortable that K-Fastigheter can deliver good profit in the future too.

The supply chain challenges we experienced during the pandemic were still present in the first quarter, but they are now driven by the tragic war in Ukraine. We currently do not see any risk for K-Fastigheter to be without key components or material but, we have had to be creative in finding new alternative materials and suppliers within the Construction and Prefab business areas. We are focusing less on “just in time” solutions, but instead on supply chain security, which require more capital to be tied up in the business in the form of increased inventory. This is however a relatively low cost compared to being without material.

Cost inflation has impacted building materials and other procurement. However, K-Fastigheter’s wonderful employees have managed to offset the majority of the price rises by increased efficiency and innovation in combination with higher volumes, and I feel very assured that we in financial year 2022, can maintain the current production cost levels, which will secure our competitive position further.

During the quarter, total apartments under management exceeded 3,000, demonstrating that our four business areas are working in harmonization, and we expect the rate of completion to further increase leading to a high growth in rental value. In addition, we had 1,880 apartments under construction at the end of the quarter which represent a total rental value of SEK 255 million and an average PTV of 70 percent (total cost in relation to market value) compared to 72 percent in PTV in the corresponding quarter in 2021. The financial letting ratio was 97.4 percent at the end of the quarter, which is a new record during our time as a listed company. The demand is high for our projects under construction and the letting ratio is satisfactory. In Prefab and Construction, we have secured our cement and steel requirements for 2021. Prefab has now received its total number of internal projects from K-Fastigheter, which represent a third of Prefab’s total order volumes for 2022 and which will guarantee the use of full capacity in the financial year. Prefab completing all internal projects for K-Fastigheter is a key factor in cost inflation mitigation.

As aforementioned, we are faced with increased inflation which is primarily caused by increased energy prices. In addition, we have the terrible war in Ukraine which affects so many people that it is difficult to talk about in relation to K-Fastigheter’s progress, but it is a reality we are forced to deal with. As previously mentioned, we have responded to the project development and construction challenges by increasing efficiency and innovation but also by increasing volumes. To account for the increase in energy and operating costs that we experienced during the fall and keep experiencing, we have changed our market valuations by increasing operating and maintenance costs to within the range of SEK 40-50/square-meter. As a result of this, the market value for our completed investment properties is relatively unchanged in the first quarter, despite the direct return declining from 3.82 percent to 3.76 percent.

With this in mind, the decision we took in 2021 to install photo voltaic cells on all new build Lateral Low-Rise buildings and Apartment Blocks on which construction was started in 2021 or later, feels like the right decision.  The production capacity of these photo voltaic cell plants is equivalent to the electricity consumption of the building which generates a reduction in operating costs of approximately SEK 15/square-meter.

Profit from property management increased by 34 percent to SEK 26.0 million corresponding to an increase of 34 percent per share. The Group’s comprehensive income in the first quarter of 2022 totaled SEK 330.3 million, an increase of 92 percent compared to the corresponding quarter in 2021. 

Net asset value per share increased by 5 percent since the end of 2021 and by 33 percent compared to the corresponding quarter in 2021. 

To conclude, K-Fastigheter is ambitious and forward looking, but is underpinned by an asset type characterized by low risk and clear demand both in the long-term and short-term.

- Jacob Karlsson, May 2022

A complete Interim report January–March is attached and published on: k-fastigheter.com/en/investors/financial-reports

A presentation of the earnings and operations is published on: k-fastigheter.com/en/investors/presentations
 

For more information, please contact:
Anders Antonsson, IR-Manager
e-mail: anders.antonsson@k-fastigheter.se, telephone: +46 708 730 900

 As a property company, K-Fastigheter’s objective is to add value for tenants by creating attractive homes with superior comfort. The Group’s operations encompass active property management, project development and proprietary construction operations. To enhance cost efficiency and cut construction times, K-Fastigheter has chosen to work with three concept buildings, developed in-house and constructed for proprietary management. K-Fastigheter provides some 3,100 homes in several locations in the Öresund region, in the province of Småland and in western Sweden, and is assessing new markets as production capacity increases. The Group’s property portfolio has a book value SEK 10.5 billion, with an annual rental value of about SEK 370 million. Since November 2019, the company’s Class B shares have been traded on Nasdaq Stockholm under the (ticker: KFAST B). Read more at k-fastigheter.com

This disclosure contains information that K-Fast Holding AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 05-05-2022 16:00 CET.

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