K-Fast Holding AB (publ): Interim report January-September 2024

*Profit from property management increases by 13 percent to SEK 102.2 million.
*Improved occupancy rate to 95.3%.
*621 apartments construction started during the period.

Financial ratios for the period 1 January–30 September 2024
(corresponding period in 2023 unless other stated)

• Rental income: SEK 452.9 million (351.5)
• Profit from property management: SEK 102.2 million (90.8)
• Profit from property management per share: SEK 0.42 per share* (0.42)
• Growth in profit from property management per share: -0.7%* (-12.4)
• Result in business segment Construction before taxes: SEK 229.5 million (259.2)
• Earnings per share in business segment Construction: SEK 0.94 per share* (1.20)
• Growth in earnings per share in business segment Construction: -21.9%*
  (-47.0)
• Profit for the period: SEK -12.7 million (-238.7)
• Earnings per share*/**: SEK -0.11 per share (-1.25)
• Long-term net asset value (NAV): SEK 6,101.5 million (Dec 31, 2023: 5,803.5)
• Long-term net asset value (NAV) per share: SEK 24.80 per share* (Dec 31, 2023: 24.25)
• Growth in long-term net asset value (NAV) per share: 2.3%* (--8.8)
• Interest coverage ratio (year): 1.5 multiple (1.9)
• Equity/assets ratio: 30.7% (Dec 31, 2023: 30,3)
• Debt-to-equity ratio: 58.4% (Dec 31, 2023: 60.2)
• Number of construction starts, apartments: 621 (199)
• Number of apartments under construction: 1,745 (1,886)
• Number of apartments under project development: 2,257 (4,290)
• Number of apartments under management: 4,987 (4,078)
• Net investments in investment properties: SEK 10.8 million (1,764.5)
• Investment properties: SEK 15,012.8 million (Dec 31, 2023: 14,870.9)

* Adjusted for new issues during 2023 and 2024..
** There are no potential shares (e.g. convertibles in the company, and accordingly no dilution effect).

A message from the CEO

Prospects are gradually improving, interest rates are heading down, and inflation has increasingly started to come under control. Profit from property management and financial occupancy have improved as a result of the hard work of our incredible colleagues and a market climate that is beginning to move in the right direction. However, a large dose of humility is still required, as the market conditions remain challenging.

The Property Management operating segment had a total of 4,987 apartments under management at the end of the quarter. The decrease in the number of apartments since the end of the second quarter was attributable to the hand-over of 311 apartments in the Copenhagen region in the quarter. In the quarter, a total of 140 apartments were taken into possession in completed projects in Gothenburg, Hässleholm and Höganäs. In year-on-year terms, rental values increased from SEK 524.1 million to SEK 655.2 million, up by 25 percent. As of 30 September, the financial occupancy rate was 95.3 percent, against 94.3 as of 30 June and 91.9 percent at the beginning of the year.  We have continued to reduce vacancies at the same time as adding new production with some vacancies, which I consider confirmation that the management organization’s focused efforts are bearing fruit. My view is that we face positive prospects of reducing vacancies to more normalized levels by the end of the year. This is derived from a focused effort in the letting operations, at the same time as no more new apartments will be completed in the year.

Rental income for the first nine months of the year totaled SEK 452.9 million and profit from property management was SEK 102.2 million, an improvement of 13 percent year-on-year. The gradually improved financial occupancy rate plus lower interest rates contributed to strengthening profit in the management operations. Profit will continue to improve at a pace with meticulous penny-saving efforts aimed at reducing the cost base in the management operations, while vacancies continue too fall. Every penny counts in property management, and recent years’ cost inflation coupled with higher interest rates have hit us and our sector peers hard. On the income side, it looks like rent increases between 2024 and 2025 will be in the interval of 4-5 percent, which helps offset higher costs in recent years. However, it is galling to see private and municipal heating and water operators introduce price increases in the range of +10 percent for the third year running without encountering significant resistance from the governing politicians.

In the Construction operating segment, construction started on two projects in the quarter. The projects relate to Skjutskontoret 3 in Malmö, comprising 154 apartments in a Lateral Low-Rise, which we started with a Yield on Cost of 6.4 percent and Production to Value of 69 percent. In addition, construction started on Rickeby 1:48 in Vallentuna. Rickeby is a project that we are constructing in a joint venture with Titania, and which comprises a total of 74 apartments started with a Yield on Cost of 6.2 percent and Production to Value of 76 percent. As we only hold 50 percent of the shares in the joint venture, the project will not be consolidated and will be recognized as external production. At the end of the quarter, there were 1,745 apartments in construction, of which 621 were started in the first nine months of the year. In addition, construction started on 74 apartments under the joint venture with Titania. This should be viewed in relation to the fact that construction started on 450 apartments for the whole of 2023. In the Construction operating segment, Prefab has managed to get through a challenging period and has turned things around through a consistent sales focus. Prefab’s order book totaled SEK 990.0 million as of 30 September, compared to SEK 457.2 million year-on-year. Following a peak in completions in the final quarter of 2023, the construction operations for concept buildings saw a period of a slightly reduce pace. However, I can conclude that this business area is also shifting up a gear, with close to 200 more apartments in construction now than at the start of the year.

In the day-to-day operations, everyone is focusing sharply on facilitating and incorporating the new business plan spanning the period until end of 2028. In addition to the hand-over of the apartments in Copenhagen, we also divested a couple of smaller development properties in Falkenberg and Malmö in the quarter. The sales process is also underway for additional properties. The new normal means that continuous sales processes are integrated into our day-to-day operations. This is a step towards implementing the new business plan, which involves divestments that favor internally-financed development operations.

- Jacob Karlsson, October 2024

A complete Interim report for January-September 2024 is attached and published on: k-fastigheter.com/en/investors/financial-reports

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

For more information, please contact:
Johan Hammarqvist, Head of Investor Relations and Communications
e-mail: johan.hammarqvist@k-fastigheter.se, telephone: +46 (0)10-167 60 99
 

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 October 25^th, 2024, 9 AM CET.

K-Fastigheter is much more than a property company. Through an integrated process, we build our business in the two business segments Construction and Property Management. In business segment Construction the objective is to deliver completed housing units based on the Group’s concept houses, developed in-house, as well as high-quality frame solutions. Our prefab operations is organized in the subsidiary K-Prefab. To enhance cost efficiency and cut construction times, K-Fastigheter has chosen to work with three concept houses for housing, developed in-house. Business segment Property Management manages the Groups property portfolio with focus on housing. K-Fastigheter offers close to 5,200 homes from Copenhagen in the south to Gävle in the north and is continuously assessing new markets. K-Fastigheter strive to create attractive homes with a high comfort factor. The Group’s property portfolio has a book value SEK 15 billion. Annual rental value in invest properties under management amounts to SEK 655 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