K-Fast Holding AB: Year-end report 2019
Financial ratios for the period 1 January - 31 December 2019 (corresponding period in the preceding year)
- Rental income: SEK 156.8 million (96.6)
- Profit from property management: SEK 52.9 million (41.1)
- Profit after tax for the period: SEK 365.3 million (244.8)
- Net investments in investment properties: SEK 1,061.1 million (835.7)
- Investment properties: SEK 4,396.7 million (3,018.1)
- Long-term net asset value (NAV): SEK 2,540.2 million (1,213.4)
- Number of apartments under management: 1,711 (1,220)
- Number of apartments under construction: 700 (541)
- Number of apartments under project development: 1,340 (688)
- Interest coverage ratio, multiple: 2.6 (3.5)
- Equity/assets ratio: 41.8% (29.3)
- Loan-to-value ratio: 40.2% (60.4)
- Growth in profit from property management per share: 24.6% (23.8)
- Growth in long-term net asset value (NAV), per share: 54.4% (29.5)
- Earnings per share: SEK 14.14 (9.79)
A Message from the CEO
With the final days of 2019 now having been laid to the record, it can only be said that things do not always turn out as planned – sometimes, they turn out much better! What a year we had!
At K-Fastigheter, we always try to build something more than just apartments. Together with our tenants, we seek to build homes, because there is definitely a difference between a home and an apartment. There is a difference between four walls and a home in which we experience well-being, security and love... Human values are part of that difference and these are also the values that set K-Fastigheter apart from many other property companies. We design the homes that we build and manage in accordance with the motto “HOMES where we ourselves want to live” – which we actually do, as about 15 percent of our employees are tenants of our portfolio. This engenders credibility, and we live as we preach. At the same time, we always keep an ear on the ground to learn how we can further improve. Because we are never completely satisfied!
K-Fastigheter’s operational targets appear realistic and achievable – these include at least 5,000 apartments under management by the end of 2023 and a project volume of 1,000 apartments commencing construction annually by that time. We enter 2020 with 1,711 apartments under management, 700 apartments currently in production, 1,340 apartments currently at the project planning stage and 199 apartments of which we will be taking possession gradually by September 2020. Consequently, our property and project portfolios amounted to a total of 3,950 apartments as of 31 December 2019. Rental income for full-year 2019 amounted to SEK 156.8 million, compared with the rolling 12-month rental value of SEK 196.6 million at the end of the year, reflecting a 25 percent increase.
We take an optimistic and opportunistic attitude, which I am convinced will bring us continued success. We seek to work closely with landowners, municipalities, tenants and partners. K-Fastigheter strives to be a long-term partner, meaning that we take all of our stakeholders seriously.
Crucial to achieving our goals is pursuing K-Fastigheter’s existing business model, with a focus on acquiring building rights in the growth locations that we prioritize. This is a long-term process, largely involving numerous small-scale acquisitions that are often achieved through established relationships with land and property owners. In December 2019 alone, we acquired building rights equivalent to 496 apartments with a market value of almost SEK 1 billion on completion.
The increase in volumes we aim to achieve will require geographical expansion. During the year, we commenced construction projects on Sweden’s west coast, acquiring building rights for almost 300 apartments in Gothenburg, of which 103 commenced construction the third quarter of 2019, and we have applied for building permits for just under 200 more apartments, the construction of which we aim to commence in 2020. We have several major projects in Växjö, where we have acquired building rights and completed properties, and where we already have 90 apartments under construction in the Pelikanen and Taket urban blocks. At current production levels and agreed dates of possession, Växjö will, within a few years, be our second-largest location after Helsingborg in terms of the number of apartments under management.
Profit for full-year 2019 amounted to SEK 365.3 million, of which 42 percent relates to project development and construction of our own concept buildings. What I want to emphasize in saying this, is that we are so much more than simply a property company. In the future, I anticipate further initiatives in the markets where we already operate and we believe the near-future conditions favourable for us to take the step across the Sound to Copenhagen and its environs, and, in the long term, to expand in and around the Mälardalen region, inland from Stockholm. Organizationally, we are already well-equipped to achieve an annual production volume of 1,000 apartments. By adding a new production unit in Hässleholm in 2020, supplementing our existing one in Osby, we will have the internal production capacity to meet the above volumes with a margin.
In addition to the above targets, we will continue to focus on increasing efficiency in the construction phase, not only during 2020, but also in the longer term. For although we can certainly build high-quality homes at an attractive cost level, the fact remains that the homes we produce ourselves are also more efficient to manage in terms of cost and the environment. Although we are pleased with a surplus ratio of 68 percent after property management expenses for a portfolio consisting predominantly of housing, it should be added that we are extremely satisfied and proud that our concept buildings, produced in-house, generate even higher surpluses. At present, our concept buildings, produced in-house, show a surplus ratio of slightly more than 80 percent, compared with our portfolio of purchased properties, which reports a surplus ratio of slightly less than 60 percent. And that, my friends, is where you have the difference that makes a difference. Just think – from the concept buildings we produce in-house, we shareholders actually get to keep 20 percent more of the rent compared with the rent from our older buildings. The earnings that take five years for our older portfolio to produce we achieve in four years with our concept buildings produced in-house.
One of the reasons for the higher surplus ratio in the newly produced concept buildings is that their overall energy consumption was 32 percent lower and their water consumption 16 percent lower in 2019, compared with our purchased portfolio.
A sustainable future is a profitable future, for the environment and for us as shareholders!
We find ourselves at the beginning of a marathon race with an eternal investment horizon. Despite the race ahead being long, I can see that we maintained a high pace in 2019 with net asset value growing by 54 percent per share, including the new shares issued in the autumn, and by 36 percent excluding them. In addition, profit from property management grew by 25 percent, corresponding to our financial target of 20-percent growth per share and year in relation to profit from property management and net asset value. We seem to be in good shape, suggesting that we will maintain a rapid rate of growth in 2020.
We ended 2019 with our class B shares being launched on Nasdaq Stockholm’s Mid Cap list. There was tremendous interest, with more than 40,000 applications, far exceeding the number of shares we had to allocate. What was most heartwarming was that most K-Fastigheter employees chose to subscribe for the issue, joining me as shareholders alongside many others. Our team spirit and sense of belonging have never been stronger, as we now progress united towards new and more ambitious objectives. We enter 2020 with approximately 3,700 shareholders. We hope to retain the confidence of these new partners on a journey that has only just begun.
Jacob Karlsson, February 2020
A complete Year-end report 2019 is attached and also published on the Group's website, under the heading Financial reports.
For further information, please contact:
Jacob Karlsson, CEO and Founder, K-Fast Holding AB, e-mail: firstname.lastname@example.org, telephone: +46 10 167 60 71
Martin Larsson, Deputy CEO/CFO, e-mail: email@example.com, telephon: +46 703 533 160
Anders Antonsson, IR Manager, e-mail: firstname.lastname@example.org, telephone: +46 709 994 970
This information is such that K-Fast Holding AB is obliged to disclose in accordance with the EU’s Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 8:00 a.m. CET on 27 February 2020. (English version was submitted on 2 March 2020)
In a recorded presentation, K-Fastigheter’s President and CEO, Jacob Karlsson, and CFO, Martin Larsson, are commenting on the Group’s Year-end report 2019. The presentation is held in Swedish with presentation materials in English. Link to the presentation: www.k-fastigheter.se/en/investors/presentations