Kojamo plc: Kojamo plc’s Half-Year Financial Report 1 January – 30 June 2020
Kojamo Plc Stock Exchange Release, 20 August 2020 at 8:00 a.m. EEST
Kojamo plc’s Half-Year Financial Report 1 January – 30 June 2020
Profitable growth, nearly 2,400 apartments under construction
This is a summary of the Half-Year Financial Report January–June 2020, which is in its entirety attached to this release and can be downloaded from the company’s website at www.kojamo.fi/investors. Unless otherwise stated, the comparison figures in brackets refer to the corresponding period of the previous year. The figures in this Half-Year Financial Report have not been audited.
Summary of April–June 2020
- Total revenue increased by 1.9 per cent to EUR 94.8 (93.1) million.
- Net rental income increased by 3.1 per cent, totalling EUR 68.9 (66.8) million. Net rental income represented 72.7 (71.8) per cent of revenue.
- Profit before taxes was EUR 73.5 (85.9) million. The profit includes EUR 26.2 (42.2) million in net gain on the valuation of investment properties at fair value and EUR -0.6 (0.0) million in profits and losses from the sale of investment properties. Earnings per share was EUR 0.24 (0.27).
- Funds From Operations (FFO) increased by 4.9 per cent and amounted to EUR 42.1 (40.1) million.
- Gross investments totalled EUR 116.9 (58.6) million, representing 123.3 (62.9) per cent of total revenue.
Summary of January–June 2020
- Total revenue increased by 3.2 per cent to EUR 190.5 (184.6) million.
- Net rental income increased by 6.2 per cent, totalling EUR 124.9 (117.7) million. Net rental income represented 65.6 (63.8) per cent of revenue.
- Profit before taxes was EUR 125.2 (124.8) million. The profit includes EUR 48.2 (52.6) million in net gain on the valuation of investment properties at fair value and EUR -0.7 (0.0) million in profits and losses from the sale of investment properties. Earnings per share was EUR 0.40 (0.40).
- Funds From Operations (FFO) increased by 7.6 per cent and amounted to EUR 71.5 (66.4) million.
- The fair value of investment properties was EUR 6.5 (5.3) billion at the end of the review period, including EUR 2.4 (23.7) million in investment properties held for sale.
- The financial occupancy rate decreased year-on-year and stood at 96.3 (96.9) per cent.
- Gross investments totalled EUR 179.0 (96.6) million, representing 94.0 (52.3) per cent of total revenue.
- EPRA NAV per share (net asset value) grew by 31.5 per cent and amounted to EUR 15.62 (11.88).
- Equity per share was EUR 12.53 (9.55) and return on equity was 6.5 (8.5) per cent. Return on investment was 5.1 (6.2) per cent.
- At the end of the review period, there were 2,380 (1,329) Lumo apartments under construction.
- Kojamo specifies its outlook for 2020.
Kojamo owned 35,474 (35,194) rental apartments at the end of the review period. Since June of the previous year, 206 (167) apartments have been acquired, 634 (952) have been completed, 534 (100) have been sold and -26 (3) have been demolished or altered.
Key figures
| 4–6/2020 | 4–6/2019 | Change % | 1–6/2020 | 1–6/2019 | Change % | 2019 | |
| Total revenue, M€ | 94.8 | 93.1 | 1.9 | 190.5 | 184.6 | 3.2 | 375.3 |
| Net rental income, M€ *) | 68.9 | 66.8 | 3.1 | 124.9 | 117.7 | 6.2 | 247.3 |
| Net rental income margin, % *) | 72.7 | 71.8 | 65.6 | 63.8 | 65.9 | ||
| Profit before taxes, M€ *) | 73.5 | 85.9 | -14.4 | 125.2 | 124.8 | 0.3 | 1,031.3 |
| EBITDA, M€ *) | 85.2 | 99.2 | -14.0 | 153.6 | 151.5 | 1.4 | 1,083.1 |
| EBITDA margin, % *) | 89.9 | 106.5 | 80.6 | 82.1 | 288.6 | ||
| Adjusted EBITDA, M€ *) | 59.6 | 56.9 | 4.9 | 106.1 | 98.8 | 7.3 | 210.3 |
| Adjusted EBITDA margin, % *) | 62.9 | 61.1 | 55.7 | 53.6 | 56.0 | ||
| Funds From Operations (FFO), M€ *) | 42.1 | 40.1 | 4.9 | 71.5 | 66.4 | 7.6 | 140.7 |
| FFO margin, % *) | 44.4 | 43.1 | 37.5 | 36.0 | 37.5 | ||
| FFO excluding non-recurring costs, M€ *) | 42.1 | 40.1 | 4.9 | 71.5 | 66.4 | 7.6 | 140.7 |
| Investment properties, M€ 1) | 6,486.4 | 5,303.2 | 22.3 | 6,260.8 | |||
| Financial occupancy rate, % | 96.3 | 96.9 | 97.2 | ||||
| Interest-bearing liabilities, M€ 2)*) | 3,212.8 | 2,616.1 | 22.8 | 2,674.2 | |||
| Return on equity, % (ROE) *) | 6.5 | 8.5 | 30.3 | ||||
| Return on investment, % (ROI) *) | 5.1 | 6.2 | 20.5 | ||||
| Equity ratio, % *) | 43.3 | 41.9 | 46.9 | ||||
| Loan to Value (LTV), % 3) *) | 42.6 | 46.9 | 40.5 | ||||
| EPRA NAV, M€ | 3,861.2 | 2,936.0 | 31.5 | 3,828.0 | |||
| Gross investments, M€ *) | 116.9 | 58.6 | 99.6 | 179.0 | 96.6 | 85.3 | 259.9 |
| Number of personnel, end of period | 340 | 329 | 296 | ||||
| Key figures per share, € | 4–6/2020 | 4–6/2019 | Change % | 1–6/2020 | 1–6/2019 | Change % | 2019 |
| FFO per share *) | 0.17 | 0.16 | 6.3 | 0.29 | 0.27 | 7.4 | 0.57 |
| Earnings per share | 0.24 | 0.27 | -11.1 | 0.40 | 0.40 | 0.0 | 3.34 |
| EPRA NAV per share | 15.62 | 11.88 | 31.5 | 15.49 | |||
| Equity per share | 12.53 | 9.55 | 31.2 | 12.51 |
| *) In accordance with the guidelines issued by the European Securities and Markets Authority (ESMA), Kojamo provides an account of the Alternative Performance Measures used by the Group in the section Key figures, the formulas used in their calculation, and reconciliation calculations in accordance with the ESMA guidelines of the Half-Year Financial Report. |
| 1) Including items held for sale. 2) Excluding liabilities related to non-current assets held for sale. 3) Excluding non-current assets held for sale or liabilities related to non-current assets held for sale. |
Outlook for Kojamo in 2020 (specified)
Kojamo estimates that in 2020, the Group’s total revenue will increase by 2–5 per cent year-on-year (previously 2–6 per cent). In addition, the company estimates that the Group’s FFO for 2020 will amount to between EUR 146–158 million, excluding non-recurring costs.
The outlook takes into account the effects of the completed housing divestments and acquisitions, the estimated occupancy rate and rises in rents, as well as the number of apartments to be completed. The outlook is based on the management’s assessment of total revenue, net rental income, administrative expenses, financial expenses, taxes to be paid and new development to be completed, as well as the management’s view on future developments in the operating environment.
Additionally, the outlook is based on strong demand sustained by migration, which will increase Like-for-Like rental income. The management can influence total revenue and FFO through the company’s business operations. In contrast, the management has no influence over market trends, the regulatory environment or the competitive landscape.
Effects of the COVID-19 pandemic on Kojamo’s outlook
In spite of the pandemic, Kojamo’s management expects the Group’s operating activities to continue undisrupted for the most part. The webstore enables the renting of apartments to continue almost as normal. The pandemic has not led to an increase in the Group’s rental receivables or credit losses, and they are not expected to grow significantly in the near future. The development of rental receivables and credit losses is actively monitored. Efforts are made to prevent increases in rental receivables through active resident advisory services as well as payment plans and arrangements agreed on with customers.
Kojamo’s management estimates that the demand for rental apartments will remain strong going forward. The restrictions implemented in response to the pandemic may, in the short term, affect people’s willingness to relocate as well as prevent both migration within the country and work-related immigration. Economic uncertainty may influence people’s willingness to take housing loans, which may increase the popularity of rental housing. On the other hand, supply in the rental housing market has increased as apartments intended for short-term rentals have moved to the long-term leasing market following restrictions on travel.
Kojamo will continue to implement its growth strategy. All development projects have progressed as planned thus far. However, challenges potentially faced by construction companies due to the pandemic may result in delays to Kojamo’s projects. In Kojamo’s construction contracts, the construction company takes on the overall responsibility for the entire construction project and payments are made in accordance with the degree of completion. Kojamo’s management estimates that potential delays in projects will not have a material impact on the Group’s total revenue and FFO for the year.
Kojamo’s financial position and liquidity are good. Thanks to the Group’s diverse financing structure, Kojamo has been able to carry out financing arrangements without disruptions.
CEO’s review
The first half of the year went well in spite of the COVID-19 pandemic. Our total revenue, net rental income and FFO increased. The fair value of investment properties was EUR 6.5 billion.
The impacts of the COVID-19 pandemic on our operations have been minor and we do not expect them to have an impact on our guidance for 2020. The pandemic has, however, had an impact on the housing market. Work-related immigration has stopped for the time being, students have temporarily moved in with their parents and foreign students have returned to their home countries. Supply has increased due to new development projects completed during the review period, and the restrictions on travel have resulted in apartments intended for short-term rentals moving to the long-term housing market. Our financial occupancy rate is at a good level in spite of the growing supply of rental housing. We expect the impacts of the pandemic to be short-lived. In the long term, urbanisation will continue even stronger after the crisis.
Housing production in the market has slowed down significantly as a result of the pandemic, but the demand for new apartments will continue to grow due to urbanisation. The situation has presented us with opportunities in our property development operations, and during the first half of the year we have announced the start of several new projects, such as the start of construction of the Lumo One high-rise building to be built next to the Redi shopping centre. We now have a record-high 2,380 apartments under construction. When you add the apartments included in our existing cooperation agreements for which construction is yet to begin, we will build some 3,600 apartments in total during the next four years. Kojamo is one of the largest companies investing in Finland, and we are in a good position to continue our profitable growth going forward.
We strengthened our financing position early on in the year to prepare for the potential consequences of the pandemic, supported by our diverse financing structure. We also secured the financing for our development projects ahead of time by carrying out a successful senior unsecured notes issue of EUR 500 million in May under our EMTN programme. Established in March, the programme covers our financing needs for the current strategy period as well as the refinancing of bonds that will mature thereafter.
We have also taken measures to pursue renewal through digital solutions. In the early summer, we completed our Digital Road Map 2023, which specifies development actions that support the execution of Kojamo’s strategy. We already have a strong frontrunner position with respect to the use of our webstore, for example, and we will continue to strengthen our position through the digital transformation of the complete customer path. We have also made progress in our sustainability efforts. As part of the development of our sustainability programme, we carried out a materiality analysis of sustainability in May–June to ensure that our sustainability efforts are focused on the sustainability themes that are the most material with regard to our strategy, business operations and stakeholders. During the summer, we have also participated in the Global Real Estate Sustainability Benchmark (GRESB) survey for the first time. We will tell more about the Digital Road Map and we will publish our sustainability programme during 2020.
We are in a good position to continue our operations. Much of the credit for this belongs to our employees, who have done an excellent job of maintaining our operating activities during the exceptional circumstances.
Jani Nieminen
CEO
News conference and webcast
Kojamo will hold a news conference for institutional investors, analysts and media on 20 August 2020 at 10:00 a.m. at the company’s head office at Mannerheimintie 168A, Helsinki. The event will be held in English. Members of the media will also have the opportunity to ask questions in Finnish after the event.
Participants are requested to only attend the event in person if they are completely healthy. The practical arrangements take into account the official recommendations concerning the coronavirus pandemic.
The event can also be streamed as a live webcast. A recording of the webcast will be available later on the company website at https://kojamo.fi/en/investors/releases-and-publications/financial-reports/
The news conference can be streamed online at https://kojamo.videosync.fi/2020-q2-results
You can also participate in the press conference by calling:
FI: +358 981 710 310
SE: +46 856 642 651
UK: +44 333 300 0804
US: +1 631 913 1422
Please use the following PIN code to participate in the press conference by telephone: 76954984#
For more information, please contact
Maija Hongas, Manager, Investor Relations, Kojamo Plc, tel. +358 20 508 3004
Erik Hjelt, CFO, Kojamo Plc, tel. +358 20 508 3225
Distribution:
Nasdaq Helsinki, Irish Stock Exchange, key media
Kojamo is Finland’s largest private residential real estate company and a frontrunner in the housing business. Our mission is to create better urban housing. The Lumo brand provides environmental-friendly housing and services in Finland’s biggest growth centres. We actively develop the value of our investment properties by developing new properties and our existing property portfolio. We want to be the property market frontrunner and the number one choice for our customers. Kojamo’s shares are listed on the official list of Nasdaq Helsinki. For more information, please visit kojamo.fi/en/
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