Developing our communities

Hembla AB (publ) reports for the third quarter of 2019 a profit after tax amounting to SEK 208 million compared to SEK 881 million for the third quarter of the previous year.

Earnings per share after tax amounted to SEK 2.24 (9.58). The adjusted equity (EPRA NAV) increased by 17 percent compared to the third quarter 2018 and amounted to SEK 184.41 per share (158.13) at the end of the period.

1 January – 30 September 2019

• Rental income increased to SEK 1,435 million (1,316)
• Net operating income increased to SEK 763 million (699)
• Income from property management increased to SEK 285 million (217)
• Unrealized changes in the value of investment properties amounted to SEK 1,283 million (3,085)
• Changes in the value of financial instruments of SEK -7 million (-37)
• Profit before tax amounted to SEK 1,584 million (3,244)
• Profit after tax amounted to SEK 1,212 million (2,709)
• Earnings per share amounted to SEK 13.12 (30.97) before dilution and amounted to 13.06 (30.91) after dilution

Statement from the CEO

A functional property management organization

The third quarter was the first quarter where we from the start operated in our new functional property management organization. Organizational changes are processes, which requires time for both preparation and implementation. It is also essential to continuously evaluate efforts in order to further develop the organization and the work ahead. The third quarter is therefore a clear first indication on where we stand.

There is no doubt that we have taken large steps towards the main goal for the organizational change; to further deliver on our promise to always put the tenant first and at the same time offer our employees opportunities for good professional development. I am convinced that improvement must be immediately visible, both internally among our employees, but also for our tenants. This creates motivation for the employees and increased tenant satisfaction.

The new property management organization’s work processes and routines have provided immediate and noticeable results. During September we launched a new central phone number to our customer service for all our communities. Thanks to this, we have increased our availability and the hours that tenants can get in contact with us. On a weekly basis, we receive approximately 5,000 calls to the new service center number, and we have the capacity to provide our tenants service in 13 different languages. This has not only increased our availability and service level but has also simplified the process for tenants to reach us. New ways of conducting maintenance rounds of our properties and communities have taken us big steps towards being able to offer our tenants even better living environments, as evidenced by the feedback from tenants in many of our communities.

 We have also gained a new and strengthened leadership within property management with functional heads and group managers, who are responsible for the operations going forward. This has created new career paths within the company and provides opportunities to retain talented and highly motivated employees.

Refurbishment campaigns

Communicating the benefits of being a tenant with us to our existing tenants are important. We have an attractive offering that lets our tenants choose if they would like a more modern standard in their living. The interest for that offering is large. During the summer months we performed a targeted campaign to tenants living in unrefurbished apartments in a few selected communities. The purpose of the campaign was to market the possibility to get the tenants’ current apartment refurbished, but also to conduct a pilot on a new working method. The campaign became a big success and the method to market our offerings this way will be implemented in the entire portfolio and be further developed.

Community development and tenant dialogues

With a large number of ongoing development projects in our communities a number of tenant dialogues have been conducted during the quarter to listen to the tenants’ views on how the communities should be developed. The tenant dialogues are important forums where the tenants are given the opportunity to influence their own living environments outside their apartments.  A positive and encouraging conclusion from all the dialogues we have conducted during the quarter is that the vast majority of all our tenants feel very at ease in their communities. Refurbishment and upgrading efforts have a positive impact on the tenants’ views of the area and their willingness to continue living there. This comes as no surprise, but it is a clear acknowledgement that our business efforts create value not only for us as a company but also for our tenants, the specific communities and the community at large.

We have also intensified the work on the development of our commercial facilities within the property portfolio during the quarter. I am convinced that a central part of a pleasant community is that local services and public services are close by. This is also something that has been highlighted in our tenant dialogues. In one of the tenant dialogues we conducted in our portfolio on Albyberget in Botkyrka municipality it became clear that, for instance, the demand of different types of commercial services is large. As digitization continues more and more purchases are made online and the demand for parcel delivery service points for goods purchased online is large among our tenants. As property owners we have the opportunity to influence this development and within this area there is a large potential for business development. The commercial- and community development work that have been intensified during this quarter will continue in the same pace when we now enter the fourth and last quarter of the year.

New joint venture projects

We are working with three main objectives to create socially sustainable communities. It is about strengthening the sense of community, increase the tenants’ influence and enable improved networks and relationships between people who live and stay in the communities. The most important focus area is perhaps the cooperation with other parties to reach these objectives. If we can cooperate with other parties with a similar approach we will have a large impact. That is why we entered a new cooperation with Haninge municipality and the organization A Healthy Generation during the third quarter of the year. The cooperation is an ambitious and long-term project to improve public health. Through the project we will contribute to offering families with children in our communities the possibility to participate in activities for a year free of charge. This will give more families the opportunity to an active leisure, better health and increased quality of life.

During the third quarter, we have initiated a cooperation with Eskilstuna United’s women’s football club in a project targeting young girls living in Årby in Eskilstuna. Within the framework of the concept Ronjabollen, football is used as a tool to engage and strengthen young girls with limited experience from such activities. In this proven working method the participants are introduced to working with values on among other things health, self esteem and love in parallel to the football activities. Ronjabollen was developed in Gottsunda in Uppsala where the initiative has delivered good results. Through this, we are contributing to making Årby an even more safe and pleasant community.

Changes in ownership structure

During September it was announced that the German residential real estate company Vonovia had agreed to acquire the current majority owner Blackstone Group’s shares in Hembla. The acquisition is subject to approval by competition authorities, which is expected to happen during October or November. The acquisition will also trigger a mandatory bid on all remaining shares, which is also expected during the fourth quarter.

It has been a great privilege to lead this company during the years with Blackstone as majority owner. The competence and experience they have contributed with in Hembla’s development have been invaluable. We had not been where we are today, without them. We have focused our strategy towards creating vibrant communities where the tenants are in focus. Blackstone has through Hembla’s chairman of the board James Seppala and the rest of the board of directors been a leading force in formulating this vision. All of us in the company have been given resources and the mandate to realize this vision. Therefore, I want to thank Blackstone and their team for these amazing years.

I would also like to welcome Vonovia as new majority owner. Vonovia is a company with a strategy that is similar to Hembla’s for the most part. I have visited Vonovia’s operations in Germany myself for a couple of years ago and I was impressed with their focus on service, the tenants and their ambition to develop their communities to pleasant living environments. I look forward to continuing working together with Vonovia in the coming quarter to continue along this path together.

Stockholm 25 October 2019

Svein Erik Lilleland

CEO Hembla

This constitutes information that Hembla AB is legally obliged to publish under the EU’s Market Abuse Regulation. The information was released for publication on 25 October 2019 at 07.00 a.m. (CEST).

About Hembla

Hembla is a property company focusing on residential properties in the Greater Stockholm region and other growth areas. The company’s business concept is to own property portfolios slated for a gradual renovation of apartments in conjunction with the natural turnover of tenants. This can take place quickly and cost-efficiently thanks to extensive experience from the company's renovation method which, among other things, means that no evacuation needs to take place. In addition to this, the company creates value through the development of building rights in existing portfolios. The market value of the company’s properties amounted to SEK 33,508 million on 30 September 2019. The total rental value amounted to SEK 1,967 million annually on 30 September 2019. The economic occupancy rate is high – vacancies are virtually non-existent. Hembla is listed on Nasdaq Stockholm.