Klövern AB: Year-end Report January – December 2017

• Income increased by 5 per cent to SEK 3,029 million (2,876).
• The operating surplus increased by 6 per cent to SEK 2,006 million (1,891).
• Profit from property management increased by 7 per cent to SEK 1,263 million (1,180).
• Profit before tax increased by 17 per cent to SEK 3,211 million (2,756) and net profit increased by 16 per cent to SEK 2,611 million (2,259), corresponding to SEK 2.53 (2.11) per ordinary share.
• Changes in value of properties totalled SEK 1,913 million (1,709).
• Project development, including development of building rights, contributed to increases in value of properties by SEK 546 million (603).
• After taking possession of 27 properties for SEK 2,116 million, transfer of possession of 54 properties for SEK 1,796 million and investments of SEK 1,489 million, the value of the property portfolio amounted to SEK 42,961 million.
• The interest coverage ratio amounted to 2.9 (2.9) and the adjusted equity ratio increased to 38.5 per cent (36.7).
• EPRA NAV increased by 20 per cent to SEK 14.07 (11.70).
• The Board of Directors proposes a dividend of SEK 0.44 (0.40) per ordinary share to be paid in four instalments of SEK 0.11 and a dividend of SEK 20.00 (20.00) per preference share to be paid in four instalments of SEK 5.00.

Statement by the CEO

Strong earnings combined with strategic acquisitions and continued streamlining

Klövern is reporting solid earnings for 2017. Profit before tax of SEK 3,211 million corresponds to an increase of 17 per cent. We have continued our work on focusing the property portfolio on the strongest growth regions. During the year, we have carried out transactions involving 81 properties and since the half-year stage of 2016 we have sold 66 properties, at the same time as we have acquired 57 properties and kept a continued high pace in project development.

During 2017, we have continued to be very active in the transaction market. Of Klövern’s total property value, 98 per cent is now situated at our twelve selected growth locations. At these locations, the average population growth has overall been over 15 per cent in the past 10 years. Early in the year, Klövern acquired additional properties in Gothenburg and during the year we have also made add-on acquisitions in Stockholm, Malmö, Norrköping and Uppsala among other places.

The Stockholm region (including Uppsala) now accounts for 50 per cent of the total portfolio, followed by Gothenburg with 9 per cent and Linköping with 7 per cent. In all, we have acquired 27 properties and sold 54 properties during the year. As a result of our divestments, we have completely left seven locations, among others Karlskrona. During the fourth quarter, Klövern also signed a contract to acquire an office property in Copenhagen, for an underlying property value of DKK 620 million, which was taken possession of in February.

The Swedish economy continues to be strong. Modern offices are in great demand at the same time as office premises of less good standard which have been vacated are often converted into housing. Rental levels are rising which in turn drives up property values. In particular, rental levels and property prices are developing strongly in the Stockholm region, especially in central Stockholm. We are now seeing an increasingly clear trend as regards searches for premises outside the most central parts of Stockholm due to the increasingly high rental levels. This will benefit companies with properties in surrounding areas of the city such as Klövern with a portfolio of office properties in Söderstaden (Globen), Solna, Kista and Täby.

The credit market is a bit mixed. Credit institutions are relatively willing to finance real estate companies. Klövern’s interest coverage ratio is high and amounted during the year to 2,9 with an average interest rate of 2.5 per cent while the average period of fixed interest was 2.8 years and the period of tied-up capital 3.0 years.

We are reporting a positive net moving-in of SEK 54 million for 2017, which is clearly stronger than 2016 when the equivalent figure was SEK 20 million. During the fourth quarter of 2017, we have also signed additional lease contracts with moving-in during 2018/19, among other locations in Kista with Novartis and Nordic Choice. At the same time, we are seeing new records for rental levels on many markets. Our profit from property management was SEK 1,263 million, corresponding to an increase
of 7 per cent. A fundamentally stable operating surplus was supported by positive net moving-in, a strong development of rents, acquisitions and low interest rates.

Klövern has a relatively stable project volume with an annual volume of approximately SEK 1.5 billion. The most extensive projects currently include a hotel and fair facility in Gothenburg and the office projects S7 in Västerås, Kopparhusen in Norrköping and the refurbishment of an office building in Solna for the EU agency ECDC. Klövern’s ten largest projects encompass investments of SEK 1.5 billion and around 74,000 square metres. Project development, including development of building rights, contributed during 2017 with an increase in value of SEK 546 million, which we consider should be regarded as part of our operating profit.

In Klövern Living, we are working with a large number of residential projects, where the first project starts are planned to take place during the second half of 2018. Planning applications are in process for over 5,000 apartments. Klövern is planning to start production of 100-200 apartments in 2018 and 300-500 apartments in 2019/2020.

Klövern’s financial strength improved further during the year. The adjusted equity ratio amounted to 38.5 per cent at the end of the fourth quarter, compared with 36.7 per cent at yearend 2016. During the same period, leverage decreased from 60 per cent to 58 per cent. The net asset value per share (EPRA NAV) amounted to SEK 14.07 on 31 December, corresponding to an increase of 20 per cent during the year.

Overall we are satisfied with the profit during 2017 and the structural streamlining that we have succeeded in carrying out during the past two years. We look forward confidently to a continued stable development during 2018 and hope that we will succeed in signing a few larger lettings and hopefully also a few additional acquisitions.

Rutger Arnhult, CEO Klövern

For additional information:
Rutger Arnhult, CEO, +46 (0)70-458 24 70, rutger.arnhult@klovern.se
Lars Norrby, IR, +46 (0)76-777 38 00, lars.norrby@klovern.se

Klövern is a real estate company committed to working closely with customers to offer them efficient premises in growth regions. Klövern is listed on Nasdaq Stockholm. For further information, see kelly.corem.se.

Klövern AB (publ), Bredgränd 4, 111 30 Stockholm. Phone: +46 (0)10-482 70 00. E-mail: info@klovern.se.

The information in the interim report is such that Klövern AB (publ) is obliged to publish under the EU Market Abuse Regulation and the Securities Market Act. The information was made available for publication, through the abovementioned contact persons, at 07:30 CET on 14 February 2018.