Klövern (publ): Interim Report January – September 2017

» Income increased by 6 per cent to SEK 2,261 million (2,138).

» The operating surplus increased by 8 per cent to SEK 1,553 million (1,439).

» Profit from property management increased by 9 per cent to SEK 1,001 million (918).

» Profit before tax increased by 15 per cent to SEK 2,410 million (2,101) and net profit increased by 18 per cent to SEK 2,006 million (1,694), corresponding to SEK 1.93 (1.58) per ordinary share.

» Changes in value of properties amounted to SEK 1,371 million (1,406).

» After taking possession of 20 properties for SEK 1,338 million, transfer of possession of 48 properties for SEK 1,531 million and investments of SEK 976 million, the value of the property portfolio amounted to SEK 41,392 million.

» The interest coverage ratio improved to 3.1 and the adjusted equity ratio increased to 37.9 per cent.

Statement by the CEO

Strong earnings, positive acquisitions and continued streamlining

Klövern is reporting solid nine-month earnings. Profit before tax of SEK 2,410 million corresponds to an increase of 15 per cent. We have continued our work on focusing the property portfolio on the strongest growth regions. During the period January to September, we have carried out transactions involving 68 properties and, since the end of the first six-month period last year, we have sold 60 properties, at the same time as we have acquired 50 properties and kept a continued high pace in project development.

During 2017, we have continued to be very active on the transaction market. Of Klövern’s total property value, 98 per cent is now situated at our 12 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 ninemonth period we have also made acquisitions in Stockholm, Norrköping and Nyköping. 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 20 properties and sold 48 properties during the period. As a result of our divestments, we have completely left seven locations, among others Karlskrona just before the end of June. During the period, Klövern also concluded an agreement to acquire another two modern office properties in central Malmö for SEK 360 million and a well-situated office property in Uppsala for SEK 285 million, which were taken possession of in early October.

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 to 3.1 during the period with an average interest rate of 2.5 per cent while the average period of fixed interest was 2.2 years and the period of tied-up capital 2.9 years.

We are reporting a positive net moving-in of SEK 42 million for the nine-month period, which is clearly stronger than the corresponding period last year when the equivalent figure was SEK 6 million. At the same time, we are seeing new records for rental levels on many markets. Our profit from property management was SEK 1,001 million, corresponding to an increase of 9 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, Gamlestaden in Gothenburg and Kopparhusen in Norrköping. Klövern’s ten largest projects encompass investments of SEK 1.6 billion and over 83,000 square metres.

In Klövern Living, we are working with a large number of residential projects, where the first project starts are planned to take place after the end of the year. 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.

Project development, including development of building rights, contributed during the first nine months of the year with an increase in value of SEK 380 million, which we consider should be regarded as part of our operating profit. Total investments amounted to SEK 976 million which can be compared with SEK 1.6 billion for the full year 2016.

Klövern’s financial strength improved further during the period. The adjusted equity ratio amounted to 37.9 per cent, at the end of the third quarter, compared with 36.7 per cent at year-end 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 13.08, corresponding to an increase of 12 per cent since the year-end.

We are pleased to note that our long-term sustainability work is producing results. In one of the largest brand surveys in the Nordic region focusing on sustainability, Sustainable Brand Index B2B, Klövern has been designated as Sweden’s second most sustainable real estate company and number one among the listed real estate companies. We also regard it as very important to inform about Klövern’s operations in a balanced, transparent and clear way. In this area as well, we have obtained confirmation that a high level of ambition produces results in the form of Klövern obtaining the top ranking in this year’s Hugin & Munin, the magazine Fastighetsvärlden’s prize for the best information and communication work in the real estate industry.

Overall, we are satisfied both with the profit during the period and the structural streamlining that we have succeeded in carrying out during 2016-2017. We look forward confidently to a continued stable development during the rest of the year and hope that we will succeed in signing a few larger lettings and hopefully an additional acquisition.

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 CEST on 19 October 2017.