Kojamo Oyj

Earnings Release • Aug 24, 2018

24 August 2018 Jani Nieminen, CEO Erik Hjelt, CFO

Half Year Financial Report 1−6/2018

Kojamo Plc

• Summary of January−June 2018
• Financial development
• Outlook, financial targets and dividend policy

Saariniemenkatu 6, Helsinki

The half year financial report will be presented by

Jani Nieminen CEO

Erik Hjelt CFO

Summary of January−June 2018

Operating environment

General macroeconomic

• General operating environment Kojamo is affected by the situation on the Finnish housing market and related factors particularly in the Finnish growth centres, as well as macroeconomic factors.
• Finland

According to a forecast by the Finnish Ministry of Finance (June 2018), Finland's GDP is expected to grow by 2.9% in 2018 and 1.8% in 2019.

• Household consumption demand is limited by the weakening growth in real disposable income.

• Construction volumes

According to the Confederation of Finnish Construction Industries RT (CFCI), the number of building permits granted for apartments continued to decrease in May 2018, decreasing by approximately a third in the spring from the previous year.

• According to CFCI, the number of residential building permits granted was 46,400 on an annual level, and the number of construction starts was over 48,000.
• Commercial rental apartments CFCI expects the number of rental apartments constructed for investors to grow in 2018.
• Construction costs CFCI projects that construction costs will increase by 2.5% in 2018.

development Urbanisation Development of living habits and structure of households

• Apartment prices

According to a forecast by Pellervo Economic Research (PTT), apartment prices have diverged considerably not only between regions but also between different-sized apartments. Demand is still strongest for small apartments in growth centres.

• According to Statistics Finland, apartment prices increased during March−April 2018 by 1.3% in the Helsinki Metropolitan Region and by 0.6% in the whole country on average.

• Rents

According to preliminary data, the rents of privately financed apartments increased by 1.8% in 2017. Compared to the year before, increase in rents slowed down. PTT forecasts that the rents of privately financed apartments will increase by 2.1% in 2018.

Strong operational development and increased investments during the review period

• Total revenue increased to EUR 178.0 (167.2) million, showing 6.4 per cent growth. Total revenue for the second quarter increased to EUR 89.8 (83.6) million, by 7.3 per cent.
• Net rental income increased to EUR 109.5 (101.1) million, representing 61.5 per cent of total revenue. In the second quarter, net rental income increased to EUR 61.4 (55.6) million, representing 68.4 per cent of total revenue.
• Profit before taxes was EUR 140.5 (132.0) million. Profit before taxes for the second quarter was EUR 91.5 (80.7) million.

• The financial occupancy rate remained high, standing at 96.5 (96.6) per cent. The financial occupancy rate improved during the second quarter.

• The fair value of investment properties was EUR 4.9 (4.4) billion at the end of review period.

• Strong investments in Lumo segment continued. Gross investments totaled EUR 243.2 (129.4) million. Kojamo acquired 981 apartments from OP Financial Group's funds. 689 new Lumo apartments were completed during the period.
• Use of the Lumo web store increased sharply: the number of tenancy agreements signed via web store exceeded 6,000 by the end of June.
• Kojamo's listing in June was an important milestone for the company.

The focus of our operations is on the seven main urban regions of Finland

The number of Lumo apartments increased in line with our strategy

• The number of Lumo apartments increased by 8 per cent year-on-year.
• At the end of the review period, the Lumo segment included 32,943 apartments.
• The number of apartments in the VVO segment decreased to 1,229.

Kojamo plc's Half Year Financial Report 2018

	4−6/2018	4−6/2017	Change,%	1−6/2018	1−6/2017	Change, %	2017
Total revenue, M€	89.8	83.6	7.3	178.0	167.2	6.4	337.0
Net rental income, M€	61.4	55.6	10.4	109.5	101.1	8.3	216.0
Net rental income margin, % of total revenue	68.4	66.5		61.5	60.5		64.1
Profit before taxes, M€	91.5	80.7	13.3	140.5	132.0	6.4	266.7
Gross investments, M€	39.5	64.4	-38.7	243.2	129.4	87.9	367.3
Funds From Operations (FFO), M€	17.6	31.0	-43.1	39.5	44.9	-12.1	107.8
FFO per share, €	0.08	0.14	-43.9	0.17	0.20	-12.7	0.47
Financial occupancy rate, %				96.5	96.6		96.7
Fair value of investment properties, Bn€				4.9	4.4	11.3	4.7
Number of apartments				34,172	33,877		34,383
Lumo apartments under construction				1,214	1,835		1,525
EPRA NAV per share, €				11.17	10.59	5.5	11.11
Equity ratio, %				41.6	38.7		41.3
Loan to Value (LTV), %				46.7	46.1		46.0

Financial development

Total revenue increased in the first half of 2018, profit improved

Change in the fair value of investment properties Other items

^*As of 2014, the Group adopted IFRS for its financial reporting.

In Lumo segment, total revenue and net rental income increased year-on-year

Total revenue, Lumo segment, M€ Net rental income, Lumo segment, M€

^*As of 2014, the Group adopted IFRS for its financial reporting.

Investments in Lumo segment continued

Gross investments and sales of investment properties, M€ Modernisation investments and repairs, M€

*As of 2014, the Group adopted IFRS for its financial reporting.

**The calculation method of gross investments has been changed. Previously, gross investments in the cash flow were presented; starting from 31 Dec 2015, investments on an accrual basis are presented.

The value of investment properties developed in line with strategy

Fair value of investment properties, M€ (at the end of the review period)

M€	30 Jun 2018	30 Jun 2017	31 Dec 2017
Fair value of investment properties 1 Jan	4,710.2	4,298.9	4,298.9
Acquisition of investment properties	233.0	120.1	338.6
Modernisation investments	8.8	7.8	25.4
Disposal of investment properties	-104.2	-72.8	-82.2
Capitalised borrowing costs	1.4	1.6	3.3
Transfer to owner-occupied property	0.0	0.0	0.0
Valuation gains/losses on fair value measurement	74.1	67.5	126.2
Fair value of investment properties, at the end of period	4,923.3	4,423.0	4,710.2

*As of 2014, the Group adopted IFRS for its financial reporting.

The occupancy rate remained high and increased during the second quarter

Financial occupancy rate = (Rental income / potential rental income at full occupancy) x 100. Financial occupancy rate does not include apartments under renovation. Tenant turnover = (terminated rental agreements under the period / number of apartments) x 100 The calculation method of tenant turnover has been changed starting from 1 January 2017. The comparison data has not been modified to reflect the new calculation method.

Financial occupancy rate, % Tenant turnover, % Excluding internal turnover

Equity ratio improved

Equity per share, € Equity ratio, %

*As of 2014, the Group adopted IFRS for its financial reporting.

The share issue improved the equity ratio by 1.6 percentage points.

Versatile capital structure

The Group's loan distribution 30 June 2018

Loan total EUR 2,540 million

Distribution of the Group's loan maturities 30 June 2018: average maturity of 5.9 years

Nominal values of the loans. 'Other' item includes capitalised arrangement fees of the loans. The amounts include VVO segment loans totalling 34 M€ , of which interest subsidy loans represent 30 M€ and loans from financial institutions 4 M€.

Strong financial key figures

Group's LTV, Loan to Value, %

Average interest rate, maturity and interest rate fixing period of the Group's loans

*As of 2014, the Group adopted IFRS for its financial reporting.

Outlook, financial targets and dividend policy

We are progressing toward our strategic targets

Straregic key figures	Goal 2021	June 30 2018
Fair value of investment properties	EUR 6.0 billion	EUR 4.9 billion
Number of apartments	About 38,000	34,172
Equity ratio, %	> 40	41.6
Loan to Value, %	< 50	46.7
FFO as a percentage of total revenue	> 32	22.2*
Net Promoter Score (NPS)	40	36

* Not adjusted with the change in property tax recognition.

Outlook for Kojamo in 2018 (unchanged)

• Kojamo estimates that in 2018, the Group's total revenue will grow by 3 to 9 per cent year-onyear. In addition, the company estimates that the Group's FFO for 2018 will amount to between EUR 103 and EUR 116 million, excluding one-off items. Investments in new development and housing stock acquisitions are forecast to exceed EUR 300 million.
• The outlook takes into account the effects of the housing divestments and acquisitions completed in 2018, 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-forlike 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.

Dividend policy

Kojamo's objective is to be a stable dividend payer whose annual dividend payment will be at least 60 per cent of FFO, provided that the Group's equity ratio is 40 per cent or more and taking account of the company's financial position.

Appendix

Kojamo's ten largest shareholders (31 July 2018)

	Shareholder	Number of shares	% of shares
1.	Ilmarinen Mutual Pension Insurance Company	32,359,243	13.1
2.	Varma Mutual Pension Insurance Company	30,398,089	12.3
3.	The Finnish Industrial Union	28,954,557	11.7
4.	Trade Union for the Public and Welfare Sectors	15,630,222	6.3
5.	Finnish Construction Trade Union	14,880,053	6.0
6.	Trade Union of Education in Finland	14,164,742	5.7
7.	Trade Union PRO	13,460,270	5.4
8.	Service Union United PAM	13,401,963	5.4
9.	The Finnish Electrical Workers' Union	2,704,781	1.1
10.	Union of Health and Social Care Professionals TEHY	2,479,419	1.0
	Nominee-registered and direct foreign shareholders	58,498,178	23.7
Other	Finnish shareholders	20,212,882	8.2
Total		247,144,399	100.0

The number of shareholders after the completion of the Initial Public Offering was 2,700.

The number of registered shareholders on 31 July 2018 was 3,089.

The ten largest shareholders owned 68.2 per cent of Kojamo's shares after the IPO.

The proportion of nomineeregistered and direct foreign shareholders was 23.7 per cent.

Consolidated income statement

M€	4−6/2018	4−6/2017	1−6/2018	1−6/2017	2017
Total revenue	89.8	83.6	178.0	167.2	337.0
Maintenance expenses	-18.4	-17.6	-50.9	-48.5	-85.4
Repair expenses	-9.9	-10.4	-17.5	-17.6	-35.6
Net rental income	61.4	55.6	109.5	101.1	216.0
Administrative expenses	-11.2	-9.5	-20.2	-18.0	-37.2
Other operating income	0.4	0.4	0.7	-0.1	0.7
Profit/loss on sales of investment properties	0.4	0.5	1.0	1.3	2.5
Profit/loss on sales of trading properties	0.0		0.0		0.0
Fair value change of investment properties	53.4	44.0	74.1	67.5	126.2
Depreciation, amortisation and impairment losses	-0.2	-0.3	-0.4	-0.6	-1.1
Operating profit	104.2	90.7	164.6	151.3	307.0
Total amount of financial income and expenses	-12.7	-10.0	-24.1	-19.3	-40.5
Share of result from associated companies					0.1
Profit before taxes	91.5	80.7	140.5	132.0	266.7
Current tax expense	-20.7	-4.8	-27.8	-17.3	-28.6
Change in deferred taxes	1.7	-12.0	-1.4	-9.5	-25.1
Profit for the period	72.5	64.0	111.2	105.2	212.9

Balance sheet

M€	Group 30 June 2018	Group 30 June 2017	Group 31 Dec 2017
ASSETS
Non -current assets
Intangible assets	0.3	0.5	0.4
Investment properties	4,923.3	4,419.1	4,706.5
Property, plant and equipment	30.7	31.1	31.0
Investments in associated companies	2.6	1.2	1.7
Financial assets	0.5	0.5	0.5
Non -current receivables	5.5	5.8	5.3
Derivatives	3.0	5.4	6.5
Deferred tax assets	11.1	13.6	10.9
Total non -current assets	4,977.0	4,477.2	4,762.7
Non -current assets held for sale		3.9	3.7
Current assets
Trading properties	0.4	0.9	0.6
Derivatives	0.5	0.1	0.0
Current tax assets	9.0	5.1	0.5
Trade and other receivables	11.0	8.4	8.8
Financial assets	180.6	64.1	49.3
Cash and cash equivalents	242.9	421.2	117.8
Total currents assets	444.5	499.8	177.0
Total assets	5,421.5	4,980.9	4,943.5

Balance sheet

M€	Group 30 June 2018	Group 30 June 2017	Group 31 Dec 2017
EQUITY AND LIABILITIES
Equity attributable to owners of the parent company
Share capital	58.0	58.0	58.0
Share issue premium	35.8	35.8	35.8
Fair value reserve	-19.4	-27.7	-23.7
Invested non -restricted equity reserve	164.6	17.9	17.9
Retained earnings	2,013.4	1,842.9	1,950.6
Equity attributable to owners of the parent company	2,252.4	1,926.9	2,038.6
Total equity	2,252.4	1,926.9	2,038.6
Non -current liabilities
Loans and borrowings	2,434.8	2,248.1	2,109.8
Deferred tax liabilities	480.2	464.4	478.3
Derivatives	41.1	54.3	48.3
Provisions	0.7	1.2	0.8
Other non -current liabilities	14.0	6.9	14.8
Total non -current liabilities	2,970.8	2,774.9	2,652.0
Current liabilities
Loans and borrowings	105.4	211.9	173.2
Derivatives	0.4	0.6	0.2
Current tax liabilities	24.1	15.9	9.1
Trade and other payables	68.3	50.8	70.4
Total current liabilities	198.3	279.1	252.9
Total liabilities	3,169.1	3,054.0	2,904.9
TOTAL EQUITY AND LIABILITIES	5,421.5	4,980.9	4,943.5

Segment information

	Lumo 1−6/2018	Lumo 1−6/2017	VVO 1−6/2018	VVO 1−6/2017	Group 1−6/2018	Group 1−6/2017
Total revenue, M€	172.4	152.3	5.7	15.2	178.0	167.2
Operating profit, M€	106.6	93.2	3.1	8.2	109.5	101.1
Balance sheet, M€	5,371.9	4,876.5	66.0	179.8	5,421.5	4,980.9
Equity, M€	2,232.8	1,882.4	20.0	44.5	2,252.4	1,926.9
Equity ratio, %	41.6	38.6	30.3	24.8	41.6	38.7
Apartments	32,943	30,512	1,229	3,365	34,172	33,877
Financial occupancy rate, %	96.5	96.5	96.4	98.2	96.5	96.6
Tenant turnover, excluding internal turnover, %	14.9	14.9	8.1	9.7	14.7	14.4
Average number of personnel	312	281	13	25	325	306

Financial key figures

	30 Jun 2018	31 Mar 2018	31 Dec 2017	30 Sept 2017	30 Jun 2017
Equity ratio, %	41.6	37.4	41.3	40.2	38.7
Interest cover	4.2	4.2	4.2	4.1	4.2
LTV, %	46.7	49.2	46.0	45.9	46.1
Hedging ratio, %	92	87	111	88	83
Average interest rate, %	1.8	1.8	2.0	2.0	1.9
Average loan period, years	5.9	5.8	5.6	5.7	5.7
Average interest rate fixing period, years	5.8	5.6	5.6	5.8	5.7

Contact details:

CEO Jani Nieminen, tel. +358 20 508 3201

CFO Erik Hjelt, tel. +358 20 508 3225

www.kojamo.fi