Selvaag Bolig ASA

Earnings Release • Aug 19, 2015

Oslo 19 August 2015 Baard Schumann, CEO Sverre Molvik, CFO

Agenda

Highlights

• Operational update
• Financial update
• Market
• Outlook and summary

Highlights Q2 2015 HIGHLIGHTS

• Continued strong results
• High sales activity
• High level of deliveries and construction activity
• Continued strong demand in key markets
• H1 2015 dividend of NOK 0.70 per share proposed

Løren Stasjon, Oslo

Key financials Q2 2015

HIGHLIGHTS

Agenda

• Highlights
• Operational update
• Financial update
• Market
• Outlook and summary

High level of sold units OPERATIONAL UPDATE

Note: All numbers are adjusted for Selvaag Bolig's ownership in joint ventures. * Includes 95 student residences with an average value of NOK 0.7 million (dotted area)

High sales drives construction start-ups…

162 construction starts in Greater Oslo

• Lørenskog stasjonsby: 55 starts
• Løren stasjon: 54 starts
• Kornmoenga: 27 starts
• Kaldnes: 26 starts
• 32 construction starts in Trondheim
• 5 construction starts in Stavanger

OPERATIONAL UPDATE

Construction starts per quarter

No of units

Sales value of units under construction

NOK 4 909 million

…and units under construction OPERATIONAL UPDATE

• 8o% of the units are sold
• 63% of construction volume in Greater Oslo

Note: Projects are included when construction start is decided. All numbers are adjusted for Selvaag Bolig's ownership share in joint ventures.

Development units under construction

Expected completions per quarter

1 011 units for completion next five quarters

• 89% of 2015 completions sold by the end of Q2 2015
• 84% of H1 2016 completions sold by the end of Q2 2015

OPERATIONAL UPDATE

Acquired large potential land at Løren, Oslo

OPERATIONAL UPDATE

• Owned and developed by Selvaag Bolig alone
• Planning permission for residential housing
• Potential of ~400 units
• Acquired for NOK 335m
• Final closure conditional on satisfactory due diligence

Lørenveien 55-65, Oslo

Agenda

• Highlights
• Operational update
• Financial update
• Market
• Outlook and summary

12

Income statement highlights Q2 2015 (IFRS)

• Delivery of 232 units (236) Revenues NOK 830m (810) Sale of units NOK 818m (721) Other revenues NOK 12m, mainly lease income Project costs NOK 659m (686) Of which NOK 27m are interests Other costs NOK 57m (57) Salaries and sales and marketing key components EBITDA adjusted 151m (125) Adjusted for financial expenses included in project costs NOKm 810 765 12% 12%
• EBITDA NOK 124m (100)
• EPS in the quarter NOK 0.86, YTD NOK 1.52

FINANCIAL UPDATE

Revenues and EBITDA margin (IFRS)

Operating revenues EBITDA margin

13

Income statement highlights Q2 2015 (NGAAP)

FINANCIAL UPDATE

* Construction costs are exclusive of financial expenses in the segment reporting (NGAAP)

12 months rolling revenues (NGAAP)*

Revenues and EBITDA margin (NGAAP)* NOKm NOKm 830 724 871 ^{827 858} 15% 17% 15% 17% 15% Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Operating revenues EBITDA margin 2 888 2 997 3 113

Cash flow development Q2 2015

FINANCIAL UPDATE

• High construction activity and land acquisition explains cash flow from operations
• Investments of NOK 12m in associated companies and equipment
• Dividend of NOK 113m, NOK 1.2 per share, paid in the quarter

Condensed cash flow

Assets Equity and Liabilities

Balance sheet highlights Q2 2015

		Balance sheet composition
Book value per share NOK 26.4 (40%) 	NOKm
NOK 26.7 in Q1 2015 	7,000
Changes since Q1 2015: 	6,000	Non-current assets
Inventories increased by NOK 132m 	5,000
Trade receivables decreased by NOK  8m	4,000
Cash decreased by NOK 193m 	3,000	Current assets
Prepayments from customers count  for NOK 250m of other current non	2,000 1,000
interest-bearing liabilities	0	Cash

FINANCIAL UPDATE

Non-current liabilities

Current liabilities

Equity

Inventories (property) Q2 2015

FINANCIAL UPDATE

Sound debt structure

FINANCIAL UPDATE

Drawn per 30 June (NOKm)	Interest rate margin
500	4.75%
0	2.50%
0	2.00%
1 128	2.00% - 2.50%
1 146	1.90% - 2.50%

Interest bearing debt as at 30 June 2015

Note: Top-up loan of NOK 500m in the table differs form the summed up top up loan in the pie chart (NOK 493m). The difference is due to NOK -7m in amortized cost which is not actual debt.

H1 2015 dividend of NOK 0.7 per share proposed FINANCIAL UPDATE

Agenda

• Highlights
• Operational update
• Financial update

Market

Outlook and summary

Source: Eiendomsverdi

Low inventories level in Oslo, high in Stavanger

MARKET – SECOND HAND

Source: Eiendomsverdi

Selected areas: Bergen, Fjell og Askøy

Market inventory secondary homes 31 July Sold units July

Market inventory secondary homes 31 July Sold units July

Low inventories level in Oslo, high in Stavanger

MARKET – SECOND HAND

Gap between supply and demand within Oslo

MARKET – NEWBUILD

Annual newbuild supply at ~4k units vs. demand at ~6.4k next years

Number of newbuilding units in Oslo - historical and forecasted Statistics Norway and Prognosesenteret

>50 000 next five years

Forecasted population growth Oslo Statistics Norway base case

• Annual demand for new house units in Oslo next five years ~6 400*
• Lease market stable, ~3.400** units available in Oslo in July 2015, lower than 2014
• Oslo land bank with housing planning permission adjusted for completed projects ~13 000***
• Selvaag Bolig has Oslo projects with potential of 2 400 units with short time to market

*** Oslo Kommune numbers adjusted by OBOS and Selvaag Bolig

^*Prognosesenteret, based on Statistics Norway mid alternative

High momentum, but drop in supply expected

MARKET – NEWBUILD

Total Oslo market per half year

Offered for sale Sold Vacant

High recent market activity and liquidity with historically high newbuild supply rapidly consumed

Forecasted drop in newbuild supply

• in H2 2015
• 2016

Selvaag Bolig coming to market with large new projects in H2 2015 and H1

Average market price Oslo new housing: NOK ~63k per m² , Selvaag Bolig H1 2015 NOK ~58.6k

Agenda

• Highlights
• Operational update
• Financial update
• Market
• Outlook and summary

COMPANY OUTLOOK

• Selvaag Bolig's high sales reflect competitive prices and defined housing strategy
• All construction activity put out to competitive tender
• Large land bank in fast growing urban areas
• Selvaag Bolig average price in Q2 2015: NOK 3.3m
• Total market (second hand) average price in H1 2015*: flats NOK 3.4m , terraced NOK 4.2m, semi-detached NOK 5.0m

Sales reflects market momentum and strategy

Sales activity vs. peers last 5 quarters

* Selected markeds: Greater-Oslo, Tromsø, Trondheim, Bergen and Stavanger Housing types Selvaag Bolig: flats, semi-detached and terraced homes

Source: Selvaag Bolig and Eiendomsverdi

26

Focus on growing urban areas COMPANY OUTLOOK

• Land bank tilted towards growing Greater-Oslo area
• Portfolio development adapted to local market demand
• New office in Bergen strengthens local presence

Positive overall outlook for Selvaag Bolig COMPANY OUTLOOK

• Strong demand and record low market inventory in core market Greater Oslo
• Increased uncertainty in Stavanger area mitigated by low-risk business model
• Strong demand and low market inventory in core markets Bergen and Trondheim

Summary

• Continued strong results
• High delivery and construction activity
• High sales activity
• Continued strong demand in key markets
• The board has proposed to pay dividend of NOK 0.70 per share for H1 2015

Nybyen Økern, Oslo

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Norwegian housing market features

• Low risk for housebuilders
• Advance sales: banks require that 50-70% of homes are sold before construction starts
• Binding offers: offer to purchase is a binding sales contract, and requires a 10% minimum cash deposit
• Economic benefits for home owners
• 27% of mortgage loan interest payments are tax-deductible
• Transfer stamp duty for new houses is lower than for second hand homes
• High level of home ownership
• 85% (one of the world's highest)

Source: Source Selvaag Bolig and Eurostat

Selvaag Bolig – value proposition

Selvaag Bolig ASA is a Norwegian residential property developer with no in-house construction arm, which controls the entire value chain from the acquisition of land to the sale of homes.

• Proven low-cost strategy
• Very competitive prices ensure a broad customer base
• No in-house construction arm
• low building costs
• fixed construction price
• reduced risk
• smaller exposure to market fluctuations
• Defined housing concepts
• Aimed at broad consumer categories
• Profit maximisation in all projects
• Large land bank
• Several thousand homes under development in Norway's four fastest growing urban regions

Value creation in Selvaag Bolig

Construction costs financed

Target 100% sale at delivery

Purchase and payment of land takes place after zoning plan approval. If this is not obtained, the purchase is cancelled

SBO is in charge of the zoning process

Purchase price is decided by a land appraisal made by three external consultants at the time of zoning approval

The median valuation is used as purchase price

Pre-sales of minimum 60% secures the majority of revenue before construction

10% of purchase price paid by the buyer at point of sale, and proof of financing for the remaining amount is required

Construction contracts with solid counterparties are made with fixed price

Project costs are secured before construction starts

Low-risk business model

• With minimum 60% pre-sale, there is limited remaining project risk
• 81% of units in production are sold per Q1'15

Risk profile at start of project De-risking in key stages of projects

Construction starts in the quarter

Note: all figures in NOKm are expected revenue

Modular

Onsite

Income statement IFRS

(figures in NOK million)	Q2 2015	Q2 2014	1H 2015	1H 2014	2014
Total operating revenues	830.0	809.5	1 585.6	1 054.1	2 945.2
Project expenses	(659.2)	(685.8)	(1 268.7)	(878.8)	(2 371.8)
Other operating expenses	(50.7)	(52.2)	(105.2)	(93.5)	(215.5)
Other gains (loss)	-	-	-	-	(3.5)
Associated companies and joint ventures	3.4	28.7	10.4	27.5	32.4
EBITDA	123.5	100.2	222.2	109.2	386.9
Depreciation and amortisation	(6.0)	(5.2)	(11.8)	(10.4)	(21.2)
EBIT	117.5	95.0	210.4	98.8	365.7
Net financial expenses	(7.2)	(4.5)	(15.1)	(10.8)	(17.0)
Profit/(loss) before taxes	110.4	90.5	195.2	88.0	348.7
Income taxes	(29.9)	(23.9)	(52.9)	(23.3)	(94.2)
Net income	80.5	66.6	142.3	64.7	254.5
Net income for the period attributable to:
Non-controlling interests	(0.2)	(0.0)	(0.2)	1.1	1.2
Shareholders in Selvaag Bolig ASA	80.6	66.6	142.5	63.6	253.2

Cash Flow statement

(figures in NOK million)	Q2 2015	Q2 2014	1H 2015	1H 2014	2014
Net cash flow from operating activities	(60.8)	373.2	36.9	(40.5)	187.3
Net cash flow from investment activities	(11.8)	9.8	(49.5)	7.2	(5.7)
Net cash flow from financing activities	(120.5)	(215.6)	(83.1)	200.3	(202.7)
Net change in cash and cash equivalents Cash and cash equivalents at start of period Cash and cash equivalents at end of period	(193.1) 663.3 470.2	167.4 586.6 754.0	(95.7) 565.9 470.2	166.9 587.0 754.0	(21.1) 587.0 565.9

(figures in NOK million)	Q2 2015	Q1 2015	Q2 2014	2014
Intangible assets	406.4	411.0	425.0	415.6
Property, plant and equipment	22.6	17.3	4.0	17.4
Investments in associated companies and joint ventures	209.0	200.2	170.9	156.7
Other non-current assets	123.5	123.0	172.5	121.8
Total non-current assets	761.5	751.5	772.4	711.5
Inventories (property)	4 695.3	4 563.1	4 582.0	4 348.8
- Land	1 871.2	1 653.7	1 653.7	1 614.4
- Work in progress	2 546.0	2 790.8	2 790.8	2 360.3
- Finished goods	278.1	137.5	137.5	374.1
Other current receivables	350.1	350.3	257.1	588.0
Cash and cash equivalents	470.2	663.3	754.0	565.9
Total current assets	5 515.6	5 576.7	5 593.1	5 502.8
TOTAL ASSETS	6 277.1	6 328.2	6 365.5	6 214.2
Equity attributed to shareholders in Selvaag Bolig ASA	2 472.6	2 504.5	2 253.0	2 442.6
Non-controlling interests	14.5	14.7	23.8	14.7
Total equity	2 487.1	2 519.2	2 276.8	2 457.3
Non-current interest-bearing liabilities	2 018.5	1 685.6	2 470.0	1 752.4
Other non-current non interest-bearing liabilities	308.4	308.3	279.3	293.6
Total non-current liabilities	2 326.9	1 993.9	2 749.4	2 046.0
Current interest-bearing liabilities	748.9	1 075.4	595.8	959.5
Other current non interest-bearing liabilities	714.2	739.7	743.5	751.4
Total current liabilities	1 463.1	1 815.1	1 339.3	1 710.9
TOTAL EQUITY AND LIABILITIES	6 277.1	6 328.2	6 365.5	6 214.2

Balance sheet

* Corresponding to a book value of NOK 26.4 per share

In compliance with financial covenants

FINANCIAL UPDATE

Sales ratio covenant (minimum 60.0%) Equity ratio covenant (minimum 25.0%)

Substantial portfolio for development COMPANY OUTLOOK

Total land bank portfolio at 30 June 2015

No of units

Maintaining strong market position COMPANY OUTLOOK

Units under construction vs. peers (net figures)

Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Operational highlights – key operating figures

	Q2 14	Q3 14	Q4 14	Q1 15	Q2 15
Number of units sold	255	259	233	308	210
Number of construction starts	197	203	280	284	199
Number of units completed	253	274	319	208	190
Number of units delivered	236	279	266	224	232
Number of units under construction	1 418	1 347	1 308	1 384	1 394
Proportion of sold units under construction	76%	76%	77%	81%	80%
Number of completed unsold units	17	18	39	40	31
Sales value of units under construction (NOK million)	5 238	5 159	4 689	4 968	4 909
Number of employees	100	100	99	99	99

IFRS EBITDA Q2 2015

(figures in NOK million)	Property development	Other	Total
IFRS EBITDA for the quarter, per segment
Operating revenues	826.0	4.9	830.9
Project expenses	(660.4)	0.3	(660.0)
Other operating expenses	(13.1)	(37.7)	(50.8)
Share of income (losses) from associated companies and joint ventures	3.4	-	3.4
Other gain (loss), net	-	-	-
EBITDA	156.1	(32.5)	123.5

Operational reporting Q2 2015

(figures in NOK million)	Property development	Other	Total
Operating revenues	853.3	4.9	858.2
Project expenses	(682.5)	0.3	(682.2)
Other operating expenses	(13.1)	(37.7)	(50.7)
EBITDA (percentage of completion)	157.8	(32.5)	125.3

Note: Construction costs are exclusive of financial expenses in the segment reporting.

Land loan interests on the P&L

• Total land loans are NOK 1 128 million of which NOK 708 million are loans where interest cost are activated
• Land loan interests activated at regulation
• At 3O June interests connected to land loans of NOK 418 million was charged on the P&L

Loans recognised in profit and loss at 30.06.2015

NOKm

Book value at time of valuation (Nov 2014)

• Independent land valuation, by Akershus Eiendom.
• Valuation is mainly based on a calculated profit from sales of fully developed housing units
• For projects under development, remaining costs are split on developer and buyer, affecting value distribution
• DCF valuation method is applied on residents for lease

Land bank valuation from Q4 2014

NOKm

External valuation vs. book value

Modules vs. on-site construction

Lørenskog stasjonsby - modular Lervig Brygge – on-site

Approximate average value Production split units under construction