Selvaag Bolig ASA

Earnings Release • Aug 27, 2014

Oslo 27 August 2014 Baard Schumann, CEO Haavard Rønning, CFO

Operational highlights second quarter

• Strong sales development, positive trend from last quarter continues
• Increased number of sales starts due to improved market
• High construction activity

Financial highlights

HIGHLIGHTS

Sales starts driven by improved market conditions

• Sales starts on 10 projects
• Vestparken, Lørenskog
• Kaldnes, Tønsberg
• Bjørnåsen Nord, Oslo
• Kornmo, Oppegård
• Nyhavn, Bergen
• Sjøsia, Tromsø
• Lade Allé, Trondheim
• Jaasund (two projects), Sola
• Aase Gaard, Sandnes

OPERATIONAL UPDATE

Sales starts per quarter

Sales back on healthy levels OPERATIONAL UPDATE

Stronger sales lift construction starts

• Construction start on five projects
• Lørenskog Stasjonsby, Lørenskog
• Kornmo, Oppegård
• Strandkanten, Tromsø
• Lervig Brygge, Stavanger
• Aase Gaard, Sandnes

OPERATIONAL UPDATE

Construction starts per quarter

Stable production OPERATIONAL UPDATE

• Sales value of units under construction NOK 5 238 million
• 73% of production volume in Greater Oslo
• 76% of the units are sold

Note: All numbers are adjusted for Selvaag Bolig's ownership in joint ventures. Measure point: decision of construction start. Selvaag Bolig has in joint venture project under construction. The joint venture partners' share amount to 32 residential units, implying that Selvaag Bolig currently manages 1450 residential units under construction

Development units under construction

Units

Production split

Starts and completions according to plan

OPERATIONAL UPDATE

Lørenskog stasjonsby, Lørenskog

Note: All numbers are adjusted for Selvaag Bolig's ownership in joint ventures.

Construction starts and completed units

No of units

Activity maintained during market slowdown

OPERATIONAL UPDATE

Units under construction vs. peers

No of units

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014

Expected deliveries per quarter

1 083 units for delivery next five quarters

• 93% of 2014 completions sold
• Advancements since last quarter
• 4 units at Jaasund advanced from Q1 2015 to Q4 2014
• 11 units at Kornmo advanced to Q2 2015
• 12 units at Aase Gaard advanced to Q2 2015

Disposals

OPERATIONAL UPDATE

• Jaasund in Sola (two plots)
• Kindergarten plot NOK 12.5 million
• School plot NOK 40.0 million
• Both plots sold for approximate cost price
• Aase Gaard in Stavanger (several plots)
• Total sales price NOK 24.0 million

Sale of plots at two locations

Lørenpynten, Oslo

Income statement highlights Q2 2014 (IFRS)

• Revenues NOK 810 million (621)
• Delivery of 236 units (212)
• Project costs NOK 686 million (480)
• Provisions for bonus NOK 4 million
• NOK 2 million salary cost
• NOK 2 million project cost
• In previous years all bonus provisions has been recognised in 2H

FINANCIAL UPDATE

Operating revenues EBITDA margin

Income statement highlights Q2 2014 (NGAAP)

• High production
• Good margins in projects under construction

FINANCIAL UPDATE

Revenue and EBITDA margin (NGAAP)*

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

NOKm

Cash flow development Q2 2014

FINANCIAL UPDATE

• Payments for the majority of deliveries recognised in both Q1 and Q2 2014 had a cash effect in this quarter
• High activity in projects under construction

Balance sheet highlights Q2 2014

• Book value per share NOK 24.0
• Changes from Q1 2014:
• Trade receivables reduced by NOK 82 million
• Inventories reduced by NOK 79 million
• Net increase NOK 139 million in non current interest-bearing liabilities
• Net reduction of NOK 291 million in current interest-bearing liabilities
• Prepayments from customers count for NOK 306 million of other current non interest-bearing liabilities

FINANCIAL UPDATE

Balance sheet composition

Inventories (property)

Land (undeveloped) Work in progress Finished projects

FINANCIAL UPDATE

Sound debt structure FINANCIAL UPDATE

Drawn per 30 Jun (NOKm)	Interest rate margin
500	4.75%
0	2.50%
0	2.50%
1 120	2.20% - 3.15%
1 456	2.00% - 3.00%

Interest bearing debt as at 30 Jun 2014

Note: Bond loan of NOK 500m differs form the summed up top up loan in the table (NOK 490m). The difference is due to NOK -10m in amortized cost which is not actual debt.

In compliance with financial covenants

FINANCIAL UPDATE

Source: Eiendomsverdi

Units Units 0 1 000 2 000 3 000 4 000 5 000 2007 2008 2009 2010 2011 2012 2013 2014 Market inventory secondary homes 31 July 2014 Sold units July 2014 0 200 400 600 800 1 000 Sold units July 2014

MARKET OUTLOOK Oslo and Akershus, July 2007-2014 Rogaland, July 2007-2014 Second-hand market: Sound market in Oslo, challenging in Rogaland

Selected areas: Oslo, Lørenskog, Ski ,Oppgård, Bærum, Asker Selected areas: Stavanger, Sola, Randaberg, Sandnes

Market inventory secondary homes 31 July 2014

Price increase deflated by purchasing power

MARKET OUTLOOK

• High gap between nominal and real price development past ten years
• Price increase since 1985:
• Nominal: 6.3x
• Adjusted for CPI: 3.0x
• Adjusted for disposable income: 1.5x
• The increase in purchasing power explains much of the nominal growth in housing prices

Housing price development in Norway

Index
700
600
500
400
300
200
100
0
	Nominal prices CPI adjusted prices
	Source: Norges Bank

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Prices adjusted for disposable income per capita

COMPANY OUTLOOK

• Good sales development for all players this quarter
• Particularly strong sales for Selvaag Bolig
• Company strategy support market position:
• Low-cost strategy
  • Average price Selvaag Bolig 1H 2014: NOK 3.4m *
  • Average price total market: NOK 4.0m+ *
• No in-house construction arm
• Defined housing concepts
• Large land bank

Market position strengthened

Sales activity vs. peers

Source: Selvaag Bolig

* Housing types: flats, semi-detached/terraced homes Markets: Oslo, Akershus, Hordaland, Rogaland and Troms

Selected upcoming projects

• Nyhavn, Bergen
• Expected sales start on 70 units in Q3 2014
• Kornmo, Oppegård
• Expected sales start on 18 units in Q3 2014
• Lørenpynten, Oslo
• Expected sales start on 26 units in Q3 2014
• Lade, Trondheim
• Expected sales start on 40 units in Q3 2014

COMPANY OUTLOOK

Kornmo, Oppegård

Lørenpynten, Oslo

Well positioned in improving markets

COMPANY OUTLOOK

Strandkanten, Tromsø

• Good outlook for Selvaag Bolig in all core areas, given unchanged (or improved) market inventory levels and macro economic conditions
• Rigged with a land bank allowing for future growth
• Well positioned through low cost production and competitive products targeting broad consumer groups
• Sales and construction development indicate continued growth in market share

Summary

• Sales picking up in improving markets
• High construction activity
• Selvaag Bolig continued to improve its market position during the quarter
• Company strategy supports a strong position in a growing market going forward Lervig Brygge,

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Stavanger

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Q3 2014: 14 Nov 2014

Norwegian housing market

• Good demand for new homes and persistent population growth in urban areas
• 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
• High level of home ownership
• 85% (one of the world's highest)
• 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
• Attractive market outlook
• Strong population growth
• High level of purchasing power
• Favourable macro-economic climate and low interest rates

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

	Construction start								Scheduled completion
	Q2 2014	Q3 2014	Q4 2014	Q1 2015	Q2 2015	Q3 2015	Q4 2015	Q1 2016
Kornmo	22 Terraced			NOK 98m					Note: all figures in NOKm are expected revenue
Aase Gaard	12 Apartments			NOK 32m					Modular Onsite
Lervig Brygge	26 Apartments					NOK 118m
Strandkanten	75 Apartments					NOK 161m
Lørenskog Stasjonsby	62 Apartments						NOK 233m

Total units: 197

Construction start on existing projects

Note: all figures in NOKm are expected revenue

$\mathcal{A}$ .	7.7	21.4
63.6	112.4	164.1

Income statement IFRS

(figures in NOK million)	Q2 2014	Q2 2013	1H 2014	1H 2013	2013
Total operating revenues	809.5	620.9	1 054.1	1 144.6	2 197.0
Project expenses	(685.8)	(479.9)	(878.8)	(857.8)	(1 709.6)
Other operating expenses	(52.2)	(56.9)	(93.5)	(100.4)	(208.8)
Other gains (loss)	-	-	-	-	(0.4)
Associated companies and joint ventures	28.7	10.2	27.5	10.0	10.9
EBITDA	100.2	94.3	109.2	196.5	289.1
Depreciation and amortisation	(5.2)	(5.7)	(10.4)	(11.2)	(22.1)
EBIT	95.0	88.6	98.8	185.2	267.0
Net financial expenses	(4.5)	(6.5)	(10.8)	(21.1)	(30.0)
Profit/(loss) before taxes	90.5	82.1	88.0	164.2	237.0
Income taxes	(23.9)	(23.4)	(23.3)	(44.0)	(51.4)
Net income	66.6	58.7	64.7	120.2	185.6

Net income for the period attributable to:

Non-controlling interests	(0.0)	2.7	1.1	7.7	21.4
Shareholders in Selvaag Bolig ASA	66.6	55.9	63.6	112.4	164.1

Cash Flow statement

(figures in NOK million)	Q2 2014	Q2 2013	1H 2014	1H 2013	2013
Net cash flow from operating activities	373.2	152.4	(40.5)	471.9	104.0
Net cash flow from investment activities	9.8	17.8	7.2	38.1	48.8
Net cash flow from financing activities	(215.6)	(39.1)	200.3	(361.0)	(123.7)
Net change in cash and cash equivalents Cash and cash equivalents at start of period	167.4 586.6	131.1 575.9	166.9 587.0	149.0 558.0	29.1 558.0
Cash and cash equivalents at end of period	754.0	707.0	754.0	707.0	587.0

(figures in NOK million)	Q2 2014	Q2 2013	2013
Intangible assets	425.0	449.9	434.5
Property, plant and equipment	4.0	6.2	4.9
Investments in associated companies and joint ventures	170.9	155.3	150.7
Other non -current assets	172.5	163.9	166.6
Total non -current assets	772.4	775.5	756.7
Inventories (property)	4 582.0	3 915.2	4 283.9
- Land	1 653.7	1 870.9	1 753.4
- Work in progress	2 790.8	1 895.0	2 398.8
- Finished goods	137.5	149.3	131.6
Other current receivables	257.1	184.7	342.3
Cash and cash equivalents	754.0	707.0	587.0
Total current assets	5 593.1	4 806.8	5 213.2
1 TOTAL ASSETS	6 365.5	5 582.3	5 969.8
1112131 Equity attributed to shareholders in Selvaag Bolig ASA*	2 253.0	2 184.6	2 236.3
Non -controlling interests	23.8	27.3	22.7
Total equity	2 276.8	2 211.9	2 259.0
Non -current interest -bearing liabilities	2 470.0	1 843.2	2 116.2
Other non -current non interest -bearing liabilities	279.3	257.2	258.1
Total non -current liabilities	2 749.4	2 100.4	2 374.3
Current interest -bearing liabilities	595.8	680.9	669.0
Other current non interest -bearing liabilities	743.5	589.0	667.5
Total current liabilities	1 339.3	1 269.9	1 336.6
TOTAL EQUITY AND LIABILITIES	6 365.5	5 582.3	5 969.8

Balance sheet

* Corresponding to a book value of NOK 24.0 per share

Operational highlights – key operating figures

(number of residential units, unless otherwise stated)	Q2 2013	Q3 2013	Q4 2013	Q1 2014	Q2 2014
Number of units sold	200	236	61	139	255
Number of commenced units	284	335	296	77	197
Number of units completed	211	188	101	77	253
Number of units under construction	1 131	1 279	1 474	1 474	1 418
Proportion of sold units under construction	83 %	80 %	75 %	76 %	76 %
Number of completed unsold units	23	22	8	8	17
Sales value of units under construction (NOK million)	4 163	4 657	5 421	5 547	5 238
Number of employees	100	101	97	98	99

IFRS EBITDA Q2 2014

		Property development
(figures in NOK million)	Greater Oslo	Rest of Norway	Other countries	Other	Total
IFRS EBITDA for the quarter, per segment
Operating revenues	647.0	159.0	0.3	3.3	809.5
Project expenses	(550.4)	(134.5)	-	(0.8)	(685.7)
Other operating expenses	(10.3)	(7.0)	(0.7)	(34.3)	(52.3)
Share of income (losses) from associated companies and joint ventures	(1.0)	3.1	26.5	-	28.7
Other gain (loss), net	-	-	-	-	-
EBITDA	85.3	20.5	26.2	(31.8)	100.2

Operational reporting Q2 2014

(figures in NOK million)	Property development
	Greater Oslo	Rest of Norway	Other countries	Other	Total
Operating revenues	517.1	309.7	0.3	3.3	830.5
Project expenses	(407.9)	(248.5)	-	(0.8)	(657.2)
Other operating expenses	(10.3)	(7.0)	(0.7)	(34.3)	(52.3)
EBITDA (percentage of completion)	98.8	54.3	(0.4)	(31.8)	121.0

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

Land loan interests on the P&L

• Total land loans are NOK 1 120 million of which NOK 757 million are loans where interest cost are activated
• Land loan interests activated at regulation
• As at 30 June interests connected to land loans of NOK 363 million was charged on the P&L

Interest charged on the P&L as at 30.06.2014

NOKm