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Selvaag Bolig ASA

Investor Presentation • Feb 12, 2020

3741_rns_2020-02-12_0825ccd8-0867-4954-aa7d-f0e898822bfa.pdf

Investor Presentation

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Oslo, 12 February 2020 Rolf Thorsen, CEO Sverre Molvik, CFO

Q4 2019

Agenda

Operational and financial update Market

Highlights Q4 and FY 2019

  • · Strong operational performance during Q4 and FY 2019
  • · Urban Property transaction completed
  • -EO dividend of NOK 22 per share
  • · Proposes ordinary dividend of NOK 3.00 per share for 2H 2019

Completed, ongoing and upcoming projects

Key financials Q4 and FY 2019

* EBITDA is profit before interest, taxes, depreciation and amortization. EBITDA adjusted is excluding financial expenses included in project costs ** EBITDA is operating profit before depreciation, gains (losses) and profit from associated companies

Q
4
2
0
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)
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)
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ion

23.6

EBITDA** margin (NGAAP)

Per cent

28.5

Adjusted EBITDA* margin

Per cent

Sales value and units sold

Note: Sales value is adjusted for Selvaag Bolig's share in joint ventures

Rolling sales value and units sold

Note: Sales value is adjusted for Selvaag Bolig's share in joint ventures *Total columns show Selvaag Bolig's gross sales. Columns excluding dotted areas show Selvaag Bolig's net sales

Operational and financial update

Construction starts and completions

Construction starts and completions per quarter

Note: Number of units are adjusted for Selvaag Bolig's share in joint ventures

Units under construction and completions

Note: Sales value and number of units are adjusted for Selvaag Bolig's share in joint ventures * Includes: Oslo, Lørenskog, Follo, Tønsberg, Asker

·Q4 2019: 91% of construction volume in Greater Oslo Area*

-75% of 2020 completions sold by Q4 2019

Income statement highlights Q4 2019 (IFRS)

·

·

·

·

Note: EBITDA is profit before interest, taxes, depreciation and amortization. EBITDA adjusted is excluding financial expenses included in project costs

·

Revenues and adjusted EBITDA margin (IFRS)

Income statement highlights FY 2019 (IFRS)

  • ·Delivery of 732 units (849)
  • Revenues NOK 3 369 (3 342)
  • · EBITDA adjusted 959m (827)
    • Adjusted for financial expenses included in project cost
  • ·EBITDA NOK 877m (754)
  • Earnings per share full year NOK 7.04 (6.14)

Revenues and adjusted EBITDA margin (IFRS)

Note: EBITDA is profit before interest, taxes, depreciation and amortization. EBITDA adjusted is excluding financial expenses included in project costs

Income statement highlights Q4 2019 (NGAAP)

* Construction costs are exclusive of financial expenses in the segment reporting (NGAAP) Note: EBITDA is operating profit before depreciation, gains (losses) and profit from associated companies

  • ·Cash flow from operations positive at NOK 944m mainly explained by units delivered and reduced receivables
  • ·Cash flow from investment activities negative at NOK 10m
  • ·Cash flow from financing activities negative at NOK 243m mainly due to net decrease in loans

Cash flow development Q4 2019

1 179262

Net change in borrowings

Cash and cashequivalents at 31 December 2019

Note: Amounts below NOK 25m are excluded from the cash flow overview

NOK million

Balance sheet highlights Q4 2019

B
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Balance sheet composition

Assets Equity and Liabilities

Inventories (property) Q4 2019

L
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Q4 19 vs Q3 19

Inventory value development

NOK million

NOK million

Interest-bearing debt as at 31 December 2019

Debt structure

L
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-

Total Q4 2019 net interest-bearing debt NOK 1 075 million

Total Q3 2019 net interest-bearing debt NOK 2 013 million

Return on equity (IFRS)

12 months rolling net income (IFRS)* and return on equity**

NOK million

* Net income attributable to shareholders in Selvaag Bolig ASA

** Based on equity at the start of the period (attributed to shareholders in Selvaag Bolig ASA)

Earnings and dividend per share since IPO

  • ·FY 2019 EPS of NOK 7.04 (6.14)
  • · FY 2019 DPS of NOK 5.00 (4.50)
  • -H1 2019 DPS of NOK 2.00
    • Proposed H2 2019 dividend of NOK 3.00 per share
  • ·2020 EO DPS of NOK 22.00
  • ·Dividend policy unchanged

EPSDPS

Accumulated dividend and earnings per share

Reduced capital binding in practice, in effect no equity needed in Selvaag Bolig for land

Residential development value chain: cooperation between Selvaag Bolig and Urban Property

Example project calculations before and after

Example apply a land ownership period in Urban Property of 3-4 years, and a finance cost of 4% on all capital employed in the project

P
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1

  • Initial project margin and IRR before Urban Property when purchasing land at market value
  • 2Initial project margin and IRR with Urban Property as partner when purchasing land at market value (including option premium)

In total marginal lower project margins, but significantly increased IRR and RoE

Project margin will somewhat deflate*

Balance sheet implications and effects of EO dividend

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(
)
iv
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N
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n
p
er
s
re		 2
2.
0
0
  • Transaction value NOK 3 360m
  • Repayment of debt NOK 1 160m
  • Free liquidity from transaction ~NOK 1 800m
  • EO dividend of NOK 22 per
  • Pro forma equity down ~NOK 1 000 to NOK 2 371m Equity ratio 41%, down from 49%

Agenda

Highlights and sales Operational and financial update MarketSummary and outlook

Price development Norway and selected regions (2005-19)

Price development Norway and selected regions (2015-19)

Price development (rebased 01/01/15)

Estimated completions well below forecasted need

Sources: Historic data: Statistics Norway (SSB), Forecasted housing completions: Røisland, Forecasted housing need: Prognosesenteret Note: Housing demand calculated on parameters such as number of persons per household, lag on housing development, housing demolition Note: Completions exclusive of student- and senior housing

Oslo second-hand market update

Bergen second-hand market update

Trondheim second-hand market update

Stavanger second-hand market update

Bergen

Stavanger area

Regional price development (2006-19) Regional price development (2006-19)

Sources: Eiendomsverdi 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Trondheim Trondheim

Newbuild market update

Source: SA - ECON Nye Boliger

Newbuild market update

Source: SA - ECON Nye Boliger

* Adjusted for temporary withdrawals or cancellations during the period

Lørenskog stasjonsby

~1 000 units remaining

Sales start: 2013

Project completion: 2030

Sales value: NOK 4.5bn

Ongoing projects

Tiedemannsparken

Total number of units: 322

Sales start: Q1 2019

Project completion: Jun 2022

Sales value: NOK 1.7 bn

Ongoing projects

Skårerbyen

~1 000 units remaining

Sales start: Q4 2018

Project completion: 2030

Sales value: NOK 4.5bn

Ongoing projects

Ongoing projects

Landås (Asker)

~600 units remaining

Sales start: 2019

Project completion: 2028

Sales value: NOK 3.0bn

Fornebu

~1 800 units (50/50 JV)

Expected sales start: 2023

Project completion: 2038

Expected sales value: NOK 12 bn

Bjerke

~1 100 units

Expected sales start: 2023

Project completion: 2030

Expected sales value: NOK 7.0 bn

Sinsenveien

~350 units (50/50 JV)

Expected sales start: Q4 2020

Project completion: 2024

Expected sales value: NOK 1.75bn

Lørenvangen

~160 units

Expected sales start: Q4 2021

Project completion: 2024

Expected sales value: NOK 800m

Agenda

Highlights and sales Operational and financial update MarketSummary and outlook

  • ·Positive market sentiment in Q1
  • · Attractive projects for sale in all the markets where we operate
  • · Positioned with competitive housing offering and substantial capacity

Outlook

Completed, ongoing and upcoming projects

  • ·Strong operational performance during Q4 and FY 2019
  • ·Urban Property transaction completed
  • ·EO dividend of NOK 22 per share
  • ·Proposes ordinary dividend of NOK 3.00 per share for 2H 2019

Summary

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Next event: 1st quarter 2020 20 May 2020

Appendix

Increasing share of population growth in Oslo and Akershus

Share of total population in Oslo and Akershus Share of total population growth in Oslo and Akershus

Source: Statistics Norway

Selvaag Bolig's ambition is to pay high and stable dividends to its owners.

The company aims to pay dividends of minimum 40 per cent of net annual profit, paid in two instalments over the year. However, the size of the dividend will be weighed against the company's liquidity forecasts and capital adequacy.

The company will maintain an equity ratio of minimum 30 per cent

Dividend policy

Share performance and dividend since IPO

Source: Oslo Børs

* EO dividend of NOK 22 per share paid on 31 January 2020

Largest shareholders at 31 December 2019

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* Further information regarding shareholders is presented at: http://sboasa.no/en

** The shares were purchased for the company's share programmes for employees

Strategy

Low-risk business model creates healthy profits

Competitive housing offering, targeting growth regions

Efficient and flexible cost structure

Capital-efficient business model backed by strong balance sheet

Large, actively-managed land bank, owned by partner Urban Property

  • · Presence in fast-growing urban regions with high demand and large market depth Competitive prices, addressing large customer base
  • Defined housing concepts, aimed at wide range of consumers
  • ·Value appreciation through refinement of land for housing development
  • ·Flexibility to develop thousands of homes in growing urban regions
  • ·Active asset management
  • ·Partnership reduces invested capital and strengthen ability to buy land
  • ·No in-house construction arm; improves flexibility and cost optimisation
  • ·Project-based business model improves flexibility and reduces risk
  • ·Economies of scale through large projects
  • ·Lean organisation reduces overhead
  • ·60% pre-sale before construction start lowers project financing need and inventory risk
  • ·Sound debt structure and financial flexibility

Value drivers

Low-risk business model

De-risking in key stages of projects

  • · Selvaag's equity investment in a project and project margin bring the remaining project cost down to 74%-78%
  • With minimum 60% pre-sale there is limited remaining project risk. For the the remaining 40% a price reduction of 35% would recover equity
  • ·70% of units in production are sold at end Q4'19

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

··Land purchase conditional on zoning approval Land purchase price based on market value at time of zoning ··Minimum sales rate of 60% before construction ··4Fixed price construction contract··

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

Risk profile at start of a MNOK 550 project

3
2
3
9		 3
9
1
7		 3
2
0
4
2
9
2
9		 3
0
3
8
%
2
6		 2
7
%		 %
2
6		 %
2
8		 %
2
9

Project margin development

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

** Project margins are exclusive of overhead costs

Positioned to realize large projects in Norway's four largest growing urban areas

·

·

  • Acquire the right mix of zoned and unzoned land in suitable locations
  • ·Land acquisitions in defined core areas
  • High degree of site utilisation and strategic land development
  • Substantial land bank to accommodate targets/growth in core areas
  • Good infrastructure and public transport
  • ·Joint ventures (JVs)

·

·

Land bank exposure

Trondheim369 units

Geographical spread

Stockholm40 units

Greater-Oslo 9 719 units

Stavanger 969 units

Bergen 516 units

Land-bank strategy

Note: The numbers represent the size of the land portfolio as at 31 December 2019. All numbers are adjusted for Selvaag Bolig's share in joint ventures. 1) Greater Oslo area: Oslo, Akershus, Buskerud, Vestfold and Østfold, 2) The residential property development portfolio consists of land plots that are to be paid for when planning permission is received. The portfolio has a development potential of ~6 100 residential units, whereof the company has purchasing obligations for ~6 000 and purchasing options for ~100 units.

Land bank in Oslo and Greater Oslo

Lørenskog 2 213 units Lørenskog Stasjonsby 724 units Skårer bolig 901 units LSV 300 units Luhrtoppen 288 units 2 213unitsOslo South 315 units Gjertsrud Stensrud 315 units Follo/Østfold 1 869 unitsLanghus 255 units Solberg 154 units Ski 75 unitsGrenseveien 385 unitsFredrikstad 1000 units 1 869LillestrømBjerke 1 000 units Bjerke 1 000 units 1 000 units

*The numbers are adjusted for Selvaag Bolig's share in joint ventures

Land bank in Stavanger area

*The numbers are adjusted for Selvaag Bolig's share in joint ventures

Land bank in Bergen, Trondheim and Stockholm

*The numbers are adjusted for Selvaag Bolig's share in joint ventures

Substantial portfolio for development

Total land bank portfolio at 31 December 2019

Units

Income statement IFRS

2018
3 342.1
(2 421.6)
(268.1)
101.8
754.187
(3.7)
750.5
(18.0)
732.5
(165.6)
566.8
(
)
f
ig
in
N
O
K m
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l
l
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ure
s		 Q
4
2
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1
9		 Q
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s		 (
)
9
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1
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Net income for the period attributable to:

No
l
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res		 - (
)
0.
0		 - (
)
0.
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6
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5
4.
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6
6.
9

Balance sheet

(
)
f
ig
in
N
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i
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ure
s		 Q
4
2
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1
9		 Q
3
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1

* Corresponding to a book value of NOK per share 36.0

Cash flow statement

(
)
f
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r
o		 4
8
8.
3		 4
2
2.
1		 6
5
7.
0		 4
8
5.
6
C
h
d
h
iv
l
d
f
i
d
t
t
a
s
a
n
c
a
s
e
q
u
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e
n
s
a
e
n
o
p
e
r
o		 1
1
8.
7
7		 6
0
5
7.		 1
1
8.
7
7		 6
0
5
7.

Operational highlights – key operating figures

Q
8
4
1		 Q
9
1
1		 Q
2
9
1		 Q
3
9
1		 Q
9
4
1
An
l
l so
lg
he
ta
te
ter
en		 8
1
4		 2
4
3		 2
1
0		 1
5
9		 1
4
0
l
l
ig
he
An
ta
t
te
ter
an
g
sa
en		 4
0
2		 9
7		 3
1
1		 1
7
4		 2
4
8
An
l
l
fer
d
ig
i
l
he
ta
t
te
ter
s
en		 4
4
1		 1
2		 3
0
7		 2
0
3		 2
5
4
An
l
l ov
lev
he
ta
te
ter
er
er
en		 4
2
1		 2
9		 2
4
6		 2
4
3		 2
1
4
An
l
l e
he
de
by
ing
ta
ter
n
un
r
g
g		 1
4
4
9		 1
5
3
4		 8
1
5
3		 1
5
1
0		 1
5
0
4
de
l so
lg
he
de
by
ing
An
te
ter
en
un
r
g
g		 %
6
6		 %
7
0		 %
7
1		 %
7
2		 %
7
0
An
l
l
fer
d
ig
i
l
i
k
ke
lg
he
ta
t
te
te
ter
s
so
en		 2
6		 1
3		 4
8		 3
4		 5
6
(
)
Sa
lg
d
i av
bo
l
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i p
du
ks
j
N
O
K m
i
l
l
ion
sve
r
ro
on
er		 6
7
1
2		 7
0
9
7		 7
0
3
9		 7
1
9
2		 7
1
5
5
9
1		 9
1		 9
1		 9
1		 9
1
Q4 19
140
248
254
214
1 504
70%
56
7 155
01

EBITDA Q4 2019

P
t
r
o
p
e
r
y
(
)
f
i
i
N
O
K
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O
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s		 1
0
4
3.
5		 1
9.
0		 1
0
6
2.
4
P
j
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)
7
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7.
8		 (
)
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4		 (
)
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3
8.
2
O
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1
9.
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)
7
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3		 (
)
9
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5
(
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E
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n
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m
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8
6.
4		 (
)
5
3.
7		 2
3
2.
7
N
C
i
l
i
f
f
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t
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e:
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g.
I
F
R
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f
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q
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m
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n
O
i
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p
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r
a
n
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r
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v
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3
9
5.
5		 1
9.
0		 1
4
1
4.
4
P
j
t
r
o
e
c
e
p
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n
s
e
s
x		 (
)
9
3
6.
3		 (
)
0.
4		 (
)
9
3
6.
7
O
h
i
t
t
e
r
o
p
e
r
a
n
g
e
x
p
e
n
s
e
s		 (
)
1
6.
6		 (
)
7
2.
3		 (
)
8
8.
9
(
)
S
h
f
i
l
f
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d
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t
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r
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o
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c
o
m
e
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s
s
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m
a
s
s
o
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p
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d
j
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t
t
a
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s
v
u		 (
)
1
3.
7		 - (
)
1
3.
7
E
B
I
T
D
A		 4
2
8.
9		 (
)
5
3.
7		 3
7
5.
2
U
i
i
d
i
t
t
n
s
n
p
r
o
u
c
o
n		 1
5
0
4		 /
N
A		 /
N
A
U
i
d
l
i
d
t
n
s
e
v
e
r
e		 2
1
4		 /
N
A		 /
N
A

Value of units sold - gross and net

Sales value of units sold

1
3
2
0		 1
3
9
3		 2
9
0
9
1
4		 8
5
9
6
6
0
1
1
8
3		 1
1
0
6
3
9
4		 7
5
6		 7
0
5

Number of units sold - gross and net

Number of units sold

Norwegian housing market

·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 minimum 10% cash deposit
  • · High level of home ownership
  • -85% (one of the world's highest)
  • · Economic benefits for home owners
  • -23% of mortgage loan interest payments are tax deductible
  • -Transfer stamp duty for new houses is lower than for second-hand homes
  • · Strong population growth
  • -Norway's urban areas are among the fastest growing in Europe
  • -Good demand for new homes

Total household debt and homeownership

Source: OECD, Prognosesenteret

Newbuild effect on total second-hand market in Oslo for 2018

Source: Selvaag Bolig, Eiendomsverdi

Increase in newbuild completions has limited effect on second-hand market

  • Second-hand sales generated from newbuild completions in 2018 Second-hand sales generated from newbuild completions in an average year Additional second-hand sales generated from newbuild completions in 2018
  • Total second-hand market in Oslo in 2018

On average ~ 1 400 units are added to the second-hand market in Oslo (based on ~ 2 800

Completion of 3 800 newbuild units in 2018 will add ~ 1 900 units to the second hand market in

The additional ~ 500 units in 2018 will have a limited effect on second-hand market in Oslo

Units

Homeownership rate among immigrants in Norway (per year living in Norway)

Immigration increases demand over time

of years in Norway

Norway – robust economic conditions

GDP growth 2012 - 2021e Unemployment 2012 - 2021e

Population growth 2018 - 2030e and 2040e Interest rates 2012 - 2021e

Source: International Monetary Fond, Eurostat

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