Year-end Report, 31 December 2022
"Value-creating measures supporting our property values"
Andreas Morfiadakis, CEO
October - December
- Revenue for the quarter amounted to SEK 139.4 million (115.1), a year-on-year increase of 21.1 per cent.
- The Group's net operating income amounted to SEK 75.4 million (62.9), up 19.9 per cent year-on-year.
- Profit from property management for the quarter amounted to SEK 25.4 million (22.7), a year-on-year increase of 11.9 per cent.
- Changes in the value of investment properties amounted to SEK -147.7 million (303.7) and changes in the value of derivatives to SEK 9.5 million (4.4).
- Profit for the quarter totalled SEK -96.2 million (251.7), corresponding to SEK -0.73 per share (2.19) before dilution.
- As of Dec. 31, the loan-to-value ratio amounts to 49.3 percent with only bank financing.
January - December
- Revenue for the period amounted to SEK 501.6 million (344.2), up 45.8 per cent year-on-year.
- The Group's net operating income for the period amounted to SEK 278.9 million (189.9).
- Profit from property management amounted to SEK 113.4 million (76.4), a year-on-year increase of 48.4 per cent.
- Changes in the value of investment properties amounted to SEK -25.7 million (737.3) and changes in the value of derivatives to SEK 95.9 million (10.9).
- Profit for the period totalled SEK 125.1 million (640.5), corresponding to SEK 0.95 per share (7.75).
- The net realizable value per share is SEK 34.4 (33.9), a 1.5 per cent increase compared with the preceding year.
- The Board has proposed to the Annual General Meeting (AGM) that no dividend be paid for the 2022 financial year, which is in line with the company's dividend policy.
Significant events after the end of the period
- Joined LFM30, Malmö's local roadmap for a climate-neutral construction sector by 2030 at the latest, consisting of six strategic focus areas each with detailed targets.
- Revised and established new sustainability goals in line with the Paris Agreement and the UN Sustainable Development Goals (SDGs). The new goals also include social responsibility and corporate governance.
- Signed a six-year lease comprising 350 square metres with the National Government Service Centre in Västervik, with an annual rental value of approximately SEK 1.7 million, as well as an expanded lease with Praktikertjänst in Malmö comprising an additional just over 130 square metres, with annual rent of approximately SEK 0.2 million.
Comments from CEO Andreas Morfiadakis
KlaraBo continued to refine its portfolio during the quarter. A total of 86 renovations were carried out in the quarter, leading to an increase in rental value of a full 1.1 percentage points excluding general rent increases. We renovated an average of 72 apartments per quarter during 2022, which is a record number for us. The advantage with our model is that it allows us to maintain control over our business, while demand will likely remain high as a result of reduced construction. Around two-thirds of our entire portfolio of approximately 6,500 apartments still need to be upgraded, which is reassuring in an otherwise uncertain market.
Back in Q2 and Q3, I mentioned that market values would likely need to be adjusted due to sharply rising interest rates and the lack of transactions, which indicates that the values are intact. During the quarter, external valuations indicated that property values had decreased as a result of an average increase in yield requirements of approximately 25 basis points. According to our sensitivity analysis, this increase is equivalent to just over SEK 510 million, or approximately 5 per cent of the value from the third quarter, all other things being equal. Nonetheless, this is exactly where we see the potential of KlaraBo's business model, which limited our decline in value for the quarter to SEK 148 million, in large part because of our value-creating measures and the fact that inflation did not increase further. This means it is important for us to continue developing the portfolio through improvements and densification in line with our strategy. We currently have an average rent of SEK 1,026 per square metre in the portion of the portfolio where there is potential for improvement, which leaves plenty of room for future value creation through improvements.
Active risk limitation
We see a troubled market around us and have acted proactively to limit risks and continuously ensure long-term stable financing. In the balance sheet, only marginal values are recorded for the project portfolio since we lowered the risk by reducing the production pace. For the quarter, our interest rate level was 67.1 percent, while we extended the fixed interest period from 1.6 years to 3.4 years in 2022. In addition, we had a credit commitment period of 2.5 years, where just under SEK 450 million matures during the latter part of 2023. The loan-to-value ratio was 49.3 percent with only bank loans, and we had approximately SEK 340 million in cash at year-end. All in all, this means that we believe that the risk level is low and that the company is financially stable.
So far, we have landed rent negotiations for 2023 for around one-third of the portfolio, leading to an average increase of approximately 4 per cent. This is lower than inflation, which was around 10 per cent for 2022, but from a long-term historical perspective, rent increases have typically exceeded inflation and we expect this to be the case after equilibrium has been achieved.
Greater focus on sustainable development
A great deal of progress was also achieved in the area of sustainability during the quarter. We revised and established new sustainability goals in line with the Paris Agreement and the UN SDGs. The new goals presented in this report include social responsibility and corporate governance. We joined LFM30, Malmö's local roadmap for a climate-neutral construction sector by 2030 at the latest. The initiative is in line with our target to achieve climate-neutral properties by 2030 at the latest.
The world has faced a variety of challenges in the last few years, including a pandemic, rapidly increasing energy prices and inflation. One way or another, however, the world will adapt to these new and somewhat grim conditions, which is why we are convinced that rent levels and energy prices will eventually find a new equilibrium. Developments are still difficult to predict, but we have recently seen several indications that the outlook for Sweden's economy is not as dire as it was in the fourth quarter.
As we indicated earlier, we do not intend to propose any dividends for the operating year. This is because we can create more shareholder value over the long term by continuing to invest in our property portfolio. Nor is it impossible that attractive acquisition possibilities will turn up later in the year, after a cautious transaction market in the fourth quarter and the beginning of 2023.
Andreas Morfiadakis, CEO of KlaraBo
Teleconference and webcast presentation
KlaraBo's CEO Andreas Morfiadakis and CFO Jenny Appenrodt will present the Year-end Report through a webcast presentation and teleconference at 9:00 a.m. (CET) on Wednesday 15 February. The presentation will be held in English.
Link to webcast below. Via the webcast you can ask written questions.
If you wish to participate via teleconference, please register on the link below. After registration, you will be provided with phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.
This information is information that KlaraBo Sverige AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below, at 08.00 CET on 15 February 2023.
For more information:
Andreas Morfiadakis, CEO KlaraBo
+46 76 133 16 61
KlaraBo is a real estate company that acquires, builds, owns and manages attractive residential properties. The company was founded in 2017 and operates throughout the country. The strategy is to acquire existing residential properties as well as land for new construction in regions with population growth and a strong labour market. Our newly constructed apartments are developed in-house and space efficient, which contribute to reasonable rents. Both apartments and buildings are designed in collaboration with the municipality to fit local needs. With wood as the main building material, the new construction holds a high environmental standard. KlaraBo is a long-term property owner. KlaraBo is listed on Nasdaq Stockholm and is traded under the ticker KLARA B.
KlaraBo är ett fastighetsbolag som förvärvar, uppför, äger och förvaltar attraktiva bostäder. Företaget grundades 2017 och agerar över hela landet.