Financial ratios for the period 1 January-31 December 2020
+---------------------------------+---------+--------+---------+---------+
|  Financial ratios               |    2020 |   2019 |    2020 |    2019 |
|                                 | Oct-Dec |Oct-Dec | Jan-Dec | Jan-Dec |
+---------------------------------+---------+--------+---------+---------+
|  Rental income, SEK million     |    56.2 |   44.7 |   203.9 |   156.8 |
+---------------------------------+---------+--------+---------+---------+
|  Profit from property           |    19.1 |    8.6 |    75.3 |    52.9 |
|management, SEK million          |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Profit for the period, SEK     |   171.1 |  167.9 |   474.5 |   365.3 |
|million                          |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Net investments in investment  |   532.8 |  351.4 | 1,888.6 | 1,061.1 |
|properties, SEK million          |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Investment properties, SEK     | 6,853.5 |4,396.7 | 6,853.5 | 4,396.7 |
|million                          |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Long-term net asset value      | 3,661,2 |2,540.2 | 3,661.2 | 2,540.2 |
|(NAV), SEK million               |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|                                 |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Number of apartments under     |   2,237 |  1,711 |   2,237 |   1,711 |
|management                       |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Number of construction starts, |     193 |    129 |     912 |     518 |
|apartments                       |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Number of apartments under     |   1,311 |    700 |   1,311 |     700 |
|construction                     |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Number of apartments under     |   3,880 |  1,340 |   3,880 |   1,340 |
|project development              |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|                                 |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Interest coverage ratio,       |     2.7 |    2.2 |     2.6 |     2.6 |
|multiple                         |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Equity/assets ratio, %         |   41.9% |  41.7% |   41.9% |   41.7% |
+---------------------------------+---------+--------+---------+---------+
|  Loan-to-value ratio, %         |   46.7% |  40.2% |   46.7% |   40.2% |
+---------------------------------+---------+--------+---------+---------+
|                                 |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Profit from property           |    0.53 |   0.30 |    2.18 |    2.05 |
|management, SEK per share        |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Growth in profit from property |   74.6% |   6.6% |    6.3% |   24.6% |
|management per share, %          |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Long-term net asset value      |  102.02 |  74.96 |  102.02 |   74.96 |
|(NAV), SEK per share             |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Growth in long-term net asset  |    6.3% |  26.1% |   36.1% |   54.4% |
|value (NAV), per share, %        |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Earnings per share, SEK        |    4.77 |   5.94 |   13.72 |   14.14 |
+---------------------------------+---------+--------+---------+---------+
|  Number of shares outstanding at|  35,889 | 33,889 |  35,889 |  33,889 |
|the end of the period, thousands |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
|  Average number of shares       |  35,889 | 28,264 |  34,583 |  25,830 |
|outstanding during the period,   |         |        |         |         |
|thousands                        |         |        |         |         |
+---------------------------------+---------+--------+---------+---------+
 
A Message from the CEO
2020 was a different and eventful year, when the COVID-19 pandemic impacted significantly on people's health, society and the financial markets. In addition to those who are directly affected by the virus and fall ill, it is saddening to see the economic effects. Fortunately, the pandemic has had little or limited negative impact on K-Fastigheter's operations. As a committed landlord, we maintain a close dialog with our most affected tenants. On the whole, the financial impact was very limited, and we actually had fewer late rental payments at year end 2020 compared to the previous year. In this context, I would like to shine the spotlight on our employees, who contribute in many different ways and have made an extraordinary effort to support our tenants as well as their colleagues.
In 2020, K-Fastigheter celebrated its 10-year anniversary and our first year as a listed company. Otherwise, like all other years in our 10-year history, this year was characterized by a high pace and great performance by our capable employees.
Furthermore, we finalized the acquisition of Finja Prefab, which provides us with the infrastructure we need to realize our geographical growth plan, and a directed new share issue raised a total of SEK 504 million before issue expenses. The funds have been, and will, primarily be used to expand our portfolio of building rights. Profit after tax for the year was SEK 475 million, corresponding to profit growth of 30 percent year-on-year. Net asset value per share increased by 36 percent in the year.
In the year, K-Fastigheter started construction of 912 apartments, and there were 1,311 apartments in production at year end, compared to 700 apartments in production at the end of 2019, an increase of 87 percent. The organization has demonstrated that the resources are in place to take on far more projects and to increase the volume of apartments in production. Our portfolio of building rights in project development grew from 1,340 to 3,880 in the year, an increase of 190 percent.
Considering these factors, we have good reasons for increasing our previously communicated operational target of 1,000 new apartment construction starts annually by the end of 2023. We feel well equipped to exceed that target by healthy margin, and have chosen to revise it to 1,300 apartments annually by the end of 2023.
As previously mentioned, the Project Development business area has a great portfolio of attractive building rights, where we focus on acquiring building rights at an early stage to enable us to influence the planning process. I am often asked if K-Fastigheter will be able to maintain such low acquisition costs for its HOMES produced in-house also in the future. My answer is that I am convinced that we can in fact become even more cost-efficient. Historically, K-Fastigheter has acquired building rights on market terms, where the degree of utilization of building rights has rarely been maximized - a disadvantage when building concept houses and working with pre-determined measurements. We ensure our financial efficiency through standardized and financially effective construction. At the end of the year, average acquisition costs in relation to market value on completion were 73.1 percent for proprietary projects, considerably below our maximum of 75 percent. This means that, on average, we generate unrealized value of close to 27 percent in our projects.
When we carry out construction on the basis of detailed development plans that we have contributed to ourselves, and where we have been able to adapt the plans to our concept buildings, we can access building rights with low acquisition costs and a high degree of utilization, and where the rights are optimized for our concept buildings. The first construction starts based on detailed development plans initiated by us are expected within two to three years. On this basis, I am convinced that our total acquisition cost in relation to market value, which we term PTV (production-to-value), will be lower in future than it is today, given unchanged market values.
In 2020, our property management portfolio grew by 46 percent in terms of market value at year end, which was in line with growth in rental income of 30 percent, and profit from property management which was up by 42 percent. Unfortunately profit from property management and the surplus ratio were negatively affected by continued high economic vacancies in Växjö. As I explained in the third quarter report, we have taken possession of a major new-build holding of 171 apartments intended as tenant-owner units, which we have acquired to convert to rental apartments. This meant that letting started relatively late in the process. In addition, we completed three Apartment Blocks containing 66 apartments in a neighboring property in the fourth quarter. This meant that we could offer significant volumes to the market in a relatively short period of time. Our assessment is that the relatively high vacancies are a short-term issue, and that these will fall in line with other completed projects in Växjö during 2021, where we have zero vacancies. In the long term, I am very confident that the area will become one of our more attractive ones, as the property standard is very high, and the properties are in a central and attractive location. Excluding the above projects, we had a very high financial letting ratio of 97.4 percent at the end of the period.
On 1 December 2020 we entered an agreement relating to the acquisition of Finja Prefab AB, a nationwide leading provider of prefabricated concrete elements. We took possession in January 2021, and the operations will be reported as an independent business area from the first quarter 2021. The acquisition strengthens Finja Prefab's position as a leading supplier to Swedish construction companies at the same time as K-Fastigheter secures access to critical construction components. The acquisition assures the infrastructure required for K-Fastigheter's geographical expansion. Finja Prefab has seven plants in three main regions: South, East and West, with its own assembly teams in each region. The strategic acquisition and our existing manufacturing plants for lightweight external wall units provide us with all the critical construction components needed for our three concept buildings. Concrete elements are a critical component in our concept buildings and represent a large proportion of the total acquisition cost. I am convinced that a high rate of prefabrication in a controlled process ensures the most cost-efficient and high-quality housing production possible. The acquisition of Finja Prefab is the most important transaction carried out in K-Fastigheter's ten-year history, and will contribute to improve PTV as outlined above.
The collective bargaining process makes shift work more difficult, while demands for increased salary and other remuneration make it more costly to carry out traditional construction site production. As working hours shift from construction sites to factories, this increases the degree of prefabrication which allows us to keep costs down, reduce our geographical dependence and carry out shift-based production when required.
Traditionally, construction sites in Sweden are as undeveloped as the construction industry as a whole. Construction takes place over a 40 hour week, which means that production is down for 128 hours each week, or nearly 80 percent of the time. Site expenses relating to scaffolding, work huts, construction elevators and cranes do not reflect that there is no onsite activity for most of the week. The effect is that job opportunities for construction workers are shifting towards factory-based work.
Our business concept of owning and managing HOMES with an unlimited time frame, makes concrete the right choice of material. Concrete is sometimes cited as being less sustainable than other construction materials, something I consider to be incorrect. From a CO\2\ perspective, traditional concrete frames are worse than wood frames in a 100-year perspective. BUT you only have to increase the time frame to a 150-year perspective for concrete to have a lower overall CO\2\ footprint. And our business concept of owning and managing properties with an unlimited time frame means that we are building housing with a life span of over 150 years. In addition, Finja Prefab is a flagship provider of sustainable prefab production that manufactures climate-positive concrete frames, partly by utilizing reinforcement bars from reclaimed steel.
To sum up 2020, we maintained a high pace of transactions for future growth, and are entering 2021 as a new company with a fourth business area and a new, higher operational target. The share price increased by 66 percent, which was positive for our approximately 3,600 shareholders.
At the end of the year, our total portfolio of apartments under management, in production, in the project portfolio and acquisitions where we have not yet taken possession totaled 7,496, an increase of 90 percent year-on-year.
Jacob Karlsson, February 2021
A complete Interim report January-December 2020 is attached and also published on the Group's website, under the heading Financial reports. (https://k-fastigheter.com/en/investors/financial-reports)
For further information, please contact:
Jacob Karlsson, CEO and Founder, K-Fast Holding AB, e-mail: jacob.karlsson@k-fastigheter.se,telephone: +46 738 219 626
Martin Larsson, Deputy CEO/CFO, e-mail: martin.larsson@k-fastigheter.se,telephone: +46 703 533 160
Anders Antonsson, Head of Investor Relations, e-mail: anders.antonsson@k-fastigheter.se,telephone: +46 708 730 900
This information is such that K-Fast Holding AB is obliged to disclose in accordance with the EU's Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 26 February 2021.
---
In a recorded presentation, to be published at 8:30 am CET today, 26 February 2021, K-Fastigheter's President and CEO, Jacob Karlsson, and CFO, Martin Larsson, are commenting on the Group's Year-end report January-December 2020. The presentation is held in Swedish. Link to the presentation: www.k-fastigheter.com/en/investors/presentations. Questions may be addressed in writing to ir@k-fastigheter.sewith answers being compiled on an ongoing basis during the day and being published on www.k-fastigheter.com/en.