Company presentation November 2017 Baard Schumann, CEO Sverre - PowerPoint PPT Presentation

Company presentation November 2017 Baard Schumann, CEO Sverre Molvik, CFO

Selvaag Bolig is a residential developer that provides targeted housing concepts to suit aspirations of different households in and around the main cities: Oslo , Stavanger , Bergen and Trondheim 2

Norway’s leading homebuilder ▪ 1 582 units worth NOK 7 050 million under construction 78 per cent sold by Q3 17  ▪ 178 units sold in Q3 2017 Trondheim 683 units ▪ Dividend twice a year ▪ Q3 2017 adjusted IFRS EBITDA Bergen 303 units Greater-Oslo margin of 11.8 per cent 8 585 units Stockholm Stavanger ▪ Only projects with more than 150 105 units 1 549 units units Land bank potential Q3 2017 ▪ Focus on fast growing urban regions Note: The numbers represent the size of the land portfolio as at 30. September 2017. 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 3 paid for when planning permission is received. These have a development potential of ~5 900 residential units, whereof the company has purchasing obligations for ~5 400 and purchasing options for ~500 units

Efficient and flexible value chain 6 – 36 MONTHS 6 – 12 MONTHS 3 – 9 MONTHS 12 – 24 MONTHS 0 MONTHS Acquire and refine Contracting, marketing Project design Construction and sales Delivery to customers land for development and pre-sales ZONING SALES START CONSTRUCTION START DELIVERIES ▪ Buy (i) options on unzoned land ▪ Plan and prepare ▪ 60% pre-sale before start-up ▪ Fixed-price contracts with ▪ Target 100% sale at delivery or (ii) ready-to-build land for construction reputable counterpart ▪ Lever acquired land ▪ Prices on remaining 40% to improve ROE increased gradually during sell-out phase ▪ Construction costs financed with construction loans 4

Scale and broad customer offering drive volume Target markets Size and price Housing concepts Average price per housing unit NOK 3-5 million Number of units per project > 300 Trondheim in Oslo Bergen Greater Oslo Number of units per project > 150 Stockholm Stavanger in other regions 5

Low-risk business model creates healthy profits Strategy Value drivers Presence in fast-growing urban regions with high demand and large market depth ▪ Competitive housing offering, Competitive prices, addressing large customer base ▪ targeting growth regions Defined housing concepts, aimed at wide range of consumers ▪ Value appreciation through refinement of land for housing development ▪ Large, actively-managed Flexibility to develop thousands of homes in growing urban regions ▪ land bank Active asset management ▪ No in-house construction arm; improves flexibility and cost optimisation ▪ Project-based business model improves flexibility and reduces risk Efficient and flexible ▪ cost structure Economies of scale through large projects ▪ Lean organisation reduces overhead ▪ 60% pre-sale before construction start lowers project financing need and inventory risk ▪ Capital-efficient business model backed by strong balance sheet Sound debt structure and financial flexibility ▪ 6

Margin development through project stages* 6 – 36 MONTHS 6 – 12 MONTHS 3 – 9 MONTHS 12 – 24 MONTHS 0 MONTHS Acquire and refine Contracting, marketing Project design Construction and sales Delivery to customers land for development and pre-sales Project margin 20% 15% Project margin 20% 10% 5% 0% ▪ Land acquired with minimum ▪ Adding value through ▪ Value added when ▪ Maximising price in ▪ Delivery in accordance with 12% project margin and building permits and achieving 60% pre-sale accordance with market expectations minimum 12% IRR area utilisation (+2% provisions) 7 * Assuming flat market development

Low-risk business model Risk profile at start of a MNOK 550 project De-risking in key stages of projects ▪ Purchase and payment of land takes place after 1 zoning plan approval. If this is not obtained, the Land purchase purchase is cancelled conditional on zoning approval ▪ SBO is in charge of the zoning process 2 60% 76% 14% 10% 100% ▪ Purchase price is decided by a land appraisal Land purchase = = = = = made by three external consultants at the time price based on MNOK MNOK MNOK MNOK MNOK of zoning approval market value at 330 418 77 55 550 time of zoning ▪ The median valuation is used as purchase price approval Minimum pre- Remaining Project margin Equity Sales price ▪ Pre-sales of minimum 60% secures the majority 3 sale project cost investment of revenue before construction Minimum sales ▪ 10% of purchase price paid by the buyer at point rate of 60% before of sale, and proof of financing for the remaining construction Selvaag’s equity investment in a project and project margin bring ▪ amount is required the remaining project cost down to 74%-78% With minimum 60% pre-sale there is limited remaining project risk. ▪ 4 ▪ Construction contracts with solid counterparties For the the remaining 40% a price reduction of 35% would recover Fixed price are made with fixed price equity construction ▪ Project costs are secured before construction starts contract 78% of units in production are sold at end Q3’17 ▪ 8

Finance and financial update 9

FINANCIAL UPDATE Income statement highlights Q3 2017 (IFRS) Revenues and adjusted EBITDA margin (IFRS) ▪ 75 units delivered (129) NOK million ▪ Revenues NOK 379m (387) ▪ Units delivered NOK 359m (365) 1 135 ▪ Other revenues NOK 20m (23), mainly lease income 886 ▪ Project costs NOK 279m (283) ▪ Of which NOK 19m is interest (9) ▪ Other costs NOK 54m (61) 456 ▪ Salaries, sales and marketing key components 387 379 24% ▪ Adjusted EBITDA NOK 45m (92) 22% 21% 19% 12% ▪ Adjusted for financial expenses included in project costs ▪ EBITDA NOK 26m (84) Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 ▪ EPS in the quarter NOK 0.18 (0.63) Operating revenues Adjusted EBITDA margin 10

FINANCIAL UPDATE Income statement highlights Q3 2017 (NGAAP) Revenues and EBITDA margin (NGAAP)* 12 months rolling revenues (NGAAP)* NOK million NOK million 967 3 672 947 941 3 511 3 514 3 283 3 229 818 498 25% 24% 21% 28% 19% 25% 18% 23% 22% 21% Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Operating revenues EBITDA margin Operating revenues EBITDA margin * Construction costs are exclusive of financial expenses in the segment reporting (NGAAP) 11

FINANCIAL UPDATE Cash flow development Q3 2017 NOK million 341 217 20 239 Cash and cash Profit (loss) before Changes in Changes in trade CF from investment Net change in Dividends paid to Cash and cash equivalents at 30 income taxes inventories (property) receivables activities borrowings equity holders of equivalents at 30 June 2017 Selvaag Bolig ASA September 2017 Cash flow from operations negative at NOK 163m mainly explained by high construction activity and few units delivered ▪ Cash flow from investment activities negative at NOK 46m mainly explained by purchase of and loans to associated companies ▪ Cash flow from financing activities at NOK 107m ▪ Net increase in loans NOK 217m, mainly construction loans ▪ Paid dividend of NOK 110m ▪ Note: Amounts below NOK 5m are excluded from the cash flow overview 12

FINANCIAL UPDATE Balance sheet highlights Q3 2017 Balance sheet composition ▪ Book value decreased by NOK 1.0 to NOK 28.6 per share NOK million ▪ Equity ratio 42.4% 7 000 ▪ H1 17 dividend payment of NOK 1.20 per share 6 000 ▪ Changes from Q2 2017: Non-current assets Equity 5 000 ▪ Inventories increased by NOK 160m ▪ Trade receivables increased by NOK 33m 4 000 ▪ Cash decreased by NOK 102m 3 000 Current assets Non-current ▪ Prepayments from customer’s accounts liabilities 2 000 for NOK 477m of other current non- interest-bearing liabilities 1 000 Current liabilities Cash 0 Assets Equity and Liabilities 13

FINANCIAL UPDATE Inventories (property) Q3 2017 Q3 17 vs Q2 17 Inventory value development NOK million ▪ Land value up NOK 10m 5 000 230 250 185 ▪ Work in progress up NOK 105m 302 267 4 000 Due to high construction activity ▪ 2 867 2 816 2 761 3 000 ▪ Finished goods up NOK 45m 2 654 2 580 Due to an increase in number of ▪ 2 000 unsold units 1 000 1 686 1 672 1 682 1 435 1 437 0 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Land (undeveloped) Work in progress Finished projects 14

FINANCIAL UPDATE Sound debt structure Interest-bearing debt as at 30 September 2017 NOK million Drawn at 30 Sep. Interest rate Loan facility (NOKm) margin NOK 400 million revolving credit 1 facility from DNB maturing in 0 2.90% 2021 NOK NOK 150 million working capital 2 497 2 facility from DNB maturing in 17 2.00% 1 193 2017 1 287 (Q2: 1 161 ) million Land loan facilities from a range (Q2: 1 109 ) 3 1 193 2.00% - 2.50% of Nordic credit institutions (Q2: 2 270 ) Construction loan facilities 4 from a range of Nordic credit 1 287 1.75% - 2.70% institutions Total Q3 2017 net interest-bearing debt NOK 2 258 million Top-up loan Land loan Construction loan Total Q2 2017 net interest-bearing debt NOK 1 929 million 15