Neobo Fastigheter AB (publ) (NEOBO) Earnings Call Transcript & Summary

Welcome to Neobo Q3 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO Ylva Sarby Westman. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to the presentation of Neobo's Interim Report January to September 2025. My name is Ylva Sarby Westman, and joining me today is our CFO, Maria Strandberg. We have remained focused on our core business, creating attractive and sustainable living environments where people can thrive and feel secure. And it's rewarding to see our efforts paying off. Profit from property management increased by 32% during the period despite 7 properties being divested last year. Rental income in the like-for-like portfolio increased by 4% and net operating income increased by 10% in the like-for-like portfolio due to both higher rental income and lower property management costs. We are reporting positive unrealized value changes in the property portfolio of SEK 14 million as a result of increased net operating income due to investments being made in the portfolio. The property portfolio now has a value of SEK 13.9 billion, comprising 8,300 apartments and residential properties account for 94% of the total value. Our rental value exceeds SEK 1 billion and has been positively impacted by, among other things, a 4.8% rent increase in the residential portfolio and apartments renovations that we have completed. We continue to create value through strategic improvements. And since the start of the year, we have invested SEK 167 million to improve the attractiveness and safety of our properties. The economic occupancy rate for our commercial premises increased sharply by 4.1 percentage points during the quarter, attributable to the 6-year lease agreement with the Swedish Prison and Probation Service went into effect that an almost entirely vacant property in Karlskoga has been divested and the successful leasing of some large premises that had previously been unoccupied for an extended period. Meanwhile, our residential occupancy rate decreased slightly due to a higher pace of renovation, but we remain committed and continue to work diligently to increase the occupancy rate across our portfolio. In summary, we report the highest total occupancy rate ever, corresponding to an improvement from 92% when Neobo was established to 93.1% at present. As a step in reducing our energy consumption and climate footprint, we have strengthened our technology organization with new expertise in energy optimization to focus further on our efforts to achieve a 20% reduction in energy consumption by 2030. We have also developed an energy road map that guides us forward and will help us achieve our ambitious goals. The transaction market in Sweden continues to show signs of improvement with volumes up by 38% compared to last year. We continue to optimize our portfolio. Since the summer, we have divested 2 noncash flow generating properties, a development right in Sollentuna and a largely vacant commercial property in Karlskoga. We have also divested a residential property in Enköping to housing cooperative established by our tenants at a sale price of SEK 130 million. And all 3 divestments were conducted in line with the most recent external valuations and confirm our book values. A few highlights from our interim results. We continue to work with a strong focus on cost reductions and total property management costs decreased by SEK 11 million year-on-year. The decrease was attributable to cost saving measures in property operation and energy as well as a milder winter compared to last year. Excluding items affecting comparability in the preceding year, central administration costs increased by SEK 4 million due to the operation and organization now being fully established. Net financial items are in line with the corresponding period last year, and profit from property management improved significantly with an increase of 32% year-on-year. If we took a look at our earnings capacity, net operating income increased by SEK 9 million due to the net effect of successful leasing and divestments. Net financial items decreased by SEK 1 million, and profit from property management improved by SEK 10 million to SEK 244 million, and the net initial yield now stands at 4.0%. Increased net operating income has led to positive unrealized value changes of SEK 14 million, despite the average yield requirement used in the valuations having increased slightly by 0.5 percentage points during the quarter. We are maintaining a stable financial situation with an average interest rate of 3.4% at the end of the period. The average fixed rate period increased from 2.4 to 2.5 years, and the ICR was 1.8x over the past 12 months and 1.9x for the quarter. During the third quarter, we refinanced bank loans for nearly SEK 2 billion at significantly lower margins than the average margins in our loan agreements. [ Sorry ], this is a sign of strength for Neobo and a clear indication that the financing market has continued to improve over the year. To increase the predictability of future cash flows, we employ interest rate derivatives. And at the end of the period, the aggregated nominal value of active swaps was SEK 5.9 billion. I'm very pleased to share that we have strengthened our management team with Andreas Wik, Head of Real Estate; Ali Ali, Head of Transactions; and Daniel Bonn Rosén, Head of Treasury, with expertise in value-creating asset management, project development, transactions and financing. Our primary objective is to maximize shareholder value. Accordingly, the Board has today decided to utilize its authorization from the AGM to repurchase own shares. Under prevailing market conditions and in combination with continued value-creating investments in the property portfolio, this is considered favorable for delivering the highest total return to our 86,000 shareholders. And finally, some key takeaways. We continue to deliver strong results. Profit from property management improved by 32%. We report the highest total occupancy rate ever. We have completed 3 divestments at price levels that confirm the property values in the balance sheet. During the quarter, we refinanced bank loans of SEK 2 billion at attractive conditions. And finally, we are now initiating share buybacks to secure the highest possible return for our shareholders. And with that, we are happy to take any questions.

[Operator Instructions]

If we don't have any questions, I think that we are ready for today since we don't have any questions on the web.

Exactly.

Exactly. So thank you very much for listening in, and have a great day. Bye-bye.