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

Welcome to Neobo Q2 Report 2026. [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 for the first half of 2026. My name is Ylva Sarby Westman, and with me today is our CFO, Maria Strandberg. Despite an uncertain market environment, we have stayed focused on what we can influence and continue to improve our residential areas. Our rental income in the like-for-like portfolio increased by 4% driven in part by completed apartment renovations and lower vacancy rates. Net operating income decreased to SEK 244 million, mainly due to divestments and colder weather in the first quarter. Profit from property management decreased to SEK 87 million, driven by the same factors. And due to share buybacks, profit from property management per share decreased slightly less by 11%. The value of our property portfolio remained stable at SEK 13.6 billion. It comprises approximately 8,100 apartments with residential properties accounting for 95% of the total portfolio value. Rental value continues to increase. As previously communicated, the annual rent negotiations for our residential portfolio have been concluded, resulting in an average uplift of 3.4%. The increase has also been supported by lower vacancies and apartment upgrades. The economic occupancy rate has improved by 1 percentage point over the past 12 months. During the second quarter, however, it declined slightly to 93.5% following the departure of some commercial tenants. Two divestments of low-yielding properties were completed in June as part of our strategy to optimize the property portfolio and maximize shareholder value. Prastkragen 5 in Helsingborg was divested at an underlying property value of SEK 27.5 million, representing a premium of 3% to the book value. Two leasehold properties in Varberg were divested at an underlying property value of SEK 104 million, which was 18% above the book value as of Q1. Closing will take place during the third quarter, and these transactions release capital that will be used for higher return investments with the aim of increasing Neobo's net asset value and earnings per share. It is positive to note that activity in the transaction market has picked up significantly with volumes up 65% year-on-year. The increased liquidity creates new opportunities for us, and we will continue to actively optimize our portfolio. We continue to create value through strategic improvements. And during the period, we invested SEK 96 million in initiatives that strengthen NOI including the renovation of 88 apartments and several sustainability projects. Among other initiatives, we completed fiber installation in 20 properties, achieving a yield on cost of 25%. We have also renovated a number of apartments in the Stockholm area, generating rental increases of 45% and the yield on cost exceeding 9%. To accelerate our sustainability efforts, improve operational efficiency and support NOI growth, we have established a new Chief Technology Officer position, responsible for leading Neobo's technical organization and advancing our operational and sustainability agenda. Some additional comments on our first half results. We have remained focused on increasing rental income and improving cost efficiency. As mentioned earlier, the first quarter was significantly colder and snowier than last year, resulting in higher property costs. At the same time, our efficiency initiatives reduced central administration expenses by SEK 1 million. The value of the property portfolio remains stable at SEK 13.6 billion, and the average weighted yield requirement is unchanged at 5.1%. An overview of Neobo's earnings capacity. Net operating income decreased by SEK 1 million, reflecting the net effect of higher rental income from renovations and higher vacancy rate. Net financial items improved by SEK 6 million, mainly driven by lower lending margins. Profit from property management increased by SEK 4 million. Our financial position remains strong with a loan-to-value ratio below 50%, and interest coverage ratio of 1.8x and an average interest rate of 3.4%. We continue to benefit from a solid and resilient capital structure. During the quarter, we extended 2 loan agreements totaling SEK 1.2 billion on attractive terms. Thanks to strong access to capital and confidence in Neobo's financial profile, we secured financing at margins below the average margin of our existing loan portfolio. Interest rate derivatives -- the derivatives are used to improve cash flow predictability and reduce financial risk. At period end, the aggregated nominal value of active swaps amounted to SEK 5.9 billion. Creating long-term shareholder value remains at the core of our strategy. And in the current market environment, we view share buybacks as an attractive capital allocation opportunity and an effective way to increase long-term value for our shareholders. During the second quarter, we initiated our third share buyback program, and we now hold 5.8 million shares, representing approximately 4% of the total number of shares. At the end of May, Neobo had around 74,000 shareholders. Finally, I would like to thank our shareholders and investors for your continued support on Neobo. I wish you all a great summer and look forward to an exciting and productive second half of the year. Thank you for your attention, and we are now happy to take any questions.

[Operator Instructions] There are no telephone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Yes. We have 2 written questions. The first one, commercial tenants seems to be developing weakly. Do you see more tenants leaving the coming quarters?

No, we don't see this as a trend. During this period, we have had 2 commercial tenants in Karlskoga and one in [indiscernible] vacated their premises. We are now actively working to secure new tenants for these spaces. I don't consider this to be a trend.

Can you give an estimate how much of your portfolio is for sale and how much is core holdings?

Yes, very good question. I mean, as we have said several times before, the optimization is a very important part of our strategy, really -- we really would like to make it much more efficient in fewer municipalities with a higher concentration in strategic areas and good markets. I think I have mentioned before that maybe 20 municipalities in the long perspective going forward, we are today represented in 38 municipalities. We are working with a lot of discussions all the time, I would say. It's an important part of our strategy and we don't have a figure like SEK 3 million is up for sale or something like that. But we will, for sure, continue to make it more efficient and to be able in the next step to grow the property portfolio in strategic markets.

Yes. The next question, what are the biggest obstacles to closing the gap between the actual property and property management and maximizing the earning capacity?