Neobo Fastigheter AB (publ): Interim report January-June 2023

January–June 2023
· Rental income increased to SEK 434 m (422). For the like-for-like portfolio, rental income increased by 4.7 percent. The impact on the residential portfolio of this year’s rent increases, which averaged 4.5 percent, will have full effect in the third quarter.
· Net operating income increased to SEK 226 m (201) during the period. For the like-for-like portfolio, net operating income increased by 6.9 percent mainly due to increased rental income.
· Profit from property management totaled SEK 75 m (94) at the end of the six-month period. The reduction is a result of higher financial expenses.
· The unrealized change in value of the properties amounted to SEK -534 m (-276) for the period.
· The value of the property portfolio totaled SEK 14,745 m at the end of the period, compared with SEK 15,295 m at year-end.
· Net loss for the period amounted to SEK -344 m (-39), corresponding to SEK -2.36 per share (-0.27)
· The net asset value amounted to SEK 46.39 per share (47.31).

April–June 2023
· Rental income increased to SEK 220 m (213) during the quarter, as a result of the rent increases which began to take effect during the second quarter.
· Net operating income increased to SEK 128 m (112) due to higher rental income and reduced costs.
· Profit from property management for the second quarter totaled SEK 46 m (58). The decrease is due to higher financial expenses and increased costs for central administration. Non-recurring costs of SEK 6 m were charged to administration costs in the second quarter.
Events after the second quarter
· Neobo’s management team is being reorganized to increase focus on the company’s core business. As of today, Anna-Carin Skoglund, Head of Region North and Per Sundequist, Head of Region South – will join the management team, while Head of IR Johan Bergman will step down from the management team.
· Malin Axland, who is currently General Counsel of Neobo and member of the company’s management team, has been appointed as General Counsel and Head of Sustainability with the overriding responsibility for Neobo’s sustainability agenda. Malin will take up her new additional duties today, July 12.

CEO Comments
Continued positive trend for net operating income
Our operations have continued to develop in a positive direction and net operating income for the first half of the year rose by 12 percent to SEK 226 m. For the like-for-like portfolio, net operating income increased by 6.9 percent due to higher rental income and good cost control.
The surplus ratio increased to 52 percent (48) for the interim period and to 58 percent (53) for the quarter. This is a clear improvement, but more can be done to further increase the surplus ratio.
Profit from property management fell to SEK 75 m (94) due to higher financing costs. Interest rates continued rising during the first half of the year but thanks to our derivative portfolio we have been able to limit the impact of this. Our average interest rate was 3.1 percent at the end of the six-month period and the average fixed rate period was 2.1 years. Our financial position is stable, with a low loan-to-value ratio, long loan-to-maturity periods and comprising solely bank financing, which is a strength.

Favorable conclusion to the year’s rent negotiations
We have now completed the year’s rent negotiations and following a favorable conclusion, the average rent increase for the residential portfolio was 4.5 percent. The increase is below current inflation but historically property owners have been fully compensated for inflation over time, which we expect will also be the case moving forward.

Focus on increased yield and sustainability
Our prime focus here and now is on increasing the return on the existing portfolio by raising rental income, reducing the vacancy rate and implementing value-generating investments. We will also review the potential to optimize the portfolio to add further value.
We are continuing to focus our efforts on drafting a sustainability strategy and an energy management system and we have now completed a stakeholder analysis and initiated a materiality analysis based on the requirements of the Corporate Sustainability Reporting Directive (CSRD).

Long-term commitment to increase occupancy rate
We have been successful in our leasing initiatives, but due to more tenants vacating properties, the occupancy rate remained unchanged during the quarter. Reducing vacancies in the residential portfolio is a long-term commitment focusing on a number of measures, such as renovating empty apartments and conducting activities to increase tenant satisfaction and reduce tenant turnover.

New shareholders
Since the listing of Neobo, the liquidity of the company’s shares has been high and a number of major changes took place during the second quarter among the company’s largest owners, refer to page 17 of this report. For example, ICA-handlarnas förbund has become the largest shareholder with 9 percent of Neobo’s shares.

I’m looking forward with confidence to the continued work of creating value for our customers and shareholders.

Stockholm, July 12, 2023

Ylva Sarby Westman, CEO