Genova Property Group Interim report January–September 2024

January–September period 2024

• Rental income amounted to SEK 382.7m (377.1), an increase of 2%.
• Net operating income amounted to SEK 283.1m (280.7), an increase of 1%.
• Income from property management amounted to SEK 84.1m (42.5), an increase of 98%, of which income from property management attributable to shareholders was SEK 26.3m (-18.3), corresponding to SEK 0.58 (-0.40) per share.
• Net income for the period amounted to SEK 9.4m (-201.9), corresponding to SEK -1.06 (-5.78) per share less interest paid on hybrid bonds. The increase was mainly due to improved changes in the value of properties.
• Long-term net asset value attributable to shareholders decreased 4% to SEK 3,249.3m (3,396.4), corresponding to SEK 71.24 (74.46) per share.

Third quarter July–September 2024

• Rental income amounted to SEK 120.6m (122.6), down 2%.
• Net operating income amounted to SEK 92.0m (94.3), down 2%.
• Income from property management amounted to SEK 27.5m (18.4), an increase of 49%, of which income from property management attributable to shareholders was SEK 8.7m (-3.2), corresponding to SEK 0.19 (-0.07) per share.
• Net loss for the quarter amounted to SEK -50.2m (-54.1), corresponding to SEK -1.51 (-1.66) per share less interest paid on hybrid bonds. Of net loss for the quarter, negative changes in the value of derivatives accounted for SEK -82.8m.

Significant events during the period

• In August, new green bonds of SEK 450m were issued with a floating interest rate of STIBOR 3M + 415 basis points and will mature in November 2027.
• In September, three properties were divested in Uppsala and Upplands-Bro at an underlying property value of SEK 121m, which exceeded the book value.
• Interest-rate swaps of SEK 1,080m were entered into, with an average rate of approximately 2.3% and an average term of about six years.
• A new green finance framework was established with a second opinion from Sustainalytics.
• In September, new green hybrid bonds of SEK 300m were issued. At the same time, hybrid bonds of SEK 342m were repurchased.
• In September, Genova’s strategy and targets were updated. At the same time, an amended dividend policy was adopted.

Events after the end of the period

• After the end of the quarter, Anna Barosen was recruited to the newly created position of Head of Sustainability at Genova. Anna Barosen will join Genova’s Executive Management Team.
• After the end of the period, Genova refinanced bank loans of approximately SEK 3,200m, of which SEK 350m comprised a revolving credit facility and SEK 75m an overdraft facility. The refinancing strengthens Genova’s liquidity by almost SEK 100m, with a positive impact of nearly SEK 30m on cash flow due to lower repayments.

CEO’S STATEMENT
Genova delivered strong growth in income from property management. A continued focus on the capital structure and refinancing is expected to reduce the company’s borrowing costs by nearly SEK 50m on an annual basis. The Board has decided to update Genova’s strategy in order to leverage Genova’s ability to continuously adapt its operations, capitalise on business opportunities and thereby strengthen profitability.

Operations were stable during the period, with growth in rental income and increased net operating income. Income from property management rose 98% to SEK 84m, an effect of lower negative value changes in joint ventures and associated companies, increased net operating income and improved net financial items. Net asset value per share decreased 4% to SEK 71.24 per share year-on-year, but increased compared with the end of the preceding year.

Financing
By working systematically, we have continued to reduce our financial expenses, which will strengthen earnings and increase income from property management per share. During the quarter and after the end of the quarter, we entered into new financing agreements with banks for a total amount of approximately SEK 3.4 billion with favourable terms and extended maturities, and also implemented a range of other measures. Overall, these measures are expected to lower borrowing costs for interest-bearing liabilities and hybrid bonds by nearly SEK 50m on an annual basis, while extending maturities and fixed-rate periods.

Updated strategy
The Board updated Genova’s strategy to make better use of the company’s ability to continuously adapt its operations by focusing on the property segments that are deemed to generate the best returns at any given time. Historically, Genova has successfully changed and adapted the focus of its various business areas on the basis of prevailing market conditions. Both net asset value and income from property management have increased sharply since 2017 and during the 2017-2023 period, average annual growth in income from property management and net asset value per share were 61% and 17%, respectively.

Genova’s broad experience and expertise in the property market combined with a dynamic organisation ensure that we are well positioned to continue generating positive results. Now that our former operational targets for project volumes and property value have ceased to apply, we can be more flexible in how we work to achieve our financial targets of growth in income from property management and net asset value per share. I see this as a natural step forward in Genova’s development.

Investments
Genova will continue to grow profitably in existing business areas: management, urban development, project development and property transactions. In projects and urban development, we are continuing to focus on our ongoing construction of residential units and premises in Norrtälje, Knivsta, Enköping and Upplands-Bro. However, we expect a more limited volume of new projects moving forward. In terms of property transactions, we believe that business opportunities that suit Genova will increase in line with the higher activity we are seeing in the market. We will continue to grow with selected property acquisitions that show a potential for growth in returns and the development of building rights.

At present, Genova has a substantial building rights portfolio of almost 600 ksqm. Our intention is to evaluate the sale of these rights to a greater extent, and thereby realise the strong value growth we have had in our building rights portfolio. Released capital will be reinvested in high-yielding or cash flow-generating properties with development potential to strengthen earnings and cash flows.

Updated dividend policy
Genova currently has a stable balance sheet, a balanced capital structure and a good platform for continued value generation and increased earnings. In view of this, the Board has decided to update the company’s dividend policy. As of the 2025 Annual General Meeting, Genova’s aim is to pay annual dividends to shareholders that amount to at least one third of income from property management, unless the company’s financial position warrants otherwise. The dividend will be paid on a quarterly basis.

Reinforcement with Head of Sustainability
Efforts to strengthen Genova’s sustainability performance are ongoing. As part of this process, we have recruited Anna Barosen to the newly created position as Head of Sustainability and she will also be a member of the Executive Management Team. With her broad and extensive experience in the property sector, sustainability and innovation, Anna will play a key role in driving our sustainability efforts forward.

Looking forward
The property market is characterised by higher activity overall, but several macro factors remain uncertain. With an updated strategy, improved capital structure and a highly committed organisation, we are well positioned to take the next step in Genova’s development.

Michael Moschewitz, CEO

For further information, please contact:
CEO, Michael Moschewitz, mobile +46 (0)70-713 69 39, [email protected]

About Genova
Genova Property Group AB (publ) is a dynamic property company with extensive expertise in various segments of the property market. The company aims to drive sustainable value growth through active property management, urban development, project development and property transactions in Sweden. As of 30 September 2024, Genova owned properties valued at approximately SEK 9.5 billion and the company held a substantial building rights portfolio. Genova’s share has been listed on Nasdaq Stockholm since 2020.

This information is such information that Genova Property Group AB (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on 25 October 2024 at 8.00 a.m. CEST.

Genova – Smålandsgatan 12 – SE-111 46 Stockholm – www.genova.se