Magnolia Bostad (MAG) Q4 2018 earnings summary

Executive summary

• FY2018 net sales were SEK 1,054m and operating profit SEK 164m; zoning-related project delays drove a sharp decline in earnings YoY.

• The project portfolio reached 17,288 estimated building rights; 1,314 residential units were sold and 3,068 rights acquired during the year.

Financial highlights

• Net sales fell to SEK 1,054m from SEK 1,781m; property sales contributed SEK 789m versus SEK 1,347m.

• Gross profit was SEK 147m versus SEK 434m; operating profit was SEK 164m versus SEK 384m, including SEK 67m of unrealized fair-value gains on management properties.

• Profit before tax was SEK 22m versus SEK 276m; net profit was SEK 7m versus SEK 276m and EPS SEK 0.26 versus SEK 5.37.

• Net financial items were SEK -142m versus SEK -109m; central administration costs increased to SEK 64m from SEK 41m as the organization expanded.

Outlook and guidance

• Management expected delayed projects to be realized in 2019; Norra Kajen in Sundsvall and Ferdinand 9 in Spånga had zoning plans become legally effective early in 2019, covering ~1,050 units.

• A Heimstaden framework agreement covers 14 planned projects valued at SEK 9.6bn and ~5,300 homes over five years; four Alecta hotels are planned with ~1,000 rooms.

• Derome letter of intent provides for 600–800 wooden multi-family homes annually over five years; planned capacity targets are 3,000 residential units, 2–4 care facilities and 1–2 hotels annually.

• Long-term financial targets are return on equity above 30% and equity/assets above 30%; 2018 outcomes were 1.0% and 30.3%, respectively.