Operator: Welcome to SBB Q2 earnings call 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to Treasury Director Sebastian Westberg. Please go ahead.
Sebastian Westberg: Good morning, everyone. Thank you for listening in to our presentation of the second quarter of 2026. My name is Sebastian Westberg. I am the Treasury Director and Head of IR at SBB. Here with me today, I have our CEO, Leiv Synnes, who will walk you through the highlights of the quarter, assets and strategy, the financials, and finally, the key investment highlights of SBB. Myself and our Finance Director, Daniel Tellberg, will join Leiv in the Q&A session after the presentation to answer any and all questions that you might have. With that said, I would now like to hand over to Leiv. Please go ahead.
Leiv Synnes: Thank you very much, Sebastian. Good morning, everyone, and welcome. I am Leiv Synnes, CEO of SBB. Today, I will walk you through the second quarter, a quarter where we continue to strengthen our core holdings, simplify the structure, and execute the transactions that will build long-term value. Nothing new. That is what we have been doing the last years. SBB today is a Nordic social infrastructure investment company. Core holdings are Sveafastigheter, Public Property Invest, and Nordiqus. These entities represent the majority of our value. They are all market leaders in their respective segments, and this is an achievement to be proud about. Sveafastigheter is Sweden's largest listed residential company. Public Property Invest is Europe's largest listed social infrastructure company, and Nordiqus is Europe's largest educational infrastructure company. These platforms have strong assets, access to investment-grade funding, strong demand from tenants, and growing cash flows. The companies are young. They still are improving every quarter at the moment. Non-core assets that SBB hold is good. They will over time be divested in order to support stronger financials and to enable more resources to be put into the market-leading platforms. One example is SBB Residential that will be moved into Sveafastigheter in line with the ambition to decrease non-core holding and increase core holdings. We for sure continue to walk the talk. Independent of the business cycle, we can try to improve the things we can control. This has been done the previous years and much so also during the second quarter. For Sveafastigheter, the second quarter was a transformational quarter with major strategic value creation. Sveafastigheter grows 60% by merging with KlaraBo and SBB Residential. I will come back to this later in the presentation. Sveafastigheter also started to divest newly produced residential assets during the quarter. These assets are sought after by investors, and Sveafastigheter can, by divesting, realize +20% in development margin. The capital received can be recycled into new projects or used to be repurchasing shares. PPI is scaling fast, strengthening margin, and expanding its Nordic leadership. Public Property Invest delivered many strategic improvements during the quarter, demonstrating both operational momentum and financial strength. During the spring, PPI successfully integrated SBB's property management and a large part of the central administration. This was a major structural step that strengthens efficiency, margins, and platform scalability. The company also completed its primary listing on Nasdaq Stockholm, further increasing access to capital. PPI continued to execute on the funding part. The company secured SEK 3.6 billion five-year bank financing and issued EUR 200 million in five-year bonds, both at very attractive terms. This shows confidence in PPI from lenders and investors. It is also an evidence that SBB's strategy with moving assets into strong companies leads to enhanced access to funding. Operationally, PPI is expanding its footprints with disciplined high-quality acquisitions. During the second quarter, the company acquired two healthcare projects in Finland for EUR 33 million. They add long duration that supports stable cash flow and profitability. With a scalable platform, investment-grade rating, and long leases and a diversified Nordic portfolio, PPI is positioned to continue consolidating the social infrastructure market. The company enters the second half of the year from a position of strength, stability, and strategic momentum. Nordiqus. The company's platform is becoming increasingly robust, scalable, and strategically important in the Nordic social infrastructure landscape. Portfolio activity is good in Nordiqus. Nordiqus successfully integrated previously acquired educational properties in Stockholm and Gothenburg that were acquired for SEK 1.8 billion. These assets strengthen the company's presence in two of Sweden's most attractive educational markets, and they contribute to a scalable and robust earning base. During the quarter, Nordiqus signed a 15-year lease with Kunskapsskolan for a new school in Sweden, adding high-quality, long-duration income. Nordiqus has low financial risk, with long-term financing averaging more than 10 years and a strong investment-grade rating. It can be said that Nordiqus has a very solid financial structure. In short, Nordiqus is currently strengthening its Nordic platform and is delivering predictable long-term cash flow based on long leases, essential social infrastructure, and long-term funding. SBB Development. SBB Development shows that focus delivers results. During 2025, SBB put properties which needed more attention into a specialized company, which we named SBB Development. One year after its creation, SBB Development is delivering clear results. Net leasing reached close to SEK 13 million during the quarter, showing strong momentum. One example is a new 10-year lease with Saab for a 9,000 sq m in a previously vacant property. This is also a strong confirmation of the potential in urban development assets and show organizational skills to enter agreement with professional counterparts. SBB Development showed property sales totaling SEK 500 million, 12% above fair value. Including the signed sale to KlaraBo, the balance sheet has decreased by 20% to SEK 5 billion during the year. I believe that more value-creating processes are on the way, which we hope to be able to present to you in later reports. The Sveafastigheter, KlaraBo, and SBB Residential merger is a transformational step. Prior to the merger, SBB had become the largest owners in all three entities, with a clear ambition to make all three entities stronger by a merger. The outcome of the merger will be a more robust and scalable platform, a stronger credit profile, more interesting for investors, and a more stable and predictable cash flow platform. It creates a company with SEK 47 billion in combined property value, which is an increase of 60% for Sveafastigheter. We will be able to get SEK 120 million in annual synergies. Regarding the benefits for SBB will gain a 20% earnings uplift due to improved cost of funds. This is a clear example of how SBB actively builds up market-leading platforms and improves capital allocation. Sveafastigheter is now positioned as a clear market leader among listed entities in a regulated residential housing market in Sweden, a sector with strong demand, resilient valuations, and profitable growth. Due to the transaction, SBB capital structure will be more transparent and more cost-efficient with less administration. Evidence of the reduced cost we hope to be able to present in the later financial reports. This page illustrates the assets post the Sveafastigheter, KlaraBo and SBB Residential transaction. Our core holdings have become even stronger and more clearly defined, and there is a reduction in non-core holdings. It's even more clear that we now hold three Nordic market-leading platforms within social infrastructure, educational infrastructure, and multifamily residential. Each platform is scaled with SEK 42 billion-SEK 52 billion in size, resilient with low downside risk in revenues, and backed by investment-grade funding, and also located in geographies with positive economic and demographic trends. This structure give us a balanced, transparent foundation for long-term value creation. This page illustrates the buildup of net asset value in SBB. First, we have the core holdings, then the non-core holdings, and then we have the debt in the parent. The majority of the gross asset value comes from Nordiqus, Public Property Invest, and the Sveafastigheter. Rather even position in each company with SEK 9 billion-SEK 10 billion in each company. The position in Sveafastigheter will be larger once the merger with KlaraBo and SBB Residential is complete. The number of holdings will be gradually reduced and more and more focus is solely put on developing the core holdings. The net assets is SEK 14 billion or SEK 7.94 per share, a slight decrease since year-end. Property valuations across our holdings are stable. For Sveafastigheter, there is a slight lower required yield in the best location, and the company has carried out sales at fair value, a clear signal where the transaction market is. Nordiqus have had some isolated events in a few assets which lower the value growth. The same story goes for SBB Development, however mitigated with good progress in development gains. For PPI, the higher interest rates in Norway has had a negative effect on transaction market and thus the values. As a whole, a stable situation regarding property valuations. If we move over to the financials of the quarter. The net operating income was stable. This basically is a result of a growth in Sveafastigheter and lower income in SBB Development due to the investments. The like-for-like net operating income is up, which is the key long term. The results from the associated companies and joint ventures came in at SEK 91 million. This is a figure that will be much higher in the future when property values have a normal growth pace. Negative foreign exchange effects and currency affect the result negatively with SEK 728 million. This is an effect of the debt in the parent being in EUR and due to the stronger euro during this year. All in all, a negative result, but we have good hope to turn this around during the second half of the year. Now we come to the liquidity position. This has been much improved during the last years, and we have now a clear and well-defined path for managing upcoming debt maturities. We have funds for all maturing debt during 2026. For 2027, we have several options for managing the maturities and plenty of time on our side. One clear possibility is monetizing the SEK 5 billion claim that we hold on Nordiqus. The market value of our listed holdings add further flexibility from a financial standpoint. Overall, we have a strong confidence in our ability to navigate the maturity profile in a disciplined and controlled manner. Financial results for the period were negatively affected by adverse currency movements, which reduced net asset value and have an impact on reporting earnings. These effects are temporary and no cash. Operationally, the business remains strong, and we continue to deliver strategic improvements which support long-term results. The property exposure increased mainly due to the growth in core holdings. This growth is expected to continue during the upcoming year. The interest cover ratio is lower due to lower income from receivables from joint ventures. We expect to lower the debt in the parent and will also benefit from a larger Sveafastigheter, which is consolidated. We are confident to maintain a good debt coverage in the future. Loan-to-value remains at a manageable level at 54%, but we have a clear ambition to lower the financial risk. This is expected to be done by good development in core holdings and divestments of non-core holdings. Let me summarize where SBB stands. SBB is a Nordic social infrastructure company. Our strategy is clear and consistent. Build and develop the market leading players in social infrastructure. These platforms benefit from strong market position, access to financing, and streamlined organizations. We continue to strengthen our companies through strategic transactions, including the Sveafastigheter merger, and through liquidity-generating divestments that reinforce the balance sheet. Our corporate structure is now significantly simplified, with focused platform and reduced central administration. Core holdings are retained long-term, while non-core assets are monetized to create value and support for lower leverage. This model positioned us for net asset growth and long-term value creation. Thank you for listening in, and we will now move over to the Q&A session.
Operator: If you wish to ask a question, please dial number pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial number pound key six on your telephone keypad. The next question comes from Rebecca Clements from JPMorgan Asset Management. Please go ahead.
Rebecca Clements: Good morning. Thanks for taking my questions. I have a couple. The first one is related to some comments this morning on the Sveafastigheter call talking about capital allocation, and share repurchase was mentioned. Do you have a preference as to whether or not, if they do actually deploy cash for shareholder purposes? Do you have a preference for share repurchase versus dividends? What would a share buyback mean for the liquidity of the shares? I would think that that would be a bit of a drag on the shares, given that you hold a large proportion of those. That's my first question.
Leiv Synnes: Okay. I think we will try to increase the dividend received from our core holdings. At the moment, we don't receive dividends from Sveafastigheter, and we hope to be doing so in the future. We are receiving dividends from Nordiqus and PPI as of today.
Rebecca Clements: Right. They were asked about from a capital allocation perspective. I was personally surprised, given I know they haven't been paying dividends. I was surprised that they were asked about share repurchases. Would your preference be, if it were up to you, would your preference be to receive dividends as opposed to a share repurchase effort on their part?
Leiv Synnes: Yes, the Sveafastigheter is like an independent company. I think we, from our position, would welcome that the company start to give dividend. Share buybacks could, of course, be a complement to that. That is our view.
Rebecca Clements: Okay. What will be the pro forma stake that you hold in Sveafastigheter post the KlaraBo transaction?
Leiv Synnes: 57%, 58%, if I remember correctly.
Rebecca Clements: What percentage?
Leiv Synnes: 58%.
Rebecca Clements: 58%. Okay. Thank you. The SEK 657 million receivable from PPI, will that actually end up being cash to SBB? When do you expect to receive that?
Leiv Synnes: We expect to receive it tomorrow, and it will be in cash.
Rebecca Clements: Great. That leads into my last question. You mentioned that you had your 2026 maturities covered with existing liquidity, but it exceeds your reported cash balance as of the second quarter. What will fund the remainder there?
Leiv Synnes: Good question. That's correct that the liquidity on the balance sheet is not enough, but we have our own facility, and we have our own definition of liquidity, where we add liquidity and unused facilities in the term. Together that amount is larger than the maturing debt.
Rebecca Clements: Okay, we should assume that you would use your credit facilities to fund any sort of remaining portion that isn't covered by existing cash. Presumably you want to hang on to some existing cash as well, and then the receivable from PPI, is the differential then, you expect to draw that on the credit facilities?
Leiv Synnes: That is correct.
Rebecca Clements: Okay. Just last question, what would be the minimum cash that you would want to maintain on your reported balance sheet?
Leiv Synnes: It's a good question. Usually we would like to be in a place where we cover at least one year of debt maturities or capital need in line with the requirement to be an investment-grade company. That is the ambition, to have that amount of cash. That amount can of course be larger if we have larger maturities ahead. If the maturities are lower, we can hold a smaller amount of cash, but usually not less than SEK 1 billion, I would say, given the current operations.
Rebecca Clements: Okay, will you just use your credit facility then for that if you end up just looking at the SEK 4.1 billion of maturities that you have on your slide, and the SEK 1.8 billion of cash, the SEK 3.5 billion of credit facility that isn't drawn. Would you use your credit facility to make sure that you have enough cash on balance sheet? Or would you do something else or source that cash elsewhere?
Leiv Synnes: In a normal situation, we would like the liquidity on the balance sheet plus the undrawn facilities to be larger than the debt maturities within one year. It's not always that we have been able to have that in the last years, but that is our ambition to have in the future. We will improve the financials. That is our ambition, so we can always hold that on long term. I think on the short term, it's likely that we will hold a little bit less liquidity if we combine the cash on the balance sheet plus the undrawn facilities, the maturities, due to that we have a little bit of weak financial position and large bond maturities. Also the cost of that is a bit high for us at the moment. We will continue to improve the liquidity position in the years to come. We will always be having a liquidity position that the market appreciates.
Rebecca Clements: Okay, then just given that it's lower than obviously you would ideally like, given the maturities, have you engaged in any discussions about perhaps selling the Nordiqus receivable or some other transaction potentially with Brookfield?
Leiv Synnes: Yes. We have been discussing the loan to Nordiqus with Brookfield in the past, we have also discussed it with a lot of accounts in London, and there is a great appetite to provide liquidity to us. So far, we have chose not to monetize that loan, partly due to the cost of doing so, and that we have found that other sources of capital have been better to use. We know that within a short notice can borrow on that claim. We're not worried. That is also one reason why we could have a little bit low liquidity than the maturities in the, let's say in 2027, because we know that we have that ability. We also have the ability, if we would like to pledge shares or divest shares or other kind of solutions. We have a lot of ways to create liquidity, which we didn't have in the past. From a lack of financial flexibility, SBB is much stronger today than it was just one or two years ago.
Rebecca Clements: Understood. Definitely the structure of the company is very, very different even from six, nine months ago. Thank you very much.
Leiv Synnes: Thank you.
Operator: As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Othman El Iraki from Fidelity International. Please go ahead.
Othman El Iraki: Yes. Hi, guys. Thanks for the call. Just a couple of maybe follow-ups from Rebecca's questions. Just in terms of liquidity needs, does your kind of SBB Development stake need any outflow from SBB to spend CapEx, et cetera, on some projects? That's my first question.
Leiv Synnes: Yes, that's a good question. When we want to do a project in social infrastructure in a property that lies in SBB Development, then we are looking for a long lease with a stable counterpart. That project then become, you can say, a liquid product in the market. If we don't have in-house liquidity, we could either borrow on that assets, and we could also sell the assets to another counterpart that have a different financial situation than SBB. For example, one or two years ago, we sold a property to Intea, and then we sold the property based on the project where we had a long lease investor with us. If we don't have the internal proceeds, we can create the project, find the tenants, and then sell the project. Let's say we have some proceeds, we can use that proceeds and do the project ourself, and then we can instead sell the property when the project is finished. The return on that is a little bit higher than selling the property before the project is completed. In SBB Development, there is, if I remember correctly now, is 91 assets. Usually we can sell one or two assets each quarter, and that bring cash flow to the remaining properties that need investments. It's not so that we need to invest in all properties at the same time, or we need to hold on to all properties at the same time. We are rather confident that we will not need to put in much new equity into SBB Development. We have many solutions to work with this.
Othman El Iraki: Okay. That's clear. Okay. Thank you very much. My second question really is on, you said you have many options for the 2027 maturities. I think you discussed the Nordiqus shareholder loan. Again, looking at your non-core assets, do you think it's realistic that you sell a big chunk of those developments within one year? You think you will probably wait to finish all the construction, et cetera, before you sell? How do you look at this part of your portfolio?
Leiv Synnes: I think we can be open to discuss a larger deal regarding SBB Development if we find a party that is interested in the whole package. At this point, it may be more realistic to that we divest part of it during the next quarter, the end result will be the same, it will take a little bit more time.
Othman El Iraki: Okay. Great. My last question really is on the ICR, which is a bit weaker. Do we expect with Sveafastigheter and KlaraBo, when the deal is done in September, that actually your ICR will improve from here? It's quite close, I think, to the incurrence ICR level on your bonds. Just wondering if you expect this to improve a bit.
Leiv Synnes: Yes. We believe that the results in, as I mentioned during the call, that the result in Sveafastigheter due to the combined portfolios with SBB Residential and KlaraBo, that big entity will be consolidating the figures we can benefit from the cash flow. Also KlaraBo has a higher cash flow than Sveafastigheter has. We will benefit from that, we will benefit from a lower debt level. We will, of course, within a month or so, amortize on the 2026 bond, bringing down the debt level. Those two effects will help the debt coverage going forward. Also for maybe all listeners, maybe not all are experts in covenants, I can just mention that the risk we have with the covenants in our bonds is very low due to the fact that they are written in an issuer-friendly language and also incurrence-based. We see no or very little risk for the company regarding the loan-to-value or the interest coverage going forward, which is quite the opposite situation if you look back just one or two years when we have the dispute. I think the covenants now. They are very friendly for us.
Othman El Iraki: Okay, that's understood. Thank you very much, Leiv. Thank you. That's it from me.
Operator: There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Leiv Synnes: Thank you all for listening, I think it was very good questions. I hope to be seeing you in a quarter when we present the next interim report. Thank you.
