INTERIM REPORT JANUARYMARCH 2019

everything we do. Everyone at Diös is different, but equal in terms of our core values. In a world that is changing faster than ever, it is essential ...

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Q1 INTERIM REPORT JANUARY-MARCH 2019

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

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HIGHLIGHTS OF Q1 RENTAL INCOME increased by 2 per cent to SEK 457 million (450) PROPERTY MANAGEMENT INCOME increased by 13 per cent to SEK 212 million (187)

UNREALISED CHANGES IN VALUE of properties were SEK 60 million (109) and unrealised changes in value of derivatives were SEK 0 million (6)

THE PROFIT AFTER TAX was SEK 230 million (229) EARNINGS PER SHARE were SEK 1.71 (1.70)

36.9%

6.2

equity ratio

NET PROFIT FOR THE PERIOD, SEKm

interest coverage ratio

2019 3 months Jan-Mar

2018 3 months Jan-Mar

2018 12 mths Jan-Dec

Income

457

450

1,810

Operating surplus

268

250

1,140

Property management income

214

187

894

Profit before tax

277

299

1,597

Profit after tax

230

229

1,341

60

56

64

Surplus ratio, %

91

92

91

Equity ratio, %

Occupancy rate, %

36.9

35.3

37.2

Property loan-to-value ratio, %

52.8

56.7

53.4

Equity per share, SEK

52.9

58.3

EPRA NAV per share, SEK

61.6

67.6

52.8% loan-to-value ratio

SIGNIFICANT EVENTS Q1 Diös acquires three centrally located properties in Gävle, Borlänge and Mora with a completion date of 15 February. Diös acquires a centrally located property in Östersund with a completion date of 4 March. Diös divest and leave four industrial properties in Östersund and one property in Falun. The Östersund City Council grants Diös sole negotiating rights in respect of the exploitation of Gustav III:s torg, a square in the centre of town.

For definitions of key ratios, see 27.

Cover: Diös 2 tenant Jazzköket Bistro, Östersund.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

CHIEF EXECUTIVE’S REVIEW

Knut Rost, CEO

A UNIQUE POSITION We continue to deliver. Revenue is up and both operating and financial costs are under control. With our strong cash flow, we are investing for continued growth in our cities. Property management income increased by 13 per cent. Rental income per square metre has increased by 7 per cent in one year as a result of a refined property portfolio, rising rental levels and a reduced proportion of industrial properties in favour of centrally located office and social-use properties. The costs for the first quarter are lower and more normal compared to the same quarter last year. We are seeing an ever clearer polarisation emerge, which means that our property managers and letting agents really need to be active. Strong demand for the right locations is driving rents and the right mix of tenants is absolutely crucial. Thanks to our unique position, we have exactly what it takes to create growth, for our tenants and for the city. The let of our head office to Webhelp, a fast expanding company, is a prime example. We enable a business to establish a presence that will create new jobs while investing in a new office for ourselves in vacant premises. The end result is increased flows of people and increased growth – compleatly in line with our urban development strategy. We have a clearer profile as a company and our position in our cities is becoming ever stronger. During the period, we acquired four properties in the most central locations, in four cities. We see a big potential to develop these premises in a way that will further increase the attractiveness of the city centre. The SEK 316 million investment volume is a new record for an individual quarter. That testifies to a high level of activity and shows that demand for adaptations from our tenants remains good. During the period, we also initiated one of our major new build projects, the hotel in Sundsvall. The first sod was turned on 1 March and the building is expected to take about two years to complete. A total of SEK 385 million will be invested.

The development of Gustav III´s square in central Östersund has taken a step forward after the local authority decided to grant us sole negotiating rights in respect of a 25,000 sq.m plot. That is a big responsibility but it is also a huge and unique opportunity. It involves creating a place, in a responsible and long-term manner, that will encourage an increased flow of people and increased quality. The square is there for everyone and needs to enable growth and make the city more attractive. The loans which matured at the end of March have been refinanced at maturities of 2–4 years with continued good terms. We also took advantage of the strong demand to issue new commercial paper during the period. Access to capital remains good and pricing has remained stable since last year. Stronger key financial ratios have attracted increased interest from banks and the capital market. Business is done between people, and it is my conviction that better relations lead to increased and profitable business. A genuine interest in our tenants’ businesses and success is a mantra that I repeat every day to our staff. Our urban development strategy is about growth. We want to make life in the city better for everyone. To succeed, we need to know what is being demanded across the whole range of stakeholders, from residents to visitors to the city. We have the will to push things forward together with our tenants, the local authority, other property owners and other stakeholders. Growth drives profitability and value – for our tenants, our shareholders and ourselves.

Knut Rost, CEO DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

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WELCOME TO DIÖS Diös is one of Sweden’s leading property companies. We own, manage and develop centrally located properties in ten growth cities. OUR STRATEGY IS URBAN DEVELOPMENT. Through strong

relationships, a local presence and a responsible approach, we develop commercial and residential properties in our cities. That enables us to create Sweden’s most attractive places and build long-term value for our tenants, our owners and ourselves.

3%

5% 6%

care/ education

hotel/ restaurant

330

number of properties

21.5

property value, SEKbn

1,473 leasable area, ‘000 sq.m

6%

industrial/ warehouse other RENTAL VALUE BY TYPE OF PREMISES

Office, 52% Retail, 21%

52% Residential, 7%

7%

offices

residential

21% retail

Hotel/Restaurant, 6% Care/Education, 5%

RentalIndustrial/Warehouse, value by 3% type ofOther, premises 6%

Elin Almqvist, DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019 4 Property Manager, with Diös tenant Markus Richtmann, owner of Stadskällaren, Lekatten 9, Skellefteå.

RELATIONS AND BUSINESS Through GOOD RELATIONSHIPS , we build a profitable long-term business. With satisfied employees, we build good relationships. Our success is in the hands of OUR EMPLOYEES. That’s why we have a strong focus on building a company where people are happy, can grow and develop, and show commitment. Our core values SIMPLE, CLOSE AND ACTIVE are the basis for everything we do. Everyone at Diös is different, but equal in terms of our core values. In a world that is changing faster than ever, it is essential to be dynamic. We are convinced that EVERYTHING IS POSSIBLE! That is the starting-point for all our business dealings and all our relations. Long-term relationships are built on trust. We strive to have a reputation of honesty, expertise and professionalism in everything we do. We run our business on a foundation of high business ethics and zero tolerance to corruption. Our code of conduct is based on the ten principles of the UN Global Compact. WELCOME TO OUR CITIES!

PROMISE AND CORE VALUES Our promise is that everything is possible. We strive to be perceived as simple, close and active. Simple by being open and honest. Close by having a local presence, being available and taking an interest. Active by developing, growing and taking advantage of opportunities.

RESPONSIBLE BUSINESS For Diös, responsible business is about taking a comprehensive approach to economic, social and environmental aspects. We want to help fight climate change and create safer cities while also creating new opportunities for businesses and new meeting places for people.

We want to create Sweden’s most inspiring cities. DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

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INCOME STATEMENT CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME, SEKM INCOME STATEMENT Rental income

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

341

325

1,436

Service income

116

125

374

Total income

457

450

1,810

Property costs

-189

-200

-670

Operating surplus

268

250

1,140

Central administration

-17

-17

-71

Net financial items

-39

-46

-175

Property management income

212

187

894

65

106

687

0

6

16

Profit before tax

277

299

1,597

Current tax

-23

-17

-90

Deferred tax

-24

-53

-166

Profit after tax

230

229

1,341

Profit attributable to shareholders of the parent company

229

229

1,338

1

0

3

230

229

1,341

Change in value, properties Change in value, interest rate derivatives

Profit attributable to non-controlling interests Total

STATEMENT OF COMPREHENSIVE INCOME Profit after tax

230

229

1,341

Comprehensive income for the period

230

229

1,341

Comprehensive income attributable to shareholders of the parent company

229

229

1,338

Comprehensive income attributable to non-controlling interests Total

Earnings per share, SEK

1

0

3

230

229

1,341

1.71

1.70

9.94

Number of shares at end of period (‘000)

134,512

134,512

134,512

Average number of shares (‘000)

134,512

134,512

134,512

Number of treasury shares at end of period

0

0

0

Average number of treasury shares

0

0

0

There is no dilutive effect, as no potential shares (such as convertibles) exist. Accounting policies are presented on page 21.

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DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

EARNINGS

January – March 2019

PROPERTY MANAGEMENT INCOME Property management income for the period, i.e. income excluding changes in value and tax, was SEK 212 million (187). This is an increase of 13 per cent compared with the previous year. For comparable properties, our property management income increased by 13 per cent year on year. INCOME Income for the reporting period was SEK 457 million (450), representing a 91 per cent (92) economic occupancy rate. For comparable properties, contracted rental income increased by 2.3 per cent year on year. Other property management income totalled SEK 7 million (5) and consisted mainly of costs for work in leased premises that are passed on to tenants. REVENUE GROWTH

Comparable properties Acquired properties Sold properties Contracted rental income Other property management income Income

2019 Jan-Mar

2018 Jan-Mar

Change %

438

428

2.3

12

1

1

17

451

446

6

4

457

450

PROPERTY COSTS Total property costs were SEK 189 million (200). Winterrelated costs decreased compared with the same period last year, which is due to a milder winter. Of total property costs, SEK 4 million (3) refers to work in leased premises for which the costs are passed on to tenants.

OPERATING SURPLUS The operating surplus was SEK 268 million (250), representing a surplus ratio of 60 per cent (56). For comparable properties, our operating surplus increased by 7.4 per cent compared with the previous year. CENTRAL ADMINISTRATION The central administration expense was SEK 17 million (17). Central administration includes costs for Group-wide functions such as senior management, IT, annual reports, auditors’ fees, legal advice and so on. NET FINANCIAL ITEMS Net financial items for the period were SEK -39 million (-46). The interest costs for the period, including costs for interest rate derivatives and loan commitments, represent borrowings at an average annual interest rate of 1.3 per cent (1.5). CHANGES IN VALUE, PROPERTIES The average valuation yield at the end of the period was 5.92 per cent (6.04). At portfolio level, this represents a change of -0.05 percentage points since year-end. The positive value change of SEK 60 million (109) is mainly attributable to a higher net operating income. The change in value represented 0.3 per cent (0.6) of market value. At 31 March, the market value was SEK 21,479 million (19,739). During the period, 5 properties (4) were sold, resulting in a realised change in value of SEK 5 million (-3), and 5 properties (2) were acquired.

MARKET VALUE AND PROPERTY MANAGEMENT INCOME 24,000 20,000 16,000 12,000 8,000 4,000 0

2015

2016

2017

Market value of properties, SEKm

2018

Q1 2019

OPERATING SURPLUS AND SURPLUS RATIO 1,100 1,000 900 800 700 600 500 400 300 200 100 0

Property management income, SEKm

1,300

70

1,100

65

900

60

700 55

500

50

300 100

2015

2016

2017

Operating surplus, SEKm

2018

Q1 2019

45

Surplus ratio, %

1The figures for property management income, operating surplus and surplus ratio in Q1 2019 are on a rolling 12-month basis.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

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CHANGES IN VALUE, DERIVATIVES The portfolio of interest rate derivatives has been measured at fair value. If the contracted interest rate deviates from the market rate, a theoretical fair value gain or loss arises on the interest rate derivatives. The change in value is of an accounting nature and does not affect cash flow.

The remaining tax loss carry-forwards are estimated at SEK 0 million (15). The Group also has untaxed reserves of SEK 245 million (148). The fair value of the properties exceeds their tax base by SEK 6,438 million (5,495), less SEK 3,760 million (3,502). The tax liability has been calculated based on the tax rate applying at the time when the tax consequence is expected to arise.

During the period, unrealised changes in value on derivatives totalled SEK 0 million (6), which have been fully recognised in the income statement.

While the reporting of taxes complies with the applicable accounting rules it should be noted that the amount of tax paid over the period generally differs from the reported amount. In addition, tax regulations are complex and hard to interpret. The application of the regulations may also change over time. Diös has no ongoing tax disputes.

PROFIT BEFORE TAX The profit before tax was SEK 277 million (299). The improvement in earnings is mainly due to higher property values and increased revenue. PROFIT AFTER TAX The profit after tax was SEK 230 million (229). The current tax expense is SEK -23 million (-17) and is mainly attributable to tax in subsidiaries which are not permitted to offset losses against Group profits, and to tax arising from property transactions in trading partnerships and limited partnerships. Deferred tax was SEK -24 million (-53) after a positive effect from restatement of deferred tax after the corporate tax rate was changed from 22 per cent to 20.6 per cent.

TAX CALCULATION FOR THE PERIOD

SEKm

Effective tax

Property management income

57.0

2.0

56.0 1.5

55.0 54.0

1.0

53.0 52.0

0.5

51.0 50.0

Q1 2018

Q2 2018

Loan-to-value ratio, %

Q3 2018

Q4 2018

Q1 2019

0.0

Average interest rate, %

TAX The nominal corporate tax rate in Sweden is 21,4 per cent. Thanks to the option of using tax depreciation allowances, recognising the full amount of expenses for certain types of conversion projects in the first year and using tax loss carry-forwards, tax paid was low.

8

37

Taxable property management income

249

Sale of properties

-47

Change in value, properties Taxable profit

AVERAGE INTEREST RATE AND LOAN-TO-VALUE RATIO

212

Tax adjustments

60 262

Tax for the period

55

Restatement of deferred tax1

-8

Tax for the period as per income statement

47

1 The

deferred tax liability has been restated as follows: Deferred tax liability on untaxed reserves has been calculated using a tax rate of 20.6 per cent.

NEW TAX RULES On 14 June 2018, the Swedish parliament adopted a new law on limitation of interest deductibility for businesses, which became effective on 1 January 2019. The law means that the possibility of deducting interest expense declines, and the income tax will gradually be reduced. With our strong cash flow combined with historically low interest rates will have small effects on paid tax under the new law, provided that an effective group equalization of net interest income can occur. If interest rates were to rise it would have a negative impact (assuming cash flow remains unchanged).

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

OUR TENANTS LEASE TERM The average lease term for commercial premises at 31 March was 3.3 years (3.1).

TENANTS Our tenant base is well diversified geographically and in terms of industry. The number of commercial leases was 2,973 (3,044). The number of residential leases was 1,704 (1,632). The ten largest tenants represent 15.8 per cent (15.6) of Diös’ total contracted rental income. At 31 March, 26 per cent of contracted rental income came from tenants engaged in activities on behalf of the central government, county councils or local authorities.

VACANCIES Vacancies remained unchanged during the period, with economic vacancies standing at 9 per cent (8) and physical vacancies at 14 per cent (14) at 31 March. Economic vacancies are highest in office and retail premises while physical vacancies are highest in office and industrial premises. The economic vacancy rate for the period, excluding discounts, was 10 per cent (8).

NET LEASING Net leasing for the period was SEK 6 million (-1). Net leasing increased during the period as a result of a number of major lets. Noteworthy lets during the period included those to the Swedish Transport Administration, Östermalm 6:16, Luleå, Webhelp AB, Kommunalmannen 4, Östersund and Falun Local Authority, Holmen 8, Falun.

OUR LARGEST TENANTS TENANTS AT 31 MARCH 2019

LEASES AND MATURITIES

No. of contracts

Annual contract value, SEK ‘000

Average lease term, years

Swedish Transport Administration

No. of contracts

Contract value SEKm

Share of value, %

27

62,163

1.6

Leases for premises, maturity year

119

36,995

2.7

2019

553

122

7

Swedish Public Employment Service

31

29,349

2.2

Swedish Police Authority

31

23,942

4.8

2020

910

360

20

Swedish Social Insurance Agency

24

23,064

3.1

2021

675

361

20

Swedbank

11

22,921

3.4

2022

529

284

16

Swedish Migration Board

12

22,375

2.3

2023+

306

482

27

5

22,123

5.3

Total

2,973

1,609

89

46

21,899

5.3

Residential

1,704

132

8

Other leases1

4,215

63

3

TOTAL

8,892

1,804

100

Östersund Local Authority

Åhléns AB Folksam ömsesidig sakförsäkring Telia Sverige AB Total, largest tenants

24

21,024

9.8

330

285,855

3.6

1 Other

leases refer mainly to garage and parking spaces.

NET LEASING 80 60 40

SEKm

20 0 -20 -40 -60 -80

Q1

Q2

Q3

2014

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2015

2016

New contracts

Terminated contracts

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Q1

Q2

Q3

Q4

2017

Q1

Q2

Q3

2018

Q4

Q1 2019

Net leasing

9

BALANCE SHEET AND EQUITY CONDENSED CONSOLIDATED BALANCE SHEET, SEKM ASSETS

2019 31 Mar

2018 31 Mar

2018 31 Dec

Investment properties

21,479

19,739

20,802

Other non-current assets

32

60

54

Finance right-of-use asset

43

-

-

Current portion of finance right-of-use asset Current receivables Cash and cash equivalents TOTAL ASSETS

4

-

-

300

266

201

-

123

-

21,858

20,188

21,057

EQUITY AND LIABILITIES Equity

8,069

7,116

7,839

Deferred tax liability

1,377

1,238

1,353

9

9

9

11,349

11,186

11,099

336

-

198

43

-

-

4

-

-

671

639

559

21,858

20,188

21,057

Provisions Interest-bearing liabilities Overdraft facilities Non-current lease liability Current lease liability Current liabilities TOTAL EQUITY AND LIABILITIES

CONDENSED STATEMENT OF CHANGES IN EQUITY, SEKM

Equity, 31 Dec 2017 Profit for the period after tax Comprehensive income for the period

Attributable to noncontrolling interests

6,887

6,841

45

229

229

0

229

229

0

7,116

7,070

45

Profit for the period after tax

1,112

1,109

3

Comprehensive income for the period

1,112

1,109

3

Equity at 31 March 2018

-390

-390

-

7,839

7,790

49

Profit for the period after tax

230

229

1

Comprehensive income for the period

230

229

1

8,069

8,019

50

Dividend Equity, 31 Dec 2018

Equity, 31 Mar 2019

10

Equity

Attributable to shareholders of the parent company

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Henrik Sjöstrand, Letting Agent, and Emma Widegren, Property Manager. Gästgivaren 3, Östersund. 11

OUR PROPERTIES PROPERTY PORTFOLIO The property portfolio is concentrated to central locations in ten priority cities in northern Sweden. The portfolio is well diversified, consisting mainly of residential, office and retail properties. At the end of the period, the portfolio comprised 93 per cent (93) commercial properties and 7 per cent (7) residential properties based on rental value by type of premises.

CHANGES IN VALUE Unrealised changes in value for the period totalled SEK 60 million (109) and were due to mainly higher net operating income.

PROPERTY VALUATION At each closing date, all properties are measured at fair value. The aim is to determine the properties’ individual values in a sale executed through a structured transaction between market players. Any portfolio effects are thus not taken into account. Diös’ property portfolio is divided into a main portfolio and a subsidiary portfolio. The main portfolio comprises around 75 per cent of the property value, or SEK 15,745 million, and 115 properties. The valuation method requires that an external valuation of the entire main portfolio be made each year. The external valuation is made by valuation consultants Savills, who assess 25 per cent of the main portfolio each quarter. The remaining portion is valued internally. All properties in the main portfolio are also physically inspected by Savills within a three-year period. In addition to the regular inspections, physical visits are also made after major changes. Properties in the secondary portfolio are valued internally with assistance from Savills. All property valuations are based on a number of assumptions about the future and the market. Savills’ calculations thus have an uncertainty range of +/-7.5 per cent. For Diös, this translates into a value range of SEK 19,868-23,090 million. No changes in terms of valuation methodology or approach were made during the period. The valuations were made in accordance with IFRS 13 level 3. CHANGE IN PROPERTY VALUE

Property portfolio, 1 January

33

55

Change in required rate of return

27

45

Total

60

100

CHANGES IN THE PORTFOLIO One part of our strategy is to continuously strive to concentrate our property portfolio to central locations in our priority cities. In the first quarter, Diös completed on the sale of five properties and on the acquisition of five properties. LIST OF PROPERTY TRANSACTIONS JAN-MAR 2019 Sold and completed on Property

Quarter

Price1, SEKm

City Area, sq.m

Nedre Gruvriset 33:156

1

Falun

5,325

Portfolio of 4 properties

1

Östersund

15,410

49

20,735

129

Total

80

Acquired and completed on Property

Quarter

City Area, sq.m

Norr 37:4

1

Gävle

Price1, SEKm

7,633

134

Tyr 23

1

Borlänge

9,194

109

Stranden 18:4

1

Mora

3,914

40

SEKm

SEKm

Staben 10

1

Östersund

2,375

28

Näringen 18:11

1

Gävle

Number

Number

19,457

339

Acquisitions

421

5

68

2

Investments in new builds, extensions and conversions

316 -120

164 -5

60

Reclassifications Value of property portfolio 31 March

%

Change in net operating income, etc.

31 Mar 2018

330

Unrealised changes in value

31 Mar 2019 SEKm

31 Mar 2019

20,802

Sales

UNREALISED CHANGES IN VALUE

6,448

114

29,564

424

1 Underlying property values -4

109

21,479

-69

Total

10 330

19,739

337

VALUATION ASSUMPTIONS 31 Mar 2019

Yield for assessing residual value 1,%

Office

Retail

6.8-5.5

6.7-5.8

31 Mar 2018

Industrial/ Residential warehouse 5.3-4.7

9.1-6.9

Other

Office

Retail

7.0-6.2

7.0-5.6

6.7-5.9

Industrial/ Residential warehouse 5.3-4.7

7.9-7.0

Other 7.0-6.5

Cost of capital for discounting to present value, %

8.1

8.2

7.2

10.7

8.8

8.1

8.2

7.3

9.8

8.3

Long-term vacancy, %

4.9

3.8

1.8

14.4

6.1

5.1

3.7

1.8

11.9

4.8

1 From lower to upper quartiles in the portfolio. The valuation model is based on a five-year analysis period and a long-term inflation rate of 2 per cent.

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DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Barbro Wårell, Luleå Science Park service centre, with the tenant Gunilla Enquist, Aulis Konsult & Utveckling, Project Manager, Porsön 1:423, Luleå.

INVESTMENTS We are continuously investing in our portfolio to improve, adapt and improve the efficiency of our premises for our tenants. Our investments added SEK 316 million (164) to the value of the property portfolio in the first quarter. IMPROVEMENTS Our investments in our existing portfolio comprise conversions and extensions as well as energy-saving measures. The investments must result in a higher occupancy rate, increased customer satisfaction, lower costs and a reduced impact on the environment. During the period, SEK 316 million (164) was invested in 550 projects (476). At the end of the period, 43 major1 improvement projects were ongoing, with a remaining investment volume of SEK 370 million and a total investment volume of SEK 754 million. In the quarter, decisions were taken on 74 new investments. The return on completed investments for the period was 8.9 per cent on the invested amount while the return on our ongoing projects was 8.3 per cent. 1

Initial investment volume > SEK 4 million.

NEW BUILDS Our existing and potential development rights cover a gross area of over 150,000 square metres, of which around 50 per cent refers to development rights for residential properties and 50 per cent refers to development rights for commercial properties. Among these, Diös has identified various types of projects with a total estimated investment volume of around SEK 4,000 million. The Falan 20 residential property project is ongoing and is expected to be completed in spring 2019. The Riverside hotel project in Sundsvall has been initiated, with preparatory work underway on the underground car park on which the hotel will stand. Construction is scheduled to begin in March 2019. Construction of the hotel project on the Magne 4 property in Umeå commenced in the first quarter of 2019.

ENERGY USE AND CARBON DIOXIDE EMISSIONS Unit

2019 3 mths Jan-Mar

Heating1

kWh/sq.m

38.0

40.0

District cooling2

kWh/sq.m

6.0

2.7

Electricity

3

Carbon dioxide, total4

kWh/sq.m

14.5

15.5

g CO2/kWh

23.6

31.4

m3/sq.m

0.1

0.1

Water 1 Heating 2 District

has been adjusted to a normal year.

cooling does not include self-produced cooling.

3 Electricity 4 Carbon

2018 3 mths Jan-Mar

from energy use and tenants where electricity is included in the lease.

dioxide from electricity and heating.

All values have been provided by the suppliers. Floor area refers to tempered area. The comparative figures have been updated for the current portfolio and thus show changes for comparable properties.

The target for 2019 is to reduce energy consumption by 3 per cent. The optimisation efforts that were stepped up in the second quarter of 2018, with a clearer focus and technology strategies, have continued to yield fruit. Overall energy use in the first quarter was down by 5 per cent. To lower the environmental impact, we only purchase origin-labelled electricity and we can now see that 98 per cent of our energy use comes from renewable sources.

CERTIFICATIONS Eight BREEAM In-Use certification processes were initiated during the period. Our target for the year is to certify 16 properties under the BREEAM In-Use environmental certification standard. The goal for 2019 is to obtain environmental certification for 17 per cent of the portfolio by surface area. We now have 23 properties certified under the Miljöbyggnad, BREEAM In-Use and GreenBuilding standards, which represents 11 per cent of the total area of the property portfolio.

PROJECTS AND PROPERTY DEVELOPMENT Projects refer to the creation of new spaces, property development refers to investments in existing properties in the form of conversions and extensions as well as energy-saving measures.

City

Property

Property type

Leasable area, sq.m

New build

Sundsvall

Noten

Hotel

14,350

100

385

New build

Umeå

Magne 4

Hotel

14,500

100

400

Type

Occupancy Planned Start of rate, % investment, SEKm construction

Estimated completion

Environmental certification

Q1 2019

Q2 2021

BREEAM SE Very good

Q1 2019

Q3 2022

BREEAM SE Very good

Projects with an initial investment volume >SEK 150 million.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Visualisation of Riverside, 13Sundsvall.

FINANCING CAPITAL STRUCTURE At 31 March 2019, 37 per cent (35) of Diös' total assets of SEK 21,858 million was funded through equity, 53 per cent (55) through debt securities and 10 per cent (10) through other capital.

measurement is based on observable market data (see Note 21 in the Annual Report 2018). Changes in value are recognised through profit or loss. If market interest rates increase by 1 percentage point

SENSITIVITY ANALYSIS

EQUITY At 31 March, equity was SEK 8,069 million (7,116). The equity ratio was 36.9 per cent (35.3), which exceeds the target of 35 per cent.

AT 31 MARCH 2019

Change in average annual interest rate, %

Change in Change in average annual market value, interest rate, SEKm SEKm

INTEREST-BEARING LIABILITIES Interest-bearing liabilities in the Group were SEK 11,349 million (11,186). Of total interest-bearing liabilities, SEK 8,859 million (9,180) refers to bank financing, SEK 1,240 million (1,206) to covered bonds and SEK 1,250 million (800) to commercial paper. The loanto-value ratio in the Group was 52.8 per cent (56.7) at the end of the period. The average annual interest rate at 31 March, including the cost of derivatives and loan commitments, was 1.3 per cent (1.5) and the interest coverage ratio 6.2 times (4.9).

Loan portfolio excl. derivatives

0.4

+48

Derivatives portfolio

0.0

0

+1

Loan portfolio incl. derivatives

0.4

+48

+1

FINANCIAL INSTRUMENTS Out of the Group’s total interest-bearing liabilities, SEK 4,000 million (4,600) has been hedged through derivatives. At 31 March 2019, the market value of the derivative portfolio was SEK 0 million (-10). The financial instruments limit the impact of changes in interest rates on our average borrowing cost. The value of derivatives is always zero at maturity. All financial instruments are measured at fair value and are classified in Level 2 in accordance with IFRS 13, which means that the

CASH AND CASH EQUIVALENTS Consolidated cash and cash equivalents at the end of the period were SEK 0 million (123) and drawn overdraft facilities were SEK 336 million (0). The agreed limit on the overdraft facility was SEK 600 million (600).

FIXED-RATE TERMS AND LOAN MATURITIES The average fixed-rate term, including derivatives, was 1.1 years (2.2) and the average loan maturity 2.3 years (2.2). Of the Group’s outstanding loans, SEK 6,510 million (8,163) is subject to fixed interest rates.

15%

BREAKDOWN OF INTEREST-BEARING FINANCING undrawn credit facilities

9%

commercial paper

9% bonds

67%

1.3%

Breakdown of interest-bearing Bank, 67% Bonds, 9% financing

annual interest rate

Commercial paper, 9% Undrawn credit facility, 15%

bank finance

INTEREST RATE AND DEBT MATURITY STRUCTURE AT 31 MARCH 2019 Interest rate and margin expiration Maturity year

Loan maturity

Loan amount, SEKm Average annual interest rate1, % Credit agreements, SEKm

Drawn, SEKm

2019

1,834

0.5

584

584

2020

7,685

1.3

6,167

5,667

2021

1,831

1.2

1,111

1,111

2022

-

-

3,222

2,171 1,120

2023

-

-

1,120

2027

-

-

697

697

Drawn credit facilities

11,349

1.2

13,301

11,349

Undrawn credit facilities2

1,952

0.1

Financial instruments

4,000

0.0

TOTAL

1.3

1 Average annual interest rate refers to the average interest rate based on interest rate terms and the outstanding liability as at 31 March 2019. 2 The cost of unused credit facilities affects the average annual interest rate by 0.06 percentage points.

14

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

CASH FLOW CONDENSED CONSOLIDATED CASH FLOW STATEMENT, SEKM 2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

Operating surplus

268

250

1,140

Central administration

-17

-17

-71

0

0

2

OPERATING ACTIVITIES

Reversal of depreciation, amortisation and impairment Interest received Interest paid

1

1

8

-31

-29

-185

Tax paid

-23

-17

-90

Cash flow from operating activities before changes in working capital

198

188

804

-105

-101

-35

Changes in working capital Decrease (+)/increase (-) in receivables Decrease (-)/increase (+) in current liabilities

9

59

31

Total changes in working capital

-95

-42

-4

Cash flow from operating activities

102

146

800

Investments in new builds, conversions and extensions

-209

-125

-557

Acquisition of properties

-312

-42

-371

146

55

443

-

-

-10

-375

-112

-495

INVESTING ACTIVITIES

Sale of properties Other non-current financial assets Cash flow from investing activities

FINANCING ACTIVITIES Dividends paid

-

-

-390

222

175

312

Repayment and redemption of interest-bearing liabilities

-87

-118

-457

Change in overdraft facility

138

-

198

Cash flow from financing activities

273

57

-337

Cash flow for the period

0

91

-32

Cash and cash equivalents at beginning of period

0

32

32

Cash and cash equivalents at end of period

0

123

0

New borrowing, interest-bearing liabilities

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

15

REPORTING BY BUSINESS UNIT AT 31 MARCH 2019 Amounts in SEKm unless otherwise indicated. 2019 By business unit Rental income

Dalarna

Gävle

Skellefteå

Umeå

Luleå

Group

52

35

Sundsvall Åre/Östersund 54

59

28

49

64

341

14

6

12

17

6

10

11

75

6

3

8

9

1

6

7

41

Service income Tariff-based services Care and upkeep Repair and maintenance

-2

-1

-2

-3

-2

-3

-2

-16

-13

-6

-11

-16

-6

-9

-11

-72

Property tax

-3

-2

-4

-4

-1

-4

-5

-22

Other property costs

-8

-5

-11

-11

-3

-8

-12

-58

Property management

-3

-2

-3

-4

-1

-3

-3

-20

Operating surplus

268

Tariff-based costs

43

27

42

46

22

38

50

Central administration/net financial items

-

-

-

-

-

-

-

-56

Property management income

-

-

-

-

-

-

-

212

Property, realised

0

-

-

5

-

-

-

5

Property, unrealised

3

3

21

14

1

1

17

60

Interest rate derivatives

-

-

-

-

-

-

-

0

Profit before tax

-

-

-

-

-

-

-

277

Leasable area, sq.m

271,684

160,604

233,490

291,478

109,126

200,829

205,440

1,472,651

Rental value

79

50

83

91

36

72

85

496

Economic occupancy rate, %

90

86

88

92

97

89

95

91

Surplus ratio, %

60

64

58

56

63

59

61

60

2,805

1,971

3,424

3,556

1,430

3,562

4,054

20,802

149

245

-

28

-

-

-

421

72

62

29

33

28

58

34

316 -120

Property portfolio, 1 January Acquisitions Investments in new builds, extensions and conversions Sales

-49

-

-

-71

-

-

-

Reclassifications

-

-

-

-

-

-

-

-

Unrealised changes in value

3

3

20

14

1

1

17

60

2,979

2,281

3,475

3,560

1,457

3,622

4,105

21,479

Property portfolio 31 March Columns/rows may not add up due to rounding.

16

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

2018 By business unit Rental income

Dalarna

Gävle

Skellefteå

Umeå

Luleå

Group

50

37

Sundsvall Åre/Östersund 48

55

25

48

57

320

13

8

12

16

5

9

11

74

Service income Tariff-based services Care and upkeep Repair and maintenance Tariff-based costs

7

5

11

11

2

6

9

51

-3

-1

-2

-2

-2

-3

-2

-15

-12

-8

-11

-16

-5

-9

-10

-72

Property tax

-3

-3

-4

-4

-2

-4

-4

-22

Other property costs

-9

-8

-14

-14

-3

-8

-14

-70

Property management

-3

-2

-4

-4

-1

-2

-3

-20

Operating surplus

250

41

28

36

44

19

37

45

Central administration/Net financial items

-

-

-

-

-

-

-

-63

Property management income

-

-

-

-

-

-

-

187

Property, realised

-

-3

-

-

-

-

-

-3

-9

9

-

24

17

60

8

109

Interest rate derivatives

-

-

-

-

-

-

-

6

Profit before tax

-

-

-

-

-

-

-

299

Property, unrealised

Leasable area, sq.m

266,682

216,692

233,490

304,511

109,126

197,942

205,440

1,533,883

Rental value

76

56

80

90

33

70

82

486

Economic occupancy rate, %

92

90

88

91

97

90

95

92

Surplus ratio, %

58

57

51

54

60

59

58

56

2,649

2,045

3,234

3,257

1,222

3,272

3,778

19,457

-

-

-

-

68

-

-

68

38

14

33

33

4

3

39

164

Sales

-

-69

-

-

-

-

-

-69

Reclassifications

2

0

3

1

2

1

10

Property portfolio, 1 January Acquisitions Investments in new builds, extensions and conversions

Unrealised changes in value Property portfolio 31 March

-9

9

0

24

17

60

8

109

2,680

1,999

3,270

3,315

1,311

3,337

3,826

19,739

Columns/rows may not add up due to rounding.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Diös tenant Stadium, Micke Jonsson Store Manager, with Emelie Kjellner, City Centre Manager, Katten 1714, Luleå.

KEY FINANCIAL RATIOS The interim report presents non-IFRS performance measures. We consider that these measures provide valuable additional information for investors, analysts and the company’s management, as they enable the evaluation of relevant trends and the company’s performance. As not all companies calculate financial measures in the same way, these are not always comparable with the measures used by other companies. These financial measures should therefore not be viewed as substitutes for IFRS-defined measures. The following table presents non-IFRS measures unless otherwise stated. Definitions of these measures are provided on page 34 and in the descriptions of the purpose of the various measures in the annual report for 2018. The financial targets for 2019 adopted by the Board are presented on page 23 of this report. Figures refer to SEK million unless otherwise indicated.

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

Number of shares at end of period, thousands (balance sheet KPIs)

134,512

134,512

134,512

Average number of shares, thousands (income statement KPIs)

134,512

134,512

134,512

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

277

299

1,597

-65

-106

-687

0

-6

-16

212

187

894

Property management income

212

187

894

Reversal, current tax property management income

-23

-17

-77

-1

0

-3

EPRA earnings

188

170

814

EPRA earnings per share, SEK

1.40

1.26

6.05

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

There is no dilutive effect, as no potential shares (such as convertibles) exist.

Property management income Profit before tax Reversal Change in value, properties Change in value, derivatives Property management income EPRA earnings (property management income after tax)

Minority share of earnings

Loan-to-value ratio Interest-bearing liabilities

11,349

11,186

11,099

Investment properties

21,479

19,739

20,802

52.8

56.7

53.4

Loan-to-value ratio, % Equity ratio Equity Total assets Equity ratio, %

8,069

7,116

7,839

21,858

20,188

21,057

36.9

35.3

37.2

212

187

894

Interest coverage ratio Property management income Reversal Financial costs Total

40

48

183

252

235

1,077

Financial costs

40

48

183

Interest coverage ratio, times

6.2

4.9

5.9

11,349

11,186

11,099

0

-123

0

336

0

198

11,685

11,063

11,297

1,158

1,089

1,140

-71

-67

-71

Net debt to EBITDA Interest-bearing liabilities as per balance sheet Cash and cash equivalents Overdraft facilities Net debt Operating surplus as per income statement Central administration as per income statement Reversal Depreciation and amortisation EBITDA Net debt to EBITDA

18

2

2

2

1,089

1,024

1,071

10.7

10.8

10.5

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

Net asset value Equity as per balance sheet Minority share of equity

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

8,069

7,116

7,839

-50

-45

-49

Reversal as per balance sheet Fair value of financial instruments Deferred tax on temporary differences EPRA NAV (long-term net asset value) EPRA NAV (long-term net asset value) per share, SEK

-1

10

-1

1,326

1,209

1,299

9,343

8,290

9,088

69.5

61.6

67.6

Deductions Fair value of financial instruments Estimated actual deferred tax on temporary differences, approx. 4%1 EPRA NNNAV (short-term net asset value) EPRA NNNAV (short-term net asset value) per share, SEK

1

-10

1

-247

-215

-242

9,097

8,065

8,847

67.6

59.9

65.8

1 Estimated actual deferred tax has been calculated at approx. 4 per cent based on a discount rate of 3 per cent. The calculation is based on the assumption that the property portfolio will be realised over

a period of 50 years, with 10 per cent of the portfolio being sold directly subject to a nominal tax rate of 20.6 per cent, and the remaining 90 per cent being sold indirectly through companies subject to a nominal tax rate of 6 per cent.

OTHER KEY RATIOS Return on equity, %

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

2.9

3.3

18.2

60.0

52.9

58.3

277

299

1,597

-60

-109

-678

0

-6

-16

1

1

2

Current tax

-23

-17

-90

Total

195

168

815

Equity per share, SEK Cash flow per share, SEK Profit before tax Reversal Unrealised change in value, properties Unrealised change in value, derivatives Depreciation and amortisation

Average number of shares (‘000)

134,512

134,512

134,512

Cash flow per share, SEK

1.45

1.25

6.05

Earnings per share, SEK

1.71

1.70

9.94

1.4

1.6

1.4

2019 3 mths Jan-Mar

2018 3 mths Jan-Mar

2018 12 mths Jan–Dec

Debt/equity ratio, times

OTHER INFORMATION Contracted rental income, SEKm

450

445

1,771

Economic occupancy rate, %

91

92

91

Surplus ratio, %

60

56

64

EPRA vacancy rate Estimated market rent for vacant space Annualised rental value for the whole portfolio EPRA vacancy rate, %

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

178

154

154

1,975

1,904

1,904

9.0

8.1

8.1

19

PARENT COMPANY The activities of the parent company consist of central Group functions as well as the ownership and operation of the Group’s subsidiaries. Income totalled SEK 41 million (41) and the profit after tax was SEK 9 million (1). Net sales referred chiefly to services sold to the Group’s subsidiaries. Cash and cash equivalents were SEK 0 million (120) at 31 March 2019 and drawn overdraft facilities were SEK 327 million (0). External interest-bearing liabilities, excluding overdraft facilities,

totalled SEK 2,209 million (3,309), of which SEK 1,250 million (800) referred to outstanding commercial paper. The average annual interest rate based on the situation at 31 March 2019 amounted to 0.9 per cent (1.0). The parent company prepares its financial reports in compliance with RFR 2 Financial Reporting for Legal Entities.

CONDENSED PARENT COMPANY INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME, SEKM

CONDENSED PARENT COMPANY BALANCE SHEET, SEKM

2019 3 months Jan-Mar

2018 3 months Jan-Mar

2018 12 mths Jan–Dec

Income

41

41

164

Investments in Group companies

Gross profit

41

41

164

Receivables from Group companies

-49

-49

-204

-8

-8

-40

TOTAL ASSETS

0

0

611

EQUITY AND LIABILITIES

74

58

253

-57

-49

-222

9

1

602

INCOME STATEMENT

2019 31 Mar

ASSETS

Operating profit Income from investments in Group companies Financial income Financial costs Profit after financial items Current tax

-

0

-

Profit after tax

9

1

602

Profit after tax

9

1

602

Comprehensive income for the year

9

1

602

2018 31 Dec

2,124

2,124

2,124

12,798

11,581

11,214

22

28

21

-

120

-

14,944

13,853

13,359

Equity

3,315

3,096

3,307

Interest-bearing liabilities

2,209

3,309

2,238

Liabilities to Group companies

9,068

7,417

7,579

327

-

201

25

31

34

14,944

13,853

13,359

Other assets Central administration

2018 31 Mar

Cash and cash equivalents

Overdraft facilities Other liabilities TOTAL EQUITY AND LIABILITIES

STATEMENT OF COMPREHENSIVE INCOME

Emma Widegren, 20 Property Manager.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

OTHER INFORMATION EMPLOYEES AND ORGANISATION

The number of employees on 31 March 2019 was 157 (157), of whom 63 were women (63). The majority of our employees, 105 people (105), work in our business units and the rest at our head office in Östersund. As of January 2019, Skellefteå has been a separate business unit, which means that Diös now has seven business units.

RISKS AND UNCERTAINTIES

Material risks and uncertainties affecting the business include market and business intelligence, the business model, the properties, cash flow, financing and sustainability. Demand and prices in the Swedish property are influenced by the level of economic activity globally and in Sweden as well as by interest rates. Our properties are measured at fair value on an ongoing basis, and changes in value are recognised in the income statement. The effects of changes in value affect the income statement and balance sheet and thus also the related performance measures. Any significant negative impact is managed through a diversified portfolio of centrally located properties in growth cities. PROPERTY VALUE SENSITIVITY ANALYSIS

Change in property value, % -7.5

0.0

+7.5

Property value, SEKm

19,868

21,479

23,090

Equity ratio, %

31.9

36.9

41.2

Loan-to-value ratio, %

57.1

52.8

49.2

Cash flow consists of income and expenses and is primarily attributable to rent levels, property costs, occupancy rates and interest rates. A change in these items affects cash flow and thus also earnings. Any significant negative impact is managed through a diversified tenant structure, good cost control and active interest rate risk management. CASH FLOW SENSITIVITY ANALYSIS Contracted rental income Economic occupancy rate Property costs Interest rate on interest-bearing liabilities

Change

Impact on earnings, SEKm1

+/- 1%

+/- 18

+/- 1 percentage point

+/- 20

-/+ 1%

+/- 7

-/+ 1 percentage point

+/- 48

1 Annualised.

Access to financing is the biggest financial risk and is essential to running a property business. The risk is limited through good relations with banks, access to the capital market, and strong finances and KPIs. A sustainable business model and sustainable behaviour are essential to creating long-term value. Through good internal control and procedures, we take responsibility for building a sustainable long-term business. No material changes in the assessment of risks have been made after the publication of the annual report for 2018. For more information on risks and risk management, see Diös’ annual report for 2018, pages 60–64.

RELATED-PARTY TRANSACTIONS

There were no significant related party transactions in the period. Those related-party transactions which did occur are deemed to have been concluded on market terms.

SEASONAL VARIATIONS Costs for operations and maintenance are subject to seasonal variations. Cold weather and snow affect the costs for heating, snow clearance and roof snow removal. The costs are normally higher in the first and fourth quarters.

ACCOUNTING POLICIES

Diös complies with EU-adopted IFRS standards and the interpretations of these (IFRIC). This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The report for the parent company is prepared in accordance with RFR 2 Financial Reporting for Legal Entities and the Swedish Annual Accounts Act. Disclosures under IAS 34 are provided elsewhere in the interim report than in a note. All property-related transactions have been recognised based on calculations of the preliminary consideration. The calculation of the final consideration will be completed in the second quarter of 2019. The accounting policies applied in preparing the interim report are consistent with the accounting policies applied in preparing the consolidated financial statements and annual accounts for 20181, Note 1. New or amended IFRS standards and new interpretations which have not yet become effective: IFRS 16 LEASES IFRS 16 has been applied for the financial year that began on 1 January 2019. Diös does not apply the standard retrospectively. The accounting treatment for lessors is essentially unchanged. For lessees, the standard has the effect that most leases will be recognised in the balance sheet. For Diös, the main impact is in respect of the recognition of leasehold contracts and car leases, which from 1 January 2019 will be recognised in the balance sheet and will thus have an impact on total assets. The lease payment is accounted for as depreciation of the right-of-use asset and finance charge, and is no longer included in net operating income. The recognised right-of-use assets have been assigned the same value as the lease liability recognised at 1 January 2019. As Diös has a limited number of contracts, the impact on the financial statements is limited. In preparation for the change, Diös reviewed and assessed the Group’s leases in its capacity as lessee, identifying leasehold contracts and car leases as being the most material. In addition to these, only minor leases have been identified, such as leases for office equipment and similar items. As at 1 January 2019, the Group recognised a lease liability of SEK 35 million for leasehold contracts along with a corresponding right-of-use asset. After that date, Diös has recognised the right-of-use asset at fair value, as it ACCOUNTING POLICIES CONTINUE ON THE NEXT PAGE

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

21

is considered to be an investment property. As a result of the transition to IFRS 16, all ground rent costs have been treated as financial cost, which differs from the previous principle, under which these costs were treated as an operating expense that reduced the operating surplus. Property management income remains unchanged, however. The recognised expense for ground rent in 2018 was SEK 3 million. As at 1 January 2019, the Group recognised a lease liability of SEK 14 million for car leases along with a corresponding right-of-use asset. These are recognised at the value of the right-of-use asset at the beginning of the period less depreciation and a finance charge, which

differs from the previous principle, under which this was treated as an operating expense that reduced the operating surplus. The recognised expense for leased vehicles in 2018 was SEK 4 million. As Diös has a limited number of contracts, the impact on the financial statements is limited. A table showing the change and the impact on key ratios as at 1 January 2019 is presented below. Other changed and new IFRS standards entering into force during the coming periods are not assessed as having any significant impact on the Group’s financial reporting. 1 The Annual Report 2018 is available at www.dios.se.

BALANCE SHEET AT 1 JANUARY 2019 AFTER ADOPTION OF IFRS 16 LEASES Balance sheet items at 1 January 2019

Restatement under IFRS 16

Restated balance sheet items 1 January 2019

Assets Investment properties Finance right-of-use asset Other non-current assets Current receivables Current portion of finance right-of-use asset Cash and cash equivalents Total assets

Equity Retained earnings Deferred tax liability Provisions Interest-bearing liabilities Non-current lease liability

20,802 -

54

201 -

201 51

5

49

21,106

0 21,057

0

7,839 0

7,839 0

1,353

0 1,353

9

9

11,099

11,099

198

Current liabilities

559

Total equity and liabilities

44

54

Overdraft facilities

Current lease liability

20,802 441

442

44 198 559

-

52

5

21,057

49

21,106

1

Refers to the recognition of ground rent of SEK 35 million and car lease liabilities of SEK 14 million. Refers to the recognition of ground rent of SEK 35 million, all of which is classified as long-term liability, and to car-related liabilities, of which the current portion refers to the estimated portion maturing within 1 year. 2

Impact on key ratios 1,597

1,597

Loan-to-value ratio, %

Property management income, SEKm

53.4

53.5

Equity ratio, %

37.2

37.1

Interest coverage ratio, % Surplus ratio, %

5.9

5.8

64.0

64.8

TRANSITION FROM OPERATING LEASES IAS 17 TO IFRS 16 LEASES AS AT 1 JANUARY 2019 Operating lease commitments at 31 Dec 2018

49

Finance lease liabilities at 31 December 2018

0

Short-term leases

0

Low-value leases

0

Impact of reclassification to finance leases under IFRS 16: Ground rent

35

Leased cars

14

Recognised lease liability opening balance sheet 1 January 2019

49

In the opening balance sheet as at 1 January 2019, Diös has used a weighted average marginal borrowing rate of 5.9 per cent in determining the lease liability for grounds rents and a rate of 7.9 per cent in determining the lease liability for cars.

22

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

SUMMARY OF QUARTERLY RESULTS 31 Mar 2019 Income, SEKm

31 Dec 2018

30 Sep 2018

30 Jun 2018

31 Mar 2018

31 Dec 2017

30 Sep 2017

30 Jun 2017

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

457

447

467

446

450

443

436

435

Operating surplus, SEKm

268

283

312

295

250

266

287

286

Property management income, SEKm

212

225

248

234

187

197

222

224

Profit for the period, SEKm

255

229

451

303

358

229

256

192

Surplus ratio, %

60

64

70

67

61

61

67

66

Economic occupancy rate, %

91

91

91

91

92

91

91

91

2.9

5.9

4.2

5.0

3.3

3.8

2.9

3.9

Equity ratio, %

36.9

37.2

36.1

34.8

35.3

34.9

33.9

33.3

Property loan-to-value ratio, %

58.3

Return on equity, %

52.8

53.4

54.6

55.8

56.7

57.1

57.8

Average interest rate at end of period, %¹

1.3

1.2

1.3

1.5

1.5

1.5

1.6

1.6

Interest coverage ratio, times

6.2

6.3

6.0

6.3

4.9

4.8

5.5

5.8

Property management income per share, SEK

1.57

1.67

1.84

1.74

1.38

1.46

1.65

1.67

Earnings per share after tax, SEK

1.71

3.35

2.25

2.64

1.70

1.91

1.43

1.88

Equity per share, SEK

60.0

58.3

54.9

52.7

52.9

51.2

49.3

47.9

Market price per share, SEK

76.3

56.4

56.9

53.8

56.4

55.8

52.0

46.6

1 Includes

expenses relating to commitment fees and derivatives.

TARGETS OPERATIONAL AND FINANCIAL TARGETS

Outcome Jan-Mar 2019

Target 2019

Growth in property management income per share, %

1

8

>5

Surplus ratio, %

60

65

Energy use, %

-5

-3

Environmentally certified properties, % of total

11

17

Employee satisfaction index

-

76

Customer satisfaction index

-

67

17.51

>12

-

~50

Loan-to-value ratio, %

52.8

<55

Equity ratio, %

36.9

>35

Return on equity, % Distribution of profit for the year2,%

1 2

Rolling twelve months Profit after tax, excluding unrealised changes in value and deferred tax.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

23

SHARE PRICE PERFORMANCE VOLUME (‘000)

SHARE PRICE (SEK)

8,000

80

7,000

75

6,000 70 5,000 65 4,000 60 3,000 55 2,000

50

1,000

45 APR

MAY

Diös Fastigheter

JUN

JUL

AUG

SEP

OMX Stockholm 30 Index

OCT

NOV

DEC

JAN

FEB

MAR

0

OMX Stockholm Real Estate PI

THREE REASONS TO INVEST IN DIÖS

DIVERSIFIED PROPERTY PORTFOLIO A comprehensive and diversified property portfolio ensures risk distribution between different markets, tenants and industries. The profit equalises over time. Our portfolio also provides us with great opportunities to offer our tenants new premises whenever their needs or business change.

24

AN ATTRACTIVE YIELD Since 2013, the yield has amounted to 4.8 per cent on average, which is among the highest in the industry. According to the dividend policy, approx. 50 per cent of the profit for the year after tax, excluding unrealised changes in value and deferred tax, should be passed onto the shareholders as a dividend.

VALUE GROWTH THROUGH INCREASED CASH FLOW Since 2013, the cash flow per share has increased by 71 per cent. This is the result of effective management, energy-saving measures, profitable investments and a tenant-focused organisation.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

SHARE INFORMATION SHARE PERFORMANCE Diös’ share price at the end of the period was SEK 76.3 (56.4), which represents a market capitalisation of SEK 10,263 million (7,580), and the return for the past 12 months was 35.4 per cent (28.1). If the dividend is included, the total return on the shares for the period was 42.7 per cent (33.9). The diagram shows share prices for the past 12 months for both Diös and the indexes. The return on the OMX Stockholm 30 Index was -1.5 per cent (-3.3) and the return on the OMX Stockholm Real Estate PI index 26.8 per cent (5.7). At 31 March, Diös Fastigheter AB had 13,975 shareholders (14,648). The share of foreign-owned shares was 24.6 per cent (21.3) while the total number of shares during the period remained unchanged at 134,512,438 (134,512,438). The single largest shareholder was AB Persson Invest, with 15.4 per cent (15.4) of the shares. The ten largest shareholders accounted for 53.7 per cent (57.4) of the total number of shares and votes. The Annual General Meeting 2018 resolved to authorise the company to buy back ten per cent of the total number of outstanding shares of the company. No repurchases were made during the period. No new changes of ownership were flagged during the period. The ten largest shareholders of Diös Fastigheter AB according to Euroclear Sweden AB are shown above. Diös Fastigheter AB is a publicly traded company listed on the NASDAQ OMX Nordic Exchange Stockholm, Mid Cap list. The ticker symbol is DIOS and the ISIN code SE0001634262. RETURN AND NET ASSET VALUE Our goal is to generate a return on equity in excess of the risk-free rate plus 12 per cent. On an annualised basis, the return for the period was

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

12 per cent (13). Equity at the end of the year was SEK 8,069 million (7,116) and the long-term net asset value, EPRA NAV, was SEK 9,343 million (8,289). On a per share basis, EPRA NAV was SEK 69.5 (61.6), which means that the share price at 31 March represented 110 per cent (92) of long-term NAV. The net asset value per share for the period, expressed as EPRA NNNAV, was SEK 69.5 (59.9). EARNINGS Earnings per share for the period were SEK 1.71 (1.70) while longterm earnings per share, expressed as EPRA EPS, were SEK 1.40 (1.26). EPRA EPS, which is designed to show an entity’s long-term earnings per share, is calculated as property management income after deducting 21.4 per cent corporation tax attributable to property management income less minority share of earnings.

LARGEST SHAREHOLDERS of Diös Fastigheter AB at 31 March 2019 No. of shares

Capital and voting rights, %

AB Persson Invest

20,699,443

15.4

Backahill Inter AB

14,095,354

10.5

SHAREHOLDERS

Pensionskassan SHB Försäkringsförening

8,096,827

6.0

Nordstjernan AB

6,787,374

5.0

Bengtssons Tidnings AB

6,787,374

5.0

Handelsbankens Fonder

5,150,000

3.8

SEB Fonder

3,433,978

2.6

Avanza Pension

3,330,040

2.5

Thompson, Siegel & Walmsley LLC

2,079,079

1.5

Sten Dybeck, including company and family

1,920,000

1.4

Total, largest shareholders

72,379,469

53.7

Other shareholders

62,132,969

46.3

134,512,438

100.0

TOTAL

25

REVIEW OF THE REPORT The Board of Directors and the CEO declare that the financial statement gives a true and fair view of the operations, financial position and income of the company and the Group, and describes the principal risks and uncertainties faced by the company and the Group’s companies. This financial statement has not been subject to review by the Company's auditor. Financial reports can be viewed in full on Diös’ website, www.dios.se.

Östersund, 23 April 2019

Chairman

Eva Nygren Board member

Ragnhild Backman

Anders Nelson

Board member

Board member

Anders Bengtsson Board member

Tomas Mellberg Board member Employee representative

Bob Persson

Knut Rost Chief Executive Officer

FINANCIAL CALENDAR Q2 Interim Report January-June 2019

5 July 2019

Q3 Interim Report January–September 2019

25 October 2019

EVENTS AFTER THE REPORTING DATE No events to report after the reporting date.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Knut Rost, CEO, +46 (0)770-33 22 00, +46 (0)70-555 89 33 [email protected] Rolf Larsson, CFO, +46 (0)770-33 22 00, +46 (0)70-666 14 83, [email protected] This constitutes information which Diös Fastigheter AB is required to publish under the EU’s Market Abuse Regulation. The information was submitted for publication through the above contact person on 23 April 2019, at 12 p.m. CEST.

26

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

DEFINITIONS AVERAGE NUMBER OF SHARES

EQUITY PER SHARE

Number of shares outstanding at the beginning of the period, adjusted by the number of shares issued or repurchased during the period weighted by the number of days that the shares were outstanding, in relation to the total number of days in the period.

Equity at the end of the period divided by the number of shares outstanding at the end of the period.

CASH FLOW PER SHARE

EQUITY RATIO Equity divided by total assets at the end of the period.

Profit before tax, adjusted for unrealised changes in value plus depreciation/amortisation less current tax, divided by the average number of shares.

INTEREST COVERAGE RATIO

COMPARABLE PROPERTIES

LOAN-TO-VALUE RATIO, PROPERTIES

Comparable properties refer to properties which have been owned throughout the period and the whole comparative period. The term is used to highlight growth in rental income, excluding one-off effects resulting from early vacating of properties, and property costs as well as acquired and sold properties.

Interest-bearing and other liabilities relating to properties, divided by the carrying amount of the properties at the end of the period.

CONTRACTED RENTAL INCOME Rents invoiced for the period less rent losses and rent discounts including service income.

Income from property management after reversal of financial costs, divided by financial costs for the period.

NET DEBT TO EBITDA Net debt is calculated as interest-bearing liabilities less cash and cash equivalents plus overdraft facilities. Net debt is then divided by EBITDA.

NET LEASING

DEBT/EQUITY RATIO

Net annual rent, excluding discounts and supplements, for newly signed, terminated and renegotiated contracts. The lease term is not taken into account.

Interest-bearing liabilities divided by shareholders' equity at the end of the period.

NUMBER OF SHARES AT END OF PERIOD

EARNINGS PER SHARE Profit for the period after tax, attributable to shareholders, divided by the average number of shares.

EBITDA Operating surplus less central administration after reversal of scheduled depreciation and amortisation. The calculation is made on 12-month rolling basis, unless otherwise stated.

Actual number of shares outstanding at the end of the period.

PROJECT PROPERTY Refers to a property that is intended to be redeveloped or improved. Divided into the following sub-categories: New builds – land and properties with ongoing new builds or that are undergoing complete redevelopment.

ECONOMIC OCCUPANCY RATE

Improvement property – properties with ongoing or planned conversion or extension work that materially affects the property’s operating surplus or standard or changes the use of the premises.

Contracted rental income for the period divided by rental value at the end of the period.

Tenant improvements – properties undergoing conversion or minor improvements to premises.

ECONOMIC VACANCY RATE

PROPERTY MANAGEMENT INCOME

Estimated market rent for unused premises divided by total rental value.

Revenue less property costs, costs for central administration and net financial items.

EPRA EARNINGS Property management income less nominal tax attributable to property management income, divided by average number of shares. Taxable property management income refers to property management income less, inter alia, tax-deductible depreciation and amortisation and redevelopments.

EPRA NAV/LONG-TERM NET ASSET VALUE PER SHARE Equity at the end of the period after reversal of interest rate derivatives and deferred tax attributable to temporary differences in properties and minority share of equity, divided by the number of outstanding shares at the end of the period.

EPRA NNNAV/CURRENT NET ASSET VALUE PER SHARE Equity at the end of the period adjusted for actual deferred tax instead of nominal deferred tax and minority share of equity, divided by the number of shares outstanding at the end of the period.

EPRA VACANCY RATE Estimated market rent for vacant space divided by the annual rental value of the whole property portfolio.

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019

RENTAL VALUE Rent at the end of the period plus a supplement for the estimated market rent for unoccupied floor space.

RETURN ON EQUITY Profit for the period attributable to parent company shareholders divided by average equity attributable to parent company shareholders. Average equity is defined as the sum of the opening and closing balance divided by two.

SERVICE INCOME Income from tariff-based services and income from care and upkeep.

SURPLUS RATIO Operating surplus for the period divided by contracted rental income for the period.

YIELD Operating surplus for the period divided by the properties’ market value at the end of the period.

27

28

DIÖS KOMMUNIKATION 2019, PHOTOGRAPHS: TINA STAFRÉN

DIÖS FASTIGHETER AB (PUBL) FRITZHEMSGATAN 1A, BOX 188, 831 22 ÖSTERSUND, TEL: +46 (0)770-33 22 00 CRN: 556501-1771. REGISTERED OFFICE ÖSTERSUND. WWW.DIOS.SE

DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–MARCH 2019