CEO comment

Increased share of rentals, more focused housing product to the target group.

50% rental units and a more focused cooperative apartment offering for SSM’s target group

The housing market in Stockholm remains cautious despite a certain level of stabilization during the year, mainly in the secondary market. At the end of 2018, SSM adapted its strategy and housing product to meet the changed financial situation of its target group. Increased amortization requirements and internal interest calculations at banks have made it more difficult for many young adults and single-person households to buy a home.

In light of the change, we have adjusted our strategic product mix, which means that in the near future and going forward, we intend to increase the production of rental apartments to 50,0 percent. Another strategically important adjustment was to quickly adjust prices in projects where sales had started to under 2.0 MSEK which we achieved by redesigning a number of units as smaller and even more space-efficient homes. The goal is for at least 90,0 percent of our cooperative apartments to cost less than 2.0 MSEK. In mid-February 2019, we relaunched about 70 redesigned cooperative apartments in combination with an offer to pay 50,0 percent of the down payment for new buyers. The initial response from customers has been positive. In 2018, SSM signed 101 pre-purchase agreements, 38 of which in the fourth quarter. The sales rate for projects in production was 96.9 percent at the end of the year.

During the year, SSM started production of the company’s first two rental projects, which include an agreement that was signed to sell Täby Turf, a project with 178 homes, for 473.0 MSEK to the property company Willhem via forward funding. SSM has an attractive portfolio of rental apartments and we expect strong growth in the rental market as a result of the conversions of rental units into cooperative apartments that has taken place in the past ten years together with planned conversions of municipal property companies’ holdings in the region.

Liquidity good, cost-efficiency program initiated for improved profitability in the near future

The operating profit and operating margin developed negatively during the year, mainly due to lower gross profits and increased project costs. In addition to the above-mentioned changes to the company’s commercial offering, SSM’s organization has been adapted to lower salary costs by -15.0 percent, or 14.0 MSEK, during 2019. During 2019 we have introduced a cost-efficiency program aiming reduce overhead costs in 2019 by 50 percent, which corresponds to about 25.0 MSEK. SSM’s liquidity is good thanks to positive cash flow during the year and as a consequence of changes within the Bromma Boardwalk and Clustret projects that benefited the company from a liquidity perspective.

Relevant housing concept & portfolio of building rights portfolio for continued growth

It is my opinion that with our offering housing concept, product mix and portfolio is well positioned for continued growth. This has been confirmed by the fact that all 515 cooperative apartments we completed during the year have been sold and are now occupied. In 2019, our goal is to start production of 300 homes, both cooperative apartments and rental units, and then gradually increase production to 1,500 homes by 2023. Finally, I’d like to highlight the joyful news from the end of January 2019 that the City Planning Committee announced that planning work would continue for our Tellus Towers project.

Mattias Roos
President & CEO