ALM Equity AB (publ): Semi-annual Report January- June 2021

Q2

H A L F - Y E A R R E P O RT

J A N U A R Y - J U N E 2 0 2 1

EVENTS DURING THE QUARTER

• ALM Equity acquired all the shares in Järntorget Byggintressenter AB for a total of around
  SEK 1.7 billion.
• ALM Equity issued unsecured bonds worth SEK 1 billion as well as preference shares of around SEK 400 million and ordinary shares of around SEK 300 million.
• The Project Development business area started construction of 896 residential units, 858 are for the property management market and 38 for the private market. The Construction Management business area is the turnkey contractor.

EVENTS AFTER THE END OF THE PERIOD

• ALM Equity received approval from existing bond- holders to give the company's subsidiaries will have the opportunity to use the capital market as a complement to existing sources of financing.
• Fredrik Arpe, currently CEO of Järntorget, will take on the role of business area manager for the Property Management business area and join ALM Equity's Group Management in his capacity as Deputy CEO.

CONSOLIDATED KPIS

Summary	2021	2020	2021	2020	2020
	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Jan-Dec
Net sales, SEK m	752	280	925	693	1,759
Profit/loss for the period, SEK m	62	27	133	144	229
Return on equity, %	-1	-1	-2	3	4
Equity/assets ratio, %	38	40	38	40	40
Cash and cash equivalents, SEK m	966	701	966	701	722
Equity	4,637	3,607	4,637	3,607	3,790
Balance sheet total, SEK m	12,161	9,077	12,161	9,077	9,465

Key figures per share	2021	2020	2021	2020	2020
	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Jan-Dec
Adjusted net asset value*, per ordinary share, SEK	905	N/A	905	N/A	N/A
Share price on the closing day, SEK	780	550	780	550	700
Earnings per ordinary share, SEK	0.07	-0.62	-2.15	7.48	10.58

• Adjusted net asset value is based on the actual net asset value adjusted for the estimated market value of the operations at ALM Equity. For further information on how this value is produced, see page 5.

CEO'S STATEMENT

The foundations are being laid for a new management business

With the acquisition of Järntorget finalized, we have laid the foundations for strong, independent business areas as well as building up a new property management business.

TAKEOVER OF JÄRNTORGET

We have signed the last papers, the money has been exchanged and the acquisition of Järntorget is therefore complete. It has been an intensive and inspiring acquisition process and we have started the really exciting work of integrating the businesses and building on the values we create together. We will benefit from the expertise available at Järntorget in both project development and construction management, and these activities will be fully integrated into the Project Development and Construction Management business areas, respectively. Together, we have become a significantly larger Group and the Project Development business area, with its almost 17,000 building rights, will be one of the leading players in the Stockholm area.

The interest in the deal from both current and new shareholders and financiers has been significant in connection with the deal, which we are very happy about. The bond issue, which was the largest in ALM Equity's history, was completed on the best terms to date and the share issues were significantly oversubscribed. Financiers and owners obviously see potential in us being able to create added value on our continued journey.

Following the acquisition, the company's updated external market valuation is SEK 11.3 billion based on the calculated net asset value for tall of ALM Equity as of 30 June. This means that a value of around SEK 0.6 billion attributable to ordinary shareholders was added during the quarter. We have not taken into account the surplus value of the future management surplus from about 1,000 residential units that the Property Management business area has in a joint venture with Klövern, or surplus values in our digital business.

A NEW, STRONG MANAGEMENT BUSINESS

Our focus going forward is to create a new, strong property management business and we are very happy that Fredrik Arpe, the former CEO of Järntorget, will take on this exciting task as the new head of the Property Management business area. Järntorget's building rights portfolio consists of around 1,500 building rights which, by adapting them to a smaller and more in-demand size, can be doubled to 3,000. Together with around 3,000 existing building rights

in the Property Management and Project Development business areas, we have a portfolio totalling 6,000 building rights suitable for the property management business. Through this packaging, we can offer external financiers to share in the management journey once again. Ownership in Svenska Nyttobostäder will remain within the business area, but it is our ambition to increase the ownership spread in Svenska Nyttobostäder and reduce our ownership to less than 50% through sales or dividends. Due to an ownership of less than 50%, Svenska Nyttobostäder will no longer be consolidated in ALM Equity's accounts but will become a financial asset and thus make the values that are created clearer.

FURTHER DEVELOPMENT OF INDEPENDENT BUSINESS AREAS

We are now taking the next step in the development of the business areas. After the integration of Järntorget's business activities, all business areas will become more independent operations. All business areas must be able to stand on their own two feet and our objective is for them to be fully listed on the stock exchange. With greater independence, the business areas will increase the pace for further structural deals.

An interesting piece of the puzzle in the deal with Järntorget is Bomodul, which manufactures high-quality wooden house modules. We see great potential here for development and growth in industrial construction. Bomodul will be the hub for developing the business with both expanded capacity and vertical integration. The Construction Management business area has a very exciting future.

JUST THE BEGINNING

I've probably said it before, but this is just the beginning. Strengthened by the trust we have received from our owners and financiers, we will continue to develop ALM Equity's business and lead the restructuring of the housing industry through our various business areas. Through the management deal, we will create new values and perhaps Svenska Nyttobostäder will be listed on the stock exchange in a few years' time.

We are continuing to do what we are very good at - using new and old pieces of the puzzle to realize hidden values and create new structures that we can then realize when the time is right.

Last but certainly not least, I want to welcome all the fantastic employees from Järntorget to ALM Equity! Let's go!

Joakim Alm, CEO

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Järntorget Byggintressenter AB

The acquisition of Järntorget Byggintressenter AB was completed during Q2. The shares were transferred on 30 June 2021.

TRANSACTION AND FINANCING

On 4 May 2021, ALM Equity and the main owners of shares corresponding to 93.3% in Järntorget signed a letter of intent regarding the acquisition. An unconditional acquisition agreement was signed on 1 June 2021. Järntorget's earnings have been consolidated into ALM Equity from the beginning of Q2. More about the financial impact can be found in Note 7 on page 28.

The purchase price was around SEK 1.7 billion, which was financed partly with an issue of unsecured bonds

in ALM Equity of SEK 1 billion and partly with new issues of around SEK 0.3 billion in ordinary shares and around SEK 0.4 billion in preference shares. Järntorget's largest owner, Dammskogen Förvaltning AB, received part of the purchase price in the form of ordinary shares in ALM Equity. Some smaller owners received parts of the purchase price via ordinary and preference shares in ALM Equity and a smaller volume of ordinary and preference shares in ALM Equity's subsidiary Svenska Nyttobostäder.

ACQUISITION FINANCING

Ordinary shares

SEK 0.3 bn

Pref. shares SEK 0.4 bn

Acquisition price

SEK 1.7 bn

Bonds

SEK 1.0 bn

WHO IS JÄRNTORGET?

For 30 years, Järntorget has been a family-owned property developer which, with experience in all phases of housing develop- ment, has grown into a reputable property developer in Greater Stockholm.

ALM EQUITY AFTER THE

ACQUISITION

The acquisition will complement and strengthen ALM Equity's existing business areas in an effort to make the Group the leading corporate developer in the property sector in the Stockholm region. The addition of Bomodul further strengthens industrialized and sustainable construc-

tion. Large parts of Järntorget's building rights portfolio are suitable for the property management market, creating expansion opportunities for ALM Equity's Property Management business area. Järntorget's activities will be integrated into the Project Development and Construction Management business areas.

The business covers all parts of the value chain and the company

BEFORE THE ACQUISITION AS OF 31 DECEMBER 2020

develops residential units for both the private market and for property owners. Production takes place either through the company's own wooden house module factory or through the company's construction activities. The business has always been characterized by long-term profitability, cost control and a strong focus on sustain­ ability, including the Nordic Swan Eco-label.

	2020:
ALM	SEK 1,759 m net sales
Equity	97 employees
Property	13,301 building rights,
Management BA	of which 1,709 in
	production
	33 employees
Project	SEK 837 m net sales
Development BA	34 employees
Construction	7,027 managed units
Management BA	9 employees

	Järntorget	2020:
	Bygg­	SEK 381 m net sales
	intressenter	71 employees
Järntorget	3,821 building rights,
+		of which 775 are in
	­production (1,500 suitable
	for the property manage-
Abacus	ment market)
		48 employees
Bomodul	SEK 126 m net sales
		23 employees

Over the years, Järntorget has started around 400 residential units per year and the building rights portfolio consists of just over 3,800 building rights, including

775 in production. The Group has about 70 employees and in addition to Järntorget, the Abacus and Bomodul brands are also included.

AFTER ACQUISITION AS OF 30 JUNE 2021

					Residencies
		Sales April	Employees	Building	in produc-
Business area		- June 2021,	as of	rights as of	tion as of
Brands	SEK m	30 June	30 June	30 June
Property		1,454	50	16,713	2,912
Management BA
Project		406	86		3,089
Development BA
Construction		33	12
Management BA

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This is ALM Equity

ALM Equity develops and invests in business in the property sector. The business is structured in five business areas with independent companies and brands in property management, project develop- ment, construction management, financing and digital services.

VISION

ALM Equity will be the most profitable and innovative Group in certain parts of the Swedish property sector.

BUSINESS CONCEPT

ALM Equity will invest and develop business in the Swedish property sector based on the future needs of the market. Through active owner- ship, ALM Equity drives the initiatives that are judged to create the highest risk-adjusted return on equity for each individual business, and at the next level creates the maximum risk-adjusted return on equity for shareholders.

OBJECTIVE

Maximize risk-adjusted return on equity within each business through a flexible business model with an adaptable financing model and with a sustainable investment strategy.

PROFIT/LOSS PER BUSINESS AREA JANUARY-JUNE 2021

Property Management	Project Development	Construction Management
16%	66%	18%
SEK 38 M	SEK 156 M	SEK 44 M
SHARE OF ADJUSTED NET ASSET VALUE*
Property Management	Project Development	Construction Management
34%	41%	10%

SEK 3.8 BN

SEK 4.7 BN

SEK 1.1 BN

• Adjusted net asset value is based on actual net asset value adjusted for estimated market value of the activities at ALM Equity. For further information on how this value is produced, see page 5. In addition to the values in the business areas, there are values of SEK 1.7 billion in the parent company, corresponding to 15% of the total net asset value.

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Market valuation and adjusted net asset values

The holding in Svenska Nyttobostäder will be continuously market-valued after the listing in 2020, which will make the values created in that transaction visible. Currently, values created in other Group holdings are also made visible through external valuations carried out by PwC.

Estimated market values (SEK billion)	30/06/2021	31/03/2021
Property Management business area	3.8	3.8
Project Development business area	4.7	4.1
Construction Management business area	1.1	1.1
Parent company's assets	1.7	1.0
Total market value	11.3	10.0

The market value is distributed between ALM Equity's shareholders as follows: SEK 1.7 billion to the preference shareholders and

SEK 9.6 billion to the ordinary shareholders. This corresponds to an adjusted net asset value per ordinary share of SEK 905 as of 30 June 2021, equivalent to a discount of 16%.

During Q2, the total market value increased by SEK 1.3 billion and, via new issues, around SEK 0.3 billion in ordinary share capital and SEK 0.4 billion in preference share capital was added. This means that unrealized surplus values of around SEK 0.6 billion attributable to ordinary shareholders was added during Q2. The majority of the value creation is attributable to the assets that were added in connection with the acquisition of Järntorget.

METHOD OF VALUATION

In the Property Management business area, the holding in Svenska

Nyttobostäder has been valued at the share price as of 30 June 2021. No value has been set for the management business that exists in the ­second part of the ALM Property Management business area, where there are agreements for the acquisition of around 1,000 managed properties. No value has been set for the Digital Services business area either.

For the Project Development and Construction Management business areas, the holding has been valued externally by PwC, which has carried out a return valuation of future cash flows. The result of the return valuation has been reconciled using a relative valuation based on price-­ related key figures for comparable companies.

For the Project Development business area, a required return on equity of 11.9% has been applied up to and including the year 2027. For 2028 onwards, a return requirement of 14.9% has been used in order to

reflect greater risk in the future building rights portfolio. The valuation takes into account the fact that there is co-owner­ ship in the form of preference shareholders who have invested in parts of the projects.

For the Construction Management business area, a required rate of return of 13.2% was used throughout the ­period. In the valuation, the only customer is assumed to be ALM Småa Bostad with a continual business relationship. As a result, the customer concentration has not been taken into account in the valuation.

The valuation is updated quarterly based on updated forecasts and assumes a value interval of +/- 5% where the value is adjusted when the return value increases/decreases by at least 5% from the initial valuation which was carried out with a value date of

31 December 2020.

The valuation is based on assumptions about future developments based on the facts and the surrounding global situation that prevails today; it is not to be seen as a forecast. This means that it is not established values that are promised as an outcome, but they can change based on events that affect the activities.

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