Annual report 2019 TRONDHEIM
BERGEN
OSLO A LEADING HOUSEBUILDER STOCKHOLM Selvaag Bolig ASA is a STAVANGER residential property developer controlling the entire value chain from acquisition of land to sale of homes. The company has several thousand homes under development at any given time, and focuses on the growth areas in and around Greater Oslo, Bergen, Stavanger, Trondheim and Stockholm. Selvaag Bolig represents a continuation of Selvaag’s 70-year history and experience, and offers a broad variety of property types. The company’s head office is at Ullern in Oslo.
www.selvaagboligasa.no CONTENTS
ORGANISATION AND BOARD
CEO letter 4
Executive management Selvaag Bolig ASA 7
Description of the business 8
Corporate governance in Selvaag Bolig 12
Corporate social responsibility (CSR) 22
The environment 28
The Fornebu neighbourhood town 36
FINANCIAL: GROUP
Director’s report 38
Board of directors 46
Statement of comprehensive income 48
Statement of financial position 49
Statement of changes in equity 50
Statement of cash flows 51
Notes to the consolidated financial statements 52
FINANCIAL: PARENT COMPANY
Statement of profit and loss 92
Financial position 93
Statement of cash flows 95
Accounting policies 96
Notes to the financial statements 98
Declaration by the board of directors and CEO 107
Auditor’s report 110
ANNUAL REPORT | 3 CEO LETTER
AN IMPORTANT YEAR FOR SELVAAG BOLIG
The year 2019 proved important for Selvaag Bolig, with good financial results, substantial value creation and commercial dispositions which will increase our competitiveness.
I took over as CEO in May 2019, and have found a per share) was paid as a supplementary dividend in early company with a clear and focused strategy, a unique 2020. commercial grasp and leading-edge development expertise. The business model and main direction remain unchanged. The Urban Property transaction was implemented to refine Our most important consideration is our customers and the our core business, enhance the attention paid to operations, products and experience we offer them. Profitability is and manifest the value in our day-to-day business. It will also created through good project development and attractive increase our opportunities for growth. This transaction will products in the most important growth areas. We have substantially reduce tied-up capital and establish a access to a substantial portfolio of land in and around long-term, strategic and efficient financing collaboration Greater Oslo, Bergen, Stavanger and Trondheim, and are which strengthens our competitiveness. now working to become established in Stockholm. A dividend of NOK 4.50 per share was also paid during Selvaag has built more than 55 000 homes since the the year. Since 2013, we have now distributed NOK business began in 1948. Its long history as the people’s 36.30 per share to shareholders. The board has also housebuilder imposes a responsibility on us. It will be more recommended a dividend of NOK 1.50 per share for the important in the future to offer products which stand out and second half of 2019, which will be paid in May 2020. meet the expectations of the big proportion of single people Looking ahead, our ordinary capacity to pay dividend in and the increasing group of senior citizens. New residential relation to net profit could also potentially improve. We can concepts with an increased element of sharing are a key expect to have a higher return on equity, and will no longer part of the solutions, as are homes providing services and need to use earned equity to purchase land. The goal of activities. In many ways, this provides a unique opportunity paying high and stable dividends remains unchanged. for us because of our long experience with the Pluss lifestyle product. In a short space of time, devoting attention to the environment and sustainability has become a crucial factor We have already built more than 1 500 Pluss homes, with for all commercial enterprises. Historically a big contributor concierges, activities, services and common parts which to the problem, the property sector is now becoming part of provide people of all ages with a simpler daily life as well the solution. We at Selvaag Bolig have an important social as the opportunity for unique social cohesion. Unlike most duty as one of Norway’s biggest housing developers, and other companies offering serviced homes, we operate the the environment is now an essential part of that responsibility. Pluss projects ourselves. One of my key priorities has been to clarify the significance which social changes have for our We sell homes – the biggest and most important investment products and to take account of these in the further which the great majority of us makes in our lifetime. It development and expansion of the concept, as well as the therefore goes without saying that we and our products value of the Pluss concept for differentiating us from the rest help to fulfil society’s sustainability goals and to create good of the market. frameworks and conditions to improve the quality of life for our customers. Our new environmental policy therefore At the beginning of the new decade, we implemented our provides guidelines which ensure that the environment and largest and most important transaction since the stock market sustainability are an integrated part of product development, listing in 2012. Large parts of our land bank were sold to construction and operation. A key element in our strategy Urban Property, a new company structure established to is that we will only pursue large projects in central urban own these assets. The intention is that Urban Property will areas with population growth. This is our most important enter into purchase agreements for new land in the market contribution to a more sustainable society. which we want to acquire, and we will have an option to buy back these sites from it. This transaction was worth Olav Selvaag, our founder, said: “A city is there for the NOK 3.4 billion, and about NOK 2 billion (NOK 22 people, not vice versa”. That idea has been retained in our
4 | ANNUAL REPORT vision that “we make tomorrow’s cities better”. This means that, Key figures 2019 when creating the cities of the future, our job is to see to it that Operating revenues: NOK 3 369 million people’s homes and neighbourhoods provide secure Operating profit: NOK 865 million frameworks for a good life. We ensure the construction of durable and sensible projects in areas where they are needed. Pre-tax profit: NOK 854 million That is sustainability in practice. No job is too large or too Units sold: 752 complex for us. At Løren, we converted an abandoned army Net sales value: NOK 3 753 million camp into a completely new urban district. Kaldnes in Construction starts: 830 Tønsberg was turned from a dead industrial site into a new Units delivered: 732 and vibrant residential area. And a new town is set to arise at Units completed: 776 Fornebu, where an airport once stood. Units under construction: 1504 We will continue to build homes which are required at a price most can afford. We will be a leading provider of a better quality of life for ordinary people.
Rolf Thorsen CEO
ANNUAL REPORT | 5
ORGANISATION 2019
EXECUTIVE MANAGEMENT SELVAAG BOLIG ASA
Rolf Thorsen Group CEO
Kristoffer Gregersen Sverre Molvik Vice president communications CFO and market
Øystein Klungland Halvard Kverne Petter Cedell Vice president Vice president regions Vice president Greater Oslo property investments
ANNUAL REPORT | 7 SELVAAG BOLIG ANNUAL REPORT 2019
DESCRIPTION OF THE BUSINESS
BUSINESS MODEL/STRATEGY Fewer employees: about 70 employees in the core business. Selvaag Bolig is a housing development company which offers A small organisation improves cost efficiency. homes tailored for specific customer groups in the growth areas in and around Greater Oslo, Bergen, Stavanger, Trondheim and Predictable construction costs: tenders from several Stockholm. By offering good housing at competitive prices, the contractors always ensure that the right market price is obtained company will give as many people as possible, in all phases of and construction takes place at fixed prices. their lives, the opportunity to own a home. The company does not have an in-house construction arm, and concentrates primarily on Less capital tied up and lower execution risk: using developing large housing projects with more than 150 homes – turnkey contracts reduces tied-up capital and execution risk in the mostly in the NOK 3-6 million price category. By subjecting all construction phase. construction to competitive tendering, the company reduces risk and achieves better prices. Lower market risk: having no construction personnel in-house means big staffing adjustments are not required in the event of HOUSING RANGE TAILORED TO THE MARKET market fluctuations. Selvaag Bolig has house types and concepts tailored to different target groups with varying needs and preferences. Thanks to the Right expertise: collaboration with contractors who can size of its projects, the various types of homes can be combined overcome the respective challenges in the best possible way. in each of them. That enhances residential quality by creating Contractors have leading-edge expertise in different fields. neighbourhoods where homes are matched to all conditions of life and age groups. It also provides a range tailored to the market Improved capacity: required capacity at any given time, no and helps to optimise the sales and income profile of each project. capacity problems when several projects are to be built simultaneously. COMPETITIVE TENDERING FOR ALL CONTRACTS LAND PURCHASING AND FINANCING Selvaag Bolig is solely a developer without its own construction From January 2020, large parts of Selvaag Bolig’s available land organisation, and manages the whole value chain from the purchase portfolio have been acquired by Urban Property. Selvaag Bolig of land to the sale of turnkey homes. The company takes an has pre-emptive rights to and options for these sites. The plan is efficient approach to housebuilding which helps to position it as a that Urban Property will enter into agreements to buy new land cost-effective player, well equipped to meet possible fluctuations in the in the market, and Selvaag Bolig will purchase these sites from housing market. Subjecting all construction activity to competitive Urban Property when that is considered commercially appropriate. tendering offers several advantages. This collaboration frees up capital in Selvaag Bolig and permits efficient financing of new and existing land.
Value creation in Selvaag Bolig from 2020
6 – 36 MONTHS 6 – 12 MONTHS 3 – 9 MONTHS 12 – 24 MONTHS
Preparing land for Marketing Project design Construction development and sale Residential development Value Value
creation Land search Planning permission Sales start Construction start Delivery and contracts Part-payment Part-payment for land for land
8 | ANNUAL REPORT THE BUSINESS
VALUE DRIVERS DIVIDEND POLICY In addition to subjecting construction to competitive tendering, Selvaag Bolig’s ambition is to pay high and stable dividends to Selvaag Bolig’s strategy for buying and developing new sites its owners. The goal is that dividend should be a minimum of 40 is central to value creation at the company. It has access to a per cent of net profit and paid twice a year. However, the size substantial portfolio of land. That permits purposeful selection of of the dividend must be balanced against the company’s liquidity new sites which fit with the existing portfolio and meet the market forecasts and capital adequacy. The equity ratio in the company requirements prevailing at any given time for location, size, price will not be below 30 per cent. and development potential. The company continuously acquires land in line with an acquisition strategy which gives priority to RISK MANAGEMENT large sites in its defined core areas. Selvaag Bolig works actively to minimise the risk of cost overruns and delays. Risk is minimised by entering into turnkey contracts The company’s sales strategy is the key factor in its good progress. with solid construction companies which are well financed and Segmentation of residential schemes and optimising composite have a high level of expertise as well as a documented ability to projects with a broad range of house types have yielded positive deliver. The turnkey contractor is responsible for delivering the project sales and a favourable selling pace. As a general rule, Selvaag at the agreed time and price. In addition, the greater proportion of Bolig does not start construction until 60 per cent of the value of a the project cost is assured by the fact that building does not begin building stage has been sold. The rest of the building stage is sold until advance sales reach 60 per cent. Furthermore, a high degree during the period up to completion. This makes it possible to price of standardisation, combined with considerable detailing in the the units in the project correctly, and ensures income optimisation. specifications to contractors, reduces the risk of delays in the construction process. Continuous learning at the contractors Furthermore, the attention devoted to detailed planning, standardisation, contributes to ever more efficient project execution while further site utilisation and strategic land development helps to secure low reducing the risk of errors and delays. construction costs and good project margins for the company and competitive house prices. Selvaag Bolig sets high internal EXTERNAL RISK FACTORS standards for quality at every level, and has extensive quality Norway has low interest rates, low unemployment, substantial requirements for products and operations at its sub-contractors. household purchasing power and a high level of population That helps to reduce the risk of errors in the projects, and to ensure growth in urban areas. This contributes to a big need for new that all homes are good in technical terms and energy-efficient. housing. However, experience from earlier years indicates that negative shifts could occur in demand despite solid underlying GOALS market conditions, in part because of regulatory amendments or Selvaag Bolig aims to be one of Norway’s leading housebuilders, changes to the market’s supply side. and has growth as a long-term objective. Long-term growth will not be pursued at the expense of profitability or increase financial KEY FIGURES risk. The company’s strategy helps to secure its position as market Selvaag Bolig sold 752 homes net in 2019. Construction leader and to strengthen its competitiveness. The company has an started on 830, 776 were completed and 732 were delivered expressed goal of achieving a project margin of 12 per cent. to customers. At 31 December, the company had 1 504 homes under construction with a combined value of NOK 7.2 billion.
Value drivers in Selvaag Bolig
Competitive products Large, actively managed Effective and flexible Capital-efficient business model in growth areas land bank cost structure backed by solid balance sheet Concentrates exclusively on urban Value creation through initial and No in-house construction Requiring 60 per cent advance growth areas with high demand for further development of land as well organisation gives flexibility, sales before project start reduces housing and market depth as its optimisation reduces risk and optimises costs the need for project finance and the risk of inventory build-up Competitive prices providing a big Flexibility to develop several thousand Project-based business model customer base homes in urban growth areas increases flexibility and reduces risk Healthy debt structures and financial flexibility A broad range of house types Active capital management Big projects with more than 150 which reach more market segments homes provide economies of scale and maximise income in the Lean and efficient organisation projects reduces overheads . .
ANNUAL REPORT | 9 ILLUSTRATION: ELVEPARKEN, SANDNES (DEVIATIONS WILL OCCUR) INNHOLD SELVAAG BOLIG ANNUAL REPORT 2019
CORPORATE GOVERNANCE IN SELVAAG BOLIG
Selvaag Bolig wishes to maintain a high standard of corporate governance. This will strengthen confidence in the company, and contribute to long-term value creation by regulating the division of roles between shareholders, board and executive management over and above legal and regulatory requirements.
Corporate governance in Selvaag Bolig is based on the explain” principle. This means that the individual points in following main principles: the code are observed, but possible variances are accounted for. The company provides an annual overall presentation of • that relevant, reliable and identical information is its principles for corporate governance in its annual report, provided to all stakeholders and shareholders. and this information is available at www.selvaagboligasa.no/en. • that Selvaag Bolig’s board is autonomous and independent of the company’s executive management. 2. THE BUSINESS • that a clear internal division of roles and duties is established between board and executive management. The business purpose of Selvaag Bolig ASA is “to acquire • that all shareholders are treated equally and in and develop housing projects with a view to buying and accordance with applicable legislation. selling real property, and other activities associated with this, including business property. The company can 1. IMPLEMENTATION AND REPORTING ON participate in other companies at home and abroad related CORPORATE GOVERNANCE to housing development”. This appears in article 3 of the company’s articles of association, which are available on Compliance the company’s website at www.selvaagboligasa.no/en. Selvaag Bolig regards corporate governance as an Selvaag Bolig’s goals and principal strategies are important subject, which deals with the relationship between described in this annual report and on the website at society, the shareholders, the board of directors and the www.selvaagboligasa.no/en. The board sets clear goals executive management of the company. for the business with the aim of creating value for the shareholders. Through annual strategy processes, the board Selvaag Bolig ASA is a Norwegian public limited liability considers whether the goals and guidelines derived from company listed on the Oslo Stock Exchange. The company the strategies are unambiguous, adequate, well operationalised is subject to section 3, sub-section 3b of the Norwegian and communicated to employees, customers and other Accounting Act, which requires it to provide an annual stakeholders. statement of its principles and practice for corporate governance. This rule specifies the minimum information Selvaag Bolig has formulated guidelines for corporate which the presentation must provide. social responsibility (CSR) and other policy documents in accordance with the company’s values base. CSR is The Norwegian Corporate Governance Board (NCGB) has described in more detail in a separate section of this annual established the Norwegian code of practice for corporate report. Selvaag’s core values are commitment and governance (the code). Listed companies are required by ingenuity, and these are well entrenched throughout the the Oslo Stock Exchange to provide an annual overall business. presentation of their principles for corporate governance in line with the prevailing code. The current obligations for The guidelines contain general principles for business listed companies are available at www.oslobors.no, and practice and personal behaviour, and are intended to serve the NCGB code can be found at www.nues.no. as a starting point for the attitudes and basic views which will characterise the corporate culture and day-to-day work Selvaag Bolig observes the applicable code, published on in Selvaag Bolig. 17 October 2018, in accordance with the “comply or
12 | ANNUAL REPORT CORPORATE GOVERNANCE
3. EQUITY AND DIVIDENDS Purchase of Treasury shares The board of Selvaag Bolig believes it is appropriate that Selvaag Bolig had an equity of NOK 3 382.1 million at the board has a mandate to purchase the company’s own 31 December 2019, including non-controlling interests. shares, partly to implement the group’s share saving The board regards this as acceptable, and financing of the programme and remuneration arrangements for employees, company is tailored to its business purpose, strategy and and partly to use shares as a means of settlement in risk profile. connection with the possible acquisition of enterprises. The board was mandated by the AGM of 30 April 2019 Dividend to acquire the company’s own shares up to a total nominal The board has a clearly communicated dividend policy value of NOK 18 753 137, corresponding to 10 per tailored to the company’s goals, strategy and risk profile. cent of the share capital. This mandate can be used for a Selvaag Bolig’s ambition is to pay high and stable possible later reduction in the share capital with the consent dividends to its owners. The goal is that dividend should of the general meeting, for remuneration of the directors, be a minimum of 40 per cent of net profit and paid twice a for incentive programmes or as settlement for the possible year. However, the size of the dividend must be balanced acquisition of businesses, and for the purchase of shares against the company’s liquidity forecasts and capital where this is financially advantageous. The mandate can be adequacy. The equity ratio in the company will not be exercised several times, and remains valid until the AGM in below 30 per cent. 2020 and in any event no longer than to 30 June 2020. The mandate was not utilised in 2019, and the board will NOK 2.00 per share was paid in August 2019 as propose to the AGM that it be extended by one year until dividend for the first half of the year and amounted to the AGM in 2021. NOK 185.9 million. The board has proposed a dividend of NOK 1.50 per share for the second half of 2019, Share saving programme for all employees and amounting to NOK 140.6 million. That will make the total share purchase programme for management dividend for 2019 NOK 3.50 per share. This corresponds The company has a share saving programme for those of to 50 per cent of net profit and amounts to NOK 326.5 its employees working more than half-time. This is because million. co-ownership by the workforce is expected to promote value creation through increased commitment and greater loyalty. Selvaag Bolig proposed to the general meeting in A share saving programme encourages broad and long-term November 2019 that large parts of its land bank be sold to ownership and gives employees the opportunity to acquire a Urban Property. This transaction was completed in January direct stake in the company’s value creation. Employees can 2020, and a supplementary dividend of NOK 22 per purchase shares to a value of NOK 200 000 per year. The share amounting to NOK 2 062.8 million was then paid. price per share is the stock market price (volume-weighted average price for the final 10 days of stock exchange trading It could be appropriate for the board to receive a mandate before the programme opens) less a discount of 20 per cent, from the general meeting which allows it to determine conditional on a two-year lock-up period/restriction on sale. dividend payments continuously throughout the year, should The 2019 programme was conducted from 2-6 December, the financial basis for these be present. Such a decision 60 employees took advantage of the offer, and shares were must formally be taken on the basis of the approved annual purchased at NOK 63.16 per share before deduction of financial statements for 2019, and would in the event the 20 per cent discount. For the same incentive and reason, supplement the regular dividend approved by the general the company also has a share purchase programme for its meeting. A mandate of this kind must be adopted by the executive management. The ceiling for annual investment in general meeting and will apply until the next AGM but no the share purchase programme is the individual’s annual pay. later than 30 June in the following year. The price per share is the stock market price (volume-weighted average price for the final 10 days of stock exchange trading before the programme opens), less a discount of 30 per
ANNUAL REPORT | 13 CORPORATE GOVERNANCE
cent. Compensation is provided for the tax disadvantage The company’s transactions in its own shares are conducted of this discount to the employee. On 10 December 2019, via the stock exchange or in other ways at the stock market members of the executive management purchased 347 054 price. In the event of an increase in share capital, existing shares through the programme at a price of NOK 63.16 per shareholders will have a pre-emptive right to subscribe share before deduction of the 30 per cent discount. This is unless special considerations justify waiving this right. Any conditional on a three-year lock-up period/restriction on sale. such waivers will be justified and published in a stock Selvaag Bolig owned 344 375 of its own shares at 31 exchange announcement in connection with the increase in December 2019. Since the share programmes will continue share capital. in 2020, the board will propose to the AGM that the mandate to purchase the company’s own shares, as Conflicts of interest and transactions described in the previous section, be extended by one with related parties year until the AGM in 2021. Selvaag Bolig is concerned to maintain an open and cautious approach to investments on terms which could be Capital increase perceived as an undesirably close transaction or relationship The same AGM on 30 April 2019 mandated the board to between the company and a director, a senior executive increase the company’s share capital by up to NOK or related parties of these. This is outlined in the company’s 18 753 137. This mandate can be exercised several times, ethical guidelines and instructions for the board. and remains valid until the AGM in 2020 and in any event no longer than to 30 June 2020. It replaces earlier Where transactions take place with related parties, they mandates for similar purposes, and embraces capital must be conducted at arm’s length and on market terms. The increases in exchange for non-monetary considerations or board has guidelines which ensure that executive personnel the right to involve the company in special obligations. The report to the board if they have a material interest, directly mandate has not been utilised, and the board will propose or indirectly, in a contract entered into by the company. to this year’s AGM that it be extended by one year until the In the event of not immaterial transactions between the AGM in 2021. company and related parties, the board will commission an independent valuation and make this known to the Deviation from the code: The NCGB believes that grounds shareholders. should be given for such mandates and that they should be restricted to defined purposes. However, the board feels Transactions with related parties are reported in note 23 to that some flexibility is needed. As long as the mandates are the financial statements in the company’s annual report, and clearly limited in time and scope, the ability to take such in the half-year report. decisions should form part of the board’s administrative authority rather than requiring the holding of an Principal shareholder extraordinary general meeting. Selvaag AS is the principal shareholder in Selvaag Bolig ASA, and Selvaag Bolig ASA is a 4. EQUAL TREATMENT OF SHAREHOLDERS AND subsidiary of the Selvaag AS group. TRANSACTIONS WITH RELATED PARTIES 5. FREELY NEGOTIABLE SHARES Equal treatment of shareholders Selvaag Bolig has one class of share and all the shares No restrictions are placed by the articles of association on have equal voting rights. Emphasis is given in the work of the ability to own, sell or vote for shares in Selvaag Bolig the board and the executive management to treating all ASA. shareholders equally and to giving them the same opportunities to exercise influence. The company’s articles of association impose no restrictions on voting rights.
14 | ANNUAL REPORT CORPORATE GOVERNANCE
6. GENERAL MEETINGS found on the company’s website.
About the general meeting Agenda and execution Shareholders exercise the highest authority in Selvaag Bolig The general meeting elects its own chair. The meeting is ASA through the general meeting. The board makes opened by the chair of the board, who also arranges for provision to ensure that the general meeting is an the election of a chair for the meeting. The AGM’s duties effective forum for shareholders. include adopting the annual financial statements and directors’ report, and considering the board’s declaration on Considerable efforts are devoted to preparatory work, and the determination of executive pay and other remuneration. provisions are made for appointing proxies and for voting outside the physical meeting. Members of the nomination committee and its chair are elected by the general meeting. In addition, the general Notice meeting considers such other matters as are assigned to it The AGM is scheduled to take place from 10.00 on 24 by legislation or the articles of association. The minutes of April 2020 in the company’s premises at Silurveien 2 in the general meeting are published via a stock exchange Oslo. announcement and are made available on the company’s website at www.selvaagboligasa.no/en after the meeting. Before the meeting, shareholders have good opportunities to contact the company, either to clarify issues or to obtain The AGM in 2019 took place on 30 April, and 68.53 per help in putting issues to the general meeting. Detailed cent of the total issued shares and votes were represented. supporting documentation is posted to the company’s website 21 days before the general meeting at the latest. According to the NCGB code, provision should be made to See article 9 in the articles of association. Shareholders vote for individual candidates for the board and the nomination who have not asked to receive the supporting documentation committee. for the general meeting electronically will have this sent to them by post, as specified in the company’s articles of Deviation from the code: The nomination committee believes association. The supporting documentation must contain all that the board’s overall composition is important for the way the details required for the shareholders to form a view of it functions. For that reason, the company invites the every item on the agenda. general meeting to vote for the nomination committee’s collective recommendations for the election of the board All shareholders registered in the Norwegian Central and nomination committee. Securities Depository (VPS) will receive the notice, and have the right to submit motions and to vote directly or by proxy. According to the code, the board and chair of the A financial calendar, which includes the date of the AGM, nomination committee should attend. is available on the company’s website. Deviation from the code: The chairs of the board and the Registration and proxy form nomination committee, as well as the chief executive, are Registration must be made in writing, by post, VPS account always present to answer possible questions. The whole or e-mail. The board wishes to facilitate attendance by board will attend if this is considered necessary in view of the largest possible number of shareholders at the general items on the agenda. meeting. Shareholders who cannot attend in person are encouraged to appoint a proxy. Provision is made for the 7. NOMINATION COMMITTEE shareholder to specify separate voting instructions to their proxy for every item on the agenda. All information on the Article 7 of the articles of association specifies that the appointment of a proxy and the appropriate forms can be company will have a nomination committee. Guidelines
ANNUAL REPORT | 15 CORPORATE GOVERNANCE
have been established on this committee’s duties and requirements for the composition of the board which derive composition, and on the eligibility of candidates for at any given time from applicable legislation and statutory election. These guidelines were adopted by the general regulations. meeting held on 30 August 2011. 8. COMPOSITION AND INDEPENDENCE OF Pursuant to the articles of association, the nomination THE BOARD committee will have three members elected for a one-year term. The majority of these members must be independent of Composition of the board the company’s board and executive management, and the Pursuant to article 5 of the company’s articles of association, committee must act in the interests of shareholders in general. the board of Selvaag Bolig will comprise three-nine The chair of the nomination committee is elected by the members. The chair and the shareholder-elected directors general meeting, which also determines the remuneration of are elected by the general meeting, based on recommendations the committee’s members. The nomination committee itself from the nomination committee. recommends members of the committee. The board currently comprises seven directors, of whom The present committee was elected at the AGM of 10 April three are women, and is composed in such a way that it 2013, with the exception of Leiv Askvig. He was elected meets the company’s need for expertise, capacity and diversity. at the extraordinary general meeting of 9 December 2014 Weight is given to the whole board being in possession of to replace Peter Groth, who was elected to the company’s a broad business and management background as well as board at the same time. All members of the nomination in-depth understanding of the housing industry and property committee are up for election in 2020. The nomination development. An overview of each director’s expertise, committee currently comprises: background and shareholding in the company is available on the company’s website at www.selvaagboligasa.no/en. • Steinar Mejlænder-Larsen (chair) Employees of the business are represented on the board, • Helene Langlo Volle and the number of these worker directors is specified in the • Leiv Askvig applicable agreement on pay and conditions. At present, two directors are elected by the employees. None of the The chair of the nomination committee is employed by shareholder-elected directors are employed by or have Selvaag AS. The duties of the nomination committee are to carried out work for Selvaag Bolig. propose candidates for election as directors and to recommend fees for the directors, members of board Shareholder-elected directors are elected for one-year sub-committees and members of the nomination committee. terms. Employee-elected directors are elected for two-year The report of the board’s annual self-assessment is terms. All shareholder-elected directors are up for election in considered by the committee. The committee will account 2020. Directors’ fees are determined by the general for its work and present its recommendations, with meeting on the basis of a recommendation from the justifications, to the general meeting. The recommendations nomination committee. must encompass relevant information about the candidates and an assessment of their independence from the Independence of the board company’s executive management and board. The committee The composition of the board ensures that it can act should be in contact with shareholders, directors and the independently of special interests, and it must also function chief executive during its work on proposing candidates effectively as a collective body to the benefit of the for the board, and entrench its recommendations with the shareholders in general. company’s largest shareholders. The committee’s recommendations, with justifications, are made available No shareholder-elected director is involved in the executive 21 days at the latest before the general meeting takes management. Chair Olav Hindahl Selvaag and director place. Recommendations from the committee must meet the
16 | ANNUAL REPORT CORPORATE GOVERNANCE
Tore Myrvold are a director and CEO of Selvaag AS the basis for conflicts of interest. The company also follows respectively. Selvaag AS is the company’s principal up the various offices and so forth held by the directors to shareholder and, through subsidiaries and other investments, provide an information base for the company’s management may have business relations with Selvaag Bolig as a in avoiding unintentional conflicts of interest. supplier. The other shareholder-elected directors are independent of Selvaag Bolig’s executive management Fifteen board meetings were held in 2019, 13 as physical and significant business relations. gatherings.
See note 22 to the annual financial statements for information Meetings % attendance on the shareholdings of directors in Selvaag Bolig at 31 Olav Hindahl Selvaag1 11 of 12 92% December 2019. By virtue of their position, each director Gisele Marchand 14 of 15 93% Anne Sofie Bjørkholt 15 of 15 100% is subject to the regulations on primary insiders, with clear Peter Groth 13 of 15 87% rules related to such issues as the duty to investigate and Tore Myrvold 15 of 15 100% report in the event of trading in the company’s shares. Rune Thomassen2 10 of 11 91% Christopher Brunvoll3 4 of 4 100% 9. THE WORK OF THE BOARD OF DIRECTORS Sissel Kristensen 15 of 15 100%
The board’s duties 1 Olav Hindahl Selvaag returned to the board in May 2019 after acting as CEO for an interim period from June 2018. The board of directors bears the ultimate responsibility for 2 Became a director in April 2019. 3 Ceased to be a director in April 2019. management of the group and for supervising the chief executive and the group’s operations. Instructions for the board That makes the board responsible for ensuring an acceptable The board has adopted instructions which specify the rules organisation of the business and determining strategies, and guidelines for its work and administrative procedures. plans and budgets. The board participates in important These are reviewed annually or as required. The instructions strategic discussions throughout the year and undertakes for the board define the duties and obligations associated an annual audit of the company’s strategy. Furthermore, the with its work, and its relationship with the chief executive. board is responsible for establishing control systems and for The chair is responsible for ensuring that the work of the ensuring that the group is operated in compliance with the board is conducted in a correct and efficient manner. The established values base, the ethical guidelines and the board works on the basis of an annual plan, with specified expectations of the owners for socially responsible topics and issues for board meetings. The board evaluates operation. The board has a duty to ensure that the financial its work and competence on an annual basis. This is done statements and asset management are subject to satisfactory through a self-assessment which is summarised for the controls. Matters of significant strategic or financial nomination committee. At least once a year, the board importance are dealt with by the board. The board is reviews the most important areas of risk as well as internal responsible for appointing the chief executive, establishing control in the company. the chief executive’s instructions, authorities and terms of employment, and determining the chief executive’s Instructions for the chief executive remuneration. In addition, the board will protect the interests The chief executive of Selvaag Bolig ASA is responsible for of the shareholders while also having a responsibility for the the executive management of the Selvaag Bolig group. The company’s other stakeholders. chief executive must also ensure that the financial statements comply with legislation and other relevant provisions, and Each director is duty-bound to consider at all times whether that the group’s assets are managed in an acceptable conditions exist which, viewed objectively, might weaken manner. The chief executive is appointed by the board of general confidence in their impartiality or which might lay directors and reports to it. The chief executive is duty-bound
ANNUAL REPORT | 17 CORPORATE GOVERNANCE
to keep the board continuously informed on the group’s company’s executive management. The members financial position, operations and asset management. of the compensation committee are appointed by the board The board has also approved an authority structure for the for two-year terms or until they cease to be directors of the company which clarifies the authority of the chief executive company. and the executive management in terms of which issues must be considered by the board. The compensation committee currently comprises the following members: Financial reporting The board receives periodic reports with comments on the • Olav Hindahl Selvaag (chair) company’s financial status. Where interim reporting is • Gisele Marchand concerned, the company observes the deadlines specified • Peter Groth by the Oslo Stock Exchange. The compensation committee serves as a preparatory Board committees and advisory body for the board, and prepares issues The board has found it appropriate to establish for consideration and decision by the board concerning sub-committees to serve as preparatory and advisory remuneration for the company’s executive management and bodies for the board. associated matters. In addition, the committee prepares overall principles for the remuneration of other employees to the extent that these are to be considered by the board. Audit committee The compensation committee helps the board to shape The audit committee is elected by and from among the principles and strategies for remunerating senior executives. directors, and must comprise at least two directors. At least While the compensation committee reports and makes one of these should have experience from the exercise recommendations to the board, the latter is responsible of accounting or financial management, or of auditing. for acting on such proposals. The company has drawn up Members of the audit committee are appointed by the separate instructions for the compensation committee’s work, board, and changes to its composition are made when the which contain further details on the committee’s duties, board might wish to do so or when the members cease to composition and procedures. The committee held be directors of the company. The audit committee currently 10 meetings in 2019. comprises the following members:
10. RISK MANAGEMENT AND INTERNAL • Gisele Marchand (chair) • Tore Myrvold CONTROL
The company’s auditor also attends all the meetings. Responsibility and purpose of the board Risk management and internal control in Selvaag Bolig are The audit committee serves as a preparatory and advisory intended to help ensure that the company takes a coherent body for the board. It will (a) prepare the board’s follow-up approach to its operations, financial reporting and of the financial reporting process, (b) monitor the systems for compliance with applicable legislation and regulations. The internal control and risk management, (c) maintain ongoing board is required to conduct an annual review of Selvaag contact with the company’s elected auditor concerning the Bolig’s risk management and internal control, as well as audit of the annual financial statements, and (d) assess and its guidelines and the like on how the company integrates monitor the independence and objectivity of the auditor in concern for the world at large with value creation. Internal relation to the company, and particularly the extent to which control also embraces the company’s values base, CSR and services other than audit provided by the auditor represent a ethical guidelines, which apply to all company employees. threat to the latter’s independence and objectivity in relation to the company. The audit committee met six times in 2019. Board reviews and reporting An annual strategy meeting is held by Selvaag Bolig to lay Compensation committee the basis for the board’s consideration and decisions during A compensation committee has also been established, the year. The most important risk exposure areas and the comprising up to three directors who are independent of the internal control system are reviewed at this meeting.
18 | ANNUAL REPORT CORPORATE GOVERNANCE
A survey of the company’s risk factors and management is are not linked to the group’s performance. No options are conducted regularly. This exercise plays a key role for the awarded to directors, and shareholder-elected directors board’s strategy meeting, and defines the direction of further have no agreement on a pension plan or on payment after work on the company’s risk management. An overarching their period of service has ended. None of the management model has been established for continuous shareholder-elected directors do work for the company follow-up, based on the group’s strategy, values base and in addition to their directorship. ethical guidelines. In addition, principles have been drawn up for reporting in the key areas, as well as guidelines for Directors observe general insider regulations for trading central processes and activities. An authority matrix has also in the company's shares. See note 22 to the consolidated been established for delegating responsibilities to defined financial statements for an overview of shares owned by roles in the organisation. All employees have clear directors. guidelines on the scope of their own authority and on the next level up for decisions or approvals. 12. REMUNERATION OF EXECUTIVE PERSONNEL Selvaag Bolig has established a set of internal procedures and systems which are intended to secure uniform and As mentioned in section 9, a compensation committee reliable financial reporting and operations. A quality comprising up to three directors has been established to assurance system has also been established to safeguard support the board’s work on the conditions of employment quality when executing the group’s projects. One for the chief executive and on the strategy for and main component of this system is a review, conducted at least principles of remuneration for the company’s senior once a quarter, of risk in the projects and other parts of the executives. The group’s guidelines for the remuneration of business. This review identifies the financial development of executive personnel are described in note 22 to the the company’s projects and makes it possible to implement consolidated financial statements. The individual possible risk-reducing measures. Planning, management, components in a remuneration package must be assessed execution and financial follow-up of construction and collectively, with fixed basic pay, possible variable pay production processes and projects are integrated in the and other benefits such as pension and termination Selvaag Bolig group’s commercial operation. Construction payments viewed as a whole. Variable pay in the form of projects report systematically to the group management. bonus payments will be based primarily on objective, definable and measurable criteria. Such variable pay Selvaag Bolig’s consolidated financial statements are (bonuses) cannot exceed 100 per cent of basic pay for the prepared in accordance with the applicable IFRS. The executive management. No options have been awarded to board receives periodic reports on the group’s financial employees or elected officers of the company. results as well as a description of the status of the most important individual projects. In addition, quarterly financial These guidelines are presented annually to the general reports are prepared and approved by the board ahead of meeting in connection with its consideration of the financial interim reporting. The auditor attends meetings of the audit statements. committee and board meetings related to the presentation of the preliminary annual financial statements. The company’s 13. INFORMATION AND COMMUNICATION key risk factors are described in the directors’ report. Selvaag Bolig endeavours to ensure that all reporting of 11. REMUNERATION OF THE BOARD financial and other information is timely and correct, OF DIRECTORS and based on openness and equal treatment of players in the securities market. The company observes the The general meeting determines directors’ fees annually on recommendations of the Oslo Stock Exchange on reporting the basis of a recommendation from the nomination investor information, which came into force on 1 January committee. 2012. Information from Selvaag Bolig is published in the form of annual and interim reports, press releases, stock A total of NOK 1 867 000 was paid in directors’ fees for exchange announcements and investor presentations. All 2019. Fees paid to each director in 2019 are presented information regarded as significant for the valuation of the in note 22 to the annual financial statements. Directors’ fees
ANNUAL REPORT | 19 CORPORATE GOVERNANCE
company is distributed and published via the Cision and 15. AUDITOR Oslo Stock Exchange Newsweb messaging systems and on the company’s website at www.selvaagboligasa.no/en. Election of auditor The group’s auditor is elected by the general meeting. The The company presents its interim annual results by the end board’s audit committee will present its report when the of February. Full financial statements, together with the general meeting comes to elect the auditor. Selvaag Bolig’s directors’ report and the rest of the annual report, are made auditor is PricewaterhouseCoopers. available to shareholders every year at least three weeks before the AGM, and by the end of April at the latest. Interim figures are reported within 60 days of the end of Auditor’s relationship with board and audit the quarter, in accordance with the rules of the Oslo Stock committee Exchange. The auditor gives the board an account of its work and provides an assessment of the company’s financial reporting The financial calendar is available on the websites of and internal control in connection with the annual financial the company and the Oslo Stock Exchange. The primary statements. At this meeting, the board is briefed on which purpose of information from the company will be to clarify services in addition to auditing have been provided during the company’s long-term goals and potential, including the year. The auditor meets the board at least once a year its strategy, value drivers and important risk factors. The without the executive management being present. The auditor company’s guidelines for investor relations provide more has the right to attend Selvaag Bolig’s general meeting. detailed specifications of the way information is handled Written confirmation must be provided once a year by the in the group. Who will act as the company’s spokesperson auditor to the board that the specified requirements for the on various matters has been defined. The CEO and CFO independence of the auditor have been met. of Selvaag Bolig will be the primary spokespersons to the financial market on behalf of the company. The auditor attends the meetings of the audit committee. Once a year, the auditor must present the committee with 14. Take-overs the main features of the plan for conducting the audit work. The auditor will review possible significant changes in The company’s articles of association place no restrictions Selvaag Bolig’s accounting principles, assessments of on the purchase of shares in the company. In the event of significant accounting estimates and all significant conditions a possible take-over bid, the board will help to ensure that where disagreement has occurred between the auditor and the company’s shareholders are treated equally and that the the executive management. At least once a year, the auditor group’s day-to-day operations are not disrupted unnecessarily. must review Selvaag Bolig’s internal control system with the The board will seek to help ensure that the shareholders audit committee – including identifiable weaknesses and have sufficient information and adequate time to form an proposals for improvement. The board briefs the opinion on a take-over bid. general meeting on the auditor’s fee, broken down between audit work and other services in addition to auditing. The instructions for the board of Selvaag Bolig ASA specify how the company will respond should an offer be made for the company’s shares. In such cases, the board will issue a statement which contains an assessment of the offer and a recommendation to the shareholders on whether they should accept it. In this assessment, the board should take account of such considerations as the way a possible take-over would affect long-term value creation in the company. A justification of the recommendation must be provided.
20 | ANNUAL REPORT ILLUSTRATION: SILKEFØRET, LØRENSKOG (DEVIATIONS WILL OCCUR) SELVAAG BOLIG ANNUAL REPORT 2019
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Selvaag Bolig will meet requirements related to HUMAN RIGHTS AND SOCIAL DUMPING Selvaag Bolig does not have its own construction company, • human rights and social dumping and accordingly spends substantial amounts on purchasing • worker rights and social conditions construction services every year. That provides big • combating corruption and price fixing opportunities for influencing the industry in the fight against • impact on the natural environment. social dumping. Selvaag Bolig sets requirements for and works continuously to help ensure that suppliers and The company ranks among the leading housing developers sub-suppliers have pay and working conditions as in Norway. Its operations have big spin-offs for Norwegian required by law. The bulk of the company’s operations are sub-contractors, public welfare and value creation. The in Norway, and it purchases services primarily from large, business achieved a turnover of NOK 3.4 billion in 2019 highly reputable Norwegian construction contractors. In with the help of 90 work-years. Selvaag Bolig will create addition, it buys construction services from two large players value for society by building good and sustainable homes in Estonia and Poland. The company does not accept any which as many people as possible can afford to buy, develop form of harassment or discrimination on such grounds as good residential areas and environments and contribute race, religion, nationality, sexual orientation or gender, and actively to the development of sustainable urban communities. does not tolerate any behaviour which can be perceived as This means in part that the company gives priority to urban threatening or demeaning. areas experiencing expansion pressures as well as to large development projects, develops site-efficient homes with the Selvaag Bolig requires that its suppliers do not practise greatest volume in lower price categories, seeks to be social dumping and that all statutory requirements are cost-effective and works to ensure positive official policies observed. This requirement is included, for example, in by being a clear voice in the public debate. contracts with suppliers of construction services. In this way, the company helps to ensure that its partners and suppliers Ethical, social and environmental considerations are work in accordance with applicable legislation and rules, integrated in its day-to-day operations. The company has a and that no social dumping occurs in the value chain. Work goal of being a good and secure workplace, and requires done in Norway by supplier and/or partner employees that it and its suppliers pursue their operations in compliance complies with Norwegian collective pay agreements and with applicable legislation and statutory regulations. legislation. Suppliers doing work on Norwegian building Furthermore, Selvaag Bolig will be a responsible social sites must, for example, be able to document at all times player and minimise emissions/discharges and damage to that the labour force used on these sites is legal. This is the natural environment. The company has ethical guidelines followed up with regular inspections. which are described at www.selvaagboligasa.no/en/. To the best of the company’s knowledge, no social dumping The company also reports on its corporate governance or breaches of human rights occurred in Selvaag Bolig or at in this annual report and on the website at its suppliers during 2019. The company’s routines for www.selvaagboligasa.no/en. Continuous efforts are safeguarding human rights and countering social dumping made to ensure that employees are familiar with and are considered to function well, and work on improving observe all the company’s guidelines. To help ensure them will continue in 2019. Reference is also made to compliance with this requirement, all employees must section 3.8 of the company’s ethical guidelines on the take a mandatory e-learning course on ethics and social working environment, available on its website at responsibility. The whole workforce had taken and www.selvaagboligasa.no/en/. passed this course by 31 December.
22 | ANNUAL REPORT WORKER RIGHTS AND SOCIAL CONDITIONS New surveys indicate that these measures function well. For Selvaag Bolig will be an inclusive workplace, where the the fifth year in a row, Selvaag Bolig has been certified as rights of all employees are safeguarded in accordance with a great place to work and is on the list of Norway’s 20 best applicable legislation. workplaces. Both certification and list have been developed by the Great Place to Work Institute on the basis of a global Expertise enhancement standard for the characteristics of a good workplace. A All employees are given opportunities for professional survey and assessment of Selvaag Bolig’s organisation and development and expertise enhancement, including through management practices have been conducted. courses, seminars and specialist gatherings both in-house and externally. All managers with personnel responsibility Working environment and sickness absence must conduct annual job reviews. Expertise enhancement is Emphasis is given by the board to ensuring that efforts a key item in these discussions. The greatest expertise aimed at reducing sickness absence and preventing injury development occurs with external assistance and through have a high priority in the companies. The group’s target daily work in the company. The company makes efforts to is that sickness absence will be below three per cent. It give employees assignments in new disciplines and was 2.2 per cent for the group in 2019, compared with projects, and to ensure that the expertise developed is 3.4 per cent in 2018 and 2.4 per cent in 2017. The shared across the various departments and projects. corresponding figures for the parent company were 1.5, 2.4 and 1.7 per cent. No lost-time injuries were recorded Job satisfaction among the company’s employees during 2019. Selvaag The working environment in Selvaag Bolig is regarded as Bolig has a good overview of the causes of sickness very good. The company measures job satisfaction among absence and follows up employees on sick leave closely. employees on an annual basis, and the results in 2019 The company works continuously on measures to reduce were good. The goal is for the company to be one of sickness absence. Norway’s most attractive workplaces, and measures are continuously adopted on the basis of the employee survey to strengthen and preserve a good working environment.
ANNUAL REPORT | 23 CORPORATE SOCIAL RESPONSIBILITY (CSR)
Health, safety and the working course on ethics and social responsibility, which also deals environment (HSWE) with this topic. Selvaag Bolig has adopted guidelines based on ISO standards for health, safety and the environment. Through Further information can be found in section 3.9 of the the Norwegian construction client and internal control company’s ethical guidelines on dealings with customers, regulations, the company fulfils the requirements for suppliers, competitors and government agencies, which construction clients on monitoring health, safety and the are available on the company’s website at working environment (HSWE) at building sites. Contracts for www.selvaagboligasa.no/en. all projects accord with regulatory requirements, and HSWE performance is reported regularly to the chief executive as Whistleblowing routines specified by the guidelines to the regulations. This is also Section 3.15 of the company’s ethical guidelines contains a fixed item for consideration by the board. Selvaag Bolig provisions on routines to be followed in the event of possible sets special requirements for HSWE in all turnkey contracts. suspicions that formal legal or regulatory rules, or the Specific provisions are included in all contracts entered into company’s ethical guidelines, have been breached. These by the company with contractors on turnkey contracts. As routines instruct the employee concerned to raise the issue the construction client, Selvaag Bolig prepares an HSWE through the line organisation, possibly with the group’s legal plan for its construction projects and ensures that the turnkey officer. The company also has a channel for anonymous contractor follows up all the requirements defined in the whistleblowing on its intranet site. This is intended to lower contract. Regular inspections are conducted at the building the threshold for reporting on breaches. The ethical sites. Immediate action is taken if nonconformities are guidelines are available on the company’s website and detected. These routines function well and will be continued. intranet.
Equal opportunities The group’s general policy is that no unequal treatment or other form of discrimination related to gender or ethnic background will occur. It gives emphasise to expertise rather than gender, age or ethnic background when making appointments. Women account for 49 per cent of the workforce and 22 per cent of managers.
COMBATING CORRUPTION AND PRICE FIXING Selvaag Bolig does not accept any form of corruption. Its employees must exercise caution in accepting or providing gifts, services or other benefits from or to business contacts. Moderate forms of hospitality and social interaction are part of normal business practice, but gifts, services or benefits designed to influence employee behaviour in their work for the group must not be accepted. Relationships which could influence decision processes or could provide other grounds for believing that this is happening are not acceptable.
Selvaag Bolig does not accept any form of price fixing with other players. Employees must not contribute to any form of price collusion with business contacts or others which could distort competition or conflict with applicable regulations against price fixing and/or cartel operations. The regulations and how they are to be practised are known to the employees, in part through training programmes for new recruits and reviews in group meetings, and are available on the company’s website. No cases of price fixing or corruption were exposed in 2019, and continuous efforts are made to strengthen knowledge of the company’s routines among employees – in part through a mandatory
24 | ANNUAL REPORT
SELVAAG BOLIG ANNUAL REPORT 2019
THE ENVIRONMENT
Selvaag Bolig pays special attention to environmental considerations when pursuing its housing development activities, and has taken account of the natural environment in a dedicated environmental policy and in its planning and management systems. The company will seek to minimise its negative impact on the By building in established urban and residential areas and environment and climate. Its environmental impact relates near public transport hubs, the company helps more people primarily to the way its housing projects contribute to good to live a more environment-friendly daily life, in walking and local and urban development and are designed for sustainable cycling distance of shops and services and close to public operation, and secondarily to the energy and materials transport. This also contributes to an enhanced quality of life consumption, waste, and effects on and use of natural for customers. resources by its suppliers. Selvaag Bolig’s development projects contribute directly to Selvaag Bolig builds houses in accordance with applicable urban renewal by replacing obsolescent logistics and legislation and statutory regulations. These include strict commercial buildings in asphalted surroundings with requirements for climate-friendly and energy-efficient homes. high-value homes surrounded by green outdoor areas and The company is continuing to develop environment-friendly good urban qualities. The company’s strategy is a specific buildings in a cheaper way, in part so that the company can contribution to more residents sharing the community costs of adapt its homes more easily to possible new and tougher social and technical infrastructure, and to everyone living in official requirements. a more space-efficient way. Where the latter is concerned, this includes developing homes with efficient layouts and Internal work is evaluated regularly. The buildings and the other solutions which make it possible to live more compactly. construction process are followed up continuously through This is environment-friendly and reduces unit costs for buyers. internal and external inspections. Selvaag Bolig does not have its own construction personnel, and purchases these Large-scale projects in cities create the basis for local services exclusively from financially sound contractors with business and commercial activities. a high level of expertise and documented ability to deliver. Contractors who build for the company must have The company emphasises meeting places outdoors and documented routines to ensure a low environmental impact. indoors, and is strengthening its commitment to developing Selvaag Bolig works continually to improve its routines and good social neighbourhoods in line with government management systems, and constantly assesses whether stricter planning guidelines and good thinking on sustainability. It standards should be set for environmental reporting by has developed governing documents which take care of its executing contractors. CSR, and which cover assessments of an active contribution to the social and aesthetic aspects of projects. Selvaag The company believes that housing is the hub in sustainable Bolig also supports culture, mass-participation sports and urban development of the future. It is therefore upgrading educational institutions, primarily at local level. its ambition of building in transformation areas as well as contributing to increased urban density in line with existing Selvaag Bolig speaks with a clear voice in public debates official policies and goals set by international initiative, such on housing and urban development, and is an active contributor as the UN framework convention on climate change (the to a factually-based exchange of views. The company Paris agreement) and the UN sustainable development goals participates in political and technical advisory bodies and (SDGs), which Selvaag Bolig has committed itself to. The shares its experience and practice through speeches and company concentrates new investment on transformation public debates. areas and sites in the largest cities, which contributes to economic growth and strengthening of social conditions.
28 | ANNUAL REPORT ENVIRONMENT
The company’s environmental policy outlines its six long-term sustainability goals. These are: Selvaag Bolig adopted and introduced the following environmental measures and plans in 2019. • make provision for as many people as possible to live in an environment-friendly way • Commissioned and distributed the Lessons from the Løren • develop projects where the buildings make an report, which provides a good overview of the effects of environmental contribution various measures implemented in this part of Oslo, and a • concentrate on urban, compact projects close to public good empirical basis for how Selvaag Bolig will increase transport hubs social sustainability in new projects. • adopt financially sustainable solutions which make it possible to develop climate-friendly homes and residential • Developed an environmental and quality programme for environments Bjerke, based on the City of Oslo’s declaration and • participate in the public debate and challenge established project aimed at utilising environmental measures which solutions can help to achieve an emission-free capital by 2030. • environmental certification of future housing projects. • Decided to adopt new heating technology at the Selvaag Bolig has given priority to six of the 17 SDGs Ringve development area in Trondheim which reduces specified in the UN’s 2030 agenda for sustainable energy loses from distance heating and makes it easier development. In addition, the company has committed itself for users to measure their own consumption. to the international framework convention on climate change (Paris agreement) initiative. Work to define Selvaag Bolig’s • Completed the first phase of the Lørenporten project priority SDGs was based on a stakeholder analysis and a with solar-powered heating and lighting in common parts as well as surplus energy used to charge electric cars. review of various relevant documents from Selvaag Bolig. On The dynamic EVlink load management system from the basis of this analysis, the company has defined the most Schneider has also been installed to allocate the building’s appropriate SDGs. These reflect where the company can exert available output for car charging without exceeding its the greatest influence, either in the form of negative footprint electricity subscription. In addition, infrastructure has been or as a contribution to meeting the goals through its operations. put in place to tie in all car-parking slots as required. The available output per slot is a maximum of 11 kilowatts (three-phase).
• Decided that Landås in Asker, with about 650 flats in all, will have water-borne heat from a district heating plant based on geothermal energy. This facility will be established and utilised for heating during the first construction phase. All construction machinery used to build the infrastructure in this project will also run on biodiesel. In addition, great emphasis has been placed on reusing spoil internally in the landscaping plan to reduce transport in and out of the site. Topsoil will be used for food production elsewhere in the local authority. Section L3 at Landås has been approved as a role model for the FutureBuild programme. Plans call for about 80 homes to be built in solid wood.
• Selvaag Bolig believes that the industry can collectively do a lot for sustainability. It therefore joined the Green Building Alliance in 2019.
ANNUAL REPORT | 29 ENVIRONMENT
UN sub-targets UN sub-targets
11.1 Access for all to adequate, safe and affordable 12.2 Achieve the sustainable management and efficient housing and basic services. use of natural resources. 11.3 Achieve more inclusive and sustainable human 12.5 Reduce waste generation through prevention, urbanisation. reduction, recycling and reuse. 11.6 Ensure good air quality and responsible waste 12.7 Promote sustainable public procurement practices. management, and reduce the negative consequences 12.8 Ensure relevant information and awareness of a for the environment. sustainable lifestyle. 11.7 Provide universal access to safe, inclusive and accessible green and public spaces.
Selvaag Bolig’s contribution Selvaag Bolig’s contribution • Develop sustainable local communities which support • Plan for and design housing projects which promote sustainable cities and a sustainable lifestyle, in part by responsible consumption, a sharing economy and concentrating on the development of transformation areas intelligent solutions for repairs and recycling. near public transport hubs. • Ensure prudent waste handling during the • Protect air quality both during the construction process and construction projects. in the completed homes, in part through materials selection. • Set requirements for materials selection and resource • Plan for a good social residential environment, and ensure use at subcontractors which promote sustainability. green and healthy outdoor areas. • Ensure that housing projects are constructed to cope with tomorrow’s climate.
30 | ANNUAL REPORT ENVIRONMENT
UN sub-targets UN sub-targets
7.1 Ensure universal access to affordable, reliable and 8.2 Increase economic productivity through modern energy services. technological upgrading and innovation. 7.2 Increase the share of renewable energy in the 8.4 Work to decouple economic growth from global energy mix. environmental degradation.
7.3 Double the rate of improvement in energy efficiency. 8.8 Protect labour rights and promote a safe and secure working environment for all workers
Selvaag Bolig’s contribution Selvaag Bolig’s contribution • Build energy-efficient homes. • Ensure compliance with Norway’s Working Environment • Use energy-efficient solutions. Act and the construction client regulations, good HSE regimes and applicable collective pay agreements • Require greater use of electricity in the internally and throughout the supplier chain. construction phase. • Reduce the climate and environmental footprint over • Provide electricity infrastructure for vehicle charging, etc. the useful life of a home. • Work to ensure that operating parameters and • Ensure an appropriate pace of development in line official planning processes promote renewable and with market demand. efficient energy. • Develop projects which facilitate well-being and good health.
ANNUAL REPORT | 31 ENVIRONMENT
UN sub-targets UN sub-targets
13.1 Strengthen resilience and adaptive capacity to 3.4 Reduce by one third premature climate-related hazards and natural disasters. mortality from non-communicable 13.2 Integrate climate change measures in strategies diseases through prevention and and planning. treatment, and promote mental health and well-being. 13.3 Work to combat, adapt to and mitigate the impact of climate change.
Selvaag Bolig’s contribution Selvaag Bolig’s contribution • Build homes adapted to tomorrow’s climate. • Secure good air quality in and around • Concentrate on reducing greenhouse gas emissions the construction site. and resource use internally and at subcontractors. • Secure good air quality in completed • Reduce the climate and environmental footprint over homes. the useful life of a home. • Promote a good social residential environment. • Take account of neighbours during the planning and construction phase. • Secure functioning green spaces around the homes.
32 | ANNUAL REPORT ILLUSTRATION: FORNEBU SØR, FORNEBU (DEVIATIONS WILL OCCUR) ILLUSTRATION: FORNEBU SØR, FORNEBU (DEVIATIONS WILL OCCUR)
ENVIRONMENT CASE
THE FORNEBU NEIGHBOURHOOD TOWN
The Fornebu South development will be a town with more than 1 800 homes plus workplaces, cafes and shops, providing an urban gathering point for the whole area. Basic social and environmental guidelines being laid as early as the planning phase build on the idea of proximity to everything people need in their everyday lives. Selvaag Bolig calls this the “neighbourhood town”.
When the company emphasises environmental considerations in developing Fornebu South, it involves much more than materials selection and climate-friendly technology. It concerns the integrated actions which achieve a place where it is not only good to live but the way one lives also has a sustainable footprint.
The sum of conscious choices related to the physical, social, aesthetic and environmental aspects will ultimately determine whether Fornebu South will be merely a place to live or work, or also an attractive place to be. Selvaag Bolig has adopted the principles for a neighbourhood town as a planning tool for this development.
Selvaag Bolig has identified the following measures to be assessed when implementing Fornebu South.
• Engage an environmental coordinator for planning, designing and executing the development project.
• Seek out, challenge and reward players who propose new solutions to promote energy efficiency, flexibility, lower greenhouse gas emissions and other environmental qualities.
• Exploit roof areas, on the basis of an assessment of what best suits each project, for such purposes as surface water treatment, energy generation or recreational space.
• Plan and design for flexible and space-efficient solutions. Ensure that materials and buildings get a long useful life even when user needs change.
• Seek to keep building sites free of fossil fuels.
• Encourage users to adopt a sustainable lifestyle, including car-share schemes, secure bicycle parking and intelligent technology for energy use and power levelling in the homes.
• Prepare user guides for housebuyers and tenants in order to encourage good resource utilisation, low pollution and a good indoor climate during the occupancy phase. Tips on using the ventilation and heating system, window airing, cleaning surfaces, waste sorting and so forth will be presented in a user-friendly manner (app and/or management, operation and maintenance manual).
36 | ANNUAL REPORT ENVIRONMENT CASE
The neighbourhood town builds on five main principles
LANDSCAPE AND LOCATION The neighbourhood town is based on location-specific and natural preconditions, and reinforces the unique aspects – closeness to a blue-green landscape, to history and to the development of the site over time. A town seldom has absolute boundaries, but relates to its hinterland, and the neighbourhood town promotes a focus on its peripheral areas and the provision of a seamless transition to the surroundings. It will be close to the outside world, eliminate the distinction between town and country, and emphasise biological diversity as an important element for social reasons as well.
COMPACT URBAN STRUCTURE A compact urban structure provides greater proximity, accessibility and navigability. This means a larger proportion of the population has immediate access to services and facilities in a simple and effective way. The neighbourhood town emphasises a compact urban configuration to promote walking and cycling, improve the microclimate, reduce material use, enhance energy efficiency, and facilitate social life, an active local community and a sustainable local economy. Its structure invites variation, with an interplay of heights, volumes and facades which helps to create different spaces and zones for the population to meet, move about and linger. A compact and varied urban structure gives flexibility and makes an area less vulnerable to fluctuations and business cycle shifts in the housing market.
GREEN MOBILITY The neighbourhood town emphasises the needs of cyclists and pedestrians through good, safe and varied links which reduce perceived distance for these vulnerable road users – and where walking or biking are the simplest and most attractive options. That facilitates health and exercise. Closeness to public transport and a continuous network of streets and paths linking important destinations provide pedestrians and cyclists with many alternative routes between important daily travel targets. This creates a town where roads are replaced by streets, and where the car is a guest.
DIVERSE FACILITIES The neighbourhood town is about a concentration of functions, intensified utilisation and active facilitation of different activities in the same urban space, including at different times of day. This offers closeness to everyday tasks, but also to functions which add an extra dimension to life – day care and schools, work, public transport, shops, and social and cultural activities. That helps the place to be perceived as full of experiences, gives residents a sense of ownership, and increases the desire to look after the environment. The neighbourhood city has a life cycle perspective and will offer attractive facilities for all life’s phases.
LIFE BETWEEN THE HOUSES The neighbourhood town makes provision for social meetings and places the individual in the centre. It has a human perspective and emphasises the individual’s experience of the location. The physical structures will help to create a neighbourhood feel, which contributes to ownership, identity and care for the environment. Closeness to all generations is encouraged. The town has a life cycle perspective and is specially shaped for the youngest and oldest residents (who have the greatest need for reduced distance and a more restricted radius of movement). An equally important goal is to establish public spaces and facilities which appeal to groups which are little attracted to traditional programming and planning, such as young people.
ANNUAL REPORT | 37 SELVAAG BOLIG ANNUAL REPORT 2019
DIRECTOR’S REPORT
Selvaag Bolig had a good year in 2019, delivering homes with a combined value of NOK 3 billion to customers. The level of activity in the group was high, and the order backlog – in other words, homes sold which have yet to be delivered – is good. At 31 December, 1 504 homes with a combined sales value of NOK 7.2 billion were under construction. That will help to secure future value creation for the company. Selvaag Bolig has land and purchase agreements for about 11 600 homes in and around the four largest Norwegian cities as well as a number of interesting and profitable development projects, and is well positioned for continued growth. The board proposes a dividend of NOK 1.50 per share for the second half of 2019, which gives an overall payout of NOK 3.50 per share for the full year.
OVERVIEW OF 2019 THE GROUP’S BUSINESS Selvaag Bolig is one of Norway’s leading housing developers. Highlights It buys and develops new housing land, and manages the The level of activity in Selvaag Bolig was high during whole value chain from acquisition of land to completion 2019, with good sales and strong financial progress. A net and sale of homes. The group concentrates on the areas in total of 752 homes with a combined sales value of NOK and around Greater Oslo, Bergen, Stavanger and 3 753 million were sold during the year. Completions Trondheim as well as Stockholm. The group’s housing totalled 776 units, with 732 delivered to customers. development business embraces wholly owned projects Selvaag Bolig’s production and value creation were high as well as projects pursued as joint ventures with external at 31 December. Construction started on 830 homes during investors. Selvaag Bolig manages all the projects, with the the year, and 70 per cent of the 1 504 being built at 31 exception of those in Stockholm. The Selvaag Pluss Service December were sold. AS subsidiary offers services related to Selvaag Bolig’s Pluss concept. After a quiet period in the market for new homes during 2017, which could partly reflect the introduction of new Selvaag Bolig does not build itself, but awards construction mortgage regulations and strong price growth in 2016, contracts on a project-by-project basis. That gives it the activity was at a normally good level in 2018 – particularly opportunity to select the best and most competitive in Oslo and Akershus. Markets in Stavanger and Trondheim contractor for each project. Subjecting construction were a little more unstable, in part because of the labour contracts to competitive tendering increases flexibility market and a substantial supply of homes on the market. and reduces market risk, while helping to tie up less That position persisted in 2019, with demand for new capital and cut execution risk during the construction phase. homes high in the Oslo region and more moderate in other markets. Given the market conditions, sales for the year as The group possesses unique expertise on project development. a whole were good and helped to ensure that the sales With a modern and industrial approach to housebuilding, ratio stayed satisfactory for the homes under construction this helps to ensure lower construction costs, competitive by the company. Macroeconomic conditions and house- prices for buyers and increased profits for the company and hold purchasing power remain good, and the company is its owners. well positioned in urban areas with the highest population growth. Selvaag Bolig continues Selvaag’s historical social commitment, where value creation is combined with socially useful The company is present with local employees in Norway’s measures. The company builds large projects with a broad four largest conurbations, which have the greatest need for array of housing types, and works to develop homes which new homes, and is well positioned for further growth. In as many people as possible can afford to buy. Furthermore, addition, it established its own office in Stockholm during Selvaag Bolig seeks to be a driver in the public debate in 2019 to identify development properties. Selvaag Bolig order to secure operating parameters which make it possible also develops some commercial property, primarily related to achieve this objective while simultaneously ensuring to major housing projects where planning regulations call good and sustainable housing and urban development. By for this. building good and durable projects, which take account of social and aesthetic properties, in established urban
38 | ANNUAL REPORT DIRECTOR’S REPORT
and residential areas and near public transport hubs, the Financial items company contributes to more people being able to live a Net financial expenses came to NOK 10.7 million (NOK more environment-friendly daily life in walking and cycling 18 million). distance of shops and services, and close to public transport. Selvaag Bolig also supports culture, mass- Pre-tax profit participation sports and educational institutions, particularly Profit before tax expense was NOK 854 million (NOK in the neighbourhoods where the company has projects. 732.5 million). Net tax expense was NOK 199.5 million (NOK 165.6 million). Consolidated tax expense does not FINANCIAL REVIEW include tax liability for tax objects which are not part of the Selvaag Bolig group. Tax on non-controlling shareholders’ Income statement share of profit for the period is included in the non- (Figures for 2018 are presented in brackets) controlling share of profit and equity.
Operating revenue Consolidated net profit came to NOK 654.5 million Consolidated operating revenue for 2019 totalled NOK (NOK 566.8 million), of which NOK 654.5 million (NOK 3 368.8 million (NOK 3 342.1 million). Units delivered 566.9 million) is attributable to the shareholders of Selvaag accounted for NOK 2 962.7 million (NOK 3 225 million) Bolig ASA and NOK 0 (loss of NOK 0.1 million) to non- of total revenues. In addition, the group sold a commercial controlling shareholders. property and an option contract for NOK 320 million in all. A commercial property was sold in 2018 for NOK 42.5 Cash flow million. During 2019, 732 (849) homes were delivered, Consolidated net cash flow from operational activities was including 635 (697) from consolidated project companies NOK 985.9 million (NOK 427 million). The increase in and 97 (152) from the group’s share in joint ventures. cash flow from the year before mainly reflected the positive effect of reduced accounts receivable for homes delivered Operating costs and the inclusion of settlements for land purchases in 2018. Operating costs totalled NOK 2 566.4 million (NOK 2 693.4 million), with project costs accounting for Net cash flow from investing activities was NOK 64. NOK 2 279.5 million (NOK 2 421.6 million). The latter 1 million (negative at NOK 20.6 million). Proceeds were relate mainly to construction costs for homes delivered in the primarily the settlement of seller credits and dividend from period. Payroll costs accounted for NOK 132.2 million joint ventures as well as the sale of a joint venture in western (NOK 142.5 million) of the total. The decline from the year Norway. Payments related primarily to capital provided to before primarily reflects the inclusion of termination and joint ventures. The change from 2018 primarily reflected the compensation payments in 2018 related to efficiency receipt of NOK 44.5 million in settlement for the sale of a improvement processes and terminated employment. joint venture in western Norway.
Other operating costs came to NOK 141.9 million (NOK Net cash flow from financing activities was negative at 125.6 million), of which NOK 55.8 million (NOK 42 million) NOK 528.4 million (NOK 276.1 million). The change related to sales and marketing. from 2018 primarily reflected net redemption of debt and increased dividend payments in 2019. The share of profit from associated companies amounted to NOK 62.2 million (NOK 101.8 million). The decline from the Cash and cash equivalents increased by NOK 521.7 year before primarily reflects a reduced number of deliveries in million to NOK 1 178.7 million (NOK 657 million). joint ventures and an impairment charge for a joint venture in Trondheim. Balance sheet Assets in Selvaag Bolig at 31 December 2019 totalled Operating profit NOK 6 912.4 million (NOK 6 491.1 million). The carrying The group made an operating profit of NOK 864.7 million amount of consolidated inventories (land, housing under (NOK 750.5 million). construction and completed homes) at 31 December was NOK 4 299.2 million (NOK 4 306.3 million). Furthermore,
ANNUAL REPORT | 39 DIRECTOR’S REPORT
NOK 662.5 million of inventory has been reclassified as Each project in Selvaag Bolig is organised as a single held for sale in connection with the agreement entered into purpose vehicle (SPV). In addition to financing in the parent on the sale of parts of the land bank to Urban Property. See company, this means that each company seeks its own note 26 for detailed information. The net carrying amount of external capital financing for the development of a project. inventory after reclassification was NOK 3 636.7 million. Land credits are converted to construction loans as the See also note 5. projects start up. Building costs are wholly financed by loans, and increased activity in the companies will Equity at 31 December was NOK 3 382.1 million (NOK accordingly mean that construction loans rise in line with 3 116.1 million), corresponding to an equity ratio of 48.9 progress. per cent (48 per cent). The board proposes that a dividend of NOK 1.50 per share, corresponding to NOK 140.6 Going concern million, be paid to shareholders in Selvaag Bolig ASA for Pursuant to section 3-3a of the Norwegian Accounting Act, the second half of 2019. NOK 2.00 per share, the board confirms that the going concern assumption is corresponding to NOK 185.9 million, was paid in realistic and that the financial statements for 2019 have August 2019 based on profit for the first half-year. The been prepared on that assumption. This view rests on the total dividend for 2019 will be NOK 3.50 per share, group’s good capital adequacy and financial position. corresponding to NOK 326.5 million. That represents 50 per cent of consolidated net profit for 2019. Events after the balance sheet date In December 2019, the general meeting of Selvaag Bolig The group held cash and cash equivalents of ASA approved the sale of a large proportion of the NOK 1 178.7 million (NOK 657 million) at 31 December. company’s land to a separate company structure, Urban Selvaag Bolig ASA, the parent company, held cash and Property, owned 30 per cent by Selvaag AS. This cash equivalents of NOK 731.9 million (NOK 269 million) transaction was implemented in January 2020. See note at 31 December. 26 for further details.
At 31 December, consolidated interest-bearing debt The Covid-19 outbreak, declared a pandemic by the World amounted to NOK 2 253.3 million (NOK 2 316.3 Health Organisation (WHO) on 11 March 2020, has million), of which NOK 1 092.3 million (NOK 1 795.8 created great uncertainty. At the time of writing, it is unclear million) was non-current and NOK 1 161 million (NOK what consequences this will have for the housing market 520.5 million) was current. The rise in the proportion of and for Selvaag Bolig, but it could lead to construction current debt primarily reflects reclassification related to land delays and slower sales. The outbreak may affect building loans being redeemed in connection with the sale of parts site workforces, financing opportunities, purchasing power of the land bank to Urban Property. See note 26 for more and market psychology. Selvaag Bolig is following information. Other current non-interest-bearing debt developments closely and has introduced measures to limit amounted to NOK 710.7 million (NOK 562.3 million) at the spread of infection. Further measures are being 31 December, of which advance payments by customers continuously assessed. accounted for NOK 207.1 million (NOK 200.9 million). Parent company Selvaag Bolig ASA Financing and debt Operating revenues for Selvaag Bolig ASA, the parent Consolidated interest-bearing debt can largely be divided company, came to NOK 96.7 million (NOK 71 million), into three categories: 1) top-up, 2) land and 3) construction and the operating loss for the year was NOK 148.8 million loans. At 31 December 2019, the group had no top-up (NOK 165 million). Ordinary net profit for the year was loans, land loans of NOK 1 294.1 million and construction NOK 687.3 million (NOK 425.1 million). Profit for 2019 loans of NOK 959.2 million. Selvaag Bolig has a credit included NOK 1 041.9 million (NOK 934.7 million) facility of NOK 500 million with DNB, maturing in April in group contributions received from subsidiaries. These 2022. This facility was reduced in January 2020 to NOK internal items are eliminated in the consolidated financial 150 million in connection with the sale of parts of the land statements. bank to Urban Property. See note 26. The company also has a credit facility of NOK 150 million renewed annually. At 31 December, no drawings had been made against either of these facilities.
40 | ANNUAL REPORT DIRECTOR’S REPORT
Allocation of the net profit Plans call for Urban Property to enter into agreements to The parent company, Selvaag Bolig ASA, made a net profit purchase new land in the market which Selvaag Bolig of NOK 687.3 million for 2019 (NOK 425.1 million). wants to acquire, and the latter will have an option to buy The parent company’s equity amounted to NOK 1 137.1 this back. The Urban Property transaction was implemented million (NOK 2 798.4 million) at 31 December. to refine the core business, enhance the attention devoted to operations, and manifest the value in the day-to-day STRATEGY operation of Selvaag Bolig. It will also increase the company’s growth opportunities. The transaction will reduce tied-up The board participates in important strategic discussions capital and establish a long-term, strategic and efficient during the year and conducts an annual revision of the financing collaboration which could increase company’s operational and financial strategy together with Selvaag Bolig’s competitiveness. the executive management. RISK AND RISK MANAGEMENT Selvaag Bolig worked actively in 2019 to manage the business in accordance with the approved strategy and Risk management to ensure that the company capitalises on the competitive As a housing developer, the group is exposed to risk related advantages that this provides. Among other moves, Selvaag to land development, sales and the execution of construction Bolig concentrated and strengthened its land bank in projects. These factors can affect the group’s business geographical priority areas, and now possesses a strong activities and financial position. The board of Selvaag Bolig portfolio of sites and the ability to deliver in all its core accordingly gives a high priority to dealing with and markets. Emphasis is given to large projects and urban managing risk, and has established routines and control development schemes, and efforts in 2019 included systems to limit overall risk exposure to an acceptable level. searching actively for new sites in Greater Oslo and the establishment of a new office in Stockholm to handle Regular risk surveys contribute to raising awareness of and the company’s continued commitment in that area. To to dealing with the most significant risk conditions which ensure that Selvaag Bolig is a driving force in could affect the business goals defined in the company’s forward-looking housing and urban development, the strategy. annual revision of its strategy also includes detailed analyses of changes and trends in such areas as urban The primary risk factors can be categorised as market, development, sustainability, the residential environment, operational and financial risk. housing preferences, demographics, the sharing economy and digitalisation. The company has also capitalised on MARKET RISK the opportunities provided by the ability to choose builders freely. All construction is outsourced through competitive Housing demand is influenced by a large number of factors tendering, and the necessary capacity is bought in at the at both micro and macro level. It may be affected by market’s best prices. That increases investment opportunities substantial fluctuations in the general level of interest rates and the ability to deliver while reducing the risk profile and and/or significant changes in other financial variables to ensuring adaptability to market fluctuations both locally and which potential housebuyers might be exposed. Changes nationally. Selvaag Bolig is well positioned to reach both in housing demand could furthermore affect Selvaag Bolig’s short-term and long-term goals. opportunities to sell homes at budgeted prices within the planned time frames. Were the pace of sales to be lower At the beginning of 2020, Selvaag Bolig implemented the than expected because of changes in market conditions, company’s largest and most important transaction since its planned developments could be postponed. The company stock exchange listing in 2012. Large parts of its land bank accordingly has internal requirements related to advance were sold to Urban Property, a new company sales, where the rule is that construction does not begin until structure established to own these sites. The intention is that homes corresponding to 60 per cent of the value of each Selvaag Bolig and Urban Property maintain a long-term building stage in the respective projects, or of the overall collaboration, so that Selvaag Bolig will also secure options project, have been sold. to acquire sites purchased by Urban Property in the future.
ANNUAL REPORT | 41 DIRECTOR’S REPORT
OPERATIONAL RISK Foreign exchange risk Virtually all the group’s activities are based in Norway. Risk related to contractors Exposure to foreign exchange risk is therefore limited. Selvaag Bolig draws on external construction companies and service providers in connection with developing and Interest rate risk (own financing, deposits) building new projects. As a result, it is exposed to the risk Changes in interest rates affect the group’s borrowing costs, of loss and additional project cost if a contractor/supplier and could affect the valuation of its assets. The company finds itself in financial difficulties. To reduce this risk, the has opted not to enter into any form of hedging contract. company mainly enters into construction contracts with Furthermore, interest rate levels affect the company’s return large, well-established players who have a solid financial on free liquidity. position and experience, and who can document quality work. In addition, standardised and detailed construction Financing risk (access to capital) plans developed by Selvaag Bolig are used to reduce the Selvaag Bolig depends on access to capital in order to risk of errors, misunderstandings and delays by the acquire sites and realise projects. Where external capital contractor. is concerned, the company has good and close relations with its principal banks, which are well-capitalised Nordic Furthermore, Selvaag Bolig is exposed to increases in the institutions. Competition between the banks is perceived to level of prices for construction contracts and to cost overruns. be satisfactory, and the company has thereby been able to For projects built on site, the company mainly enters into secure the financing required for its projects. Furthermore, turnkey contracts. In this way, costs are fixed before sales the company has earlier made use of financing through the and construction begin. In the event of high building costs, bond market. Selvaag Bolig also utilises other solutions for the company also has the expertise required to implement new land purchases, including collaboration agreements projects on the basis of sub-contracts managed by the with financial players or agreements with landowners on construction client. Capacity and risk nevertheless mean future purchase which are conditional on planning permis- that this is not the preferred approach on any scale. sion being obtained.
Planning risk Liquidity risk Changes to operational parameters or planning decisions Conservative liquidity management means having sufficient by the relevant public authorities could affect both the liquid assets and available financing through lines of credit progress and the viability of Selvaag Bolig’s various to meet the group’s obligations. The group issued a bond projects, and might thereby limit opportunities to continue loan of NOK 500 million in 2013, and refinanced a large developing its properties. That could lead to delays and proportion of its loans. This loan was redeemed in 2019. increased costs. Selvaag Bolig administers liquidity actively, and pays special attention to maintaining adequate liquidity at all times. The FINANCIAL RISK company continuously monitors forecast and actual cash flows. Credit risk The group’s credit risk relates largely to the settlement of its The board takes the view that the group had a accounts receivable, which primarily involve private well-balanced exposure to financial and liquidity risk at customers as housebuyers. Buyers are required to pay a 31 December. Cash and cash equivalents in the Selvaag 10 per cent deposit in advance when a sale is agreed, Bolig group amounted at 31 December to NOK 1 178.7 and to document satisfactory financing for the property. million (NOK 657 million) for the group and NOK 731.9 Credit risk is regarded as low because payment must be million (NOK 269 million) for the parent company. Liquid made to the client account at the settlement agent before assets consisted primarily of cash and bank deposits. At 31 transfer of the residence. December, the group had two undrawn overdraft facilities of
42 | ANNUAL REPORT DIRECTOR’S REPORT
NOK 500 million and NOK 150 million respectively. The SHAREHOLDER INFORMATION larger facility was reduced to NOK 150 million in January 2020 in connection with the sale of parts of the land bank The company was listed on the Oslo Stock Exchange on to Urban Property. See note 26. Further reference is made 14 June 2012. It had 2 895 shareholders (2 330) at 31 to the comments on financing above and to note 16 to the December 2019, of whom 236 were foreign (212). consolidated financial statements for an overview of loans, See note 13 to the consolidated financial statements for maturities and loan terms. Selvaag Bolig ASA for detailed shareholder information.
ORGANISATION Transactions with related parties The general meeting of Selvaag Bolig ASA resolved in Selvaag Bolig ASA was established in 2008. It is the December 2019 to sell a large proportion of the company’s parent company for the underlying group subsidiaries, land holdings to a separate company structure, Urban which are responsible for operations. At 31 December Property, owned 30 per cent by Selvaag AS. This 2019, the Selvaag Bolig group had a total of 87 transaction was implemented in January 2020. See note work-years, including 67 in the parent company and 26 for further details. See note 23 to the consolidated 20 in the subsidiaries. financial statements for further information on transactions with related parties. CORPORATE SOCIAL RESPONSIBILITY (CSR) CORPORATE GOVERNANCE Selvaag Bolig will create value for society by building good homes, and by working actively to ensure sustainable Selvaag Bolig ASA is committed to maintaining a high housing and urban development. This means in part that the standard of corporate governance. A healthy corporate company gives priority to urban areas experiencing culture is essential for safeguarding confidence in the expansion pressures, develops site-efficient homes with company, securing access to capital and ensuing good the greatest volume in lower price categories, seeks to be value creation over time. All shareholders will be treated cost-effective and works to ensure positive official policies equally, and a clear division of labour will exist between the through a clear presence in the public debate. Ethical, board and the company’s executive management. Selvaag social and environmental considerations are integrated in its Bolig complies with the Norwegian code of practice for day-to-day operations. The company’s goal is to be a good corporate governance. and secure workplace, and requires that it and its suppliers pursue their operations in compliance with applicable legis- A detailed statement on the way Selvaag Bolig implements lation and statutory regulations. Furthermore, Selvaag Bolig the 15 sections of the code can be found on the company’s will be a responsible social player and minimise emissions/ website at www.selvaagboligasa.no/en and in this annual discharges and damage to the natural environment. The report. company has ethical guidelines which are described at www.selvaagboligasa.no/en. Continuous efforts are made PAY AND OTHER REMUNERATION to ensure that employees are familiar with and observe all OF SENIOR EXECUTIVES the company’s guidelines related to CSR and the environment. See the separate section on CSR and the Pay and other remuneration of senior executives in the environment in this annual report. group are presented in note 22 to the consolidated financial statements. This note also outlines the principles on which executive remuneration is based. Selvaag Bolig introduced a share saving programme for all employees and a share purchase programme for the executive management in 2015. These programmes are described in the chapter on corporate governance in this report.
ANNUAL REPORT | 43 DIRECTOR’S REPORT
ANNUAL GENERAL MEETING population growth create a large and long-term need for new homes in Selvaag Bolig’s core areas. Combined with The AGM for 2019 will take place on 24 April 2020. good macroeconomic conditions, high household purchasing power and demographic developments, this OUTLOOK means that Selvaag Bolig basically expects a stable newbuilding market in the time to come. Positive house sales, strong results and land purchases during 2019 secure Selvaag Bolig’s position as one of However, the picture could change markedly if the Norway’s leading and most profitable housing developers. Covid-19 outbreak proves long-lasting. Declared a The company sold a total of 908 homes worth pandemic by the World Health Organisation (WHO) on NOK 4 492 million during the year. Net sales, adjusted for 11 March 2020, this has created great uncertainty. At the Selvaag Bolig’s share in joint ventures, came to 752 homes time of writing, it is unclear what consequences this will worth NOK 3 753 million. At 31 December, Selvaag Bolig have for the housing market and for Selvaag Bolig in the had 1 504 units with a sales value of NOK 7 155 million time to come, but it could lead to construction delays and under construction. Seventy per cent of these were already slower sales if it affects financing opportunities, purchasing sold at that date, and 75 per cent of the homes due for power or market psychology. Selvaag Bolig is following completion in 2020. With an equity ratio of 48.9 per cent developments closely and continuously assessing measures. and good liquidity, the company occupies a solid financial Among other moves, the board resolved to reduce the position. dividend for the second half of 2019 from NOK 3.00 per share to NOK 1.50. This reduction was made to demon- Selvaag Bolig has a strong position and ambitions for strate extra caution in relation to the Covid-19 pandemic, further growth in and around Greater Oslo, Stavanger, and does not reflect declining house sales. Selvaag Bolig Trondheim and Bergen. These markets are characterised by has a strong balance sheet and good liquidity, and the urbanisation, population growth and big housing decision does not involve any change to its dividend policy. requirements. The company has good sites centrally located in all these areas, and constantly acquires attractive new As a pure housing developer, the company puts all development land which will strengthen its position over construction out to competitive tender and accordingly has a time. sensible staffing which can easily be adjusted to the level of activity in the market. In the board’s view, this has given and The market for new homes has been stable and normal will continue to give Selvaag Bolig competitive advantages. during 2019 and into 2020. Sales have been particularly The company is well equipped financially, operationally positive for Selvaag Bolig in Greater Oslo. Given and organisationally to safeguard and strengthen its position, population developments and the supply of new homes, even in the uncertain times Norway is now experiencing. the company expects that demand and price growth will be strongest in Great Oslo, while the Stavanger, Bergen and The board would extend its thanks to the administration and Trondheim markets will be quieter because of a large supply other employees of Selvaag Bolig for good results and a side. According to Statistics Norway, urbanisation and good commitment in 2019.
Oslo, 20 March 2020
Olav Hindahl Selvaag Peter Groth Anne Sofie Bjørkholt Sissel Kristensen Chair Director Director Director (elected by the employees)
Tore Myrvold Gisele Marchand Magnus Kristiansen Rolf Thorsen Director Director Director President and CEO (elected by the employees)
44 | ANNUAL REPORT ILLUSTRATION: ELVEPARKEN, SANDNES (DEVIATIONS WILL OCCUR) BOARD OF DIRECTORS
Olav H Selvaag (born 1969) Chair Selvaag has been chair of Selvaag Bolig ASA since 2008. He began his career at KLP Eiendom and has subsequently worked in construction, commercial property and housing development. Selvaag works today as the owner of Selvaag AS and as one of its directors. He is chair of Snøhetta AS, Selvaag Bolig ASA, Selvaag Prosjekt and the Cultural Foundation at Tjuvholmen. His other directorships include Norway’s National Theatre and Selvaag Eiendom. Selvaag has an MSc from Stanford University in the USA. He chairs the company’s compensation committee. Selvaag is a Norwegian citizen.
Gisele Marchand (born 1958) Director Marchand has been a director of Selvaag Bolig ASA since 2012 and served as chair in 2018-19 while Olav H Selvaag was acting CEO. She has broad management and boardroom experience. Earlier positions include executive vice president for the retail market in Norway at DNB and CEO of Batesgruppen, the Norwegian Public Service Pension Fund, Eksportfinans and the Haavind law firm. Marchand has broad boardroom experience from such companies as Oslo Børs, Norske Skog and Fornebu Utvikling. She currently works full-time in boardroom positions, serving as chair of Gjensidige Forsikring ASA, Norgesgruppen ASA and Boligbygg KF, as a director of Norgesgruppen ASA, Scatec Solar ASA, Eiendomsspar AS and Victoria Eiendom AS, and as a member of the nomination committee for Entra ASA. She chairs the company’s audit committee and sits on its compensation committee. Marchand is a Norwegian citizen.
46 | ANNUAL REPORT BOARD OF DIRECTORS
Anne Sofie Bjørkholt (born 1965) Director Bjørkholt has been a director of Selvaag Bolig ASA since 2013. She took a law degree at the University of Oslo in 1990, and has broad experience of property law after 30 years as a commercial lawyer and as a partner in a law firm since 2002. Bjørkholt has also worked for the Norwegian Inland Revenue. As a partner in the BAHR law firm since 2009, she works particularly on transactions with and structuring of housing and commercial property developments. She is in great demand as a speaker in the fields of property, property development, and direct and indirect taxation. Bjørkholt is a Norwegian citizen.
Peter Groth (born 1947) Director Groth has been a director of Selvaag Bolig ASA since 2015. He studied at the Norwegian Institute of Technology (NTH), now the Norwegian University of Science and Technology (NTNU), and has acquired broad experience of the building and property sectors over more than 40 years. Groth has worked for Selmer, Norwegian Contractors, Andenæsgruppen, Nydalens Compagnie and Aspelin Ramm Gruppen, and was CEO of the last two. He is currently a director of Mustad Eiendom, Høegh Eiendom, Aase Byggadministration, Møller Eiendom and Conservative House, and a member of the Council for Urban Architecture. Groth is a member of the company’s compensation committee. He is a Norwegian citizen.
Tore Myrvold (born 1971) Director Myrvold has been a director of Selvaag Bolig ASA since May 2018. He began his career as an auditor with Deloitte before becoming group controller for Hjemmet Mortensen. Myrvold joined Selvaag AS in 2005, and served in such posts as CFO and executive vice president before becoming CEO in the summer of 2016. He is a director of all the Selvaag AS subsidiaries. Myrvold has an MSc in business economics from the BI Norwegian Business School and graduated as a state-authorised auditor from the Norwegian School of Economics (NHH). He is a member of the board’s audit committee. Myrvold is a Norwegian citizen.
Sissel Kristensen (born 1972) Employee-elected director Kristensen has been a worker director of Selvaag Bolig ASA since April 2017. She qualified as an auditor at the Oslo College of Business and Economics, and has worked in auditing and accounting since 1995. Kristensen has been chief accountant at Selvaag Bolig ASA since July 2011. She is a Norwegian citizen.
Magnus Kristiansen (born 1979) Employee-elected director Kristiansen has been a director of Selvaag Bolig ASA since March 2020. He holds an MSc in business economics from the Norwegian School of Economics (NHH) and has worked in accounting and financial reporting since 2004. Kristiansen has been group accounting manager of Selvaag Bolig ASA since October 2011. He is a Norwegian citizen.
ANNUAL REPORT | 47 CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER
(amounts in NOK 1 000, except earnings per share) Note 2019 2018
Sales revenues 2, 25 3 282 480 3 267 505 Other revenues 25 86 358 74 570 Total revenues 3 368 838 3 342 075
Project expenses 5 (2 279 485) (2 421 633) Pay and personnel expenses, administrative functions 6 (132 213) (142 498) Depreciation and amortisation 9, 10 (12 748) (3 707) Other operating expenses 7 (141 909) (125 553) Total operating expenses (2 566 355) (2 693 391) Share of income (losses) from associated companies 24 62 224 101 796 Operating profit (loss) 864 707 750 480
Financial income 8 16 742 10 219 Financial expenses 8 (27 480) (28 229) Net financial expenses (10 738) (18 010) Profit (loss) before income taxes 853 969 732 470 Income tax (expense) income 19 (199 454) (165 626) Profit (loss) for the year 654 515 566 844
Other comprehensive income items which may be reclassified to profit or loss Foreign currency translation (6) 317
Total comprehensive income for the year 654 509 567 161
Profit (loss) for the year attributable to Non-controlling interests - (95) Shareholders of Selvaag Bolig ASA 654 515 566 939
Total comprehensive income for the year attributable to Non-controlling interests - (95) Shareholders of Selvaag Bolig ASA 654 509 567 256
Earnings per share for profit (loss) attributable to shareholders of Selvaag Bolig ASA Earnings per share (basic and diluted, in NOK) 14 7.04 6.14
48 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER
(amounts in NOK 1 000) Note 2019 2018
ASSETS Non-current assets Goodwill 9 383 376 383 376 Property, plant and equipment 10 5 588 8 565 Right-of-use assets 10 44 219 - Investments in associated companies and joint ventures 24 430 281 415 280 Loans to associated companies and joint ventures 23, 24 70 893 119 290 Other non-current assets 11 165 283 326 074 Total non-current assets 1 099 640 1 252 585
Current assets Inventory property 5 3 636 663 4 306 304 Trade receivables 11 82 220 215 007 Other current receivables 11 51 052 60 199 Cash and cash equivalents 12 1 178 686 657 034 Assets held for sale 5, 26, 27 864 171 - Total current assets 5 812 792 5 238 544 TOTAL ASSETS 6 912 432 6 491 129
EQUITY AND LIABILITIES Equity Equity attributable to shareholders of the company 13 3 374 218 3 106 770 Non-controlling interests 7 866 9 366 Total equity 3 382 084 3 116 136
Liabilities Non-current liabilities Pension obligations 1 017 277 Deferred tax liabilities 19 24 444 93 011 Provisions 20 60 373 60 373 Other non-current non-interest-bearing liabilities 3 105 3 225 Non-current lease liabilities 10 35 263 - Non-current interest-bearing liabilities 16 1 092 288 1 795 798 Total non-current liabilities 1 216 490 1 952 684
Current liabilities Current lease liabilities 10 7 922 - Current interest-bearing liabilities 16 1 161 043 520 508 Trade payables 17 167 633 181 360 Current income taxes payable 19 208 488 158 110 Other current non-interest-bearing liabilities 17 710 728 562 331 Liabilities directly associated with assets classified as held for sale 19, 26 58 044 - Total current liabilities 2 313 858 1 422 309 Total liabilities 3 530 348 3 374 993 TOTAL EQUITY AND LIABILITIES 6 912 432 6 491 129
Oslo, 20 March 2020
Olav Hindahl Selvaag Peter Groth Anne Sofie Bjørkholt Sissel Kristensen Chair Director Director Director (elected by the employees)
Tore Myrvold Gisele Marchand Magnus Kristiansen Rolf Thorsen Director Director Director President and CEO (elected by the employees)
ANNUAL REPORT | 49 CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL PERIOD FROM 1 JANUARY TO 31 DECEMBER
Share Other Cumulative Equity attributed Non- premium paid-in translation Other Retained to shareholders in controlling Total (amounts in NOK 1 000) Share capital account capital differences reserves earnings Selvaag Bolig ASA interests equity
Equity at 1 January 2019 185 857 1 394 857 700 629 5 792 3 528 816 106 3 106 772 9 366 * 3 116 136
Transactions with owners: Dividend - - - - - (418 179) (418 179) - (418 179) Share buy back ------Employee share programme 985 - - - - 30 133 31 118 - 31 118 Dividend to non-controlling interests ------(1 500) (1 500)
Total comprehensive income/(loss) for the period: Net income/(loss) for the period - - - - - 654 515 654 515 - 654 515 Other comprehensive income/(loss) - - - (6) - - (6) - (6) for the period Equity at 31 December 2019 186 842 1 394 857 700 629 5 786 3 528 1 082 575 3 374 220 7 866 * 3 382 084
Equity at 1 January 2018 183 523 1 394 857 700 629 5 475 3 528 560 710 2 848 724 9 419 * 2 858 142
Transactions with owners: Dividend - - - - - (351 341) (351 341) - (351 341) Share buy back ------Employee share programme 2 334 - - - - 39 840 42 174 - 42 174
Total comprehensive income/(loss) for the period: Net income/(loss) for the period - - - - - 566 939 566 939 (95) 566 844 Other comprehensive income/(loss) - - - 317 - (42) 275 42 317 for the period Equity at 31 December 2018 185 857 1 394 857 700 629 5 792 3 528 816 106 3 106 772 9 366 * 3 116 136
* Non-controlling interests include tax on profits in companies subject to partnership taxation. Income taxes in the group do not include taxes from tax subjects outside the Selvaag Bolig group.
50 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL PERIOD FROM 1 JANUARY TO 31 DECEMBER
(amounts in NOK 1 000) Note 2019 2018
CASH FLOW FROM OPERATING ACTIVITIES Profit (loss) before income taxes 853 969 732 470 Income taxes paid (158 888) (102 659) Depreciation and amortisation 9, 10 12 748 3 707 Share of (income) losses from associated companies and joint ventures 24 (62 224) (101 796) Change in inventory property 5 62 734 283 732 Change in trade receivables 11 132 787 (81 175) Change in trade payables 17 (13 727) 14 881 Changes in other working capital assets 10 189 (21 943) Changes in other working capital liabilities 148 312 (300 201) Net cash flow from operating activities 985 901 427 017
CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of tangible and intangible fixed assets 100 - Payments for acquisition of tangible and intangible fixed assets (453) (842) Proceeds from disposal of businesses and subsidiaries, net of cash disposed 12 - - Payments for acquisitions of businesses and subsidiaries, net of cash acquired 12 - 1 365 Proceeds from disposal of associated companies and joint ventures 44 500 - Payments for acquisition of associated companies and joint ventures 24 (19 219) (53 405) Proceeds from disposal of other investments and repayments on loans given 12 22 000 44 920 Payments for acquisition of other investments and loans given 12 (22 300) (43 612) Dividends and distributions from associated companies and joint ventures 24 39 500 72 132 Net cash flow from investing activities 64 128 20 558
CASH FLOW FROM FINANCING ACTIVITIES Proceeds from borrowings 16 1 398 284 1 709 364 Repayments of borrowings 16 (1 518 391) (1 662 034) Repayments of lease liabilities 10 (10 454) - Dividends paid to equity holders of Selvaag Bolig ASA (418 179) (351 341) Payment of profit sharing and dividends to non-controlling interests in subsidiaries 13 (1 500) - Proceeds from disposal of shares Selvaag Bolig ASA 13 21 864 27 909 Net cash flow from financing activities (528 377) (276 102)
Net change in cash and cash equivalents 521 652 171 473 Cash and cash equivalents at 1 January 12 657 034 485 561 Cash and cash equivalents at 31 December 12 1 178 686 657 034
For further specifications, refer to note 12.
ANNUAL REPORT | 51 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements for the Selvaag Bolig group
Notes to the consolidated financial statements for the year ended 31 December 2019.
Note 1: General information
Selvaag Bolig ASA (the company) and its subsidiaries (together the group) are a property development group involved in the construction of residential property for sale in the ordinary course of business.
Selvaag Bolig ASA is listed on the Oslo Stock Exchange. The company’s ultimate controlling party is Selvaag AS.
The registered office of the company is Silurveien 2, NO-0380 Oslo.
Note 2: Significant accounting policies
The principal accounting policies are set out below, and (b) Transactions and balances have been consistently applied to all accounting periods In preparing the financial statements of each individual presented. group entity, transactions in currencies other than the entity’s functional currency are translated into the functional currency 2.1 STATEMENT OF COMPLIANCE using the exchange rates prevailing at the dates of the The group's consolidated financial statements have been transactions. At the end of each reporting period, monetary prepared in accordance with the International Financial items denominated in foreign currencies are retranslated at Reporting Standards (IFRS) and interpretations issued by the rates prevailing at that date. Non-monetary items which the International Accounting Standards Board (IASB) and are measured in terms of historical cost in a foreign currency endorsed by the EU at 31 December 2019. are not retranslated in subsequent periods.
These consolidated financial statements were authorised for 2.4 CONSOLIDATION issue by the board of directors on 20 March 2020. The consolidated financial statements include the financial statements of the company and entities (including special 2.2 BASIS OF PREPARATION purpose entities) controlled by the company (its subsidiaries). The consolidated financial statements have been prepared Control is achieved where the company is exposed, or has on a going concern and historical cost basis, except for rights, to variable returns from its involvement with an entity derivatives which are recognised at fair value through profit and has the ability to affect those returns through its power or loss. over the entity. This is generally presumed to exist when the company holds more than 50 per cent of the voting rights. 2.3 FUNCTIONAL AND PRESENTATION The existence and effect of potential voting rights which CURRENCY are currently exercisable or convertible are also considered when assessing whether the company controls another (a) Functional and presentation currency entity. Items included in the individual financial statements of each of the group’s entities are measured using the currency of The results of subsidiaries acquired or disposed of during the primary economic environment in which the entity the year are included in the consolidated income statement operates (the functional currency). The consolidated financial from the effective date of acquisition or up to the effective statements are presented in NOK, which is also the parent date of disposal, as appropriate. A negative comprehensive company’s functional currency. income in the subsidiaries is attributed to the owners of the parent company and to the non-controlling interests even
52 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
if this results in the non-controlling interests having a deficit percentage of completion method for revenues and cost of balance. goods sold, where the degree of completion is estimated on the basis of expenses incurred relative to total estimated cost When necessary, restatements are made to the financial multiplied by the sales rate. Operating profit (loss) under the statements of subsidiaries to bring their accounting policies percentage of completion method also includes an estimated in line with those used by the group. profit element. The segment results are reconciled to the operating results for the group in the note. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. 2.6 Investments in associates An associate is an entity over which the group has Changes in the group's ownership interests in subsidiaries significant influence and which is neither a subsidiary nor a which do not result in the group losing control over the joint venture. Significant influence is the power to participate subsidiaries are accounted for as equity transactions. in the financial and operating policy decisions The carrying amounts of the group's controlling and non- of the investee but is neither control nor joint control over controlling interests are adjusted to reflect the changes in those policies. Significant influence is generally presumed their relative interests in the subsidiaries. Such transactions to exist when the company holds between 20 per cent and do not impact the profit or loss statement. 50 per cent of the voting rights.
When the group loses control of a subsidiary, the profit or Associates are incorporated in these financial statements loss is calculated as the difference between (i) the using the equity method of accounting. Under the equity aggregate of the fair value of the consideration received method, investments in associates are carried in the and the fair value of any retained interest and (ii) the consolidated statement of financial position at cost and previous carrying amount of the assets (including goodwill), adjusted thereafter to recognise the group's share of the and liabilities of the subsidiary and any non-controlling profit or loss and other comprehensive income of the interests. When assets of the subsidiary are carried at fair associate. If the group's share of losses of an associate values and the related cumulative gain or loss has been exceeds the group's carrying amount of that associate, the recognised in other comprehensive income and accumulated group discontinues recognising its share of further losses. in equity, these are accounted for as if the company had Additional losses are recognised only to the extent that the directly disposed of the relevant assets (ie, reclassified to group has incurred legal or constructive obligations or made profit or loss or transferred directly to retained earnings as payments on behalf of the associate. specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date Any excess of the cost of acquisition over the group's share when control is lost is regarded as the fair value on initial of the net fair value of the identifiable assets, liabilities and recognition for subsequent accounting under IFRS 9 contingent liabilities of an associate recognised at the date Financial Instruments or, when applicable, at the cost of acquisition is recognised as goodwill, which is included on initial recognition of an investment in an associate or within the carrying amount of the investment. Any excess a jointly controlled entity using the equity method. of the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of 2.5 SEGMENT INFORMATION acquisition, after reassessment, is recognised immediately in Operating segments are reported in a manner consistent profit or loss. with the internal reporting provided to the CEO and management group. This group is responsible for allocating The requirements of IAS 36 are applied to determine whether resources and assessing the performance of the operating it is necessary to recognise any impairment loss with respect segments. to the group’s investment in an associate. When necessary, the entire carrying amount of the investment (including For the purposes of internal reporting, the group utilises the goodwill) is tested for impairment in accordance with IAS
ANNUAL REPORT | 53 CONSOLIDATED FINANCIAL STATEMENTS
36 Impairment of Assets as a single asset by comparing its The group reports its interests in joint ventures using the equity recoverable amount (higher of value in use and fair value method, as described in note 2.6 Investments in associates less costs to sell) with its carrying amount. Any impairment above, except when the investment is classified as held for loss recognised forms part of the carrying amount of the sale, in which case it is accounted for in accordance investment. Any reversal of that impairment loss is with IFRS 5 Non-current Assets Held for Sale and recognised to the extent that the recoverable amount of Discontinued Operations. See note 2.10 below. the investment subsequently increases. Share of income (loss) from joint ventures is included in If loans are given to an associated company, and the operating profit (loss), since this is considered integral to loan is considered to be part of the net investment, any the group’s operations. accumulated negative share of the results which exceed the acquisition cost is recognised as a reduction of the carrying 2.8 BUSINESS COMBINATIONS amount of the receivable. Where property is acquired through the acquisition of entities, management considers the substance of the assets When a group entity transacts with its associate, profits and and activities acquired. When acquiring a group of assets losses resulting from the transactions with the associate are or net assets which do not constitute a business, the cost recognised in the group' consolidated financial statements price is allocated between the individual identifiable assets only to the extent of interests in the associate which are not and liabilities acquired on the basis of their relative fair related to the group. values at the acquisition date.
Accounting policies of associates have been changed Business combinations are accounted for using the acquisition where necessary to ensure consistency with the policies method. The acquisition is recognised at the aggregate of adopted by the group. the consideration transferred, measured at acquisition-date fair value, and the amount of any non-controlling interest in Share of income (loss) from associated companies is the acquiree. For each business combination, the acquirer included in operating profit (loss) since the investments are measures the non-controlling interest in the acquiree either considered to be an integral part of the group’s operations. at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are 2.7 INVESTMENTS IN JOINT ARRANGEMENTS expensed. A joint arrangement is a contractual arrangement whereby the group and other parties undertake an economic activity Goodwill is measured as the excess of the sum of the which is subject to joint control (ie, when the strategic financial consideration transferred, the amount of any non-controlling and operating policy decisions relating to the activities of interests in the acquiree, and the fair value of the acquirer's the joint venture require the unanimous consent of the parties previously held equity interest in the acquiree (if any) over sharing control). Joint arrangements are classified as joint the net of the acquisition-date amounts of the identifiable operations or joint ventures, depending on the rights to the assets acquired and the liabilities assumed. Part of assets and obligations for the liabilities of the parties to the goodwill is due to the recognition of deferred tax obligation arrangements. If the parties have rights to the net assets at nominal value. Nominal value is higher than fair value, of the arrangement, the arrangement is a joint venture. If and the difference is included in the goodwill. the parties have rights to the assets and obligations for the liabilities relating to the arrangement, the arrangement is a When a business combination is achieved in stages, the joint operation. group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (ie, the date The group does not have any interests in joint arrangements when the group obtains control) and the resulting gain or classified as joint operations. loss, if any, is recognised in profit or loss.
54 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Any contingent consideration to be transferred by the acquirer 2.10 NON-CURRENT ASSETS HELD FOR SALE will be recognised at fair value at the acquisition date. Non-current assets are classified as held for sale if their Subsequent changes to the fair value of any contingent carrying amounts will be recovered primarily through sale consideration classified as liability is recognised in profit rather than continuing use. This also applies in situations or loss. where the group is still involved but loses control over the operation. Non-current assets and disposal groups classified 2.9 INTANGIBLE ASSETS as held for sale are measured at the lower of their carrying amount and fair value less cost to sell, and presented (a) Goodwill separately as assets held for sale and liabilities related to Goodwill arising on an acquisition of a business is assets held for sale in the statement of financial position. recognised in the balance sheet at the date of acquisition of the business (see note 2.8 above). Goodwill is not The criteria for classifying as held for sale are considered to amortised, but is tested for impairment annually. For the be met only when the sale is highly probable, and the asset purposes of impairment testing, goodwill is allocated to or disposal group is available for immediate sale in its each of the group's cash-generating units (or collections of present condition. Actions required to complete the sale cash-generating units) expected to benefit from synergies of should indicate that it is unlikely that significant changes to the business combination. the plan will be made or that the plan to sell will be withdrawn. In addition, management must be committed Goodwill is tested for impairment annually, or more frequently to the plan, and it must be expected that the sale will be when there is indication that the unit may be impaired. If the completed within a year. recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to Property, plant and equipment and intangible assets are not reduce the carrying amount of any goodwill allocated to the depreciated or amortised once classified as held for sale. unit and then to the other assets of the unit pro rata on the The equity method is discontinued for joint ventures basis of the carrying amount of each asset in the unit. Any classified as held for sale. impairment loss for goodwill is recognised in profit or loss in the consolidated income statement. An impairment loss 2.11 REVENUE RECOGNITION recognised for goodwill will not be reversed in subsequent The group’s main activity is to develop residential properties, periods. and revenue is originated primarily from the sale of residential properties. Properties are usually sold to private On disposal of the relevant cash-generating unit, the customers, but there are some professional customers as attributable amount of goodwill is included in the well. determination of the profit or loss on disposal. The group also has some lease revenue and revenue from (b) Other intangible assets other services. Other intangible assets acquired through a business combination are initially recognised at fair value, and (a) Sale of residential property otherwise at acquisition cost. The asset’s residual value and Revenue from the sale of residential property (including any expected useful life are reviewed on an annual basis and sale of projects under development and undeveloped land) adjusted if necessary. If an asset’s carrying value exceeds is recognised when the control is transferred to the customer. the recoverable amount, the asset will be written down to Control is considered transferred at the time of delivery of the recoverable amount. Any gain or loss arising from the the property to the customer. disposal of an asset will be determined as the difference between the asset’s sales price and carrying value, and Customer contracts related to sale of residential properties recognised in the consolidated statement of comprehensive are in accordance with the Norwegian standard, and will income as other net profit (loss). normally include a condition that a minimum percentage of
ANNUAL REPORT | 55 CONSOLIDATED FINANCIAL STATEMENTS
sales in the project is reached. Before commencing with the (c) Sale of services construction phase of a project, the group requires 60 per Control over services is considered to be transferred to the cent of a project to be sold. customer as the service is delivered. Revenue from sale of services is recognised when the service is performed. Estate According to Norwegian regulations, the customer is agent services directly associated with the sale of property entitled to withdraw from the contract until the property is are included in sales revenue. Other services are included transferred to them. In such a case, however, the customer is in other revenue. responsible for covering any loss incurred by the group as consequence of their withdrawal. This include covering the 2.12 INVENTORY PROPERTY price difference if a lower price is achieved, plus transaction IAS 2 Inventories defines inventories as assets held for costs. sale in the ordinary course of business, in the process of production for such sale, or as materials or supplies to be The customer normally pays 10 per cent of the selling price consumed in the production process or in the rendering of when signing the contract. This prepayment is paid into an services. escrow account held by the estate agent. The group does not have a right to the advance payment until it provides The group has property which is land and buildings intended financial security in accordance with Norwegian for sale in the ordinary course of business or which is in the regulations. Once such security is provided, the advance process of construction or development for such sale. payment is released from the escrow account and recognised Inventories thus comprise land, property held for resale, as received cash and other short-term debt (advance payment). property under development and construction and unsold finished units which are not sold. Inventories are measured The remaining part of the selling price is paid into the at the lower of cost and net realisable value. escrow account prior to delivery. The amount is not released from the escrow account until security is provided or all The cost of inventories comprises all costs of purchase, formalities related to the transfer of the property to the costs of conversion and other costs incurred in bringing the customer are finalised. In the period between physical inventories to their present condition. The cost of conversion transfer of the property and finalising the formalities by the includes costs directly related to the construction of the estate agent, the consideration (reduced by advance property (such as amounts paid to sub-contractors for payments) is recognised as a trade receivable. Once the construction) and an allocation of fixed and variable right of ownership has been publicly notarised, the overheads incurred during development and construction. remaining consideration is released from the escrow Borrowing costs directly attributable to the acquisition, account. construction or production of property are added to the cost of those assets until the assets are substantially ready for Property may be sold with a degree of continuing their intended use or sale. Capitalisation of borrowing costs involvement by the seller, which may involve commitments commences when the plot acquires planning permission. to complete construction of the property, or a seller Capitalisation of other directly attributable costs commences guarantee of occupancy to a housing cooperative for when it is more likely than not that the project will be a specific period. realised. Other costs are included in the cost of inventories only to the extent that they are directly attributable to (b) Lease revenues bringing the inventories to their present location and Rental income from leasing property (operating leases in condition, including planning and design costs, for which the group is a lessor) is recognised on a straight-line example. basis over the term of the relevant lease and included in other revenues. Net realisable value is the estimated selling price in the ordinary course of business, based on market prices at the reporting date and discounted for the time value of money
56 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
(if material), less the estimated costs of completion and the the assets. Financial assets held within the group’s business estimated costs necessary to make the sale. model where the objective is to collect the contractual cash flows, and where the cash flows are solely payments of When properties are sold, the carrying amount is principal and interest, are measured at amortised cost. recognised as a project expense in the income statement in Financial assets held in a business model where the the period in which the related revenue is recognised. objective is achieved by both collecting contractual cash flows and selling financial assets are measured at fair value The group has entered into agreements to purchase land through other comprehensive income. Financial assets in the future (forwards and purchase options) for use in the not held in any of these business models are measured at ordinary course of business. The land is first capitalised fair value through profit or loss. If measuring at fair value when the cost is incurred or the control is transferred from is expected to reduce accounting mismatch or otherwise the seller. If a contract to purchase land in the future is a loss result in more relevant information, the group can choose contract, a provision is made for the estimated loss. for each asset to apply the fair value option irrevocably for assets which would otherwise be measured at the amortised 2.13 PROPERTY, PLANT AND EQUIPMENT cost of fair value through other comprehensive income. The Property, plant and equipment are recognised at acquisition group does not have any material financial assets measured cost less accumulated depreciation and impairment losses. at fair value through profit or loss or other comprehensive Acquisition cost includes expenditure which is directly income. attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as Trade receivables a separate asset, as appropriate, only when it is probable Trade receivables are amounts due from customers in the that future economic benefits associated with the item will group’s ordinary property development business and related flow to the group and the cost of the item can be measured services. Trade receivables are recognised initially at the reliably. The carrying amount of the replaced part is amount of the consideration and measured at amortised derecognised. All other repairs and maintenance are cost where the financing components are insignificant. recognised as an expense during the period in which they Impairment is recognised if there is evidence that the are incurred. Depreciation is calculated on a straight-line estimated future cash flow has been impacted. The risk of basis, generally over three to 10 years. impairment is low owing to the practice of requiring advance payments into escrow accounts. The asset's residual value and useful life are reviewed annually, and adjusted if appropriate. An asset’s carrying Loans and other receivables amount is written down to its recoverable amount if the Loans and other receivables are held in the group’s normal asset’s carrying amount exceeds its estimated recoverable business model where the objective is to collect payment amount. The assessment is made for each cash-generating and interest when due, and measured at amortised cost unit. using the effective interest method, less any impairment. The receivables are classified as current unless they are Any gain or loss arising on the disposal or retirement of an due more than 12 months from balance sheet date. item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying 2.15 FINANCIAL LIABILITIES amount of the asset and is recognised in the income Financial liabilities are recognised initially at fair value and statement as other gain/(loss) net. subsequently measured at amortised cost. If measuring at fair value is expected to reduce accounting mismatch or 2.14 FINANCIAL ASSETS otherwise result in more relevant information, the group can Financial assets are initially recognised at fair value. choose to apply the fair value option irrevocably for liabilities Subsequent measurement depends on the classification of for each liability which would otherwise be measured at the
ANNUAL REPORT | 57 CONSOLIDATED FINANCIAL STATEMENTS
amortised cost of fair value through other comprehensive is included in equity. income. The group does not have any material financial liabilities measured at fair value through profit or loss or 2.18 INCOME TAX other comprehensive income. Income tax expense represents current tax expense and changes in deferred tax expense. Borrowings Borrowings are recognised initially at the received amount, Current tax net of transaction expenditures incurred, and subsequently The tax currently payable is based on taxable profit for the measured at amortised cost. Any difference between the year. Taxable profit differs from profit as reported in the proceeds (net of transaction expenditures) and the nominal consolidated statement of comprehensive income because value is recognised in the income statement over the period of items of income or expense which are taxable or of the borrowings using the effective interest method. deductible in other years and items which are never taxable or deductible. The group's liability for current tax is Borrowings are classified as current liabilities unless the calculated using tax rates which have been enacted or group at the balance sheet date has an unconditional right substantively enacted by the end of the reporting period. to defer settlement of the liability for at least 12 months. Changes in deferred tax Trade and other payables Deferred tax is recognised on temporary differences Trade and other payables are recognised initially at fair between the carrying amounts of assets and liabilities in value and subsequently measured at amortised cost using the consolidated financial statements and the corresponding the effective interest-method. If the interest element is tax bases used in the computation of taxable profit. insignificant, trade payables are carried at the original Deferred tax liabilities are generally recognised for all invoice amount. taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the 2.16 CASH AND CASH EQUIVALENTS extent that it is probable that taxable profits will be available Cash and cash equivalents presented in the statement of against which those deductible temporary differences can cash flows include cash in hand, bank deposits and other be utilised. Such deferred tax assets and liabilities are not highly liquid investments with original maturities of three recognised if the temporary difference arises from goodwill months or less. or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction The cash flow statement is prepared using the indirect which affects neither the taxable profit nor the accounting method. Interest payments are classified as operational profit. cash flows. Deferred tax is also recognised for temporary differences 2.17 EQUITY associated with investments in subsidiaries and associates, An equity instrument is any contract which evidences a and interests in joint ventures, except where the group is residual interest in the assets of an entity after deducting all able to control the reversal of the temporary difference and of its liabilities. Equity instruments issued by the group are it is probable that the temporary difference will not reverse recognised as the proceeds received, net of direct issue in the foreseeable future. The group recognises deferred expenditures (net of income tax). tax for associated companies and jointly controlled entities subject to partnership taxation. Repurchase of the company's own equity instruments is recognised and deducted directly in equity. No gain or loss The carrying amount of deferred tax assets is reviewed at is recognised in profit or loss on the purchase, sale, issue the end of each reporting period and reduced to the extent or cancellation of the company's own equity instruments. that it is no longer probable that sufficient taxable profits will On subsequent disposal of own shares, any consideration be available to allow all or part of the asset to be recovered received (net of any directly attributable incremental in the foreseeable future. transaction expenditures and the related income tax effects)
58 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities are measured at the tax (the commencement date). rates which are expected to apply in the period in which The right-of-use asset is measured at acquisition cost, which the liability is settled or the asset realised, based on tax comprises the amount of the initial measurement of the lease rates (and tax laws) which have been enacted or substantively liability, adjusted for any lease payments made before the enacted by the end of the reporting period. The measurement commencement date, less any lease incentives received of deferred tax liabilities and assets reflects the tax consequences and any costs necessary to restore the asset to the condition which would follow from the manner in which the group required by the lease. expects to recover or settle the carrying amount of its assets and liabilities. Liabilities arising from a lease are initially measured on a present value basis using the interest rate implicit in the Deferred income tax assets and liabilities are offset when lease. If that rate cannot be readily determined, the lessee’s there is a legally enforceable right to offset current tax assets incremental borrowing rate is used. against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the Lease liabilities include the net present value of the following same taxation authority on either the same taxable entity or elements of the lease: different taxable entities where there is an intention to settle the balances on a net basis. • fixed payments (including in-substance fixed payments), less any lease incentives receivable Current and deferred tax for the year • variable lease payment which are based on an index or Current and deferred tax are recognised in profit or loss, a rate except when they relate to items which are recognised in • the exercise price of a purchase option if the group is other comprehensive income or directly in equity, in which reasonably certain to exercise that option case the current and deferred tax are also recognised in • payments of penalties for terminating the lease, if the other comprehensive income or directly in equity respectively. lease term reflects that the lessee will exercise such an option. 2.19 PROVISIONS Provisions, such as for warranties or investments in infrastructure, When adjustments to lease payments based on an index or are recognised when the group has a present legal or rate take effect, or the management makes changes in the constructive obligation as a result of past events, it is probable evaluation of options to extend or terminate the lease, the that a net outflow of resources will be required to settle the lease liability is reassessed and recognised as an adjustment obligation, and the amount can be reliably estimated. to the right-of-use asset. Provisions are not recognised for future operating losses. Payments associated with short-term leases and leases of The amount recognised as a provision is the best estimate low-value assets are recognised on a straight-line basis as of the consideration required to settle the present obligation an expense in the statement of comprehensive income. at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a 2.21 EMPLOYEE BENEFITS provision is measured using the cash flows estimated to set- Payments to defined contribution retirement benefit plans are tle the present obligation, its carrying amount is the present recognised as an expense when employees have rendered value of those cash flows (where the effect of the time value service entitling them to the contributions. of money is material). Obligations related to early retirement pensions (AFP) are 2.20 LEASES part of a multi-employer defined benefit plan. However, the In accordance with IFRS 16 Leases, leases are recognised company’s share of the liability cannot be reliably as a right-of-use asset and a lease obligation from the time measured and the plan is therefore accounted for as if it the right-of-use asset is available for use by the lessee were a defined contribution plan.
ANNUAL REPORT | 59 CONSOLIDATED FINANCIAL STATEMENTS
2.22 ADOPTION OF NEW AND REVISED The reclassifications and adjustments arising from the new STANDARDS AND INTERPRETATIONS leasing rules are recognised in the balance sheet at 1 January 2019 as follows: right-of-use assets are increased New accounting standards and amendments by NOK 54 million with a corresponding increase in the lease liability. (a) New standards and amendments this year The group has implemented new standards and changes to Long-term interests in associates and joint standards in 2019. Changes to standards with effect for the ventures – amendments to IAS 28 group are described below. The change to IAS 28 means that negative shares in associated companies and joint ventures which follow from a future IFRS 16 LEASES obligation to contribute capital are recognised as a The group has adopted IFRS 16 Leases from 1 January reduction in loans considered to be part of the net 2019 using the simplified transition approach, and has not investment. restated comparative figures for the 2018 reporting period, as permitted under the specific transitional provisions in the (b) Forthcoming requirements standard. No forthcoming changes are expected to have a significant impact for the group. Where leases which were previously classified as operating leases under the principles of IAS 17 Leases are concerned, Note 3: Critical accounting judgements and the lease liability on adopting IFRS 16 was measured as the key sources of estimation uncertainty present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at 1 January The preparation of financial statements in conformity with the 2019. IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the The associated right-of-use asset was measured at an process of applying the group's accounting policies. amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments, less any lease Estimates and assumptions about the carrying amounts of incentives received and any estimated costs for restoring the assets and liabilities which are not readily apparent from asset to the condition required by the lease. other sources will be required. The estimates and associated assumptions are based on historical experience and other In applying IFRS 16 for the first time, the group has used the factors which are considered to be relevant. The estimates following practical expedients permitted by IFRS 16: may, by definition, differ from the actual outcome.
• the application of a single discount rate to a portfolio of The estimates and underlying assumptions are reviewed on leases with reasonably similar characteristics an ongoing basis. Revisions to accounting estimates are • operating leases with a remaining term of less than 12 recognised in the period in which the estimate is revised if months at 1 January 2019 are recognised as short-term the revision affects only that period or in the period of the leases revision and future periods if the revision affects both current • operating leases of low value are excluded and future periods. • the exclusion of costs related to the initial recognition of the lease contract. The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the The group has also elected not to reassess whether a balance sheet date which have a significant risk of causing contract is or contains a lease element at the date of initial a material adjustment to the carrying amounts of assets and application. liabilities within the next financial year. Certain amounts
60 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
included in or affecting the financial statements and related Which of the properties in the transaction should be disclosure must be estimated, requiring management to derecognised as a result of the sale, and hence be make assumptions with respect to values or conditions which reclassified as held for sale in the 2019 financial statements, cannot be known with certainty at the time the financial is subject to a complex assessment, since the accounting statements are prepared. rules do not permit all the properties included in the transaction to be derecognised. Management’s discretionary interpretation Estimation of net realisable value for covers assessment of the terms in the sales contracts in inventory (property) relation to the relevant accounting rules. Property development projects are classified as inventory in accordance with IAS 2. Inventories comprise undeveloped See note 26 for further details on the assets held for sale. land, work in progress and finished units, and are measured at the lower of cost and net realisable value. Net realisable Assessment of any onerous land purchase value is the estimated selling price in the ordinary course of commitments business less the estimated costs of completion and the The group is a party to a number of contracts which commit estimated costs necessary to make the sale. In determining it to purchase land in the future. These relate primarily to the net realisable value, management assesses important properties which are subject to planning processes, where factors relevant for the valuation, including macroeconomic the conditions for fulfilment of the purchase are related to factors such as expected housing prices and rental the outcome of these processes. The purchase commitments levels as well as expected yields, approvals from the are related to non-financial assets included in the group’s authorities, construction costs and project progression. ordinary production cycle. When considered appropriate, management uses reports from external valuation experts to estimate property values The group's management has assessed whether any of or to corroborate the company’s own estimates. Changes these agreements can be considered onerous contracts in circumstances and in management’s assessments and pursuant to IAS 37. This could have been relevant in the assumptions will result in changes in the estimated net event that a significant fall in the market prices for proper- realisable value. See also note 5. ties, and/or the planning process in itself or other conditions have caused a significant change in the planned utilisation Assets held for sale and liabilities related to of the properties. The assessment of whether the purchase assets held for sale commitments are onerous contracts requires management to In 2019, the group entered into an agreement to sell the make judgments. majority of its portfolio of properties to a newly formed company, Urban Property Eier. The completion date of the After a more detailed assessment, the group management transaction for accounting purposes was in the first quarter has not identified grounds to make accounting provision for of 2020. any onerous contracts in 2019. The maturity profile of the group's property purchase commitments is specified in note 5. As a consequence of the decision to sell these properties, a significant part of the group's portfolio of properties has been reclassified as assets held for sale (as well as liabilities related to assets held for sale) in the financial statements at 31 December 2019.
The accounting considerations related to such a reclassification are based on the accounting treatment of the sale in 2020, with a significant number of the properties derecognised from the group's financial statements in the first quarter of 2020.
ANNUAL REPORT | 61 ILLUSTRATION: SKÅRERBYEN - LØRSENSKOG (DEVIATIONS WILL OCCUR) CONSOLIDATED FINANCIAL STATEMENTS
Note 4: Segment information
Management has determined the operating segments based on reports reviewed by the CEO and management group, and which are used to make strategic decisions. The figures below were reported to the CEO and the management group at the end of the reporting period. The main segment is defined as property development (""Boligutvikling""). The other segment consists of services, as well as unallocated revenues and costs.
The group utilises the percentage of completion method in its internal reporting, where the degree of completion is estimated on the basis of expenses incurred relative to total estimated costs and the sales rate. Operating revenues under the percentage of completion method also include an estimated profit element for sold units. The consolidated income statement is based on the completed contract method, in which revenue is recognised at the time of transfer of risk and control, being the point of delivery of the property. A reconciliation of this effect (from percentage of completion to completed contract) can be found in the segment reporting under "Reconciliation EBITDA to operating profit (loss)". In addition, the operating profit from IFRS contains items from IFRS16 Leases, which are not included in the segment reporting. Effects are specified in the table below.
Group management considers segment results based on the percentage of completion method for determining EBITDA. The measurement method is defined as operating profit (loss) before “Depreciation and amortisation”, “Other gain (loss), net”, and “Share of income (losses) from associated companies”. Financial income and expenses are not allocated to operating segments since this type of activity is managed by a central finance function focused on managing the group’s liquidity.
At 31 December 2019 Property (Amounts in NOK 1 000) development Other Total Operating revenues 3 204 163 55 794 3 259 957 Project expenses (2 203 911) (839) (2 204 750) Other operating expenses (78 935) (205 641) (284 576) EBITDA (percentage of completion) 921 317 (150 686) 770 631
Reconciliation EBITDA to operating profit (loss): EBITDA (percentage of completion) 921 317 (150 686) 770 631 Sales revenues (adjustment effect of percentage of completion) (2 828 584) - (2 828 584) Sales revenues (completed contracts) 2 937 465 - 2 937 465 Project expenses (adjustment effect of percentage of completion) 1 917 090 - 1 917 090 Project expenses (completed contracts) (1 991 825) - (1 991 825) Lease liabilities - 10 454 10 454 Depreciation and amortisation - (12 748) (12 748) Share of income (loss) from associated companies 62 224 - 62 224 Other gain (loss), net - - - Operating profit (loss) 1 017 687 (152 980) 864 707
Units in production 1 504 I/A I/A Units delivered 732 I/A I/A
At 31 December 2018 Property (Amounts in NOK 1 000) developmen Other TotaL Operating revenues 2 928 742 46 059 2 974 801 Project expenses (2 093 649) (682) (2 094 331) Other operating expenses (64 355) (203 696) (268 051) EBITDA (percentage of completion) 770 738 (158 319) 612 419
Reconciliation EBITDA to operating profit (loss): EBITDA (percentage of completion) 770 738 (158 319) 612 419 Sales revenues (adjustment effect of percentage of completion) (2 847 232) - (2 847 232) Sales revenues (completed contracts) 3 214 507 - 3 214 507 Project expenses (adjustment effect of percentage of completion) 2 011 966 - 2 011 966 Project expenses (completed contracts) (2 339 269) - (2 339 269) Depreciation and amortisation - (3 707) (3 707) Share of income (loss) from associated companies 101 796 - 101 796 Other gain (loss), net - - - Operating profit (loss) 912 506 (162 026) 750 480
Units in production 1 449 I/A I/A Units delivered 849 I/A I/A
ANNUAL REPORT | 63 CONSOLIDATED FINANCIAL STATEMENTS
Note 5: Inventory property Borrowing cost Capitalised project (amounts in NOK 1 000) Land of land expenses Total As of 1 January 2018 1 833 923 104 175 2 705 840 4 643 938 Additions 23 146 28 229 1 933 000 1 984 375 Acquisition of subsidiaries 97 683 - 1 940 99 623 Reclassifications of land to capitalised project expenses at construction start (471 133) (10 412) 481 545 - Inventory expenses on delivered units (project expenses) (5 321) - (2 416 312) (2 421 633) Impairment losses - - - - Carrying amount at 31 December 2018 1 478 299 121 992 2 706 013 4 306 304
Additions 433 282 37 017 1 802 085 2 272 384 Reclassified to assets held for sale (530 359) (42 131) (90 049) (662 539) Reclassifications of land to capitalised project expenses at construction start (212 697) (36 856) 249 553 - Inventory expenses on delivered units (project expenses) * (227 772) - (2 051 713) (2 279 485) Impairment losses - - - - Carrying amount at 31 December 2019 940 752 80 021 2 615 889 3 636 663
* Includes sale of commercial property and an option contract. The combined expense is NOK 242 million.
(amounts in NOK 1 000) 2019 2018 Land (undeveloped) 1 020 774 1 600 290 Work in progress 2 433 245 2 539 828 Finished projects 182 644 166 186 Carrying amount inventory 3 636 663 4 306 304
Capitalisation rates utilised to determine the amount of borrowing costs eligible for capitalisation were between 3.6 per cent and 4.1 per cent during 2019. Corresponding rates were between 3.4 per cent and 3.8 per cent during 2018.
Land loans are normally converted to construction loans in line with the progress of the respective construction projects. They are capitalised against the site from the day the project secures planning permission, and recognised in profit and loss as part of the cost of sales when the units are delivered. Interest charges of NOK 37 million related to land loans were capitalised in 2019, compared with NOK 28.2 million in 2018. Interest charges on construction loans are capitalised during the construction period and recognised under cost of sales in the same way. Capitalised interest on construction loans is included in additions to capitalised project expenses in the table above. Interest charges of NOK 64.6 million related to construction loans were capitalised in 2019, compared with NOK 57.7 million in 2018.
Valuation of properties Plots of land are considered part of inventory and are valued at the lower of acquisition cost and net realisable value.
At the group's request, external valuations of properties have been performed at 31 December 2019. The group management has determined the most significant assumptions relevant to the valuation of individual plots/properties, including size, geographic location, current planning status, potential for development and timing of sale. The external valuation indicates an excess value of NOK 1 501 million (2018: NOK 1 610) beyond the carrying amounts related to the properties included in land (undeveloped).
Impairment test inventory property The group's impairment test for inventory property is based on multiple indicators, including external valuations and changes in market conditions. The group has not recognised any impairment losses in 2019 or 2018.
See note 16 for inventory property pledged as collateral for borrowings from financial institutions.
Purchase obligations for land The group has entered into a number of agreements in recent years on the future acquisition of sites through purchase obligations and options. These are not reflected in the accounts, since recognition first occurs on takeover. The agreements relate to the 2020-35 period, with the obligations expected to yield 6 000-7 100 units (net). Of these, in excess of 85 per cent are located in the Greater Oslo area. In relation to the Urban Property transaction, some of the purchasing agreements will be transferred to Urban Property. These are referred to as portfolio C in note 26 and constitute approximately 30 per cent of the number of units in the purchase obligations.
Maturity profile for the group's purchase obligations for land 1-5 years 5-10 years More than 10 years Interval Interval Interval Estimated residential units (net) 2 240 2 690 3 240 3 840 500 600
When the agreements will mature is very uncertain, since this depends to a great extent on planning processes which are outside the group’s control. The maturity could therefore occur earlier or later than estimated. The group has assessed whether a provision for loss needs to made for some of these contracts at 31 December 2019. No loss-making contracts have been identified for 2019.
In addition to the purchase obligations, the options are expected to yield around 100 units (net).
64 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 6: Pay and personnel expenses
(amounts in NOK 1 000) 2 019 2018 Wages and salaries (124 805) (123 013) Social security tax (20 383) (22 161) Pension costs (6 617) (5 423) Other benefits (2 426) (12 991) Pay expense capitalised to inventory 22 019 21 091 Total pay and personnel expenses (132 213) (142 498) Average number of employees 90 92
Specification of pension costs (amounts in NOK 1 000) 2 019 2018 Pension cost - defined contribution and disability pension plan (4 713) (4 116) Pension cost - defined benefit plan (945) (358) Other pension costs (including early retirement (AFP)) (959) (949) Net pension costs (6 617) (5 423)
At 31 December 2019, 85 employees were included in the defined contribution plan. In addition, two employees were included in a defined benefit plan which is closed to new members. The defined benefit plan carries a net obligation of NOK 0.5 million. Sixty-seven current employees were included in the early retirement (AFP) plan. See also note 8 for Selvaag Bolig ASA.
Companies in Norway are required to offer an occupational pension plan in line with the Act on mandatory occupational pensions ("lov om obligatorisk tjenestepensjon"), and the group's companies have a pension plan which meets these requirements. The basis for earned pension rights under the defined contribution plan is 4.5 per cent of salary between one and 7.1 times the National Insurace base amount (G) and 10 per cent between 7.1 and 12G.
Note 7: Other operating expenses
(amounts in NOK 1 000) Note 2019 2018 Operation and maintenance (21 504) (28 418) Consultancy expenses (46 524) (33 295) Commisions and other sales-related expenses (55 778) (41 992) Losses on receivables 11 (14) (671) Other operating expenses (18 089) (21 177) Total other operating expenses (141 909) (125 553)
Operation and maintenance include expenses related to operation of the group headquarters, in addition to NOK 3 million (2018: NOK 10.5) in services purchased from Selvaag AS. See also note 23 on related-party transactions for further specification.
Note 8: Financial income and expenses
(amounts in NOK 1 000) Note 2019 2018 Interest income on financial assets measured at amortised cost 16 634 9 947 Net foreign currency gains 107 3 Other financial income 1 269 Total financial income 16 742 10 219
Interest expenses on financial liabilities measured at amortised cost (62 362) (51 170) Capitalised interest 5 37 017 28 229 Total interest expenses (25 345) (22 941) Net foreign currency losses (8) (15) Other financial expenses (2 127) (5 273) Total financial expenses (27 480) (28 229)
Net financial expenses (10 738) (18 010)
ANNUAL REPORT | 65 CONSOLIDATED FINANCIAL STATEMENTS
Note 9: Intangible assets
(amounts in NOK 1 000) Goodwill
Cost at 31 December 2017 383 376 Additions - Disposals - Cost at 31 December 2018 383 376 Additions - Disposals - Cost at 31 December 2019 383 376
Carrying amount at 31 December 2018 383 376 Carrying amount at 31 December 2019 383 376
Estimated useful life - Amortisation method No amortisation
The value of intangible assets is tested for impairment annually, or more often when there is an indication that the value may be impaired. If the recoverable amount is less than the carrying amount, the asset is written down to its recoverable amount.
Impairment testing of goodwill and other intangible assets The group tests goodwill for impairment annually, or more often if internal or external indications of impairment exist. Any other intangible assetss will be amortised over their expected useful life and tested for impairment if events during the period indicate that the value may be impaired. The group had no other intangible assets at 31 December 2019.
Goodwill arisen from business combinations is allocated to each of the group's cash-generating segments as follows:
2019 Goodwill Property development 382 176 Other 1 200 Total 383 376
2018 Goodwill Property development 382 176 Other 1 200 Total 383 376
Cash-generating units are divided into the property development and other operating segments. Goodwill allocated to the "other" segment is related to Selvaag Eiendomsoppgjør AS, previously part of Meglerhuset Selvaag (estate agents).
An external valuation indicates an excess value of NOK 1 501 million over and above the carrying amounts related to the properties included in land (undeveloped). See note 5. The excess value is allocated to the property development cash-generating unit. The group expects to realise excess value in the existing land bank through projects developed over the next five to 10 years.
66 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
The group has tested the goodwill for impairment on the basis of a model for estimating future cash flows from property development projects. The annual growth in cash flow is set to two per cent. The estimated cash flows are discounted to net present value using a weighted average cost of capital discount rate. Future cash flows are estimated on the basis of expected cash flow from ongoing projects, future projects from the current land bank and future projects requiring new investment in properties. Expected cash outflows related to new investment in properties and administrative costs are included in the calculation. The most significant assumptions in the calculation model are deemed to be sales volume and discount rate, in addition to the profit rate in the projects. The impairment test shows sufficient excess value over and above the carrying amount to conclude that any reasonable decrease in the key assumptions will not trigger an impairment charge for goodwill. The sensitivity analysis below shows the change in the net present value of future cash flows from changes to key assumptions. None of the scenarios in the table below would have triggered impairment losses.
Units delivered per year -10% +-0 +10%
Margin as -0.5 pp -18% -6% 5% percentage of +- 0 pp -12% - 12% revenue + 0.5 pp -6% 6% 19%
Note 10: Property, plant, equipment and leases
Total propety, Service Machinery and Inventory and plant and Right-of-use lease (amounts in NOK 1 000) property plant other equipment equipment (A) assets (B) Total (A+B) Cost at 31 December 2017 4 003 4 630 23 605 32 238 - 32 238 Additions 2018 - - 842 842 - 842 Disposals 2018 ------Translation differences ------Cost at 31 December 2018 4 003 4 630 24 447 33 080 - 33 080 Additions 2019 1 - - 453 453 53 639 54 092 Disposals 2019 - - (226) (226) - (226) Translation differences ------Cost at 31 December 2019 4 003 4 630 24 674 33 307 53 639 86 946
Accumulated depreciation at 31 December 2017 - (2 868) (17 942) (20 810) - (20 810) Depreciation 2018 - (926) (2 781) (3 707) - (3 707) Disposals 2018 ------Translation differences - - 2 2 - 2 Accumulated depreciation at 31 December 2018 - (3 794) (20 721) (24 515) - (24 515) Depreciation 2019 - (836) (2 492) (3 328) (9 420) (12 748) Disposals 2019 - - 126 126 - 126 Translation differences - - (2) (2) - (2) Accumulated depreciation at 31 December 2019 - (4 630) (23 089) (27 719) (9 420) (37 139)
Carrying amount at 31 December 2018 4 003 836 3 726 8 565 - 8 565 Carrying amount at 31 December 2019 4 003 - 1 585 5 588 44 219 49 807
Estimated useful life - 3-5 years 3-5 years 1-9 years Depreciation method No straight-line straight-line straight-line depreciation
1 Addition of right-of-use lease assets in 2019 relate to initial recognition. There were no new leasing contracts in 2019.
ANNUAL REPORT | 67 CONSOLIDATED FINANCIAL STATEMENTS
The group as lessee
Right-of-use assets Leased assets in the group are mainly office buildings. Right-of-use assets related to these are presented in the table above. The group has opted to not recognise leases for assets with low value. Lease payments related to assets with low value are expensed when they occur. A number of the lease contracts includes an extension option which can be activated during the last term of the current contract. When entering a new lease contract, the group evaluates whether the extension option is likely to be activated or not.
Lease liabilities
Development in the period
(amounts in NOK 1 000) 2019 2018 At 1 January - - New/changed lease liabilities recognised in the period1 53 639 - Repayments (10 454) - At 31 December 43 185 -
1Addition lease liabilities in 2019 is related to initial recognition.
Specification of lease liabilities
(amounts in NOK 1 000) 2 019 2018 Current lease liabilities 7 922 - Non-current lease liabilities 35 263 - Total lease liabilities 43 185 -
Maturity profile lease liabilities (nominal values)
(amounts in NOK 1 000) 2 019 2018 < 1 year 9 953 - 2-3 years 19 546 - 4-5 years 17 343 - > 5 years 2 901 - Total nominal lease liabilities at 31 December 49 743 -
68 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 11: Trade and other receivables
(amounts in NOK 1 000) 2019 2018 Receivables from sale of land 43 088 41 516 Seller credits1 64 000 86 000 Other loans and receivables2 58 195 198 558 Other non-current assets 165 283 326 074
1NOK 64 million is related to sale of shares in the Kaldnes Brygge project, Tønsberg (86). 2NOK 143 million is related to pre-payments for purchase of land properties which are reclassified to assets held for sale in 2019 related to the sale of land bank to Urban Property, see note 26.
(amounts in NOK 1 000) 2019 2018 Trade receivables 82 220 215 007
Other receivables 32 381 40 440 Other current financial receivables 32 381 40 440 Prepaid expenses 18 671 19 759 Total other current receivables 51 052 60 199
The carrying amounts of trade and other receivables are denominated in NOK.
Analysis of trade receivables at the end of the reporting period 2019 2018 Not overdue 75 869 209 695 Overdue 1-100 days 6 671 6 505 Overdue > 100 days 1 150 892 Gross trade receivables 83 690 217 092 Total allowance for doubtful debts 1 470 2 085 Net trade receivables 82 220 215 007
Losses on receivables 2019 2018 Movement in allowance for doubtful debts (615) 615 Receivables written off during the year as uncollectable 629 56 Losses on receivables in the statement of comprehensive income 14 671
Note 12: Additional information for the statement of cash flows
Acquisitions of businesses and subsidiaries The table below shows the effects on the consolidated statement of the financial position of acquisitions of businesses and subsidiaries
(amounts in NOK 1 000) 2019 2018 Current assets - 1 365 Liabilities - (1 280) Fair value of existing ownership interests in associated companies at acquisition date - (85) Total consideration - -
Cash payments related to acquisitions - - Cash in subsidiaries acquired - 1 365 Payments for acquisitions of businesses and subsidiaries, net of cash acquired - 1 365
Acquisition in 2018 is the previous joint venture Ehousing AS.
ANNUAL REPORT | 69 CONSOLIDATED FINANCIAL STATEMENTS
Disposal of businesses and subsidiaries The table below shows the effects on the consolidated statement of the financial position of the disposal of businesses and subsidiaries
(amounts in NOK 1 000) 2019 2018 Current assets - - Liabilities - - Gains (losses) on disposals of businesses and subsidiaries - - Total consideration - -
Cash proceeds related to disposals of businesses and subsidiaries - - Cash in subsidiaries disposed of - - Payments for acquisitions of businesses and subsidiaries, net of cash acquired - -
Cash and cash equivalents (amounts in NOK 1 000) 2019 2018 Restricted bank accounts 708 708 Non-restricted bank deposits and cash 1 177 978 656 326 Total 1 178 686 657 034
Interest payments Payments of and proceeds from interest are classified as operating activities. Payments were NOK 130 and NOK 104 million in 2019 and 2018 respectively. Proceeds from interest were NOK 8 million in 2019 and NOK 3 million in 2018. Some of the interest paid has been capitalised as part of the inventory in the group, see note 5 for specifications. Other interest is included in other working capital assets and other working capital liabilities.
Net interest-bearing debt (amounts in NOK 1 000) 2019 2018 Non-current interest-bearing debt 1 092 288 1 795 798 Current interest-bearing debt 1 161 043 520 508 Cash and cash equivalents (1 178 686) (657 034) Net interest-bearing debt 1 074 645 1 659 272
Gross debt - variable interest rates 2 253 331 2 316 306 Gross debt - fixed interest rates - - Cash and cash equivalents (1 178 686) (657 034) Net interest-bearing debt 1 074 645 1 659 272
Other assets Liabilities from financing activities1 Current Non-current Total non- Cash/bank Liquid interest- interest- current interest- (amounts in NOK 1 000) overdraft investments bearing debt bearing debt bearing debt Total Net interest-bearing debt at 31 December 2017 (485 561) - 380 608 1 836 824 2 217 431 1 731 870 Cash flows (171 473) - (380 608) 427 937 47 330 (124 143) Acquisitions ------Other non-cash movements - - 520 508 (468 963) 51 545 51 545 Net interest-bearing debt at 31 December 2018 (657 034) - 520 508 1 795 798 2 316 306 1 659 272 Cash flows (521 652) - (520 508) 400 400 (120 107) (641 760) Acquisitions ------Other non-cash movements 2 - - 1 161 043 (1 103 910) 57 133 57 133 Net interest-bearing debt at 31 December 2019 (1 178 686) - 1 161 043 1 092 288 2 253 332 1 074 645
1 Lease liabilities not included. 2 Net effect of NOK 57.1 million reflects the difference between accrued and paid interest (NOK 51.5 million).
Loans to associated companies and joint ventures The group paid NOK 22.3 million in loans to associated companies and joint ventures in 2019, compared with NOK 28.3 million in 2018. Proceeds from loans to companies and joint ventures were NOK 0 (20.9).
70 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 13: Additional information for the statement of changes in equity and shareholders
Paid-in capital Number of Share Share Other paid-in Total paid-in (amounts in NOK 1 000, except number of shares) shares capital premium capital capital Equity at 31 December 2017 91 761 616 183 524 1 394 857 700 629 2 279 010
Share buy-back Selvaag Bolig ASA related to share programme for employees - - - - - Sale of shares from Selvaag Bolig ASA to employees 1 167 004 2 334 - - 2 334 Equity at 31 December 2018 92 928 620 185 858 1 394 857 700 629 2 281 344
Share buy-back Selvaag Bolig ASA related to share programme for employees - - - - - Sale of shares from Selvaag Bolig ASA to employees 492 693 985 - - 985 Equity at 31 December 2019 93 421 313 186 843 1 394 857 700 629 2 282 329
At 31 December 2019 , the share capital of the company (net of treasury shares) was NOK 186.8 million, comprising 93 421 313 fully-paid ordinary shares with a par value of NOK 2.00.
At 31 December 2018, the share capital of the company (net of treasury shares) was NOK 185.9 million, comprising 92 928 620 fully-paid ordinary shares. All issued shares carry equal rights. The change in 2019 is related to the sale of shares to employees through the employee share purchase programme.
Selvaag Bolig ASA held 344 375 of its own shares at 31 December 2019 (837 068 at 31 December 2018)
The board of Selvaag Bolig ASA is mandated by the annual general meeting (AGM) to acquire the company's shares up to a total nominal value of NOK 18 753 137. The amount paid for the shares must be a minimum of NOK 10 and maximum of NOK 80. The board can use the mandate for a possible later write-down of the share capital with the consent of the general meeting, remuneration of directors, incentive programmes, settlement for the possible acquisition of businesses, or for the purchase of shares where this is financially beneficial. The board is free to choose the methods to be used for acquiring or disposing of shares. The mandate runs until the AGM in 2020. There is a proposal for the mandate to be updated so that the amount paid for the shares will be a minimum of NOK 10 and a maximum of NOK 100. The proposal also includes the extention of the mandate until the AGM in 2021.
Furthermore, the board of Selvaag Bolig ASA is mandated by the AGM to increase the share capital, on one or more occasions, up to a total of NOK 18 753 137. The mandate can be used to issue shares as payment related to incentive schemes, as consideration for the aquisition of businesses falling within the company's business purpose, or for necessary strengthening of the company's equity. The mandate runs until the AGM in 2020, when an extension of the mandate until the AGM in 2021 will be proposed.
Other equity reserves Other reserves in the statement of changes in equity consist of the group's share of transactions with owners in associated companies and joint ventures.
Non-controlling interests (NCI)
NCI in % NCI share of profit (loss) NCI carrying amount at (amounts in NOK 1 000) 31.12.2019 31.12.2018 2019 2018 31.12.2019 31.12.2018 Nesttun Pluss AS/KS 25.0% 25.0% - (95) 7 866 9 366
A dividend of NOK 1.5 million was paid to non-controlling interests in 2019. No dividend was paid to non-controlling interests in 2018.
ANNUAL REPORT | 71 CONSOLIDATED FINANCIAL STATEMENTS
Ownership structure At 31 December 2019, the group had 2 895 shareholders, of whom 236 were outside Norway. At 31 December 2018, the group had 2 330 shareholders, of whom 212 were outside Norway.
The 20 largest shareholders at 31 December 2019 were as follows
Shareholder Ordinary shares Ownership/voting share SELVAAG AS 50 180 087 53.5% LANDSFORSAKRINGAR FASTIGHETSFOND 5 653 788 6.0% TAIGA INVESTMENT FUNDS PLC-TAIGA F 2 741 751 2.9% PARETO INVEST AS 2 065 624 2.2% VERDIPAPIRFONDET PARETO INVESTMENT 1 413 000 1.5% VERDIPAPIRFONDET ALFRED BERG GAMBA 1 397 062 1.5% SEB PRIME SOLUTIONS SISSENER CANOP 1 221 349 1.3% STATE STREET BANK AND TRUST COMP * 1 217 125 1.3% JPMORGAN CHASE BANK, N.A., LONDON * 1 000 000 1.1% FLPS - GL S-M SUB 928 800 1.0% HOLTA INVEST AS 814 119 0.9% LANDKREDITT UTBYTTE 800 000 0.9% MUSTAD INDUSTRIER AS 730 179 0.8% VERDIPAPIRFONDET HOLBERG NORGE 700 000 0.7% MORGAN STANLEY & CO. INTERNATIONAL 610 216 0.7% BANAN II AS 600 000 0.6% BAARD SCHUMANN 565 127 0.6% TMAM EUROPEAN REAL ESTATE SEC 544 506 0.6% SANDEN AS 518 186 0.6% STOREBRAND NORGE I VERDIPAPIRFOND 507 654 0.5% Total 20 largest shareholders 74 208 573 79.1% Other shareholders 19 557 115 20.9% Total ordinary shares 93 765 688 100.0%
* Further information regarding shareholders is presented at: http://sboasa.no
The 20 largest shareholders at 31 December 2018 were as follows Shareholder Ordinary shares Ownership/voting share SELVAAG AS 50 180 087 53.5% LANDSFORSAKRINGAR FASTIGHETSFOND 5 653 788 6.0% MORGAN STANLEY & CO. INT. PLC. * 2 744 671 2.9% PARETO INVEST AS 2 065 624 2.2% SEB PRIME SOLUTIONS SISSENER CANOP 1 600 000 1.7% VERDIPAPIRFONDET PARETO INVESTMENT 1 596 366 1.7% STATE STREET BANK AND TRUST COMP * 1 006 629 1.1% JPMORGAN CHASE BANK, N.A., LONDON * 966 761 1.0% FLPS - GL S-M SUB 940 800 1.0% HOLBERG NORGE 936 553 1.0% HOLTA INVEST AS 846 619 0.9% SELVAAG BOLIG ASA ** 837 068 0.9% BAARD SCHUMANN 777 127 0.8% J.P. MORGAN BANK LUXEMBOURG S.A. * 774 862 0.8% BANAN II AS 600 000 0.6% STATE STREET BANK AND TRUST COMP * 590 520 0.6% STOREBRAND NORGE I VERDIPAPIRFOND 581 069 0.6% MORGAN STANLEY & CO. INTERNATIONAL 579 538 0.6% SPARHANS AS 476 221 0.5% GEMSCO AS 460 400 0.5% Total 20 largest shareholders 74 214 703 79.1% Other shareholders 19 550 985 20.9% Total ordinary shares 93 765 688 100.0%
* Further information regarding shareholders is presented at: http://sboasa.no ** The shares were purchased for the company's share programmes for employees.
Directors and the chief executive officer held no share options in the company during 2019 and 2018. See note 22 for an overview of share ownership in the company by directors and the chief executive officer.
72 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 14: Earnings per share
Earnings per share are calculated by dividing the profit (loss) for the period with the weighted average number of shares in issue. There were no diluting effects related to the share capital in 2019 and 2018. 2019 2018 Profit (loss) for the period attributable to shareholders of the company in NOK 1 000 654 515 566 939 Weighted average number of shares outstanding during the period 92 963 716 92 403 798 Basic earnings per share in NOK 7.04 6.14 Diluted earnings per share in NOK 7.04 6.14
Note 15: Dividend
The company has established a policy of paying dividends twice a year from 2015. The board has proposed a dividend of NOK 1.50 per share for the second half of 2019, corresponding to NOK 140.6 million. Furthermore, NOK 2.00 per share was paid on the basis of the financial results for the first half of 2019, corresponding to NOK 185.9 million. The total dividend for 2019 of NOK 326.5 million equals 50 per cent of earnings per share. The dividend paid for 2018 was NOK 417.2 million, corresponding to NOK 4.50 per share. That equalled 73 per cent of earnings per share. The dividend for the second half of 2019 is subject to approval by the AGM on 24 April and is not reflected in the financial statements for 2019. See the table below for specification of the amounts.
In the fourth quarter of 2019, the group entered into agreement with Urban Property to sell a substantial portion of the land portfolio, see note 26. The transaction was completed in the first quarter of 2020 and an additional dividend of NOK 22 per share was paid. The dividend will be recognised in the financial statements in 2020.
Dividend paid is calculated on the basis of the total number of shares, which amounts to 93 765 688. To find the net amout paid, the dividend related to treasury shares owned by Selvaag Bolig ASA at the time of approval is deducted.
Dividend for the first half Proposed dividend for the second half1 (amounts in NOK 1 000) NOK per share Number of shares Amount NOK per share Number of shares Amount Total for 2019 Gross dividend 2.00 93 765 688 187 531 1.50 93 765 688 140 649 328 180
Dividend related to treasury shares 2.00 837 068 1 674 - - - 1 674 Net dividend paid - - 185 857 - - 140 649 326 506
1 The amount is calculated gross since the number of treasury shares shares held at the time the dividend will be approved, 24 April 2020, was not known at 31 December 2019.
Dividend paid in 2019 was NOK 418.2 million. This consisted of NOK 232.3 million for the second half of 2018 and NOK 185.9 million for the first half of 2019
Dividend for the first half Dividend for the second half (amounts in NOK 1 000) NOK per share Number of shares Amount NOK per share Number of shares Amount Total for 2018 Gross dividend 2.00 93 765 688 187 531 2.50 93 765 688 234 414 421 946
Dividend related to treasury shares 2.00 1 307 577 2 615 2.50 837 068 2 093 4 708 Net dividend paid - - 184 916 - - 232 322 417 238
Dividend paid in 2018 was NOK 351.4 million. This consisted of NOK 166.4 million for the second half of 2017 and NOK 184.9 million for the first half of 2018.
Note 16: Interest-bearing liabilities
Specification of interest-bearing liabilities (amounts in NOK 1 000) 2019 2018 Non-current liabilities Bank loans 1 092 288 1 795 798 Total non-current interest-bearing liabilities at amortised cost 1 092 288 1 795 798 Current liabilities Bank loans 1 161 043 520 508 Total current interest-bearing liabilities at amortised cost 1 161 043 520 508 Total interest-bearing liabilites at amortised cost 2 253 331 2 316 305
Selvaag Bolig ASA has a credit facility agreement of NOK 500 million with DNB, which matures in April 2022. This facility was reduced to NOK 150 million in January 2020 in connection with the sale of parts of the land bank to Urban Property. The company also has an annually renewed overdraft facility of NOK 150 million with DNB. No drawings had been made against any of these facilities at 31 December.
The group’s interest-bearing debt falls primarily into three categories: 1) liabilities in parent company Selvaag Bolig ASA (top-up loans), 2) land loans and 3) construction loans. At 31 December, the group had no top-up loans, land loans of NOK 1 294 million and construction loans of NOK 959 million.
ANNUAL REPORT | 73 CONSOLIDATED FINANCIAL STATEMENTS
Company (amounts in NOK 1 000) Loan instrument Lender 2019 Currency Maturity date Selvaag Bolig ASA Working capital facility DNB - NOK Unspecified Selvaag Bolig ASA Revolving credit facility DNB - NOK 06.04.2022 Selvaag Bolig Lørenskog AS Land loan DNB / Handelsbanken 255 300 NOK 21.01.2020 Selvaag Bolig Landås AS Land loan DNB 185 000 NOK 21.01.2020 Selvaag Bolig Landås AS Land loan DNB 90 000 NOK 31.03.2024 Selvaag Bolig Langhus AS Land loan DNB 85 000 NOK 21.01.2020 Selvaag Bolig Stasjonsby I AS Land loan DNB 60 000 NOK 21.01.2020 Selvaag Bolig ASA - Trævarefabrikken Land loan DNB 86 000 NOK 31.03.2021 Skårer Bolig AS Land loan DNB 146 400 NOK 21.01.2020 Selvaag Løren 7 AS Land loan DNB 110 500 NOK 21.01.2020 Jaasund AS Land loan SR Bank 69 307 NOK 31.12.2021 Lervik Brygge AS Land loan SR Bank 108 604 NOK 21.01.2020 Aase Gaard AS Land loan SR Bank 50 000 NOK 01.12.2022 Selvaag Bolig Ballerud AS Land loan Sparebanken Øst 48 000 NOK 30.09.2022 Selvaag Bolig Vinterportalen AS Construction loan DNB / Handelsbanken 438 000 NOK 31.03.2022 Selvaag Bolig Lørenskog AS Construction loan DNB / Handelsbanken 72 700 NOK 31.03.2021 Skårer Bolig AS Construction loan DNB 120 097 NOK 30.09.2021 Selvaag Bolig Trævarefabrikken AS Construction loan DNB 66 099 NOK 30.09.2021 Selvaag Bolig Solberg AS Construction loan DNB / Handelsbanken 40 000 NOK 30.06.2022 Selvaag Bolig Bispelua AS Construction loan DNB / Handelsbanken 20 535 NOK 30.08.2020 Selvaag Bolig Lørenporten AS Construction loan DNB 12 085 NOK 31.03.2021 Lervik Brygge AS Construction loan SR-Bank 189 704 NOK 30.09.2020 Total interest-bearing debt 2 253 331
Interest rates are based on three-month Nibor plus a margin. At 31 December 2019, the average interest rate was 4.16 per cent for the land loans and 4.17 per cent for the construction loans.
The differences between the disclosed nominal interest rates and effective interest rates are deemed to be insignificant.
The duration of construction loans follows the completion rate and delivery of housing units, so final redemption occurs when the project is completed.
Company (amounts in NOK 1 000) Loan instrument Lender 2018 Currency Maturity date Selvaag Bolig ASA Working capital facility DNB - NOK Unspecified Selvaag Bolig ASA Revolving credit facility DNB - NOK 04.04.2021 Selvaag Bolig Lørenskog AS Land loan DNB / Handelsbanken 280 000 NOK 30.09.2021 Selvaag Bolig Hamang AS Land loan DNB 230 000 NOK 30.09.2020 Selvaag Bolig Langhus AS Land loan DNB 85 000 NOK 30.12.2019 Selvaag Bolig ASA - Lørenporten Land loan DNB 111 100 NOK 03.08.2019 Selvaag Bolig ASA - Trævarefabrikken Land loan DNB 86 000 NOK 31.03.2021 Skårer Bolig AS Land loan DNB 195 000 NOK 30.11.2021 Selvaag Løren 7 AS Land loan DNB 110 500 NOK 30.12.2019 Jaasund AS Land loan SR Bank 65 765 NOK 31.12.2021 Lervik Brygge AS Land loan SR Bank 94 820 NOK 01.12.2022 Aase Gaard AS Land loan SR Bank 50 000 NOK 01.12.2022 Selvaag Bolig Ballerud AS Land loan Sparebanken Øst 48 000 NOK 30.09.2019 Selvaag Bolig Vinterportalen AS Construction loan DNB / Handelsbanken 240 000 NOK 31.03.2022 Selvaag Bolig Hovinenga AS Construction loan DNB / Handelsbanken 304 954 NOK 30.06.2020 Selvaag Bolig Glassverket AS Construction loan DNB 64 832 NOK 31.03.2020 Selvaag Bolig Bispelua AS Construction loan DNB / Handelsbanken 49 519 NOK 30.08.2019 Selvaag Bolig Lørenporten AS Construction loan DNB 61 083 NOK 31.03.2021 Lervik Brygge AS Construction loan SR-Bank 123 343 NOK 30.09.2020 Lade Allè 67-69 Holding AS Construction loan Sparebank 1 SMN 116 389 NOK 31.12.2019 Total interest-bearing debt 2 316 305
Interest rates are based on three-month Nibor plus a margin. At 31 December 2018, the average interest rate was 3.67 per cent for the land loans and 3.70 per cent for the construction loans.
The differences between the disclosed nominal interest rates and effective interest rates are deemed to be insignificant.
The duration of construction loans follows the completion rate and delivery of housing units, so final redemption occurs when the project is completed.
74 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Non-current interest-bearing liabilites
Maturity schedule for non-current loans Period 2019 2018 To be repaid during 2020 - 723 130 To be repaid during 2021 426 288 687 848 To be repaid during 2022 576 000 384 821 To be repaid during 2023 or later 90 000 - Total 1 092 288 1 795 798
Current interest-bearing liabilities The table below includes liabilities maturing within 12 months subsequent to the reporting period
Maturity schedule for current loans:
Period 2019 2018 Repayable within 0-6 months after period-end 950 804 - Repayable within 6-12 months after period-end 210 239 520 508 Total 1 161 043 520 508
The increase in the proportion of current interest-bearing liabilities primarily reflected reclassifications in connection with land loans which are to be redeemed in connection with the sale of parts of the land bank to Urban Property, see note 26 for more information.
Collateral and guarantees, etc Secured loans 2019 2018 Bank loans - financial institutions 2 253 331 2 316 305
Carrying value of land pledged as security on bank loans 2019 2018 Inventory 4 147 083 3 981 143
Note 17: Trade and other payables
(amounts in NOK 1 000) 2019 2018 Trade payables 167 633 181 360
Accrued expenses 293 518 292 865 Other current financial liabilities - - Total other current non-interest-bearing financial liabilities 293 518 292 865 Prepayments from customers (contractual obligations) 207 102 200 860 Other current liabilities 210 108 68 606 Total other current non-interest-bearing liabilities 710 728 562 331
Trade payables The group's trade payables have the following maturity structure at 31 December: Maturity 2019 2018 Repayable 0-3 months after the end of the reporting period 167 633 181 360 Repayable 3-6 months after the end of the reporting period - - Net trade payables 167 633 181 360
ANNUAL REPORT | 75 CONSOLIDATED FINANCIAL STATEMENTS
Note 18: Managing capital and financial risk management
18.1 Financial risk factors The group’s activities expose it to a variety of financial risks: market (including currency, interest-rate and price risk), credit and liquidity risk. The group’s overall risk management activities seek to minimise potential adverse effects on its financial performance.
The CEO and the management group identify and evaluate financial risks on an on-going basis.
(a) Market risk (i) Foreign exchange risk The group is a Norwegian real estate developer, focusing on Norwegian development projects and properties. The group has certain investments in foreign operations, where net assets are exposed to foreign currency translation risk, but to a limited extent. Projects outside Norway are financed in local currency through subsidiaries.
(ii) Price risk The group is generally exposed to property price risk, and mainly in geographical terms in Norway. In addition, the group has invested in a future project in Sweden as well as one in Spain. The group is also exposed to risks related to construction costs and material prices. The profit margin for each project will vary, depending on the development of sales income per square metre for the residential properties. The group's exposure to price risk is partly hedged in that advance sales equivalent to 60 per cent of the total sales value of each project are required before construction starts. The group is not exposed to price risks from financial instruments.
The degree of risk associated with the prices of goods and services varies in accordance with contract type. Projects often span several years, and material prices and salary expenses may increase during the construction period. Most contracts are based on fixed prices for the construction period, but certain of them contain indexation clauses which permit price increases.
(iii) Interest-rate risk The group’s interest-rate risk arises largely from long-term borrowings. Borrowings raised at variable rates expose the group to interest-rate fluctuations, which affect cash flows. The group capitalises interest cost as part of development projects (inventory property) in line with the progress of the projects in accordance with IAS 23 Borrowing costs. See note 16 on interest-bearing liabilities for details of the group's borrowings.
(b) Credit risk Credit risk is managed at group level. The group is exposed to counterparty risk when its companies enter into agreements regarding sales of residential property. Credit risk also arises from outstanding receivables, such as loans to associated companies.
Credit risk related to the sale of property is considered to be limited since sales take place through professional estate agents. Normally, a 10 per cent deposit and documentation of financing are required from homebuyers when they enter into a contract. The balance is settled upon transfer of the title.
Based on the above, the group assesses credit risk associated with financial assets to be low.
The group's maximum exposure to credit risk comprises the classes "trade receivables and other current and non-current receivables" and "cash and cash equivalents". See note 18.3 for the carrying amounts of these classes at 31 December in 2019 and 2018.
(c) Liquidity risk Conservative liquidity management ensures the group has sufficient liquid assets and funding available to meet its obligations. Selvaag Bolig ASA has a credit facility agreement of NOK 500 million with DNB, which matures in April 2022. This facility was reduced to NOK 150 million in January 2020 in connection with the sale of parts of the land bank to Urban Property. The company also has an annually renewed overdraft facility of NOK 150 million with DNB. The group manages its liquidity actively to ensure adequate liquidity at any time. It continuously monitors forecasts and actual cash flows.
See note 16 on interest-bearing liabilities and note 17 on trade and other payables for a maturity analysis of financial liabilities.
76 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Maturity schedule for the group's liabilities (nominal values)
(amounts in NOK 1 000) Note Total at 31.12.2019 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not specified Interest-bearing liabilities Bank loans* 16 2 356 749 1 210 265 1 051 582 94 902 - - - Other interest-bearing liabilities 16 ------Total interest-bearing liabilities 2 356 749 1 210 265 1 051 582 94 902 - - -
(amounts in NOK 1 000) Note Total at 31.12.2019 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not speified Non-interest-bearing liabilities Trade payables 17 167 633 167 633 - - - - - Other current liabilities 17 210 108 210 108 - - - - - Other non-current non-interest-bearing liabilities 18.3 3 105 - 3 105 - - - - Total non-interest-bearing liabilities 380 846 377 471 3 105 - - - -
* Including estimated interest payments.
Maturity schedule for the group’s liabilities (nominal values)
(amounts in NOK 1 000) Note Total at 31.12.2018 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not speified Interest-bearing liabilities Bank loans* 16 2 492 632 599 054 1 502 281 391 297 - - - Other interest-bearing liabilities 16 ------Total interest-bearing liabilities 2 492 632 599 054 1 502 281 391 297 - - -
(amounts in NOK 1 000) Total at 31.12.2018 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not speified Non-interest-bearing liabilities Trade payables 17 181 360 181 360 - - - - - Other current liabilities 17 68 606 68 606 - - - - - Other non-current non-interest-bearing liabilities 18.3 3 225 - 3 225 - - - - Total non-interest-bearing liabilities 253 191 249 966 3 225 - - - -
* Including estimated interest payments.
18.2 Capital risk management The group’s objective when managing its capital is to ensure the ability of the entities in the group to continue as going concerns while providing returns for shareholders and benefits for other stakeholders as well as maintaining an optimum capital structure. This is achieved by maintaining a secure liquidity though the year and a robust equity level.
In achieving this objective, the group focuses on the profitability of the various projects. As a main rule, a 12 per cent contribution margin and a 60 per cent sales ratio before starting construction are required in the projects. At 31 December, the EBITDA margin in ongoing projects was 28.8 per cent (26.6 per cent). See note 4 Segment information for more details. Seventy per cent of units under construction were sold at 31 December (66 per cent).
The equity ratio in the group (equity as a percentage of total assets) will not be below 30 per cent. At 31 December, it was 48.9 per cent (48 per cent).
In order to optimise the capital structure, the management evaluates all available funding sources on an on-going basis. In addition, the company has two facilities, one of NOK 500 million and one of NOK 150 million, for general funding of the group. The first of these facilities was reduced to NOK 150 million in January 2020 in connection with the sale of parts of the land bank to Urban Property. Ongoing projects are mainly financed through construction loans which mature at project completion.
ANNUAL REPORT | 77 CONSOLIDATED FINANCIAL STATEMENTS
18.3 Financial assets and liabilites
Classification of financial assets and liabilities 2019 2018 Fair value Fair value through Loans and through profit Loans and (amounts in NOK 1 000) Note profit and loss receivables and loss receivables Financial assets Loans to associated companies and joint ventures - 70 893 - 119 290 Other non-current assets 11 - 165 283 - 326 074 Financial non-current assets - 236 176 - 445 364 Trade receivables - 82 220 215 007 Other current financial receivables 11 - 32 381 - 40 440 Cash and cash equivalents - 1 178 686 - 657 034 Financial current assets - 1 293 287 - 912 481 Financial assets - 1 529 463 - 1 357 845
Financial Fair value Fair value through liabilities at through profit Financial liabilities profit and loss amortised cost and loss at amortised cost Financial liabilities Non-current interest-bearing liabilities 16 - 1 092 288 - 1 795 798 Other non-current non-interest-bearing liabilities - 3 105 - 3 225 Financial non-current liabilites - 1 095 393 - 1 799 023 Current interest-bearing liabilities 16 - 1 161 043 520 508 Trade payables - 167 633 - 181 360 Other current non-interest-bearing financial liabilities 17 - 293 518 292 865 Financial current liabilites - 1 622 194 - 994 733 Financial liabilites - 2 717 587 - 2 793 756
Classes of financial assets and liabilities (amounts in NOK 1 000) Note 2019 2018 Trade receivables and other current and non-current financial assets Loans to associated companies and joint ventures 70 893 119 290 Other non-current assets 11 165 283 326 074 Trade receivables 82 220 215 007 Other current financial receivables 11 32 381 40 440 Total trade receivables and other current and non-current financial assets 350 777 700 811
Cash and cash equivalents Cash and cash equivalents 1 178 686 657 034
Trade payables and other non-interest-bearing financial liabilities Other non-current non-interest-bearing liabilities 3 105 3 225 Trade payables 167 633 181 360 Total other current non-interest-bearing financial liabilities 17 293 518 292 865 Total trade payables and other non-interest-bearing financial liabilities 464 256 477 450
Interest-bearing liabilities Non-current interest-bearing liabilities 16 1 092 288 1 795 798 Current interest-bearing liabilities 16 1 161 043 520 508 Total interest-bearing liabilities 2 253 331 2 316 305
78 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Sensitivity analysis
Interest rate risk 2019 Adjustment to interest-rate level in basis points 50 100 150 Effect - bank loans (11 424) (22 848) (34 272) Effect - other loans - - - Effect on cash flow (in NOK 1 000) (11 424) (22 848) (34 272)
2018 Adjustment to interest-rate level in basis points 50 100 150 Effect - bank loans (11 334) (22 669) (34 003) Effect - other loans - - - Effect on cash flow (in NOK 1 000) (11 334) (22 669) (34 003)
The above tables detail the group's sensitivity to a decrease or increase in interest rates by 50, 100 and 150 basis points respectively. The calculations are based on average interest rates for the year. The effects are calculated on a pre-tax basis and based on the average outstanding amounts during the period. Profit or loss and equity effects are expected to be approximately similar to the effects on cash flow after taxes.
Foreign exchange risk The group is exposed to a limited degree to foreign currency risk. Fluctuations in the amount of +/- five per cent at 31 December in 2019 and 2018 would cause immaterial changes to the group's profit and loss, and would affect the consolidated statement of changes in equity by only immaterial amounts.
18.4 Fair value of financial instruments
Principles for estimating fair values Based on the characteristics of the financial instruments recognised in the consolidated financial statements, the financial instruments are grouped into classes as described below. The estimated fair value of the group’s financial instruments is based on available market prices where applicable and the valuation methodologies per class are described below.
Fair value hierarchy The group measures fair value using the following fair value hierarchy, which reflects the significance of the inputs used in measuring the fair value of financial instruments.
Level 1: Quoted prices (unadjusted) in active markets for identical financial instruments Level 2: Inputs other than quoted prices included within Level 1 which are observable for assets or liabilities, either directly (ie, as prices) or indirectly (ie, derived from prices). Level 3: Inputs for assets or liabilities which are not based on observable market data (unobservable inputs).
All material factors included in fair value calculations are at level 3.
Trade receivables and other current and non-current financial assets For trade receivables and other current and non-current financial assets, the nominal amount, adjusted by the allowance for bad debt, is assessed to be a reasonable approximation of fair value. The effect of not discounting is considered to be immaterial for this class of financial instrument.
Cash and cash equivalents The fair value for this class of financial instrument is assessed to be equal to the nominal amount.
Trade payables and other non-interest-bearing financial liabilities For trade payables and other non-interest-bearing financial liabilities, the nominal amount is assessed to be a reasonable approximation of fair value. The effect of not discounting is considered to be immaterial for this class of financial instrument.
Interest-bearing liabilities The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the group for similar financial instruments.
The fair value for this class of financial liabilities is assessed to be equal to the nominal amount.
ANNUAL REPORT | 79 CONSOLIDATED FINANCIAL STATEMENTS
Note 19: Income taxes
Specification of income tax (expense) income (amounts in NOK 1 000) 2019 2018 Current income taxes payable (208 488) (158 110) Changes in deferred taxes 9 034 (7 515) Income taxes in profit (loss) (199 454) (165 625)
The group's business activities relate mainly to Norway, with only insignificant amounts arising in other countries. An allocation of income tax expense between countries is therefore not considered necessary.
Reconciliation from nominal to effective income tax rate (amounts in NOK 1 000) 2019 2018 Profit (loss) before income taxes 853 969 732 470
Estimated income taxes in accordance with nominal tax rate (22%) (187 873) (168 468)
Taxable income related to the exemption method, in accordance with section 2-38 of the Norwegian Taxation Act 261 1 042 Other non-deductible expenses (37 396) (26 966) Other non-taxable income 11 865 1 245 Change in income tax rate (from 23% to 22%) - 4 109 Share of income from associated companies and joint ventures 13 689 23 413 Income tax income (expense) (199 454) (165 625) Effective income tax rate* 23.4% 22.6%
* The difference between effective and nominal tax rates in 2018 primarily reflects a reduction in the tax rate for Selvaag Bolig in Norway and share of income from associated companies included on the basis of the equity method. Profit (loss) before taxes includes the shares of profit (loss) attributable to Selvaag Bolig ASA's and non-controlling interests in companies subject to partership taxation. Consolidated tax expense does not include tax liabilities for taxable entities which are not part of the Selvaag Bolig group. The non-controlling share of the profit (loss) is regarded as a permanent difference. Tax on the non-controlling interests' share of profit (loss) for the period is included in the non-controlling interests’ share of profit and equity.
The income tax rate for companies in Norway was reduced to 22 per cent with effect from 2019. Deferred tax at 31 December 2018 was consequenty calculated on the basis of a 22 per cent tax rate. The effect on tax expense for 2018 was a reduction of NOK 4.1 million.
Share of income from associated companies and joint ventures Share of income from associated companies and joint ventures which are not limited partnerships is recognised on a post-tax basis and therefore not affect the group’s income tax expense. See note 24.
Deferred tax assets and liabilities at 31 December 2019 2018 (amounts in NOK 1 000) Asset Liability Asset Liability Non-current assets - 4 099 6 349 - Inventory property - 57 819 - 123 434 Assets held for sale - 58 044 - - Receivables - - 2 569 - Current liabilities 16 246 - 9 232 - Non-current liabilities 19 910 - 12 258 - Losses carried forward 3 607 - 2 622 - Total temporary differences 39 763 119 962 33 030 123 434 Unrecognised deferred tax assets 2 289 - 2 606 - Net deferred tax assets (liabilities) in total (82 488) - (93 010) - Of which presented as liabilities held for sale1 (58 044) Of which presented as deferred tax liability (24 444)
Deferred tax assets are included in the statement of financial position to the extent that the realisation of the related tax benefit through future taxable profits is probable. There are no expiration dates on losses carried forward.
1Deferred tax liability reclassified as held for sale related to the sale of land bank to Urban Property. See note 26.
80 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
The net movement of deferred tax assets (liabilities) is as follows: (amounts in NOK 1 000) 2019 2018 Net deferred tax assets (liabilities) at 1 January (93 010) (83 537) Acquisition of subsidiaries - (973) Disposal of subsidiaries 1 488 (985) Recognised in the statement of comprehensive income 9 034 (7 515) Net deferred tax assets (liabilities) at 31 December (82 488) (93 010)
Selvaag Bolig ASA has acquired companies with land plots in previous years. These companies have no activites other than the ownership of the land plots. As a result, the purchases are recognised in the financial statements as purchase of assets and not of business combinations. No accrual for deferred tax occurs with the purchase of assets, which means that the assets are recognised net after deferred tax. See IAS 12.22 c. The land plots in the land bank affected by this had a book value of NOK 305 million (2018: NOK 482) at 31 December 2019. Based on a nominal tax rate of 22 per cent, latent tax obligations of NOK 57 million relate to the plots (2018: NOK 94). These latent deferred taxes are not recognsed in the financial statements.
Note 20: Provisions
(amounts in NOK 1 000) 2019 2018 Provision for contractual infrastructure 60 373 60 373 Total non-current provisions for other liabilities 60 373 60 373
The provision for contractual infrastructure is related to infrastructure and the construction of parking areas in Lørenskog. Infrastructure obligations amount to about NOK 6.4 million and are expected to start falling due from 2021. Obligations related to the contruction of parking areas amount to NOK 54 million and are linked to previously completed projects, which included an obligation to provide a specific number of parking spaces. These obligations are currently being met through temporary parking areas. Future development of the area will determine when the temporary car parking areas are to be removed and construction of permanent car parking facilities must commence. The obligations accordingly fall due when the projects are realised. The car parking obligations are expected to fall due some years into the future.
Development during the period (amounts in NOK 1 000) 2019 2018 At 1 January 60 373 60 373 At 31 December 60 373 60 373
Note 21: Contingent liabilities and guarantees
The group is subject to the following contingent liabilities as a result of ownership interests in subsidiaries and associated companies:
(amounts in NOK 1 000) 2019 2018 Guarantees to vendors1 188 558 26 016 Capital not called up - limited partnerships 7 784 7 784 Total contingent liabilities 196 342 33 800
1The amount for 2019 includes a guarantee of NOK 160 million related to a land acquisition in Lørenskog. The guarantee expires when the transaction is completed in the first quarter of 2020.
Parent company guarantees of NOK 370.6 million had been given in 2019 and NOK 400.6 million in 2018. These related mainly to guarantees issued by Selvaag Bolig ASA as additional guarantees for land loans in subsidiaries. The group fulfils legal requirements pursuant to sections 12 and 47 of the Housing Construction Act through purchased guarantees. In addition, it provides guarantees to contractors. Corresponding liabilities included in the statement of financial position are not included in the above amounts.
ANNUAL REPORT | 81 CONSOLIDATED FINANCIAL STATEMENTS
Note 22: Remuneration of and fees to management, directors and auditors
This statement of remuneration is valid for work performed by leading employees of the group.
Pursuant to section 6-16a of the Public Limited Companies Act, the board of directors prepares a statement on the determination of salary and other remuneration for the CEO and other senior executives. The group applies the following principles in determining the remuneration of the CEO and the management group.
The board takes the view that the salary and other remuneration of the CEO and the executive management should be competitive, and total remuneration should reflect the extent of their responsibilities. Senior executives may receive remuneration as a bonus in addition to basic salary, conditional on the fulfilment of certain performance criteria, as well as ordinary additional remuneration for this type of position. All executives are members of the group's ordinary pension scheme. The group has no specific remuneration arrangement for the CEO or other executives connected with the shares or the development of the share price, including options. The company has a share purchase programme for the group management. The background is that employee ownership is deemed to enhance value creation through increased engagement and loyalty. The ceiling for the yearly investment in the share purchase programme is the individual's annual pay. The price per share is the stock price (volume-weighted average price for the final 10 days of stock exchange trading before the programme opens), less a discount of 30 per cent. Compensation is provided for the tax disadvantage of this discount to the employee.
In the event of dismissal, the CEO will receive 12 months' salary.
Specification of remuneration to management (amounts in NOK 1 000) Share purchase 2019 Position Salary Bonus programme Pension Other Total Olav Hindahl Selvaag1 CEO 1 719 - - 30 2 1 751 Rolf Thorsen1 CEO 3 522 2 153 1 965 60 194 7 895 Sverre Molvik CFO 3 361 3 724 1 362 91 12 8 550 Halvard Kverne Vice president regions 2 537 2 850 999 91 11 6 488 Øystein Klungland Vice president Greater Oslo 3 361 3 724 1 362 91 10 8 548 Kristoffer Gregersen Vice president communications and market 1 510 1 875 593 91 16 4 086 Petter Cedell Vice president property investments 1 987 2 484 389 91 10 4 960 Total - group management 17 998 16 812 6 669 544 255 42 277
1 Rolf Thorsen joined as CEO on 1 May 2019, replacing Olav Hindahl Selvaag. Share purchase 2018 Position Salary Bonus programme Pension Other Total Olav Hindahl Selvaag1 CEO 1 882 - - 44 2 1 928 Baard Schumann1 CEO 3 880 6 388 4 876 66 4 246 19 456 Sverre Molvik CFO 3 055 2 280 1 735 88 24 7 182 Halvard Kverne Vice president regions 2 430 2 280 1 642 88 32 6 472 Øystein Klungland Vice president Greater Oslo 3 055 2 280 1 640 88 17 7 080 Kristoffer Gregersen Vice president communications and market 1 437 1 330 946 88 20 3 820 Petter Cedell Vice president property investments 1 926 1 786 277 88 17 4 094 Total - group management 17 663 16 344 11 116 550 4 358 50 031
1 Baard Schumann left the position of CEO in June 2018. Remuneration to Baard Schumann in 2018 included severance pay. Olav Hindahl Selvaag was acting CEO from June 2018 to May 2019.
Effects of the change in the company's share purchase programme in 2018 for the group management (amounts in NOK 1 000)
The company amended its share purchase programme for management in 2018 following an extraordinary general meeting in November. One result of the change is that the programme was implemented twice during the transitional year, since the final implementation under the earlier programme would have been in the spring of 2019. The background for the amendment was to simplify the terms and harmonise the implementation date with the general programme for other employees. The transitional effects in 2018, which also included advance payment of bonus which would normally have been made in 2019, are presented in the table below:
Advance Effect in 2018 of change in payment of bonus share purchase programme Sverre Molvik 1 974 1 050 Halvard Kverne 1 974 1 050 Øystein Klungland 1 974 1 050 Kristoffer Gregersen 1 000 426 Petter Cedell 400 170 7 321 3 747
82 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Specification of director's fees (amounts in NOK 1 000): Position 2019 2018 Olav Hindahl Selvaag1 Chair - 545 Gisele Marchand2 Director 745 375 Karsten Bomann Jonsen3 Director - 350 Tore Myrvold4 Director 400 - Peter Groth5 Director 375 325 Anne Sofie Bjørkholt Director 275 275 Christopher Brunvoll Director (elected by the employees) 36 23 Sissel Kristensen Director (elected by the employees) 36 35 Total - board 1 867 1 940
1Olav Hindahl Selvaag was reinstated as chair on 1 May 2019 after serving as the acting CEO. 2 Gisele Marchand served as acting chair from June 2018 to May 2019, when Olav Hindahl Selvaag was reinstated as chair. Her fee includes NOK 100 000 for work as chair of the audit committee, NOK 65 000 for work as chair of the compensation committee, and NOK 100 000 where the net amount after tax will be used to buy shares in the company. Owing to her insider position, the share purchase was not completed in 2019. 3 Karsten Bomann Jonsen was replaced as a director by Tore Myrvold at the AGM on 2 May 2018. 4 The fee includes NOK 75 000 for work on the audit committee and NOK 50 000 where the net amount will be used to buy shares in the company. Owing to his insider position, the share purchase was not completed in 2019. position 5 The fee includes NOK 50 000 for work as chair of the compensation committee and NOK 50 000 where the net amount will be used to buy shares in the company. Owing to his insider position, the share purchase was not completed in 2019.
Specification of fees paid to the auditor:
(amounts in NOK 1 000) 2019 2018 Statutory audit services to the parent company 2 345 1 075 Statutory audit services to subsidiaries 1 367 1 387 Other assurance services 173 239 Tax advisory services - - Other non-audit services 362 100 Total fees paid to the auditor (exclusive of VAT) 4 247 2 801
The following directors and group management personnel had shares in Selvaag Bolig ASA at 31 December (number of shares):
Position 2019 2018 Olav Hindahl Selvaag1 Chair 50 231 661 50 231 661 Rolf Thorsen CEO 75 725 - Tore Myrvold2 Director 13 000 13 000 Peter Groth2 Director 120 000 120 000 Gisele Marchand Director 5 000 5 000 Marianne Ørnsrud Alternate director (elected by the employees) 13 530 10 562 Sissel Kristensen Director (elected by the employees) 3 958 - Rune Thomassen3 Director (elected by the employees) 22 916 18 958 Magnus Kristiansen3 Director (elected by the employees) 19 349 15 391 Halvard Kverne Vice president regions 413 812 356 226 Øystein Klungland Vice president Greater Oslo 362 672 352 116 Sverre Molvik CFO 434 621 356 226 Kristoffer Gregersen Vice president communications and market 182 710 169 445 Petter Cedell Vice president property investments 72 246 49 628
1Includes shares owned by Selvaag AS and other related parties. 2Includes shares owned by related parties. 3Magnus Kristiansen replaced Rune Thomassen as a director in March 2020.
ANNUAL REPORT | 83 CONSOLIDATED FINANCIAL STATEMENTS
The board’s statement on determination of salary and other remuneration to leading personnel in Selvaag Bolig ASA The following statement on salary and other remuneration to members of the group's management will be presented for a vote at the annual general meeting in April 2020.
Guidelines for management remuneration Leading personnel include the chief executive officer (CEO) and other senior management.
For the purposes of these guidelines, the remuneration package signifies total compensation, including one or more of the following elements: fixed base salary, variable pay (including bonus), and other benefits (including pension contribution, termination benefits, fringe benefits and other benefits in kind).
Severance pay comprises compensation related to resignation, and may include termination payments, other financial compensation and payment in kind.
Main principles for determining remuneration packages Remuneration for management in Selvaag Bolig ASA should be competitive.
The remuneration packages must be designed so as to avoid unreasonable compensation owing to external circumstances outside management’s control.
The individual elements in a remuneration package, including fixed base salary, any variable pay or other benefits such as pension contributions and severance, must be considered in the context of total compensation. The board must maintain an overview of the total value of each manager’s agreed compensation and ensure that management’s remuneration packages do not have adverse consequences for the company or in other ways are detrimental to the company’s reputation.
Individuals in the group’s management will not receive specific compensation for directorships at wholly owned subsidiaries.
Variable pay Any variable pay willl be based on the following principles:
Clear connections must exist between the goals determining variable pay and the objectives of the company.
Variable pay must be based mainly on objective, definable and measurable criteria. For the management group, variable pay (bonus) may not exceed 100 per cent of fixed base salary.
The company has a share purchase programme for the company's executive management. Members of the executive management can choose to purchase shares in the company limited upwards to the individual's annual salary. The price per share will be the market price reduced by a factor which reflects the reduction in value imposed by a lock-up period/sale restriction of three years.
The criteria will be based on circumstances which are possible for management to influence, and specify a distinct period for which variable pay will be determined.
A system for variable pay must be transparent and easily comprehensible.
Pension contributions The terms for determining management’s pension rights should be equal to those of other employees.
Severance pay In the case of a pre-established agreement through which the chief executive officer waives the protection against dismissal set forth by the Working Environment Act (“Arbeidsmiljøloven”), an agreement regarding severance can be reached. Severance payments should not be utilised in the event of voluntary resignation, except if warranted by special circumstances.
Severance pay should not exceed 12 months fixed base salary in addition to any compensation during the period of notice.
Severance pay should be withheld if conditions for dismissal exist or if, during the period in which severance pay is provided, irregularities or acts of negligence are discovered which may result in liabilities for damages or the individual in being indicted for violation of the law.
The 2019 financial year did not contain any deviations from the guidelines for management remuneration.
84 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 23: Related party transactions
Receivables, liabilities and transactions between Selvaag Bolig ASA and its subsidiaries, which are related parties to the company, have been eliminated on consolidation and are not disclosed in this note. Selvaag AS owns 53.5 per cent of the shares in Selvaag Bolig. Purchases and sales of services involving Selvaag AS and its related parties are based on market terms. These relate mainly to rent, IT services and payroll services. Details of significant transactions between the group and other related parties are disclosed below.
During the year, group entities entered into the following transactions with related parties.
(amounts in NOK 1 000) 2019 2018 Sales of goods and services Selvaag AS (parent company) - - Associated companies and joint ventures 36 172 26 933 Other related parties (including subsidiaries of the parent company) - -
Purchase of goods and services Selvaag AS (parent company) (662) (699) Other related parties (including subsidiaries of the parent company) (7 809) (9 751)
Financial income Other related parties (including subsidiaries of the parent company) 1 572 1 413
Financial expenses Selvaag AS (parent company) - -
The following receivables and liabilities were outstanding at 31 December
(amounts in NOK 1 000) 2019 2018 Receivables Selvaag AS (parent company) 43 088 41 738 Other related parties (including subsidiaries of the parent company) - -
Liabilities Selvaag AS (parent company) - - Other related parties (including subsidiaries of the parent company) (2 510) (2 433)
Other related-party transactions The group has provided various guarantees, mainly through purchased guarantees, to associated companies and joint ventures totalling NOK 266.8 million.
ANNUAL REPORT | 85 CONSOLIDATED FINANCIAL STATEMENTS
Note 24: Investments in associated companies and joint ventures Ownership and voting power Company Year of acquisition Registered office 2019 2018 Sandvika Boligutvikling KS 2008 Norway 33.3% 33.3% Sandvika Boligutvikling AS 2008 Norway 37.0% 37.0% Stord Industribygg AS and Holding AS 1 2011 Norway - 66.0% Tangen pluss AS 2011 Norway 50.0% 50.0% S Trumpet Holding AB (formerly Projektbolaget Sädesärlan AB) 2011 Sweden 50.0% 50.0% Kaldnes Brygge AS 2016 Norway 50.0% 50.0% Kaldnes Boligutvikling AS 2 2012 Norway 25.0% 25.0% Sandnes Eiendom Invest AS 2013 Norway 50.0% 50.0% Kirkeveien Utbyggingsselskap AS 2013 Norway 50.0% 50.0% Tiedemannsfabrikken AS 2014 Norway 50.0% 50.0% Smedplassen Prosjekt AS 2014 Norway 50.0% 50.0% Sinsenveien Holding AS incl subsidiaries 2015 Norway 50.0% 50.0% Selvaag Boligutvikling II AS (formerly Ehousing AS) 3 2016 Norway 100.0% 100.0% Sandsliåsen Utbygging AS 2016 Norway 50.0% 50.0% Sandsliåsen 46 Utbygging AS 2018 Norway 50.0% 50.0% Haakon VIIs gate 4 AS and Holding AS 2017 Norway 50.0% 50.0% Fornebu Sentrum Utvikling AS 2017 Norway 50.0% 50.0% Pottemakerveien Utvikling AS 2017 Norway 50.0% 50.0% Heimdal Stasjonsby AS 2017 Norway 50.0% 50.0% Kanalveien Utvikling AS 2019 Norway 50.0% - Verftsbyen Bolig AS 2019 Norway 50.0% - Lurahøyden Bolig AS 2019 Norway 50.0% -
1 Sold in 2019. 2 The company is a wholly owned subsidiary of Kaldnes Brygge AS. 3 The company became a wholly owned subsidiary of Selvaag Bolig ASA in 2018.
Specification of investments in associated companies and joint ventures 2019 Carrying Ownership amount Additions/ Share of Dividends/ Reclassified as Carrying amount (amounts in NOK 1 000) share 01.01.19 disposals profit1 distributions participatory loan 31.12.19 Associated companies: Sandvika Boligutvikling KS 33.3% 686 - - - . 686 Sandvika Boligutvikling AS 37.0% 3 129 - (39) - . 3 090
Joint ventures: Kaldnes Brygge AS 50.0% 134 798 - 1 185 (22 000) - 113 983 Stord Industribygg AS and Holding AS 2 66.0% 42 101 (44 513) 2 412 - - - Sandnes Eiendom Invest AS 20.0% 88 636 - (1 354) - - 87 282 Tangen pluss AS 50.0% 414 - - - - 414 S Trumpet Holding AB (formerly Projektbolaget Sädesärlan AB) 50.0% - - 5 115 - - 5 115 Kirkeveien Utbyggingsselskap AS 50.0% 15 105 7 736 56 - - 22 897 Tiedemannsfabrikken AS 50.0% 75 059 - 79 728 - - 154 787 Smedplassen Prosjekt AS 50.0% 24 203 - 207 (17 500) - 6 910 Sinsenveien Holding AS incl subsidiaries 3 50.0% (397) - (5 334) - 5 731 - Sandsliåsen Utbygging AS 50.0% 5 876 - (338) - - 5 538 Sandsliåsen 46 Utbygging AS 50.0% (7) - (79) - - (86) Haakon VIIs gate 4 AS and Holding AS 3 50.0% (5 280) - (5 023) - 10 303 - Fornebu Sentrum Utvikling AS 50.0% 4 244 - (2 647) - - 1 597 Pottemakerveien Utvikling AS 4 50.0% (819) - (715) - 1 534 - Heimdal Stasjonsby AS 50.0% 27 531 - (10 923) - - 16 608 Kanalveien Utvikling AS 50.0% - 1 436 - - - 1 436 Verftsbyen Bolig AS 50.0% - 10 000 (27) - - 9 973 Lurahøyden Bolig AS 50.0% - 50 - - - 50 Total 415 280 (25 291) 62 224 (39 500) 17 568 430 281
1 None of the companies had other income or expenses. 2 Sold in 2019. 3 Negative carrying amount is recognised net together with participatory loans. The net investment is included in assets held for sale. See note 26. 4 Negative carrying amount is recognised net together with participatory loans.
86 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Specification of investments in associated companies and joint ventures 2018 Carrying Owner- amount Additions/ Share of Dividends/ Carrying amount (amounts in NOK 1 000) ship share 01.01.18 disposals profit1 distributions 31.12.18 Associated companies: Sandvika Boligutvikling KS 33.3% 686 - - - 686 Sandvika Boligutvikling AS 37.0% 3 163 - (34) - 3 129
Joint ventures: Kaldnes Brygge AS 50.0% 128 448 - 20 350 (14 000) 134 798 Stord Industribygg AS and Holding AS 2 66.0% 26 193 12 730 3 178 - 42 101 Sandnes Eiendom Invest AS 20.0% 43 759 53 383 (506) (8 000) 88 636 Tangen pluss AS 50.0% 414 - - - 414 S Trumpet Holding AB 50.0% 46 322 - 478 (46 800) (0) (formerly Projektbolaget Sädesärlan AB) Kirkeveien Utbyggingsselskap AS 50.0% 15 075 - 30 - 15 105 Tiedemannsfabrikken AS 50.0% 2 085 - 72 974 - 75 059 Smedplassen Prosjekt AS 50.0% 7 351 - 16 852 - 24 203 Sinsenveien Holding AS incl subsidiaries 50.0% 4 434 - (4 831) - (397) Sandsliåsen Utbygging AS 50.0% 6 113 - (237) - 5 876 Sandsliåsen 46 Utbygging AS 50.0% - 15 (22) - (7) Haakon VIIs gate 4 AS and Holding AS 50.0% (1 682) - (3 598) - (5 280) Fornebu Sentrum Utvikling AS 50.0% 5 016 - (772) - 4 244 Pottemakerveien Utvikling AS 50.0% (261) - (558) - (819) Heimdal Stasjonsby AS 50.0% 29 039 - (1 508) - 27 531 Selvaag Boligutvikling II AS (formerly Ehousing AS) 50.0% 85 (85) - - - Total 316 241 66 043 101 796 (68 800) 415 280
1 None of the companies had other income or expenses. 2 Addition in 2018 is conversion of debt to equity capital.
Subsidiaries in the group had given NOK 71 million (NOK 119 million) in loans to associated companies and joint ventures at 31 December. In addition, NOK 59 million has been reclassified as assets held for sale in 2019. See note 26.
Summarised financial information (100 per cent) of associated companies and joint ventures at 31 December
(amounts in NOK 1 000) 2 019 2 018 Total assets 2 873 469 2 987 350 Total liabilities 2 190 432 2 277 247 Net assets 683 037 710 103
Total revenues 1 030 412 1 259 386 Total profit (loss) for the year 123 132 214 815
All associated companies and joint ventures are established to develop housing projects. The financial information is therefore presented in condensed form.
ANNUAL REPORT | 87 CONSOLIDATED FINANCIAL STATEMENTS
Note 25: Additional information, revenues
(amounts in NOK 1 000) 2019 2018 Revenues - units delivered 1 2 962 708 3 224 979 Revenues - other property 319 772 42 526 Other revenues 2 86 358 74 570 Total operating revenues 3 368 838 3 342 075
1 Of which approximately 81 per cent (95 per cent) from Greater Oslo area. 2 Other revenues derived from non-core activities, mainly rental, project management and service revenue. See specification below.
Other revenues (amounts in NOK 1 000) 2019 2018 Rental revenue 30 263 27 552 Project management and service revenue 55 427 45 768 Other operational revenues 668 1 250 Total other revenues 86 358 74 570
Rental revenues in 2019 derived mainly from two commercial properties. One of these was sold in late 2019, while the lease for the other expired. Other rental revenues are short-term.
Revenues from project management relate to services provided to joint ventures. Service revenues derive mainly from services provided to guests and tenants in Pluss projects.
The group had 1 504 units under construction at 31 December (1 449), of which 91 per cent (79 per cent) were in Greater Oslo. The combined sales value of units under construction was NOK 7 155 million (NOK 6 712 million), with sold units accounting for NOK 4 591 million (NOK 3 950 million) of this total. Seventy per cent of units under construction were sold (66 per cent). The sold units are due to be delivered to purchasers in 2020 and 2021.
88 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
Note 26: Assets held for sale
The group has entered into an agreement to sell a substantial proportion of the land it owns where construction has yet to start (the transaction) to Urban Property (UP). UP is owned by Oslo Pensjonsforsikring AS, Equinor Pensjon and Selvaag AS, each holding 30 per cent of the shares, as well as Rema Etablering Norge AS with 10 per cent. The transaction was implemented on 21 January 2020. Reference is made to stock exchange announcements on 18 November 2019 and 21 January 2020. The purpose of the transaction is to reduce the group’s financial borrowings and tied capital, and to free up substantial added value in the Selvaag Bolig (SBO) portfolio of properties which will increase the group’s capacity to pay dividend. Through options and pre- emption agreements with UP, the group will have the opportunity to buy back the properties sold in stages as and when required, where this is commercially interesting for further development and construction.
The transaction covers properties which are divided into Portfolios A, B and C. Portfolio A comprises properties expected to be bought back through the exercise of a pre-emptive right within a longer timeframe extending beyond 2020. Portfolio B comprises properties where the group has buy-back options which primarily fall within a timeframe expected to be shorter than 2020. Portfolio C covers future land purchase agreements, and prepayments related to these, with third parties where the group currently does not own the properties. The transaction also includes the purchase by UP of two companies which currently take the form of joint ventures between SBO and Veidekke Eiendom AS and NHP Eiendom AS respectively. Portfolios B and C are covered by options for the group to buy back the properties later. SBO and UP intend to pursue a long-term collaboration, so that SBO will also obtain options to purchase land which UP acquires in the future. The intention is that Urban Property will enter into purchase agreements for new land in the market which SBO wants to acquire, and SBO will have an option to buy back these sites from UP.
The accounting effects of the transaction for Portfolios A, B and C as well as for the sale of interests in the joint ventures are discussed in more detail below.
Portfolio A property sales – pursuant to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations The consideration for shares and settlement of intercompany liabilities related to Portfolio A is NOK 1 542 million. The carrying amount of these properties at 31 December 2019 was NOK 663 million and was presented in the balance sheet as properties held for sale.
The transaction was implemented in the first quarter of 2020 and the interim financial statements will reflect a net gain of NOK 921 million from the sale of Portfolio A properties.
A pre-emptive right will be held by the group to buy back the land if UP decides on a sale. However, the group cannot at any time require UP to sell the properties.
In the following, the group has opted to provide qualitative and quantitative information about the planned sale of Portfolio A pursuant to the requirements in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations in order to provide investors with supplementary information about the Portfolio A sale.
The sale of Portfolio A covers properties where construction has not yet started, and accordingly does not involve the disposal of business operations since the land being sold has not been regarded by the group as a business activity. No significant profit and loss items have therefore been directly attributed to these properties in the group’s historical financial statements. The properties being sold (which comprise a substantial part of the land bank) have therefore not been presented earlier as a separate segment.
The sale of Portfolio A properties is therefore presented in this note as a disposal group pursuant to IFRS 5 rather than as discontinued operations. A disposal group is defined in IFRS 5.4 as the sale of a group of assets, possibly with certain directly related liabilities, together in a single transaction.
Since the transaction does not involve the sale of business operations, no historical profit or loss items are available (as specified above) for presentation. A presentation of the sale of A properties pursuant to IFRS 5 will accordingly cover only how the Portfolio A land is presented in the balance sheet.
Further information on the sale of Portfolio A properties is presented in the table below.
Sale of companies owned 50 per cent from SBO to UP – pursuant to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations At 31 December 2019, SBO owned 50 per cent of Sinsenveien Holding AS and 50 per cent of Haakon VII’s Gate 4 Holding AS. The first of these companies is a joint venture where Veidekke Eiendom AS owns the remaining 50 per cent of the shares. The second is a joint venture where NHP Eiendom AS owns the remaining 50 per cent of the shares. Both joint venture holdings are being sold in their entirety (100 per cent) in the transaction, with shareholder loans also being redeemed.
The holdings have been treated in the SBO financial statements as associated companies pursuant to IAS 28 Investments in Associates and Joint Ventures. These investments have been owned 50 per cent by external owners and 50 per cent by SBO with equal interests, and the equity method has been applied in SBO’s consolidated financial statements.
Following the sale of the two holdings in the joint ventures through the transaction, SBO will no longer own any shares in Sinsenveien Holding AS and Haakon VII’s Gate 4 Holding AS. The sale will therefore be recognised in its entirety in profit and loss. The sale of the two holdings will yield a gain of NOK 126 million and have a cash effect of NOK 185 million in the first quarter, based on values at 31 December 2019. Between 31 December and the implementation of the transaction, SBO provided a further shareholder loan of NOK 17 million which will also be redeemed through the transaction.
Historical shares of profit and loss for the above-mentioned holdings in associated companies are presented in the table below
(amounts in NOK million) Share of profit Company Ownership 2017 2018 2019 Haakon VII gt 4 Holding AS 50% (1.7) (3.6) (5.0) Sinsenveien Holding AS 50% (8.2) (4.8) (5.3) Total (9.9) (8.4) (10.4)
ANNUAL REPORT | 89 CONSOLIDATED FINANCIAL STATEMENTS
Property sale Portfolio B These properties were recognised with a total carrying amount of NOK 679 million at 31 December 2019. The total consideration amounts to NOK 864 million.
In accounting terms, the sale of Portfolio B with buy-back agreements (in other words, including purchase options) will not involve the calculation of either gain or loss, but be treated as a financing arrangement because SBO retains control of these properties. This means that the carrying amount of Portfolio B will remain unchanged as inventory after the transaction, while the consideration from the sale of Portfolio B will be recognised as a liability (to UP) in the SBO balance sheet.
The difference between sale and buy-back prices at the expected buy-back point is regarded as an interest charge. How far this interest charge can be attributed in the balance sheet to a qualifying asset must be assessed from period to period.
The option premium related to the properties in Portfolio B is paid quarterly, will correspond to about 5.5 per cent annually and will vary with the level of interest rates. SBO can cancel the option at any given time on payment of a fixed break fee corresponding to 48 months of option premiums for the property.
UP holds a sales option from SBO on two construction stages in Portfolio B, where the consideration will consist partly of a cash payment (up to NOK 100 million) and partly of a seller credit for the remainder until completion. The background for this is to secure opportunities to provide UP with liquidity.
Property sale Portfolio C Portfolio C covers properties which the group has the right or obligation to purchase in the future. An agreement has been entered into which means that UP acquires rights and obligations corresponding to those currently held by the group in relation to the landowners. SBO will remain the formal counterparty to the present landowners. The agreement covers agreements on future property acquisitions. After UP has acquired a property, SBO will have an option to buy it back on specified terms.
The buy-back prices will rise over time by a growth factor corresponding to about 5.5 per cent annually, which will vary with the level of interest rates. SBO can cancel an option at any given time in exchange for a break fee comprising the accumulated rise in the buy-back price for the property plus a fixed supplement corresponding to 48 months of growth in this price.
In connection with entering into the agreements, UP will pay SBO an amount as compensation for the prepayments made by the group to today’s landowners.
90 | ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS
The following table provides an overview of estimated accounting effects of the transaction for Portfolios A, B and C as well as the sale of joint ventures:
Statement of financial position Carrying value Total (amounts in NOK 1 000) 31.12.2019 Portfolio A Portfolio B Portfolio C Joint ventures Financing change Disposal group presented as assets held for sale Inventory Portfolio A 662 539 (662 539) - - - - (662 539) Prepayments for property acquisitions 143 000 - - (143 000) - - (143 000) Receivable from joint ventures 58 632 - - - (58 632) - (58 632) Investments in joint ventures ------
Total assets held for sale in the - balance sheet 31.12.2019 864 171 (662 539) - (143 000) (58 632) - (864 171)
Liabilities presented as held for sale
Deferred tax liabilities 58 044 (58 044) - - - - (58 044)
Other assets influenced by the transaction Cash (representing net consideration from UP) - 1 541 806 863 579 139 425 184 664 (978 517) 1 750 958 Inventory Portfolio B 678 778 ------
Other liabilities influenced by the transaction Interest-bearing liabilities (bank debt) settled as part of the transaction - - - - - (978 517) (978 517) Financial debt obligation assumed for portfolio B - - 863 579 - - - 863 579
Income tax payable - 16 436 - - - - 16 436
Equity Equity - 920 875 - (3 575) 126 033 - 1 043 332
Statement of comprehensive income Joint Total effects in 2020 (amounts in NOK 1 000) Portfolio A Portfolio B Portfolio C ventures Financing change
Gain, sale of properties 920 875 - (3 575) - - 917 300 Gain, sale of joint ventures - - - 126 033 - 126 033 Profit (loss) before income taxes 920 875 - (3 575) 126 033 - 1 043 332
The table above presents a specification of the assets and liabilities classified as held for sale in the presentation of the financial position at 31 December 2019. Other accounting implications of the transaction are also shown.
In total, including payments to Veidekke Eiendom AS and NHP Eiendom AS as settlement for shareholdings and shareholder loans in joint ventures and the settlement of bank loans in the joint ventures, the transaction amounts to NOK 3 399 million.
Note 27: Events after the reporting period
The Urban Property transaction: In December 2019, the general meeting in Selvaag Bolig ASA approved the sale of a large proportion of land portfolio to a separate company structure, Urban Property. Selvaag AS owns 30 prosent of the latter. The transaction was completed in January 2020. See note 26 for further details.
The Covid-19 outbreak: The Covid-19 outbreak, declared a pandemic by the World Health Organisation (WHO) on 11 March 2020, has created great uncertainty. At the time of writing, it is unclear what consequences this will have for the housing market and for Selvaag Bolig, but it could lead to construction delays and slower sales. The outbreak may affect building site workforces, financing opportunities, purchasing power and market psychology. Selvaag Bolig is following developments closely and has introduced measures to limit the spread of infection. Further measures are being continuously assessed.
ILLUSTRATION: LANGHUS 1405, LANGHUS (DEVIATIONS WILL OCCUR)
ANNUAL REPORT | 91 COMPANY ACCOUNTS SELVAAG BOLIG ASA
STATEMENT OF PROFIT AND LOSS
(amounts in NOK 1 000) Note 2019 2018
OPERATING REVENUE AND COST Sales revenue 15 96 544 71 019 Lease revenue 150 - Other operating revenue 1 - Total operating revenue 96 695 71 019
Project expenses (80) (4 974) Pay and personnel expenses 7, 9 (157 555) (163 036) Depreciation and amortisation 1 (3 270) (3 615) Other operating expenses 9 (84 573) (64 372) Total operating expenses (245 478) (235 997)
Operating profit (loss) (148 783) (164 978)
Financial items Interest received from group companies 19 604 17 041 Other interest income 10 870 7 233 Other financial income 1 081 369 934 973 Interest charges paid to group companies (28 009) (24 244) Other interest charges (15 160) (19 158) Other financial costs 14 (101 226) (178 646) Other gains (loss), net 16 62 654 - Net financial items 1 030 102 737 199
Profit (loss) before income taxes 881 319 572 221
Income tax (expense) income 8 (194 013) (147 140) Net profit 687 306 425 081
Net profit 687 306 425 081
Allocation Proposed dividend 140 649 234 414 Transferred to/from other equity 546 657 190 667 Total allocation 687 306 425 081
92 | ANNUAL REPORT COMPANY ACCOUNTS SELVAAG BOLIG ASA
FINANCIAL POSITION
(amounts in NOK 1 000) Note 2019 2018
ASSETS Non-current assets Intangible assets Deferred tax asset 8 7 249 3 194 Total intangible assets 7 249 3 194
Property, plant and equipment Land, buildings and property 1, 3 3 476 3 476 Inventory and other equipment 1 1 160 4 205 Total property, plant and equipment 4 636 7 681
Non-current financial assets Investments in subsidiaries 2 2 268 563 2 270 020 Investments in associated companies 2 180 846 233 457 Other investments 4 949 4 949 Other receivables 4, 12 925 089 883 062 Total non-current financial assets 3 379 447 3 391 488
Total non-current assets 3 391 332 3 402 363
CURRENT ASSETS Receivables Trade receivables 3, 12 35 354 24 194 Other receivables from group companies 12 1 042 387 1 044 276 Other receivables 4 37 978 41 225 Total receivables 1 115 719 1 109 695
Cash and cash equivalents 10 731 949 269 009 Total current assets 1 847 668 1 378 704
Total assets 5 239 000 4 781 067
ANNUAL REPORT | 93 COMPANY ACCOUNTS SELVAAG BOLIG ASA
FINANCIAL POSITION (CONT)
(amounts in NOK 1 000) Note 2019 2018
EQUITY AND LIABILITIES Paid-in capital Share capital 5,6 187 531 187 531 Own shares 5 (739) (1 724) Share premium account 5 1 395 478 1 395 478 Other paid-in capital 5 (445 165) 1 217 079 Total paid-in capital 1 137 105 2 798 364 Total equity 1 137 105 2 798 364
Liabilities Accrued liabilities Pension obligation 7 511 83 Total accrued liabilities 511 83
Non-current liabilities Non-current interest-bearing liabilities 3 86 000 86 000 Other non-current liabilities 3, 12 1 472 180 1 143 525 Total non-current liabilities 1 558 180 1 229 525
Current liabilities Current interest-bearing liabilities 3 - 111 100 Trade payables 11, 12 12 488 7 876 Current income taxes payable 174 264 126 021 Public taxes 18 235 16 325 Dividend 2 195 918 234 414 Intercompany debts 12 105 842 210 173 Other current liabilities 36 457 47 186 Total current liabilities 2 543 204 753 095
Total liabilities 4 101 895 1 982 703 Total equity and liabilities 5 239 000 4 781 067
Oslo, 20 March 2020
Olav Hindahl Selvaag Peter Groth Anne Sofie Bjørkholt Sissel Kristensen Chair Director Director Director (elected by the employees)
Tore Myrvold Gisele Marchand Magnus Kristiansen Rolf Thorsen Director Director Director CEO (elected by the employees)
94 | ANNUAL REPORT COMPANY ACCOUNTS SELVAAG BOLIG ASA
STATEMENT OF CASH FLOWS
(amounts in NOK 1 000) Note 2019 2018
CASH FLOW FROM OPERATING ACTIVITIES Profit (loss) before income taxes 881 319 572 221 Income taxes paid (126 021) (90 574) Other (gains) losses, net - - Depreciation and amortisation 1 3 270 3 615 Share of (income) losses from associated companies and joint ventures 39 500 14 000 Change in trade receivables (11 160) 4 136 Change in trade payables 4 612 (820) Changes in other working capital* (12 784) 204 459 Net cash flow from operating activities 778 736 707 037
CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of tangible and intangible fixed assets 100 - Payments for acquisition of tangible and intangible fixed assets (325) (762) Proceeds from disposal of subsidiaries and associated companies 72 720 - Payments for acquisitions of subsidiaries and associated companies (24 232) (100 144) Proceeds from disposal of other investments and repayments on loans given 22 000 44 920 Payments for acquisition of other investments and loans given (22 300) (61 669) Dividends and distributions from subsidiaries - 187 000 Net cash flow from investing activities 47 963 69 345
CASH FLOW FROM FINANCING ACTIVITIES Proceeds from borrowings - 86 000 Repayments of borrowings (111 100) (155 454) Proceeds from group contribution 353 829 59 037 Payment of group contribution (210 173) (203 386) Dividends paid to equity holders of Selvaag Bolig ASA (418 179) (351 340) Share buy back Selvaag Bolig ASA - - Proceeds from disposal of shares Selvaag Bolig ASA 21 864 27 909 Net cash flow from financing activities (363 759) (537 234) Net change in cash and cash equivalents 462 940 239 148 Cash and cash equivalents at 1 January 269 009 29 861 Cash and cash equivalents at 31 December 731 949 269 009
*Net effect from group contribution was NOK 936 million for 2019, compared with NOK 832.4 million in 2018.
ANNUAL REPORT | 95 COMPANY ACCOUNTS SELVAAG BOLIG ASA
ACCOUNTING POLICIES
ACCOUNTING POLICIES FOR Acquisition cost Leased fixed assets are capitalised as fixed SELVAAG BOLIG ASA The acquisition cost of assets comprises the assets if the lease is regarded as financial. The annual accounts have been compiled in purchase price less bonuses, discounts and the accordance with the Norwegian Accounting Act like, plus purchase expenses (freight, customs INVESTMENTS IN OTHER and Norwegian generally accepted accounting duty, non-refundable public duties and other COMPANIES principles (NGAAP). direct purchase expenses). Where purchases in With the exception of short-term investments foreign currencies are concerned, the asset is in listed shares, the cost method is used for Use of estimates capitalised at the exchange rate prevailing at the recording investments in other companies. The The preparation of the accounts pursuant to the time of the transaction. cost price is increased when funds are injected Accounting Act requires the use of estimates. in connection with capital expansions or when Furthermore, the application of the company’s Where tangible fixed assets and intangible group contributions are made to subsidiaries. accounting principles requires management assets are concerned, the acquisition cost also Dividends received are basically recorded as to exercise its judgement. Areas where such includes direct expenses for preparing the asset income. Dividends which exceed the share judgements are extensively applied, where the for use, such as costs for testing the asset. of retained earnings after the acquisition are level of complexity is high, or where assumptions recorded as a reduction in the acquisition cost. and estimates are significant for the annual Interest expenses related to manufacturing fixed Dividend/group contribution from subsidiaries accounts are described in the notes. assets are expensed. is recorded in the same year that the subsidiary allocates the amount. Dividend from other SALES REVENUES INTANGIBLE ASSETS companies is recorded as financial income on Revenues from sales of goods and services are Expenses for own development activities are receipt. assessed at the fair value of the consideration, expensed on a continuous basis. net after deduction of VAT. Sales of goods are IMPAIRMENT OF FIXED ASSETS recorded as income when the company has Expenses for other intangible assets are Where there is an indication that the carrying delivered its products to the customer and no capitalised to the extent that it is possible to amount of a fixed asset is higher than its fair unfulfilled liabilities exist which could influence identify a future financial benefit related to value, the asset is tested for impairment. This the customer’s acceptance of the delivery. developing an identifiable intangible asset, and test is performed at the lowest level of fixed Provision for expected guarantee work is the expenses can be measured reliably. In the assets which has independent cash flows. If the recorded as a cost and as a provision for opposite case, such expenses are expensed on carrying amount is higher than both the sales liabilities. a continuous basis. value and the recoverable amount (present value in continued use/ownership), the asset is written Services are recorded as income as they are TANGIBLE FIXED ASSETS down to the higher of sales value or recoverable provided. Land and residential flats are not depreciated. amount. Other tangible fixed assets are capitalised and CLASSIFICATION OF BALANCE depreciated on a straight-line basis to their Earlier impairments, with the exception of SHEET ITEMS residual value over the expected exploitable impaired goodwill, are reversed if the Assets intended for permanent ownership or use lifetime of the asset. In the event of changes to requirements for impairment are no longer are classified as fixed assets. Assets associated the depreciation plan, the effect is allocated present. with the flow of goods are classed as current over the remaining depreciation period (the assets. Other receivables are classified as current breakpoint method). Maintenance of fixed assets INVENTORY AND BUILDINGS assets if they are to be repaid within one year. is expensed continuously as operating expenses. UNDER CONSTRUCTION Analogue criteria are applied for liabilities. Upgrades and improvements are added to the Goods are assessed at the lower of acquisition Nevertheless, the first year’s instalment on long-term acquisition price of the asset and depreciated in cost (on the Fifo principle) and fair value. The receivables and liabilities is not classified as a line with the asset. The distinction between cost price of manufactured products includes current asset or liability. maintenance and upgrade/improvement is direct material and payroll costs with the calculated in relation to the asset’s condition at addition of a relative share of indirect costs. the time of acquisition.
96 | ANNUAL REPORT COMPANY ACCOUNTS SELVAAG BOLIG ASA
When developing homes on its own account, value. Fair value is the present value of expected PENSIONS the company uses the percentage of completion future payments. Nevertheless, no discounting Pensions are accounted for in accordance method, where the recording of project profit is done when the effect of discounting is with the Norwegian Accounting Standard on as income is limited to the relative share of the insignificant for the accounts. Provision for pension expenses. Defined contribution pension project which has been sold. loss is assessed in the same way as accounts plans are accrued using the matching principle. receivable. Contributions for the year to the pension scheme The practical consequence of the accounting are expensed. Early retirement commitments policy applied is that total project costs incurred FOREIGN CURRENCY under the Norwegian Confederation of Trade during the life of the project are expensed as Receivables and liabilities in foreign currencies Unions/Confederation of Norwegian Enterprise cost of sales and the project value (costs plus are assessed at the exchange rate prevailing (LO/NHO) AFP scheme relate to a defined share of profit) is recorded as income and at the end of the accounting year. Exchange benefit multi-enterprise plan, but are recorded as capitalised in the balance sheet. Project value rate gains and losses related to the sale and a defined contribution plan since they are not less payments from customers is normally purchase of goods in foreign currencies are measurable. recorded as work in progress. If payments recorded as sales income and cost of sales. from customers exceed the contractual income TAX earned, the excess is recorded as advances from Forward contracts Tax expense in the profit and loss account customers. The company and the group use forward includes both tax payable for the period and the contracts for foreign currency to secure a change in deferred tax. Deferred tax is calculated When the project is completed, the cost price future exchange rate for existing (capitalised) using relevant tax rates on the basis of temporary of unsold homes is transferred to inventory receivables/liabilities (fair value hedging), or for differences arising between accounting and tax and thereby reduces operating revenues and reasonably assured future payments received/ values as well as possible tax-related losses for expenses by the cost price of the unsold homes. made in foreign currencies (cash flow hedging). carrying forward at the end of the accounting In certain circumstances at the termination of year. Temporary tax-increasing and tax-reducing the project, this can result in low or negative Forward contracts which secure further payments differences which reverse or could reverse in the operating income/cost of sales in the company’s received/made are not recorded in the same period are offset. Recording deferred tax annual accounts. accounts. benefit on net tax-reducing differences which are not offset and losses for carrying forward are CONSTRUCTION CONTRACTS LIABILITIES justified on the basis of expected future earnings. Work in progress related to fixed-price contracts Loans are initially recorded at fair value less Deferred tax and tax benefit which can be capitalised with a long production life is assessed using the transaction costs. They are then measured at are recorded net in the balance sheet. percentage of completion method. The degree amortised cost, and differences between the of completion is calculated as costs incurred as loan paid out (less transaction costs) and the Tax reduction on group contribution paid, and a percentage of the expected total cost. The total redemption value are recorded in the profit and tax on group contribution received which is cost is reassessed continuously. Where a project loss account over the term of the loan using the applied to reducing the acquisition price or is expected to show a loss, the whole loss is effective interest rate method. directly against equity, are applied directly expensed immediately. against tax in the balance sheet (against tax Loans are classified as current unless the group payable if the group contribution has an effect RECEIVABLES has an unconditional right to defer settlement of on tax payable and against deferred tax if the Accounts receivable are capitalised in the the liability for at least 12 months after the end of group contribution has an effect on deferred tax). balance sheet after deduction of the provision the reporting period. for expected loss. Provision for loss is made Deferred tax is recorded at the nominal amount. on the basis of an individual assessment of the GUARANTEE WORK/CLAIMS receivables and a supplementary provision to Guarantee work/claims related to completed CASH FLOW STATEMENT cover other expected loss. Significant financial sales are assessed at the estimated cost of The cash flow statement is compiled using the problems at the customer, the probability that such work. The estimate is calculated on the indirect method. Cash and cash equivalents the customer will go into liquidation or enter a basis of historical figures for guarantee work, include cash, bank deposits and other financial restructuring, and delays and shortfalls but corrected for expected variance because, short-term liquid investments which can be in payments are regarded as indicators that the for example, of changes in quality assurance converted immediately and without significant receivable must be written down. routines and the product range. The provision is price risk to known cash amounts and with a recorded in other short-term liabilities, and the remaining term of less than three months from the Other receivables, both current and long-term, change in the provision is expensed. acquisition date. are recorded at the lower of face value and fair
ANNUAL REPORT | 97 COMPANY ACCOUNTS SELVAAG BOLIG ASA
Note 1: Fixed assets
Fixed assets Land Inventory and other equipment Total Cost at 1 January 2019 3 476 19 397 22 873 Additions - 325 325 Disposals - 226 226 Cost at 31 December 2019 3 476 19 496 23 424 Accumulated depreciation - 18 336 18 336 Accumulated write-downs - - - Carrying amount at 31 December 2019 3 476 1 160 5 088
Depreciation current year - 3 270 3 270
Land is not depreciated. Inventory and other equipment are depreciated over three to five years on a straight-line basis.
98 | ANNUAL REPORT COMPANY ACCOUNTS SELVAAG BOLIG ASA
Note 2: Subsidiaries, associated companies and joint ventures
Investments in subsidiaries, associated companies and joint ventures are accounted for using the cost method.
Ownership and Equity last year Profit and loss last Subsidiary Registered office voting power (100 %)) year (100 %) Carrying amount Selvaag Pluss AS Oslo 100% 163 696 537 180 797 Selvaag Bolig Sandsliåsen AS Oslo 100% 6 067 (537) 6 339 Selvaag Boligutvikling I AS Oslo 100% 114 911 26 626 114 911 Selvaag Boligutvikling II AS Oslo 100% 2 000 (267) 2 068 Selvaag Boligmegling AS Oslo 100% 3 591 (1) 3 200 Selvaag Eiendomsoppgjør AS Oslo 100% 1 452 639 1 455 Selvaag Bolig Glassverket AS Oslo 100% 15 473 43 858 15 470 Selvaag Bolig Lørenskog AS Oslo 100% 12 777 (4 823) 91 530 Lørenskog Stasjonsby B2 AS Oslo 100% 3 949 - 10 260 Lørenskog Stasjonsby B3-B5 AS Oslo 100% 2 847 - 20 520 Lørenskog Stasjonsby B4 AS Oslo 100% 1 648 - 25 650 Lørenskog Stasjonsby B6 AS Oslo 100% 3 896 - 20 520 Lørenskog Stasjonsby B7 AS Oslo 100% 4 998 - 16 672 Lørenskog Stasjonsby B8 AS Oslo 100% 5 064 - 14 428 Lørenskog Stasjonsby B9 AS Oslo 100% 5 048 - 10 260 Lørenskog Stasjonsby B9-2 AS Oslo 100% 6 587 - 10 260 Selvaag Bolig Ormerud AS Oslo 100% 2 200 (8) 2 200 Selvaag Bolig Bjerke AS Oslo 100% 5 155 (382) 5 623 Selvaag Bolig Langhus AS Oslo 100% 11 144 (2 320) 7 076 Langhus 1405 BT1 AS Oslo 100% 4 265 - 8 347 Langhus 1405 BT2 AS Oslo 100% 4 000 - 5 962 Langhus 1405 BT3 AS Oslo 100% 3 874 - 4 770 Selvaag Bolig Solberg AS Oslo 100% 21 335 (4 389) 27 630 Selvaag Løren 7 AS Oslo 100% 99 719 132 65 864 Lørenvangen 22 AS Oslo 100% 21 138 (1 662) 65 864 Selvaag Bolig Hamang AS Oslo 100% 42 298 (959) 56 714 Selvaag Bolig Øst AS1 Oslo 30% 149 472 (95) 56 724 Selvaag Bolig Rogaland AS Stavanger 100% 228 346 (5 259) 384 000 Selvaag Pluss Eiendom KS2 Oslo 66.7% 211 872 (6 586) 170 330 H-Pro 5 AS Oslo 100% 125 618 (39 933) 125 000 Selvaag Bolig Ballerud AS Oslo 100% 2 110 (2 768) 13 886 Selvaag Bolig Avløs AS Oslo 100% 1 051 (29) 1 050 Selvaag Bolig Tomt II AS Oslo 100% 443 (47) 443 Selvaag Bolig Landås AS Oslo 100% 3 651 (7 007) 8 386 Landås Vest BT2 AS Oslo 100% 78 - 1 450 Landås Vest BT3 AS Oslo 100% 91 - 1 035 Landås Vest BT4 AS Oslo 100% 48 - 838 Landås Øst BT1 AS Oslo 100% 109 - 2 398 Landås Øst BT2 AS Oslo 100% 142 - 2 254 Landås Øst BT3 AS Oslo 100% 155 - 3 148 Øya Lervig Brygge AS Stavanger 100% 48 560 792 42 424 Selvaag Bolig Hovinenga Oslo 100% 14 272 295 591 47 115 Selvaag Bolig Torvmyra AS Trondheim 100% 2 709 (546) 24 047 Selvaag Bolig Lørenporten AS Oslo 100% 195 632 201 713 378 486 Selvaag Bolig Trævarefabrikken AS Oslo 100% 6 694 (3 666) 103 040 Vestparken AS Oslo 100% 6 558 (787) 6 545 Skårer Bolig AS Oslo 100% (3 716) (5 483) 12 219 Skåreløkka BT3 AS Oslo 100% 8 176 - 2 193 Skåreløkka BT4 AS Oslo 100% 8 677 - 2 193 Skåreløkka BT5 AS Oslo 100% 3 344 - 2 193 Skåreløkka BT6 AS Oslo 100% 5 626 - 2 193 Skåreløkka BT7 AS Oslo 100% 7 021 - 2 193 Skåreløkka BT8 AS Oslo 100% 9 246 - 2 193 Skåreløkka BT9 AS Oslo 100% 17 037 - 2 193 Lørenskog Sentrum Vest AS Oslo 100% (8 608) 1 244 68 590 Kaldnes Brygge Syd AS Oslo 100% 3 035 (25) 707 Selvaag Bostad AB Stockholm 100% 4 276 (615) 4 704 Carrying amount at 31 December 2019 2 268 563
1The company is owned 30% by the parent company and 70% by a subsidiary. 2 The company is owned 66.7% by the parent company and 33.3% by a subsidiary.
ANNUAL REPORT | 99 COMPANY ACCOUNTS SELVAAG BOLIG ASA
Ownership and Equity last year Profit and loss last Associated company Registered office voting power (100%) year (100%) Carrying amount Sandvika Boligutvikling KS Oslo 33.3% 6 267 (174) 2 377 Sandvika Boligutvikling AS Oslo 37% 487 5 449 332 Kirkeveien Utbyggingsselskap AS Oslo 50% 36 982 111 22 722 Smedplassen Prosjekt AS Trondheim 50% 3 502 407 10 500 Tiedemannsfabrikken AS Oslo 50% 14 530 159 429 7 020 Sinsenveien Holding AS Oslo 50% (9 069) (13 677) 23 620 Sandsliåsen Utbygging AS Bergen 50% 4 795 (676) 6 250 Sandsliåsen 46 Utbygging AS Bergen 50% (172) (158) 15 Heimdal Stasjonsby AS Trondheim 50% 30 641 (21 845) 29 944 Fornebu Sentrum Utvikling AS Oslo 50% 2 369 (5 294) 5 016 Pottemakerveien Utvikling AS Oslo 50% (3 089) (1 430) 53 Haakon VII gt 4 Holding AS Trondheim 50% (11 843) (4 838) 20 Haakon VII gt 4 AS Trondheim 50% 38 658 (5 209) - Kaldnes Brygge AS Tønsberg 50% 14 897 12 417 61 541 Kanalveien Utvikling AS Bergen 50% 25 (5) 1 436 Verftsbyen Bolig AS Oslo 50% 4 993 (52) 10 000 Carrying amount at 31 December 2019 180 846 Selvaag Bolig ASA has uncalled capital of NOK 1 million for its owner share in Sandvika Boligutvikling KS.
Ownership and Subsidiaries owned via other subsidiaries Registered office voting power Aase Gaard AS Stavanger 100% Aase Gaard Bolig I AS Stavanger 100% Aase Gaard Bolig II AS Stavanger 100% Administrasjonsbygget AS Stavanger 100% Alfaz Del Sol Services SL Spain 100% Nordic Sol Commercial SL Spain 100% Nordic Residential SL Spain 100% Jaasund AS Stavanger 100% Jaasund Bolig I AS Stavanger 100% Jaasund Næring AS Stavanger 100% Lade Alle 67-69 Holding AS Oslo 100% Lervig Brygge AS Stavanger 100% Lervig Brygge Epletunet AS Stavanger 100% Lervig Brygge Kanaltunet BT1 AS Stavanger 100% Lervig Brygge Kanaltunet BT2 AS Stavanger 100% Lervig Brygge Lervigtunet AS Stavanger 100% Lervig Brygge Sjøtunet BT1 AS Stavanger 100% Lervig Brygge Sjøtunet BT2 AS Stavanger 100% Lervig Brygge Utsikten AS Stavanger 100% Løren 5 Næring AS Oslo 100% Nesttun Pluss Komplementar AS Oslo 75% Nesttun Pluss KS Oslo 75% Nyhavn Pluss AS Oslo 100% Selvaag Bolig Bjørnåsen Syd II AS Oslo 100% Selvaag Bolig Kornmoenga AS Oslo 100% Selvaag Bolig Lillohøyden AS Oslo 100% Selvaag Bolig Skalstadskogen AS Oslo 100% Selvaag Bolig Løren 5 AS Oslo 100% Selvaag Bolig Nybyen Økern AS Oslo 100% Selvaag Bolig Pallplassen AS Oslo 100% Luhrtoppen BT1 AS Oslo 100% Luhrtoppen BT2 AS Oslo 100% Luhrtoppen BT3 AS Oslo 100% Luhrtoppen BT4 AS Oslo 100% Luhrtoppen BT5 AS Oslo 100% Selvaag Bolig Formtoppen AS Oslo 100% Selvaag Bolig Vinterportalen AS Oslo 100% Selvaag Bolig Vaagen AS Stavanger 100% Selvaag Pluss International Holding AS Oslo 100% Selvaag Pluss Service AS Oslo 100% Selvaag Pluss Service AB Sweden 100% SPEKS Property SL Spain 100% Selvaag Bolig Bispelua AS Oslo 100% Strandkanten Pluss II AS Oslo 100%
100 | ANNUAL REPORT COMPANY ACCOUNTS SELVAAG BOLIG ASA
Note 3: Receivables and liabilities
Trade receivables 2019 2018 Trade receivables nominal value 35 354 24 809 Allowance for doubtful debts - (615) Net trade receivables 35 354 24 194
Current interest-bearing liabilities 2019 2018 Bank loans - financial institutions (specified below) - 111 100 Total - 111 100
Non-current debt due within five years 2019 2018 Bank loans - financial institutions (specified below) 86 000 86 000 Total 86 000 86 000
Non-current liabilities to financial institutions Lender Currency Maturity date Interest-rate Amount Land loan DNB Bank ASA NOK 31.03.2021 NIBOR 3m + 2.30pp 86 000 Total 86 000
Non-current liabilities due beyond five years 2019 2018 Other non-current debts to group companies 1 472 180 1 143 525 Total 1 472 180 1 143 525
Maturity schedule for non-current loans: 2019 2018 To be repaid during 2020 - - To be repaid during 2021 86 000 86 000 To be repaid during 2022 - - To be repaid during 2023 - - To be repaid during 2024 or later 1 472 180 1 143 525 Total 1 558 180 1 229 525
Pledged debts 2019 2018 Debt 86 000 197 100
Carrying amount of land pledged as security on bank loans 2019 2018 Shares in subsidiaries 550 117 548 349
ANNUAL REPORT | 101 COMPANY ACCOUNTS SELVAAG BOLIG ASA
Note 4: Receivables from associated companies Current Non-current 2019 2018 2019 2018 Tiedemannsfabrikken AS 4 522 4 108 - - Kaldnes Brygge AS 2 237 3 530 - - Dockside Næring AS 8 8 - - Sinsenveien Holding AS - - 14 117 11 621 Sinsenveien 45 - 49 AS 246 246 - - Smedplassen Prosjekt AS 115 238 705 - Sandsliåsen Utbygging AS 524 669 18 785 13 272 Sandsliåsen 46 Utbygging AS - - 310 - Stord Industribygg Holding AS - 11 - - Heimdal Stasjonsby AS 1 101 1 268 - 9 750 Haakon VIIs gt 4 AS 7 957 3 827 - - Haakon VIIs gate 4 Holding AS - - 60 341 51 574 Sandsliåsen 46 Utbygging AS 45 44 - - Fornebu Sentrum Utvikling AS 2 354 2 285 16 274 - Pottemakerveien Utvikling AS 75 71 33 238 31 796 Sandvika Boligutvikling KS 55 19 - - Elveparken Sandnes AS 454 277 - - Kirkeveien Utbyggningselskap AS - - 3 122 1 277 Verftsbyen Bolig AS 1 313 - - - Kanalveien Utvikling AS 9 - 201 - Total 21 015 16 601 147 093 119 290
Note 5: Equity Share premium Other paid-in Changes in equity Share capital Own shares account capital Total Equity 1 January 187 531 (1 724) 1 395 478 1 217 079 2 798 364 Sale of own shares - 985 - 30 133 31 118 Net income/(loss) for the period - - - 687 306 687 306 Dividend paid - - - (183 765) (183 765) Accrued dividend - - - (140 649) (140 649) Accrued additional dividend - - - (2 055 269) (2 055 269) Equity at 31 December 187 531 (739) 1 395 478 (445 165) 1 137 105
Note 6: Share capital and shareholders The share capital of NOK 187 531 376 comprised 93 765 688 shares with a par value of NOK 2.00.
20 largest shareholders at 31 December 2019 Number of shares Ownership SELVAAG AS 50 180 087 53.5% LANDSFORSAKRINGAR FASTIGHETSFOND 5 653 788 6.0% TAIGA INVESTMENT FUNDS PLC-TAIGA F 2 741 751 2.9% PARETO INVEST AS 2 065 624 2.2% VERDIPAPIRFONDET PARETO INVESTMENT 1 413 000 1.5% VERDIPAPIRFONDET ALFRED BERG GAMBA 1 397 062 1.5% SEB PRIME SOLUTIONS SISSENER CANOP 1 221 349 1.3% State Street Bank and Trust Comp 1 217 125 1.3% JPMorgan Chase Bank, N.A., London 1 000 000 1.1% FLPS - GL S-M SUB 928 800 1.0% HOLTA INVEST AS 814 119 0.9% Landkreditt Utbytte 800 000 0.9% MUSTAD INDUSTRIER AS 730 179 0.8% VERDIPAPIRFONDET HOLBERG NORGE 700 000 0.7% Morgan Stanley & Co. International 610 216 0.7% BANAN II AS 600 000 0.6% Baard Schumann 565 127 0.6% TMAM EUROPEAN REAL ESTATE SEC 544 506 0.6% SANDEN AS 518 186 0.6% STOREBRAND NORGE I VERDIPAPIRFOND 507 654 0.5% Total 20 largest shareholders 74 208 573 79.1% Other shareholders 19 557 115 20.9% Total number of shares 93 765 688 100.0%
Further information on shareholders is presented at: http://sboasa.no/en/
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Note 7: Pension
Selvaag Bolig ASA is required to offer an occupational pension plan in line with the Act on mandatory occupational pensions ("lov om obligatorisk tjenestepensjon"). The company has a pension plan which meets these requirements.
Defined contribution plan Selvaag Bolig ASA has a defined contribution plan for all employees.
AFP pension The company also has an early retirement plan (AFP) covering 64 employees. The AFP plan, established at 1 January 2011, is regarded as a multicompany defined benefit plan, but is treated as a defined contrubution plan until reliable and sufficient information is available to determine the company's share of pension cost, pension obligation and funds in the plan. Hence the company's pension obligations are not reflected as debt in the financial statements. The AFP obligation from the previous plan was included as debt and was taken to income in 2010, except for the obligation related to expected payments to cover the remaining shortage in the old AFP plan.
Other non-vested plans The company also has other non-vested pension plans where the obligation is estimated and accounted for annually.
Pension costs 2019 2018 Pension cost - IBP/UFP 4 276 3 721 Other pension cost (incl AFP) 959 949 Net pension cost 5 235 4 670
Pension obligations 2019 2018 Early retirement pension (AFP) - - Other pension plans 511 83 Net pension obligations 511 83
Economic assumptions Members in non-vested plans 2 2
Discount rate 1.80% 2.60% Future increase in salaries/pensions 2.25% 2.75% Future increase in National Insurance base amount 2.00% 2.50% Expected share of pension withdrawal through the 50.00% 50.00% AFP plan
Note 8: Income taxes
Deferred tax assets and liabilities 2019 2018 Temporary differences Non-current assets (5 674) (4 289) Net pension funds/obligations (511) (83) Accruals (26 766) (10 146) Gains (loss) account - - Other differences - - Net temporary differences (32 951) (14 518) Loss carry forward - - Base for deferred tax asset (32 951) (14 518)
22% deferred tax asset (7 249) (3 194) Of which not recognised - - Deferred tax (asset) in the balance sheet (7 249) (3 194)
Deferred tax assets are fully recognised as the company expects the position to be utilised against future profits.
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Base for tax expense, change in deferred tax and taxes payable 2019 2018 Profit (loss) before income taxes 881 318 572 221 Permanent differences (1 026 308) (749 160) Base for tax income (expense) (144 990) (176 939) Change in temporary differences 18 433 2 012 Base for income tax payable (126 557) (174 927) Changes in equity with effect on taxes - - Group contribution received 1 026 867 934 583 Group contribution given (105 842) (210 173) Use of loss carried forward - - Taxable income (base for tax payable in the balance sheet) 794 468 549 483
Specification of income tax expense 2 019 2018 Current income taxes payable 174 783 126 381 Taxes payable from group contribution recognised against investment in subsidiaries - (25 162) Tax effect from group contribution given 23 285 46 238 Income tax before change in deferred tax 198 068 147 457 Change in deferred tax (4 055) (318) Income taxes in profit (loss) 194 013 147 140
Taxes payable 2 019 2018 Taxes payable (22% of base for taxes payable in profit (loss)) (27 843) (40 233) Taxes payable from group contribution given (23 285) (48 340) Taxes payable from group contribution received 225 911 214 954 Taxes payable from advance tax on liquidated companies - - Tax refundable (tax incentive scheme for R&D) (519) (360) Taxes payable 174 264 126 021
Reconciliation from nominal to effective income tax rate 2019 2018 22% profit (loss) before tax 193 890 131 611 Permanent differences (22%) (225 788) (172 307) Change in income tax rate - (1 957) Tax effect from group contribution 225 911 189 793 Total 194 013 147 140
Reconciliation of deferred tax asset 2019 2018 Deferred tax (asset) at 1 January (3 194) (2 876) Change in deferred tax (4 055) (318) Net deferred tax liabilities (assets) at 31 December (7 249) (3 194)
Note 9: Pay, number of employees, benefits, loans to employees, etc
Pay and personnel expenses 2019 2018 Wages and salaries 118 707 124 988 Social security tax 19 697 19 980 Pension costs 5 235 4 670 Other benefits 13 916 13 399 Total 157 555 163 036 Average number of employees 67 66
Share purchase Salary Bonus programme Pension Other Total Remuneration to CEO - Olav Hindahl Selvaag 1 719 - - 30 2 1 751 Remuneration to CEO - Rolf Thorsen 3 522 2 153 1 965 60 194 7 894
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Rolf Thorsen joined as CEO on 1 May 2019, replacing Olav Hindahl Selvaag.
For remuneration of other members of the group management and shares owned by these and by directors. See note 22 to the consolidated financial statements.
Bonus is given on a discretionary basis to members of the group management on the basis of such criteria as results, execution of management in line with the company's values, and other qualitative and quantitative criteria which the individual executive is able to influence.
In the event of dismissal, the CEO will receive 12 months salary.
The employees have no share-based remuneration.
NOK 1 867 million has been paid in director's fees in 2019. See note 22 to the consolidated financial statements for details.
Fees paid to the auditor 2019 2018 Statutory audit services (incl technical support with the annual accounts) 2 345 1 075 Other assurance services - 108 Tax advisory services (incl technical support with tax returns) - - Other non-audit services 362 100 Total fees paid to the auditor 2 707 1 283
Note 10: Restricted bank accounts
The company had no restricted bank accounts at 31 December 2019. Note 11: Related party transactions
Details of transactions between Selvaag Bolig ASA and other related parties are specified below. Intercompany balances and transactions between Selvaag Bolig ASA and its subsidiaries, which are related parties to the company, are not included here.
Sale of goods and services 2019 2018 Associated companies and joint ventures 36 172 26 933
Purchase of goods and services 2019 2018 Selvaag AS (parent company) 662 699 Other related parties (including subsidiaries of parent company) 7 809 9 751
Finansinntekt 2019 2018 Selvaag AS (parent company) 1 572 1 413 Other related parties (including subsidiaries of parent company) 5 503 3 312
The following receivables and liabilities were outstanding at 31 December
Receivables 2019 2018 Selvaag AS (parent company) 43 088 41 738
Liabilities 2019 2018 Other related parties (including subsidiaries of parent company) 2 510 2 433
Goods and services sold to related parties are sold at the same prices and terms as to external third parties. Administrative service are purchased from the parent company on market-based terms.
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Note 12: Intercompany balances
Trade receivables Other receivables Current receivables 2019 2018 2019 2018 Group companies 14 152 7 188 1 042 387 1 044 276 Total 14 152 7 188 1 042 387 1 044 276
Other receivables Receivables due in more than one year 2019 2018 Group companies 519 570 488 507 Total 519 570 488 507
Other current liabilities Trade payables Other current liabilities Current liabilities 2019 2018 2019 2018 Group companies 12 - 105 842 210 173 Total 12 - 105 842 210 173
Other non-current liabilities Liabilities due in more than one year 2019 2018 Group companies 1 472 180 1 143 525 Total 1 472 180 1 143 525
Note 13: Contingent liabilities and guarantees 2019 2018 Capital not called up - limited partnerships 1 000 1 000 Total contingent liabilities 1 000 1 000
Capital not called up is related to investments in limited partnerships (note 2).
Selvaag Bolig ASA has provided the following guarantees: Amount Tax guarantee 5 900 Guarantees related to loans to subsidiaries ("Selvskyldnergaranti") 370 625 Construction client guarantee 549 026 Pre-payment guarantee pursuant to the section 47 of the Housing Construction Act 554 195 Contractor guarantee pursuant to the section 12 of the Housing Construction Act 814 594 Tax payment guarantee to Skatt Øst 27 317 Other guarantees 133 214 Total 2 454 871
Note 14: Other financial expenses
Specification of other financial expenses 2019 2018 Currency 9 18 Write-downs, shares in subsidiaries 100 784 177 375 Other financial expenses (guarantees and amortisised cost, etc) 433 1 253 Total 101 226 178 646
Note 15: Revenue
Revenues are related to business in Norway.
Specification of revenue 2019 2018 Project management and business management 47 308 45 500 Other revenue 49 236 25 519 Total 96 544 71 019
Note 16: Other gains (loss)
Other gains (loss) of NOK 62.7 million are related to the sale of shares in the wholly owned subsidiary Eyvind Lyches Vei 10 Næring AS and to the company's 66 per cent ownership share in Stord Industribygg Holding AS.
106 | ANNUAL REPORT DECLARATION BY THE BOARD OF DIRECTORS AND CEO
We hereby confirm that, to the best of our knowledge, the annual financial statements for the group and the parent company for 2019 have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the group and the parent company taken as a whole.
The directors’ report gives a true and fair view of the development, profit and position of the group and the parent company, as well as a description of the principal risks and uncertainties facing the group.
The board of directors for Selvaag Bolig ASA Oslo, 20 March 2020
Olav Hindahl Selvaag Peter Groth Anne Sofie Bjørkholt Sissel Kristensen Chair Director Director Director (elected by the employees)
Tore Myrvold Gisele Marchand Magnus Kristiansen Rolf Thorsen Director Director Director President and CEO (elected by the employees)
ANNUAL REPORT | 107 ILLUSTRATION: FORNEBU SØR, FORNEBU (DEVIATIONS WILL OCCUR)
SELVAAG BOLIG ANNUAL REPORT 2019
AUDITOR’S REPORT
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ANNUAL REPORT | 111 AUDITOR’S REPORT
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ANNUAL REPORT | 113 AUDITOR’S REPORT
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ANNUAL REPORT | 115 AUDITOR’S REPORT
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ANNUAL REPORT | 117 ILLUSTRATION: ELVEPARKEN, SANDNES (DEVIATIONS WILL OCCUR)
NYBYEN ØKERN , OSLO Selvaag Bolig ASA Postboks 13, Øvre Ullern 0311 Oslo
Silurveien 2 0380 Oslo Phone: 02224 [email protected]
Photos Martin L Øverland/Selvaag Bolig pp 5, 6, 7, 120 iStock.com/Dean Mitchell p 23 iStock.com/Viktorcvetkovic pp 25 Joshua Rainey Photography/Shutterstock.com pp 26, 27 HappyPictures/Shutterstock.com pp 29, 30 ,31 ,32 Katrine Lunke/Apeland p 46 america365/Shutterstock.com p 46
Illustrations MAD arkitekter pp 1, 10, 11, 45, 118, 119 Rodeo, Tegmark pp 33, 34, 35 EVE Images pp 21, 62 Rodeo, Haptic, Forbes Massie pp 108, 109
English translation R E Gooderham
Design Selvaag Bolig ASA
www.selvaagbolig.no www.selvaagboligasa.no facebook.com/selvaagbolig twitter.com/SelvaagAksjen www.selvaagbolig.no www.selvaagboligasa.no
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