CEO’s review

According to the Kojamo plc’s Half-Year Financial Report 1 January – 30 June 2024

Total revenue and net rental income grew in the first half of the year. FFO decreased compared to the comparison period due to an increase in financial and maintenance expenses. Our financial key figures and liquidity situation have remained good.

The market situation was reflected in a decrease in our occupancy rate and affected the rent increases. The supply of apartments remains plentiful, and the competition for good residents has been intense. A number of previously started projects were completed, and in addition, unsold new owner-occupied housing has been moved into the rental market, delaying the correction of the supply situation. Although urbanisation continued to be strong, the oversupply situation did not start to dissipate yet in the spring.

The number of residential start-ups has been very low for a long time, and the number of granted building permits has declined further from the previous year. There is no clear sign of construction activity picking up, which is why the number of market-based apartments to be completed in the next couple of years will be very limited. At the same time, urbanisation is progressing. Population growth has remained strong in Helsinki, Tampere and Turku regions due to internal migration and immigration. These factors are still expected to balance the demand and supply of rental apartments and to lead to a reduction in the supply of rental apartments in the market. Our renting in July and at the beginning of August has been supportive for the guidance.

At the beginning of the year, few significant residential real estate transactions were made in Finland. However, in the second quarter, we increased the yield requirements for investment properties to reflect the completed transactions. The decrease in interest rates reduces the pressure to change yield requirements in the near future.

The saving programme launched last autumn has progressed according to the plan. Our goal is to maintain the company’s strong financial position and adapt our operations to the challenges brought by the uncertainty in the real estate market and the higher interest rate environment. Investments this year will be exceptionally low. No new modernisation investments have been started, and we have reduced repairs other than those supporting renting of apartments. The personnel layoffs are still in effect, and in addition, we have brought efficiency to our operations by renewing our organisation. The savings in administrative and marketing expenses have been significant. Also, the decision made in the spring not to pay the dividend will help to keep the capital structure strong.

The last apartments under construction were completed at the end of June. We have a binding preliminary agreement for only one property. The situation is entirely exceptional in the company’s history. In the short term, we focus on managing the existing housing portfolio and are not currently planning any new investments. In this way, we want to ensure that our financial situation will remain strong, our existing business will strengthen, and the goals of the saving programme will be achieved.

Positive signs in the operating environment are visible. Inflation has slowed down, and the decline in market interest rates seems to have started, although a rapid decrease in interest rates has not occurred. Due to the successful financing arrangements made in the early part of the year, our financial position is solid, which allows us to patiently await improvements in market conditions.

Jani Nieminen
CEO

Page updated 15 August 2024