Bonava AB (publ)

STO:BONAV B

Earnings Call Transcript 2020-Q1

[Louise Tjeder, Head of IR]

Good morning, everyone, and welcome to Bonava's Q1 2020 Report Presentation. Speaking is Louise Tjeder, Head of IR; and with me is Joachim Hallengren, CEO; and Ann-Sofi Danielsson, CFO. Joachim will begin and take you through the highlights of the quarter, including an update on the effects and risks to Bonava related to COVID-19. And Ann-Sofi will then take you through the financials for the group and the segments. After the presentation, we will open up for a Q&A session. So with this, I will hand over the word to you, Joachim.

[Joachim Hallengren, CEO & President]

Thank you very much. Good morning all. Looking at the first quarter for us at Bonava in 2020, I think it's fair to say that we had a really good start, especially when it comes to sales. And then, of course, this quarter is, as you already know, twofold. But strong introduction, we increased the number of sold units. We sold more in each -- in all of our segments but St. Petersburg. Maybe most important, we sold more in our main markets, both in Germany and in Sweden. We also sold more on an aggregated level, and we sold investor units that we did not sell in the quarter last year. Looking at the number of starts, we were slightly down from last year. However, the majority of the started unit last year came out of the St. Petersburg region. It was almost 600 out of the 700-ish started units that came out of there. And of course, that's the ever dynamic in the St. Petersburg market with huge project. But the takeaway from the starts is that we have started more numbers in Germany and in Sweden. And this is something that we have communicated for a while now that we would see increasing starts in 2020 in those 2 markets. However, the EBIT was lower mainly due to 2 reasons. We have a pretty challenging benchmark, where last year's result came out of -- or the majority of it came from St. Petersburg, who contributed with both large volume, but also an exceptionally good margin in the units that were handed over. But nevertheless, we are also impacted by the challenging -- the challenges that we have had in the past with projects in the Nordic segment, both in Denmark, but also in Finland. There are no new projects that has affected us at this point. But it's old, well-known bad performing projects that now is entering into a completion phase, and we have had 2 of those, especially in Denmark, being completed this quarter. And of course, they come in with the top line, with their net sales, but with none or, in some cases, slight negative margin in the quarter, and of course, that affects our EBIT result and also the margin. I think it's also important to remind you that we have communicated earlier that we would have more completions, both in the second quarter and the third quarter of this sort of dead turnover projects, especially in the Nordic segment. Looking at key figures for Q1, we have a net sales more or less on par. EBIT is down, as we said, as is the unit in production. However, the strong sales starts of the year has given us a substantially higher number of value of sold but not yet recognized units. We're up from SEK 20.2 billion to SEK 21.8 billion. And also, we have increased the sales rate in the portfolio from 66% to 77%. And of course, that's a sort of a guarantee stamp on the Bonava development portfolio. Having 77% secured already in this insecure times is a really strong signal that Bonava is a company with a really solid performance in that type of sense. The number of units sold, as I said before, we had a flying start of the quarter. We have sold 1,121 -- sorry, 1,129 units compared to 731. We sold more both in the investment and the consumer segment. Slightly lower numbers of starts, but out of the 723, almost 600 were out of the large St. Petersburg projects last year. So 531, but the takeaway is good starts in both Germany and in the Swedish segment. The COVID-19 effects, and I will get back to sort of a longer outlook in a few slides, but the effects on the -- on our operations in the first quarter were actually pretty limited. Of course, we were impacted, as everybody else, by rules and restrictions made by authorities and governments to try to prevent the spreading of the virus. However, we had all our sites up and running throughout the quarter. They are not as efficient. We run as they could be, but that's due to all these rules and regulation, not least the social distancing part, which makes it pretty difficult actually to drive the construction site with full throttle. But the good news is that they are up and running. However, there are challenges. We've seen already small disturbances when it comes to supply of people and material, I will get back to that. We had a financial impact due to a delayed handover in Germany. That was an investment project, small student homes that were delayed, and that will now be recognized in the second quarter instead. And then when we talk about the actions that we have -- Bonava has taken, we have done a lot of mitigating actions. First of all, our employees' and our customers' and our partners' health and safety is extremely important for us. So that was the first thing that we did, starting to protect all these groups. Working mobile, introducing all kinds of social distancing activities. We went quickly over to things like a digital sales starts. We had digital signing processes and so on. But then, of course, also, we focus very hard on protecting our cash flow. It's so important for any company entering into an uncertain situation to protect their cash flow, and we do that by trying to lower cost. We have stopped the development projects, and I'm not talking about construction sites, I'm more talking about strategic development projects. And we have also introduced short-term work programs and other types of activities to lower our cost. And of course, we want to do that to increase our agility and flexibility and to be quicker to adjust in a very unsecure environment. But overall, the effects, taking all the activities apart on the first quarter, has been pretty limited. These are 2 examples of projects that has affected our business this quarter. To the left, you have one of the start-up projects, consumer project in Helsinki. To the right is an investment project in Lund in Sweden, which was already earlier started, but it was sold in this quarter. Many of you recognize this, this is the expected completions and sales rate. We have developed this graph a bit. We have introduced more periods. And as you can see now, it covers the full year of '20, but also the full year of 2021. And then we also have a later bar, which is beyond 2021, so '22 going forward. We want to give a bit more transparency on this, but we also realize that many of our projects are pretty complex and with long production time. So that means that it was obvious for us that we needed to be more transparent when it comes to the expectations or the projects in a later phase. And it will be even more obvious when I change the picture to the investor side where you can say that we are really backloaded here and with more than 1,000 units with an expected completion time beyond 2021. And all the numbers according to -- out of which this growth is built is, of course, as usual, available on our corporate website. Looking at the risk then regarding COVID-19 forward, it is very difficult to foresee. But I think that we have to look upon this in 2 dimensions. The first dimension is sort of the regulatory part with the -- all the mitigating actions taken to stop the spread of the virus. And of course, that threatens our production in our sites due to very complex and delicate supply chains, supply chain of material but also the supply chain of people. And as you most likely know, if you follow this industry, the construction industry all over the world, and not least in Europe, are dependent on labor that is actually migrating in from other countries to perform work somewhere else. And with our profit recognize -- recognition model or principal, the completed contract model, we are very sensitive to postponements, postponements of completions. Then we might also due to all these restrictions, see postpone on handovers. Even if the units are ready, it's not evident that the consumers, due to local legislation, can actually physically take those over. And then we might see postponed production starts. And of course, if we have a postponement, that will also delay the recognition of those projects. It might be from a quarter to another, but it might also be from 2020 to 2021 and so forward. But that has nothing to do with the profitability as such or eroding margins. It is more -- is 100% in a correlation to the way that we recognize our projects. However, the first phase with all the actions to mitigate the spread over the virus will be followed by a much larger uncertainty, how had this shutdown affected the economy. And probably, we are seeing a period now where the regulations are slowly but surely lifted, but it will leave us with some [indiscernible] territory when it comes to the impact on the macroeconomy, but also on the personal economy. So we foresee that we will have a lower volume of sold units until we have more clarity -- or rather the consumers have more clarity regarding their financial status and whether they have a job or not. And of course, if we sell less, then we will start less units. And again, there might be -- there is significant risk that we would have delayed profits due to disruptions in our sites or handovers. But that is not erosion, it's just a paralyzation.With that, I would like to invite our CFO, Ann-Sofi Danielsson, to share the quarter more in figures and details.

[Ann-Sofi Danielsson]

Thank you very much, Joachim. Yes, I will give some more details regarding our income statement, different segments, balance sheet, financial position and most -- least but not -- last but not least, our cash flow. Income statement then to start with that. First of all, I will again comment what the -- Joachim commented upon that we have a net sales, if you take the currency effect into consideration, we are on par with the net sales from last year. But of course, there are a number of different explanations why it has developed as it has, and I will come back to that. EBIT, SEK 31 million compared to SEK 165 million. And again, I will come back to that what has happened during 2020 compared to 2019, just in a couple of seconds, yes. So net financial items, almost same as last year. And also tax rate, 25%, which is normal for our business. We end up the first quarter with a net profit of SEK 2 million for the first quarter of 2020. So if we look a little bit deeper into the EBIT development, SEK 31 million compared to SEK 165 million. If you look a little bit deeper into this, you see -- you can see that the biggest deviations are in St. Petersburg-Baltics and in the Nordics. And to make it short here, St. Petersburg-Baltics, that's most of all volume-driven. We have substantially fewer units recognized in St. Petersburg 2020. And we had very high numbers of units recognized last year and also with a very good margin. And now we have fewer units due to the fact that we have fewer to sell. And in the Nordics, lower EBIT, even negative. And as Joachim stated in the beginning here, we -- there are no negative surprises. We have some low-performing projects, both in Copenhagen, but also in Helsinki. And they have been recognized -- some of them have been recognized in this quarter, giving us this EBIT of minus SEK 64 million compared to SEK 2 million last year. So that's the 2 biggest reasons why we have an EBIT of SEK 31 million compared to SEK 165 million last year. So let's go further on with some comments regarding our segments then, starting with our biggest one, Germany. What you see here is that we have recognized 180 units quarter 1 2020 compared to, all in all, 217 last year. And here, I would like to take the opportunity to say that quarter 1 is actually a rather smaller or short period. We have substantially more units recognized all over the year. So if we have, as we now have in Germany, some projects that, with somewhat lower gross profit, gross margin, they are quite few this quarter and also with lower gross profit margin than last year. That will give an effect on the EBIT result as we have here 7 compared to 28 and also a lower EBIT margin. We have a very good portfolio in Germany with good margins in the ongoing production that we have here. So the division here compared to last year is mostly connected to the fact that we have quite few units recognized in one specific quarter, giving us this result due to the fact that there are few units with somewhat lower gross profit margin to cover the ongoing running costs that we have in the business in Germany. I also take the opportunity to comment upon what we always estimate, Joachim showed you the big picture previously. And here are some more details regarding Germany. And what I want to say here is that when we completed 2019, we said that we expected to have 351 units to complete in the first quarter, 177 to -- 167 to investors and 184 for consumer. And what has happened? Well, first of all, those units that we expected to hand over to investors, they have been delayed, and that is actually an effect of COVID-19. The authorities were not allowed to go out and visit our project and give the -- well, to say okay, to hand over the -- to finalize the project and to hand it over to the investors. So that project in Heidelberg has been delayed and will be handed over in quarter 2 instead. And the other thing here is that -- not so big division, but still something to comment upon due to, well, just to say some words about the revenue recognition method. We have completed 169. However, we have recognized 180 units. That means that we have sold and handed over some units from our stock and from our balance sheet. So more units recognized than we have completed in the first quarter here. And a strong sales start in Germany. We have also started more units than we did last year before the COVID-19 breakout. That was something that we commented a lot about last year. We said that the sales were -- and also the starts in 2019 were a little bit lower than previous years, and we said that we expect starts and sales to catch up in 2020. And when we started the year, that was also what has happened. We see a very strong interest for our housing units in Germany with good sales start and also good -- high production starts in first quarter. However, we still see what we also saw last year that we have delays to get the building permits. The authorities are overwhelmed with requests for building permits, and we were hit by that last year, and we still see some effects of that. So we have one project in Cologne that we expected to start in quarter 1, but that will be delayed and started the coming quarters when we received the building permit. Sweden then, we have handed over more units than last year and also for consumers. And this has given us a good EBIT development and also a decent and good EBIT margin, driven by these volume effects, more units to consumers, higher net sales and also with a decent good EBIT margin, so 114 compared to 81, thanks to this. The year started well in Sweden as well. Market catched up late 2019, and that is also what we see here. It continued to be strong before COVID-19. A good number of sales, 169 units here to investors. As Joachim said, that was in -- that was the public in Lund that we started already in quarter 4. Normally, we sell and start units to investors in the same quarter, but this one, we started already in quarter 4. But now it is sold in Lund. And -- but we have also sold the -- more units to consumers 2020 than last year. And we have also sold from our stock, from our balance sheet in Sweden. That means that we have reduced the number of unsold units also in Sweden. And then the Nordics then. We said already in quarter 4 that we will have rather low-performing units to recognize in 2020, and that is what you see here. So no negative surprises. But low-performing projects that have impacted -- the impact both in Copenhagen and in Finland. We did restructuring in Finland, as you may remember, where we have this effect of SEK 159 million that we set up for this reorganization and the closedown of some regions in Finland. Finland is developing according to that plan that we set up then. So -- but we still have some low-performing projects ongoing in Finland. And then we also have some in Copenhagen, and that is something that we expect to continue to be in quarter 2 and quarter 3 as well. One thing I also want to point out here is that we have somewhat higher selling and admin expenses here in the Nordics, and the reason for that is that we acquired operations in Oslo in quarter 4 last year. And that -- the Oslo operations -- well, we have ongoing projects there, but they -- we will not have the time to -- we will not be able to recognize those for profit in 2020, probably not. And that means that we will have somewhat higher selling and admin expenses in the Nordic segment without having the top line coming from the Oslo business. So that is something to -- that I wanted to remind about that we -- that will be an effect of that acquisition. But also in the Nordics, we see -- we saw improved sales in the first quarter. And also here, we have sold from our stock and from our balance sheet, and by that, reduced the number of unsold units on our balance sheet. So a good sales development also in the Nordics. And we also see that the peak supply that we saw last year, especially then in Finland and also in Copenhagen, that high level has begun to come down to more decent levels. So that is also that we -- something that we have seen on that part of the market. St. Petersburg-Baltics here. Yes, here you see, last year, we recognized 519 units; this year, 167. And of course, that impacts top line, net sales lower and it also impacts EBIT. What we can also say is that the projects that we recognized for profit in St. Petersburg last year gave us very good margin. And so it was an exceptional first quarter '19, many units handed over and also with high EBIT margin. Now we are -- we have fewer units and also to a more normalized stable margin level.So here again, worthwhile to comment upon that also here, we estimated more units to be completed in quarter 1 than we actually did. And the reason is that we have 1 project in Riga, Latvia that is somewhat delayed. It will be completed and recognized in April instead. And also here, we have sold units from our stock -- we have recognized units from our stock and reduced the number of units unsold in our balance sheet. So that's why we have recognized 167 units, although we have completed only 116. And we have also sold and started fewer units. We have started some in the Baltics, but we still have a lot of -- a rather big portfolio to work with, especially in St. Petersburg, so with a very strong sales rate also. So that's the reason why we are in a more -- a lower level than last year, but still on a very good level, taking our portfolio into consideration. So that leads us to this balance sheet -- or this is the balance sheet that we have, the assets that we have when we ended the quarter 1 here. We have increased total assets. And what have we done? Well, we have invested into land, our properties held for future development in Germany, Sweden and in Norway. One other thing that I want to comment upon here is that we have an equity to assets ratio when we ended the quarter of almost 30%. We have an objective to be around 30%, so to be very close to that is -- well, that's a very solid financial position when you look at our balance sheet. And all this has given us this cash flow, negative outflow, which I will soon show you or comment upon that, always repeat that, but we have a negative outflow of cash in the first quarter, however, this year, SEK 200 million minus instead of a little bit more than SEK 1 billion. And the main reason for this improvement is that we have a positive -- a very strong positive inflow from how we have worked with our working capital. We have higher -- more interest-free financing and also high advanced payments from our customers, so SEK 1.7 billion here in change of working capital. And this is actually maybe the #1 task for us now in this world that we are in now to protect our cash flow, to be cautious with our debt situation. So just to remind you here that being this low in quarter 1, that is good. We normally have an outflow of cash flow quarter 1 to quarter 3 and an inflow in the fourth quarter. I just want to add to what Joachim said about the effects of COVID-19. If handovers are delayed from quarter 4 to next year, that will also, at least in some parts of our business, affect the cash flow as well, since in some countries, the final installment is paid when you lay your hands on your new housing units. That means that the cash flow comes from our customers when the unit is handed over. So if that is delayed, that will, of course, impact also the cash flow in the fourth quarter. So net debt, stable, SEK 7.1 billion. And I just want to repeat here that Bonava includes all debt. We have nothing outside our balance sheet. We include net debt in tenant owner associations housing companies, SEK 2.4 billion. That is the project financing that we have. And that financing -- well, it's there for us as long as the project is ongoing. So it's very important to bear that in mind when we look at us. And especially in these circumstances that we are in now, we have everything in our balance sheet. We have everything in our net debt that we present here. So that's really important to bear in mind when you look at the financial position of Bonava. And I also take the opportunity just to share with you our facilities that we have at the moment. And in quarter 1, we had financing facilities of SEK 8.1 billion. We used SEK 5.5 billion, which means that we still have SEK 2.6 billion to utilize going forward. And that is together with the project financing of SEK 2.4 billion, that's a very -- that's a solid financing position for us. In addition to this, what we have achieved during this first quarter is that we have a green financing framework established, and we are very glad for this because this is something that we can use for financing going forward. And it's also actually good for our brand that we have projects, we have housing units that are so of high level standards so that we can use this financing framework to finance these projects as well. So that's very important for us. And this is a framework that is validated through Sustainalytics, which we also think is very positive for us and for our business. Finally, then, I have commented on our equity-to-assets ratio, the objective that we have here. So finally, just to see where we are with the other financial objective, return on capital employed, to be between 10% to 15%. And with the capital employed ending quarter 1 of a little bit more than SEK 15 billion due to the fact that we had an EBIT -- not giving us the -- the EBIT that we've had, we are below that target at the end of quarter 1 here, 7%. So we have a way to go here going forward. Of course, we don't change our objective. It's still to be -- to have a return on capital employed to be between 10% to 15%. That is our financial objective also going forward, important to remember. So by concluding this, financial objectives, cash flow, some of the segments and also the development of our income statement during the quarter. I hand over to you, Joachim, to summarize this first quarter.

[Joachim Hallengren, CEO & President]

Thank you very much, Ann-Sofi. And to wrap up, again, a very strong start of 2020, especially when it comes to sales and started units, but then somewhere in the beginning of March, the tempo decreased due to the COVID-19 effect. The numbers of starts were lower than last year, but that was partly because the volume of started units in St. Petersburg was a large loss here. But the most important factor is that we started more on all our main markets, both Sweden and in Germany. We had few units -- fewer units handed over. It's a seasonality pattern, of course. And that means that individual projects might actually be pretty visible if their margin is either very high or very low, as we saw the impact of, for instance, 2 projects in Germany, they were visible with that low volume. EBIT impact, as we said, old news from Nordics, we still need to take care of that. It was Denmark and partly also Finland with old projects that are now materializing as completed and handed over. They carry their net sales, but they don't carry any profits. And then as Ann-Sofi talked about, the financial position of Bonava is very strong, and we also guard and protect our cash flow like hawks. It's so important to be agile and to be proactive in this situation. We have a solid financial position at the beginning with a good equity over assets ratio. We also have unused financing opportunities. In the end of the tunnel, there will always be opportunities for those who can be in a position to navigate and that has dry gunpowder, and my intention is that Bonava should be one of those companies. And then again, COVID-19, what will the future bring? But it's very, very difficult to say. We are now in a period where it looks like authorities are, slowly but surely, lifting the rules and regulations. That means that we will have a better moveability. We can hopefully run the business as such, a bit more smooth. But a big question after that is what impact has the COVID-19 virus had on the macro economy and also on the local economies, and when it comes to us, on our customers accordingly. And what's the consumer confidence, what's the job situation and unemployment rate in every market. And I think it would take time before the fog clears in that area. So it's challenges ahead regarding COVID-19, but it's way too early to state or even try to forecast any effect at this point. And with that said, I would like to hand over to Louise Tjeder to moderate the Q1 Q&A. Thank you, Joachim and Ann-Sofi. Yes, we will now open up for questions. Operator, please, can we have the first question?

[Operator]

[Operator Instructions] The first question comes from the line of Stefan Andersson from SEB.

[Stefan E. Andersson, Analyst]

First, a question on Germany there and the margin, if you could elaborate a little bit on the -- on what's happened there. You talked about some projects now where you had a poor performance. Is there anything else affecting the margin on those projects? What do you mean by this? This is the first time I hear about poor performance in Germany. It's always been as a successful EBIT for us, so I would like to -- some more details there.

[Ann-Sofi Danielsson]

No, there is nothing special that has happened. But as I said, when the units that we recognize for profit are few, as it was in the first quarter here, it can happen that we have some projects that are of low-margin quality or low-margin level. So it's nothing exceptional. We have had this kind of -- well, these levels of margins in the portfolio in Germany also previously. However, the number of units that we recognized in those quarters where we've had this had been higher, and that means that these units have been combined with higher-performing projects. So it hasn't been so obvious as it is now. So there is nothing special that has happened. So that's why I really wanted to say that we have a very good and sound portfolio of projects in Germany still. So it is an effect of rather few units recognized. And also these units that were recognized now in quarter 1, it was actually a couple of projects in the Ruhr-Rhine area, where the margin was somewhat lower than what is normal in our German portfolio. So nothing special. But a coincidence that few units and low margin in those units that were recognized in this first quarter.

[Stefan E. Andersson, Analyst]

Okay. Good. And then second question. On starts, you comment that you had a good performance on starts in key markets like Sweden and Germany, and that's good in Q1. And of course, you don't want to make any prognosis going forward. I could do that for you. I think you will have very, very low sales, March, April, May. So there will be slow bookings. So my question then would be, how are you planning to act in such a scenario where you have low bookings? Are you willing to start projects on speculations? Or are you fully following the market when it comes to sold units or booked units?

[Joachim Hallengren, CEO & President]

I think that's an excellent question. I mean that is something that we have to consider every day. Let me give you a few sort of dimensions on that. We have projects in some of our markets, for instance, in Germany, that are waiting for building permits that already has a high sales rate in binding contracts. Of course, that's easier for us to start such a project because then the risk in that is not that big. Then we have 77% sales rate in our portfolio, and that also gives us room to maneuver. So of course, in some cases, we can take more -- we can take a lower presales to start showing it. I would argue if we -- if, for instance, works in the development area, where we already have developed 1, 2 or 3 phases earlier, then we know the market very well, then we wouldn't probably hesitate. However, opening up a project in a completely new area, we will probably be more reluctant. But then it's also the financial side. I mean it's very different starting a project in Germany or in St. Petersburg, where we have a totally different cash flow profile, it's very different from starting something in Sweden when we have heavy or backloaded payments. So I would argue that with our footprint and our financial strength and the sales ratio of the portfolio, we have a lot of variety. We have a lot of options and room to maneuver in that question, more than some of our competitors, I would argue. But I can't give you a solid answer, but it's not either black or white. I think we can be more forward-leaning than others. But of course, every day, you need to try to assess where will the market be.

[Stefan E. Andersson, Analyst]

Yes. Okay. Good. And then on Norway, I fully understand this might be early question to raise, but I raise it anyhow. You made some big acquisitions of land in the end of last year in Norway. You talk about the Norwegian company you bought and then also some land. Norway's -- you had you have impact of COVID and the oil price, so I guess, that market could be a little bit more problematic then. Is there any risk to the land value there you think is for you to have a write-down of that land?

[Joachim Hallengren, CEO & President]

No, I can't see that really. We -- the land that we bought in Oslo was an off-market deal, and we entered it -- it was really -- it was a good deal for us. It's a small operating business. We have around 10 employees. So there, I mean, the running costs are pretty low. And we bought a land bank with a good maturity. It's 1,000 building, approximately. And we have started 1 project, and we are, within 2 quarters, able to start more projects. On the contrary, I think that it's a fantastic opportunity to act quickly when the market bounces back. But to be pretty -- to the point of your question, I don't see any risk of write-downs in Norway.

[Stefan E. Andersson, Analyst]

Okay. And then my final question. I could be wrong now, but if I remember correctly, the German business is not fully owned by you, it's still in ownership from NCC. And there's a -- is there a payment to come this year? Or is that next year? And how is that calculated? Is that fixed from before?

[Ann-Sofi Danielsson]

No, it's not -- if I understood you correctly, we have, well, an agreement with NCC, that is what you said, with the German business. Is that what you asked, Stefan?

[Stefan E. Andersson, Analyst]

Yes. Yes. Yes, sure.

[Ann-Sofi Danielsson]

And actually, yes, that is correct. And that is also stated in our report, and that we have -- I think it is -- we have -- we still have SEK 29 million to pay to NCC regarding this. And that is done in ratios where we pay 1/5 -- it was from 2016, so it is divided into 5 years. So we still have, I think, is 2 years to come. So all in all, it's around -- well, I think it is SEK 29 million for us still to pay. So not more than that, and that is divided between the different years.

[Operator]

The next question comes from the line of Fredric Cyon from Carnegie.

[Fredric Cyon, Research Analyst]

A few questions from my side. Starting off with the Nordics, you're mentioning that the losses in the first quarter is partly related to projects with poor margins. Shall we expect a similar effects for Q2, Q3? Or is it back-end loaded? Just to get a flavor for how bad it will look for the next 2, 3 quarters.

[Ann-Sofi Danielsson]

Yes. Well, what we said is that we still have some low-performing projects also in quarter 2 and quarter 3. However, it was -- we had -- what impacted quarter 1 a little bit more was the development or the projects that we handed over in Denmark. So by saying that, what I'm saying is that you can -- you will not expect -- you cannot expect high-performing projects to be recognized in quarter 2, quarter 3 in the Nordics. But with a more decent level, so to say, in quarter 2 and quarter 3 than what we -- what you saw in quarter 1.

[Fredric Cyon, Research Analyst]

That's clear. And then on handover delays, you had one project in Q1 that was delayed. Now we are 3 weeks into the second quarter, do you see any risks of project delays hitting the second quarter?

[Ann-Sofi Danielsson]

That was in Germany, you mean, but that will be -- that is already handed over, so that will be in quarter 2.

[Fredric Cyon, Research Analyst]

Yes. But I meant if there are any other projects that were expected to be handed over in the second quarter where you see risks that they might be postponed release?

[Ann-Sofi Danielsson]

No, no, no. Not -- no, that's the one that we have commented on in the report. So that's -- no, we haven't seen that yet. That is not what you can expect. And that is not what we have in our -- in the portfolio that we ended the quarter 1 with.

[Fredric Cyon, Research Analyst]

And then my final question is, obviously, very foggy circumstances at the moment, and you still had a fairly good Q1 in terms of sales. Can you give some flavor on how large proportion of those sold units occurred during January, February? And can you give some hints on development so far in April versus the end of the first quarter?

[Joachim Hallengren, CEO & President]

Well, I mean, it's obvious that when the COVID broke out somewhere there week 10, 11, the sales plummeted. However, we have a -- both in Germany and in St. Petersburg, we have a system where you have to go through the notary office or the registration office. So we still have a back loan or contracts which have to sort of formally notarized or registered. So -- but if you look on the top funnel, it's very, very quiet. And of course, that will be -- that is expected. So it's a substantial difference between the 2 first months where we actually were overperforming. And then somewhere in March, it's -- I wouldn't say it is standstill because that wouldn't be true, but it's a substantial difference in interest and conversions. And I do understand that because nobody knows what the future looks like.

[Fredric Cyon, Research Analyst]

And you're not seeing any early signs of change on customers? Or that's perhaps too early to expect?

[Joachim Hallengren, CEO & President]

Well, what we're seeing is that -- one dimension that we were a bit sort of thinking about or concerned about whether customers will show up to pay for the completed units, so we can do the handovers. But we have had, I mean, very few that hasn't done that. And in all cases, this has been -- because they haven't been quarantined, some of them abroad. But that has all been settled, so the cash flow has been secured. We can see now that the last couple of weeks, there is more activity on our webs in the early -- sort of in the top funnel, but we are not sure what that means. Maybe people have a lot of time on their hands and sitting at home and just browsing the web, but it's way too early to say. I think that it's so difficult now because I think that many people actually, by mistake, think that this is over once the regulations are lifted, but the impact of this will -- that will materialize maybe summer vacation afterward. So it's early to say. More activities on the webs, but we don't know really what that means.

[Operator]

The next question comes from the line of Tobias Kaj from ABG.

[Tobias Kaj, Research Analyst]

I have a couple of questions. First of all, regarding starts in Germany, I think you mentioned roughly 1,500 starts as a target for this year. Do you still think that's realistic given your comments on -- previous in Germany where you had some projects where satisfying booking ratios, but not building rights in place or...

[Ann-Sofi Danielsson]

I would say that it would have been very realistic before the COVID-19. It's still realistic if the market allows it, but where is the market? I don't know. But with the sales speed that we see for the moment, if that continues, then it's not possible.

[Tobias Kaj, Research Analyst]

But can you give an indication of how big volume of projects you have with satisfying booking ratio that you are confident to start as soon as you get the permissions?

[Joachim Hallengren, CEO & President]

I don't want to do that because there might actually be other challenges to that. It might be challenges to get those projects started by other reasons, as I said, disturbance in value chains, correct pricing. So I'd rather not. We will keep you updated every quarter how the market develops. And I do understand that you wanted to understand better the future, so do I. It's really unclear, I'm sorry.

[Tobias Kaj, Research Analyst]

Okay. And on Slide 25, where you divide your net debt, you have other net debt, which has increased by SEK 2.7 billion in 1 year. And the capital employed in building rights has increased by SEK 2.2 billion, so that seems to be the main driver. Can you give an indication what we should expect for capital tied in building rights in 1 year from now, for example?

[Ann-Sofi Danielsson]

Well, it's -- one thing I want to say is that, yes, we have increased net debt, not project financing, and that is because we have, at the moment, fewer projects in Sweden and in Finland. So that's the main reason for that where we have this kind of financing. Then to say what the volume will be, I think what we can say is that we are very cautious with what we invest into. And at the moment, we have a portfolio and also building rights that covers what we are producing at the moment. So I would say that what you can expect is that the level that we have today will prevail for the next coming -- the year that we are in, 2020.

[Operator]

I'm now handing back to the speakers for web questions.

[Louise Tjeder, Head of IR]

Yes. Thank you. We have 3 questions on the web. The first question comes from Simen Mortensen, DNB. How comprehensive is the completion guidance? Will it be raised in like Germany with new projects with shorter starts? Please, Joachim, can you respond to that one?

[Joachim Hallengren, CEO & President]

Yes. And again, let's take the COVID-19 out of the picture because that puts a cloud on everything. But if we talk about our ability to start new projects and still recognize them within the near future, I would say that it would be pretty unlikely that we can have any more recognitions in 2020. However, there is still a possibility that we can increase the volumes in 2021. But if we want to drive volume, then we're looking at larger projects, and we only have 21 months now left to produce that if we should have them in 2021. And that means that, most likely, all our bigger projects will end up with handovers in 2022. So yes, still a possibility to somewhat build 2021. Large volumes will materialize beyond 2021, and very limited volumes that can still enter into 2020. And of course, that's our strategy. We are working with both the single-family and the multifamily, but the spread between them are -- the majority is larger projects.

[Louise Tjeder, Head of IR]

We have 2 questions also coming from Johan Stool. The first question, what is your view on the interest from the investor market?

[Joachim Hallengren, CEO & President]

Well, as far as we see, and I got an update already later this morning, there is still a huge interest from the investor markets, from investors. What we've seen -- but this is -- I mean, short term, anything can happen, right? But what we see is that the yield expectations on commercial properties has gone up. However, the yields on residential properties are standing still on the same level. I don't know if that's temporary or if it will change over time. I do understand that in COVID-19 times, it is more risk to invest in commercial with the tenants than with housing. So we knew before the crisis, there was enormous amounts of money waiting at the sideline looking for solid, low-risk investments. And real estate is a classic fallback when you want to have a good investment with low risk, especially residential properties. So I mean, until just a few hours ago, it tells us that, that market is still wide open. And in all contracts we have with our partners and investors out there, they are still very interested. Short term, of course, as you understand, it's always a question of financing. But in a midterm perspective, this market is still very, very attractive and strong, and we are a major player there. So I think what we can do now to mitigate part of the corona -- COVID-19 effect would be to see if we can fast track some of our investor projects instead of consumer projects, instead of shifting the weight a bit. I want to be very clear that converting consumer projects into business-to-business projects, that's not a good idea because that will -- that is a terrible sort of conversion ratio. But it can be done as a last resort if you want to have things out of the balance sheet, but it's not very profitable actually.

[Louise Tjeder, Head of IR]

Thank you. And the second question from Johan Stool to you, Ann-Sofi, is the selling admin cost equally split between the quarters over the year?

[Ann-Sofi Danielsson]

More or less. It can differ from one quarter to another, but not substantially. So we have here SEK 229 million in first quarter and SEK 230 million last year, so more or less equally spread -- split between the different quarters, yes.Okay. Thank you. So we'll continue on the phone with the next question, please, operator.

[Operator]

The next question comes from the line of Niclas Hoglund from Nordea. It seems the question has been withdrawn. [Operator Instructions] It seems there are no further questions from the phone.

[Louise Tjeder, Head of IR]

Okay. Thank you. So this ends our presentation for today. Next interim report will be published 16th of July. Thank you all for listening in, and have a very nice day.