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2007-08-02 07:34:52 CEST 2007-08-02 07:34:52 CEST REGULATED INFORMATION Sponda - Quarterly reportSponda Plc's interim report January - June 2007Result of operations and financial position January - June 2007 (compared with same period in 2006): Total revenue increased significantly to EUR 107.5 (53.3) million. The increase was mainly due to the acquisition of Kapiteeli in December 2006. Net operating income was EUR 76.8 (40.6) million. The operating profit was EUR 146.5 (46.3) million, including a positive change in the value of the investment properties of EUR 56.4 million and profit on the disposal of properties of EUR 27.9 million. The profit after taxes increased to EUR 79.7 (23.6) million. Earnings per share was EUR 0.76 (0.30). The cash flow from operations per share rose to EUR 0.45 (0.27). The fair value of investment properties was EUR 2 305.4 (1 339.5) million. Net assets per shares were EUR 7.94 (7.12). Result of operations and financial position April - June 2007 (compared with April - June in 2006): Total revenue was EUR 48.4 (26.5) million. The second quarter figures do not include the EUR 401 million property portfolio sold to Whitehall/Niam. Net operating income increased to EUR 36.4 (20.1) million. The operating profit was EUR 43.1 (23.1) million, including a positive change in the value of the investment properties of EUR 9.4 million and profit on the disposal of properties of EUR 5.2 million. The profit after taxes was EUR 22.2 (11.1) million. Earnings per share was EUR 0.20 (0.14). The cash flow from operations per share was EUR 0.17 (0.13). Key figures -------------------------------------------------------------------------------- | | 4-6/07 | 4-6/06 | 1-6/07 | 1-6/06 | 1-12/06 | -------------------------------------------------------------------------------- | Economic occupancy rate, % | | | 89.8 | 88.0* | 88.8* | -------------------------------------------------------------------------------- | Total revenue, Me | 48.4 | 26.5 | 107.5 | 53.3 | 117.4 | -------------------------------------------------------------------------------- | Net operating income, Me | 36.4 | 20.1 | 76.8 | 40.6 | 87.6 | -------------------------------------------------------------------------------- | Operating profit, Me | 43.1 | 23.1 | 146.5 | 46.3 | 103.9 | -------------------------------------------------------------------------------- | Earnings per share, e | 0.20 | 0.14 | 0.76 | 0.30 | 0.61 | -------------------------------------------------------------------------------- | Cash flow from operations | 0.17 | 0.13 | 0.45 | 0.27 | 0.56 | | per share, e | | | | | | -------------------------------------------------------------------------------- | Net assets per share, e | | | 7.94 | 7.12 | 7.45 | -------------------------------------------------------------------------------- | Equity ratio, % | | | 35 | 41 | 20 | -------------------------------------------------------------------------------- | Gearing, % | | | 159 | 120 | 334 | -------------------------------------------------------------------------------- * The figure is based on Sponda's property portfolio before the Kapiteeli acquisition. ** Cash flow from operations per share includes sales profits and losses. Kari Inkinen, President and CEO “I am happy with the development of Sponda's leasing operations during 2007. The economic occupancy rate of Sponda's properties improved to 89.8 % (31 December 2006: 88.8 %). The biggest improvement was in office properties in the centre of Helsinki and in logistics properties in the Helsinki metropolitan area. The value of the property portfolio rose by EUR 9.4 million in the second quarter, which was due mainly to an increase in rent levels and a decline in property maintenance costs. Sponda financed the Kapiteeli acquisition with a short-term loan and set a target to raise the equity ratio to at least 33 % until the end of 2007. This target was reached already at the beginning of 2007 due to sale of properties and refinancing the short-term loan. Construction started according to plans on three major property development projects during the second quarter: Vuosaari Harbour, Porkkalankatu 22, and Vanhanlinnantie (Itäkeskus district in Helsinki). The estimated completion date for all three projects is towards the end of 2008.” Prospects Sponda forecasts that the earnings per share will improve significantly in 2007 from the previous year. The economic occupancy rate of its properties and the cash flow from operations per share, including profit and losses from the sale of properties, are also expected to improve in 2007. The forecasts are based on the positive development of the Finnish property market, the value increase of the property portfolio and on the profits received from sales of properties. Business conditions The volume of Finland's real estate investment market in the first half of 2007 is estimated at about EUR 2.7 billion (according to KTI Kiinteistötalouden instituutti ry), which is about one billion euros more than in January-June 2006. International investors accounted for 70 % of the transactions. Demand in the leasing market in the Helsinki Metropolitan Area remained strong in all sectors, and rent levels for offices and retail premises are expected to continue to rise thanks to the strong performance of the country's economy. Sponda's operations in January - June 2007 Sponda owns, leases and develops business properties in Finland, mainly in the Helsinki Metropolitan Area and in the largest cities, and in Russia. As from the beginning of 2007 Sponda reorganized its operations into five business units: Office and Retail Property, Logistics Property, Property Development, Real Estate Funds, and Russia & the Baltic States. Net operating income from Sponda's property assets totalled EUR 76.8 (40.6) million at the end of June. Office and retail premises accounted for 77 % of this, logistics premises for 14 %, the Real Estate Funds unit for 4 % and the Russia & the Baltic States unit for 1 %. Other net operating income, including income from subsidiary Ovenia, accounted for 4 %. The economic occupancy rate improved in the second quarter (compared to the first quarter) and was as follows (the 2006 figures are for Sponda's property portfolio before the Kapiteeli acquisition): -------------------------------------------------------------------------------- | By type of property | 30.6.2007 | 31.3.2007 | 31.12.2006 | -------------------------------------------------------------------------------- | Offices and retail, % | 89.7 | 89.3 | 88.8 | -------------------------------------------------------------------------------- | Logistics, % | 89.5 | 89.0 | 88.6 | -------------------------------------------------------------------------------- | Russia & Baltic Countries | 100.0 | 100.0 | 100.0 | -------------------------------------------------------------------------------- | Total property portfolio, % | 89.8 | 89.3 | 88.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | By geographical area | 30.6.2007 | 31.3.2007 | 31.12.2006 | -------------------------------------------------------------------------------- | Helsinki Business District, % | 88.3 | 86.7 | 89.7 | -------------------------------------------------------------------------------- | Helsinki Metropolitan Area, % | 89.3 | 89.1 | 87.5 | -------------------------------------------------------------------------------- | HMA logistics, % | 88.2 | 87.7 | 87.1 | -------------------------------------------------------------------------------- | Other areas, % | 96.7 | 98.0 | 93.4 | -------------------------------------------------------------------------------- | Total property portfolio, % | 89.8 | 89.3 | 88.8 | -------------------------------------------------------------------------------- Total cash flow derived from leasing agreements on 30 June 2007 was EUR 755 million (30 June 2006: EUR 428 million) and the average length of the agreements was 4.3 (4.1) years. The average length of leasing agreements for office and retail properties was 4.7 years and for logistics premises it was 2.6 years. Sponda signed a total of 147 new agreements (60 000 m²) during April - June and during this period 97 agreements (60 000 m²) expired. Sponda's leasing contracts expire as follows: -------------------------------------------------------------------------------- | Expiry within | % of rental income | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1 year | 12.8 | -------------------------------------------------------------------------------- | 2 years | 14.2 | -------------------------------------------------------------------------------- | 3 years | 11.4 | -------------------------------------------------------------------------------- | 4 years | 16.3 | -------------------------------------------------------------------------------- | 5 years | 4.8 | -------------------------------------------------------------------------------- | 6 years | 3.4 | -------------------------------------------------------------------------------- | more than 6 years | 22.4 | -------------------------------------------------------------------------------- | Open ended | 14.6 | -------------------------------------------------------------------------------- Property portfolio On 30 June 2007 Sponda Group had a total of 195 investment properties with an aggregate leasable area of about 1.3 million m². Of this 69 % are office and retail premises and 31 % logistics premises. During the January - June period the fair value of Sponda's investment properties rose by EUR 56.4 million, on 30 June 2007 standing at EUR 2 305.4 million (30 June 2006: EUR 1 339.5 million). Capital expenditure during the period allocated to property maintenance and improvements in quality levels was EUR 11.7 million. During the April - June period the fair value of Sponda's investment properties rose by EUR 9.4 million. Capital expenditure during this period allocated to property maintenance and improvements in quality levels was EUR 4.9 million. Factors contributing to the rise in the fair value of the investment properties were the increase in rental levels in the signed lease contract, decrease in the maintenance expenses and the increase in value as the result of capital expenditure required by tenants. Yield requirements for properties remained mainly unchanged. External valuer has not valued Sponda's properties during the second quarter of 2007. -------------------------------------------------------------------------------- | Sponda's investment | Total | Office | Logis- | Property | Russia | | properties | | and retail | tics | develop- | & | | 1 Jan.-30 | | | | ment | Baltic | | June 2007, Me | | | | | | -------------------------------------------------------------------------------- | Operating income | 97.3 | 80.9 | 14.9 | 0.8 | 0.7 | -------------------------------------------------------------------------------- | Maintenance costs | -27.0 | -22.2 | -4.1 | -0.7 | -0.1 | -------------------------------------------------------------------------------- | Net operating income | 70.3 | 58.8 | 10.8 | 0.2 | 0.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fair value of | 2 455.1 | 2 023.9 | 245.6 | 174.9 | 10.7 | | investment properties | | | | | | | at 1 Jan. 2007 | | | | | | -------------------------------------------------------------------------------- | Acquisitions in 2007 | 18.8 | 9.7 | 4.6 | 0.3 | 4.3 | -------------------------------------------------------------------------------- | Investments | 48.0 | 10.1 | 5.1 | 17.5 | 15.3 | -------------------------------------------------------------------------------- | Other transfers | 3.8 | -1.5 | 12.5 | -7.2 | 0.0 | | between segments | | | | | | -------------------------------------------------------------------------------- | Sales in 2007 | -276.7 | -263.4 | -1.8 | -11.5 | 0.0 | -------------------------------------------------------------------------------- | Fair values adjustment | 56.4 | 41.7 | 14.8 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Fair value of | 2 305.4 | 1 820.4 | 280.8 | 174.0 | 30.3 | | investment properties | | | | | | | at 30 June 2007 | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Change in fair value % | 2.3 % | 2.1 % | 6.0 % | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Annual net operating | 6.4 % | 6.1 % | 8.2 % | | 10,5 % | | income/ | | | | | | | fair value at | | | | | | | 30 June 2007 excluding | | | | | | | property development | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Yield requirement used | | 5.4-8 % | 7.5-8.2 | | | | in calculating fair | | | 5 | | | | value -% | | | | | | -------------------------------------------------------------------------------- Investments and divestments During the January - June 2007 period Sponda acquired investment properties for altogether EUR 18.8 million, and of this it acquired property for EUR 15.9 million during the second quarter. During January - June Sponda sold property for EUR 276.7 million, with the second quarter accounting for EUR 1.7 million of this. Capital expenditure allocated to property maintenance and improvements in quality levels in the second quarter amounted to EUR 4.9 million. Sponda invested EUR 5.2 million in property development. This was spent on renovating the City-Center complex in the centre of Helsinki and developing the logistics centre at Vuosaari Harbour. Office and retail properties The economic occupancy rate for the Office and Retail Property unit continued to improve, to 89.7 % (31 December 2006: 88.8 %). The property had a fair value on 30 June 2007 of EUR 1 820.4 million. The change in the fair value since the beginning of 2007 was EUR 41.7 million. The property portfolio had a leasable area of about 860 000 m², with office premises accounting for an estimated 75 % of this and retail premises for 25 %. The unit's total revenue, net operating income and operating profit were as follows: -------------------------------------------------------------------------------- | Office and retail, | 4-6/2007 | 4-6/2006 | 1-6/2007 | 1-6/2006 | 1-12/2006 | | Me | | | | | | -------------------------------------------------------------------------------- | Total revenue | 36.5 | 18.5 | 80.9 | 37.6 | 84.7 | -------------------------------------------------------------------------------- | Net operating | 27.8 | 13.9 | 58.8 | 28.1 | 63.1 | | income | | | | | | -------------------------------------------------------------------------------- | Operating profit | 34.3 | 9.4 | 115.6 | 34.8 | 78.0 | -------------------------------------------------------------------------------- During the second quarter of 2007 Sponda purchased office and retail property for EUR 6.8 million. No property was sold during the second quarter. Capital expenditure on property maintenance totalled EUR 10.1 million by the end of June, with the second quarter accounting for EUR 3.9 million of this. Logistics properties The economic occupancy rate for the Logistics Properties unit improved to 89.5 % at the end of June (31 December 2006: 88.6 %). The property had a fair value of EUR 280.8 million, and the change in the fair value since the beginning of 2007 was EUR 14.8 million. The property portfolio had a leasable area of about 400 000 m². The unit's total revenue, net operating income and operating profit were as follows: -------------------------------------------------------------------------------- | Logistics, Me | 4-6/2007 | 4-6/2006 | 1-6/2007 | 1-6/2006 | 1-12/2006 | -------------------------------------------------------------------------------- | Total revenue | 7.1 | 7.4 | 14.9 | 15.1 | 28.6 | -------------------------------------------------------------------------------- | Net operating | 5.1 | 5.9 | 10.8 | 12.0 | 22.2 | | income | | | | | | -------------------------------------------------------------------------------- | Operating profit | 8.1 | 5.9 | 25.9 | 11.2 | 42.9 | -------------------------------------------------------------------------------- During the second quarter Sponda purchased logistics property for EUR 4.6 million and sold property for EUR 1.8 million. Capital expenditure on property maintenance totalled EUR 1.6 million at the end of June, and of this EUR 1.0 million was spent during the second quarter. Property development The book value of Sponda's investment property development portfolio was EUR 174 million at the end of June 2007. During January - June EUR 17.8 million was spent on developing properties and acquisitions, and EUR 5.2 million of this was spent in April - June. The renovation work on the City-Center complex continues as planned and the underground basement facilities were completed in May 2007. The second phase, which includes the Kaivokatu street-level premises and station tunnel premises, has begun. This should be completed in the spring of 2008. The whole project is estimated to be completed by 2011 and have a total investment value of approximately EUR 110 million. Construction of the logistics area and gatehouse building at Vuosaari Harbour began in spring 2007 and the project is progressing according to plan. The actual construction of the parking building and passenger terminal will start at the beginning of 2008 and groundworks are currently underway on the site. The project will have a total investment value of roughly EUR 140 million. The harbour will start operations in November 2008. Sponda is responsible for developing, leasing and managing all the buildings. Construction has started of the retail property in the Itäkeskus district in Helsinki. The total investment value for the building will be about EUR 56 million and it will have a leasable area of 21 500 m². The property has been leased to a single tenant and will be completed by November 2008. Construction has begun of the office building at Porkkalankatu 22 in the Ruoholahti district of Helsinki. The investment value of the project will be about EUR 29 million and it will have a leasable area of 13 500 m². At the moment just over 70 % of the building has been leased, and the estimated completion date is autumn 2008. The main tenants will be Altia Corporation and Diacor Terveyspalvelut Oy. Sponda is starting construction of an office building at Lautatarhankatu 2 in the Sörnäinen district of Helsinki. Some 51 % of the building has been leased and its main tenant will be Tradeka Oy, which will move its head office into the new premises. The project will have a total investment cost of about EUR 22 million and the property will have a leasable area of 9 200 m². Sponda is applying for a building permit during the summer of 2007 and construction should begin in autumn 2007. The estimated completion date is towards the end of 2008. Sponda is starting construction of a logistics property at Itäinen Valkoisenlähteentie 18 in the Akseli district of Vantaa. The project will have a total investment cost of about EUR 5 million and 50 % of the property has been leased. The total leasable area will be 5 000 m² and construction is expected to start towards the end of 2007. The property should be completed by the end of 2008. Real estate funds Sponda is a minority holder in two real estate funds, First Top LuxCo and Sponda Real Estate Fund I Ky. First Top LuxCo (Sponda's holding 20 %)invests in office and retail properties outside Finland's largest cities. At the end of June 2007 the fund's property investments had a fair value of EUR 103.9 million. The fund has a target size of EUR 150-400 million. Sponda Real Estate Fund I Ky (Sponda's holding 47 %) invests in logistics sites outside the Helsinki Metropolitan Area. At the end of the review period the fund's property investments had a fair value of EUR 121.2 million, while the fund has a target size of EUR 200 million. Sponda is responsible for managing the funds and their properties, and receives management fees. In addition to those mentioned above, Sponda is also responsible for managing the properties in the property portfolio, with a value of about EUR 401 million, sold in March 2007 to Whitehall Street Real Estate Limited and Niam Nordic Investment Fund III. Russia and the Baltic Countries Sponda is actively looking for properties for investment and development in the Russian and Baltic markets. In April 2007 Sponda purchased a 46 hectare piece of land in Leningrad province for about EUR 9.5 million. Sponda develops the site in stages eventually into a 160 000 m² logistics facility stages. The project is currently being considered by the authorities. In May Sponda purchased a 20 hectare site in Moscow province for about EUR 6 million. The site has approved zoning for industrial use, and Sponda plans to develop an A-class logistics facility of 75 000 m² in stages. Planning of the project and obtaining approval for the plans are underway. The construction is estimated to start in 2008. Sponda purchased an office property in St Petersburg for EUR 4 million in May 2007. The property is located close to the centre of St Petersburg and it has a combined leasable area of 2 690 m². The property is fully leased. Cash flow and financing Sponda's net cash flow from operations on 30 June 2007 totalled EUR 227.1 million (30 June 2006: EUR 20.6 million). Net cash flow from investing activities was EUR 169.9 (-46.5) million and after financing activities was EUR -413.7 (26.3) million. Financial income and expenses during the period totalled EUR -38.7 (-14.4) million. Sponda's equity ratio on 30 June 2007 was 35 % (30 June 2006: 41 %) and gearing was 159 % (120 %). Interest-bearing debt amounted to EUR 1 409.6 (681.2) million, the average maturity of Sponda's loans was 3.1 (3.3) years and the average interest rate 4.5 % (4.3 %). Fixed-rate and interest-hedged loans accounted for 87 % of the loan portfolio. The average interest-bearing period of the whole debt portfolio was 3.5 (2.4) years. The interest margin, which describes the company's solvency, was 2.0 (2.7). At the end of June Sponda Group's debt portfolio comprised of EUR 650 million in syndicated loans, EUR 405.6 million in bonds, EUR 289 million in issued commercial papers, and EUR 65 million in loans from financial institutions. Sponda has EUR 300 million in unused credit limits. Sponda Group has no mortgaged loans. In April Sponda issued a EUR 150 million Private Placement bond to domestic institutional investors. The bond has a maturity of 4 years and is floating-rate, and its coupon has been confirmed as three-month Euribor plus 0.40 percentage points. Sponda did not apply for stock exchange listing for the bond. The bond was part of the refinancing of the short-term credit facility raised for the acquisition of Kapiteeli. In June 2007 Sponda signed a five year syndicated credit agreement for a total of EUR 350 million, which was used to refinance the outstanding short-term loan raised in December 2006 to finance the acquisition of Kapiteeli. The loan carries a margin at the beginning of the loan period of Euribor plus 0.375-0.425 %. Personnel and administration costs During the January-June period Sponda Group had on average 220 employees (56 in the corresponding period of 2006), of whom 133 (56) worked for the parent company Sponda Plc and 89 for the subsidiary Ovenia Oy. On 30 June 2007 Sponda Group had 222 (57) employees, of whom 133 (57) were employed in the parent company and 89 for the subsidiary Ovenia. Sponda has personnel in Finland and Russia. In January-June Sponda's administration costs totalled EUR 14.5 million (30 June 2006: EUR 4.2 million), of which EUR 12.1 million were for the parent company Sponda and EUR 2.4 million for the subsidiary Ovenia. The increase was mainly due to the growth of personnel in connection with the acquisition of Kapiteeli. All Sponda employees are included in the company's incentive bonus scheme, under which bonuses are indexed to the company's targets. The company also operates a long-term share-based incentive scheme for its senior executives that was launched on 1 January 2006. Bonuses under this scheme are based on cash flow from operations per share and return on equity, and Sponda shares are bought with these bonuses. These shares also carry a restriction forbidding their disposal within two years of their issue. The bonus is paid annually. Group structure Sponda Group comprises the parent company, the subsidiary Sponda Kiinteistöt Oy (formerly Kapiteeli Oy) and Sponda Kiinteistöt Oy's 50.9 per cent owned subsidiary Ovenia Oy, as well as the Group's mutually owned property companies, which are either wholly or majority owned by Sponda Plc or Sponda Kiinteistöt Oy. Sponda Group also includes Sponda Russia Ltd and Sponda Asset Management Oy. The Sponda share In July 2007 Sponda was upgraded from the mid cap to the large cap companies in the classification of the OMX Nordic Exchange. The upgrade was based on the company's market capitalization. The weighted average price of the Sponda share in the January-June 2007 period was EUR 11.76. The highest quotation on the Helsinki Stock Exchange was EUR 13.29 and the lowest EUR 9.82. Turnover during January-June totalled 24.1 million shares or EUR 282.9 million. The closing price of the share on 29 June 2007 was EUR 10.77, and the market capitalization of the company's share capital was EUR 1.2 billion. The Annual General Meeting on 4 April 2007 authorized the Board of Directors to purchase the company's own shares. The authorization was not exercised during the review period. Sponda issued the following flagging announcements in the April-June 2007 period: 17 April 2007: Stichting Pensioenfonds ABP announced that its holding of shares represented 4.985 % of the total number of shares and votes in Sponda Plc. 18 June 2007: Stichting Pensioenfonds ABP announced that its holding of shares represented 5.007 % of the total number of shares and votes in Sponda Plc. 21 June 2007: Stichting Pensioenfonds ABP announced that its holding of shares represented 4.985 % of the total number of shares and votes in Sponda Plc. 28 June 2007: Stichting Pensioenfonds ABP announced that its holding of shares represented 5.004 % of the total number of shares and votes in Sponda Plc. At the end of the review period on 30 June 2007 Sponda's ownership structure was as follows: -------------------------------------------------------------------------------- | | Number of | % of total | | | shares | | -------------------------------------------------------------------------------- | The Finnish State | 38 065 498 | 34.3 | -------------------------------------------------------------------------------- | Other public entities | 1 574 098 | 1.4 | -------------------------------------------------------------------------------- | Nominee registered | 61 804 211 | 55.7 | -------------------------------------------------------------------------------- | Households | 6 184 795 | 5.5 | -------------------------------------------------------------------------------- | Non-profit organizations, total | 1 533 590 | 1.4 | -------------------------------------------------------------------------------- | Private corporations, total | 883 454 | 0.8 | -------------------------------------------------------------------------------- | Financial and insurance institutions, total | 768 399 | 0.7 | -------------------------------------------------------------------------------- | Foreign owners, total | 216 140 | 0.2 | -------------------------------------------------------------------------------- | Total number of shares | 111 030 185 | 100.0 | -------------------------------------------------------------------------------- Annual General Meeting The Annual General Meeting of Sponda Plc was held in Helsinki on 4 April 2007. The meeting adopted the consolidated financial statements and the parent company's financial statements for the financial year of 2006 and discharged the Board of Directors and the CEO from liability. The AGM approved the Board's proposal to pay a dividend of 0.40 euros per share. The dividend was paid on 18 April 2007. The rest of the distributable assets, EUR 203,868,737.72, were retained in the distributable free equity. The AGM authorized the Board of Directors to decide on the acquisition of own shares using the company's free equity pursuant to the proposal of the Board of Directors. A maximum of 5,551,509 shares can be acquired in one or more tranches, however so that the total number of own shares in the possession of the company or its subsidiaries or shares pledged by the company may not exceed five per cent of the total number of shares of the company. The proposed maximum number corresponds to approximately five per cent of all shares of the company. The authorization is valid until 30 June 2008. Furthermore, the AGM authorized the Board of Directors to decide on the assignment of own shares in the possession of the company pursuant to the proposal of the Board. The authorization is for a maximum of 5,551,509 shares. The proposed maximum amount corresponds to approximately five per cent of all the existing shares of the company. The authorization is valid until 30 June 2008. This authorization replaces the authorization on share issue given by the Extraordinary General Meeting on 5 January 2007. The AGM approved the proposal of the Board of Directors on the amendments to the Articles of Association. The Articles of Association can be seen on Sponda's internet site at www.sponda.fi. The AGM decided to establish a Nomination Committee according to the proposal of the State of Finland as shareholder. The role of the Nomination Committee is to prepare proposals for the next Annual General Meeting relating to the company's Board members and their remuneration. The Nomination Committee comprises representatives of the three (3) largest shareholders and the Chairman of the Board who acts as an expert member of the Committee. The shareholders who hold the majority of all voting rights on the 1 November immediately preceding the next Annual General Meeting are entitled to appoint the members representing the shareholders. The Nomination Committee is summoned by the Chairman of the Board and the Committee elects a chairman from its members. The Nomination Committee shall submit its proposals to the company's Board of Directors at the latest on the 1 February immediately preceding the Annual General Meeting. Board of Directors and auditors Sponda's Annual General Meeting confirmed that the Board of Directors would have six members. The following persons were re-elected as Board members: Ms Tuula Entelä, Mr Timo Korvenpää, Mr Harri Pynnä and Mr Jarmo Väisänen, and Mr Lauri Ratia and Ms Arja Talma were elected as new members, all to serve for a term ending at the close of the next Annual General Meeting. All had given their consent to election. At its constitutive meeting after the AGM, the Board of Directors elected Lauri Ratia as its chairman and Jarmo Väisänen as deputy chairman. All Board Members are independent of the company, and five of the six are independent of major shareholders in the company. The AGM confirmed that the chairman of the Board of Directors is paid a monthly remuneration of EUR 5,000, the Deputy Chairman of the Board a monthly remuneration of EUR 3,000 and other ordinary members a monthly remuneration of EUR 2,600. In addition the AGM confirmed that an attendance allowance of EUR 500 is paid to all members for each meeting. Travel expenses are refunded according to the company's current travel policy. Mr Sixten Nyman, CPA auditor, and KPMG Oy Ab, CPA audit firm, with Ms Raija-Leena Hankonen, CPA auditor, as principal auditor were elected as auditors of the company, and Ms Riitta Pyykkö, CPA auditor, was elected as deputy auditor. Committees of the Board of Directors On 4 April 2007 the Board of Directors established two permanent committees to assist the Board by preparing matters for which the Board is responsible. The permanent committees are the Audit Committee and the Structure and Remuneration Committee. The Audit Committee comprises chairman Arja Talma and ordinary members Tuula Entelä and Timo Korvenpää. The Structure and Remuneration Committee comprises chairman Lauri Ratia and ordinary members Jarmo Väisänen and Harri Pynnä. Management Sponda Plc's president and chief executive officer is Kari Inkinen. The Executive Board comprises the president and CEO, the CFO, the SVP Legal Affairs and Treasury, and the heads of the business units, in total eight persons. Suit for payment In a ruling issued on 11 January 2007, the Helsinki city court ordered Sponda Plc to pay interest, penal interest and court costs totalling EUR 7.6 million to Sampo Bank Plc based on a credit agreement. Sponda appealed the decision to the Helsinki court of appeal on 9 February 2007. The amount of Sampo Bank's suit for payment, EUR 7.6 million, was recognized as an expense under provisions in the 2006 financial statements. Subsequent events No significant events occurred after the close of period. Prospects During 2007 Sponda expects its earnings per share to improve significantly from the previous year. Likewise the economic occupancy rate and the cash flow from operations per share, including profits and losses on property sales, are expected to improve during 2007. The forecasts are based on the positive development of the Finnish property market, the value increase of the property portfolio and on the profits received from sales of properties. Risks and uncertainty factors in the near future Recognized risks in the property investment sector include the risks associated with the property market and the risks relating to property investments and capital expenditure. If they materialize these could have a weakening effect on Sponda's financial result. Rising construction costs and delays in project schedules may increase the costs of property development. In Russia there are also risks relating to permit procedures that may have an impact on the schedules of property development projects. Financing involves refinancing risks and loan agreements have an interest rate risk. Sponda reduces the refinancing risk by using credit agreements of varying durations, employing a number of funding sources and maintaining the company's reputation as a trustworthy debtor. Sponda's operational risks are risks resulting from inadequate or defective internal processes or systems. They also include risks associated with the legal operating environment. Operational risks relate for example to the functionality of the company's information systems and to the permanence of its skilled employees. 2 August 2007 Sponda Plc Board of Directors Further information: Kari Inkinen, President and CEO, tel. +358 20-431 3311 or +358 400-402 653 and Robert Öhman, CFO, tel. +358 20-431 3320 or +358 40-540 0741. Distribution: Helsinki Exchanges Media www.sponda.fi This interim report is unaudited. It has been prepared applying IAS 34 (Interim Reports). The same accounting and measurement principles have been applied in this interim report as in the previous annual financial statements bulletin. Sponda Plc Consolidated income statement (IFRS) Me -------------------------------------------------------------------------------- | | 4-6/ | 4-6/ | 1-6/ | 1-6/ | 1-12/ | | | 2007 | 2006 | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | Revenue | | | | | | -------------------------------------------------------------------------------- | | Rental income and | 44.0 | 26.0 | 101.0 | 52.7 | 115.4 | | | recoverables | | | | | | -------------------------------------------------------------------------------- | | Interest income from | 0.1 | - | 0.2 | - | - | | | finance leasing | | | | | | | | agreements | | | | | | -------------------------------------------------------------------------------- | | Service income, fund | | | | | | | | management fees | | | | | | -------------------------------------------------------------------------------- | | and share of fund | 4.3 | 0.5 | 6.3 | 0.6 | 2.0 | | | profit | | | | | | -------------------------------------------------------------------------------- | | | 48.4 | 26.5 | 107.5 | 53.3 | 117.4 | -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | | Maintenance expenses | -11.2 | -6.3 | -29.5 | -12.6 | -29.4 | -------------------------------------------------------------------------------- | | Service expenses and | | | | | | -------------------------------------------------------------------------------- | | direct fund expenses | -0.8 | -0.1 | -1.2 | -0.1 | -0.4 | -------------------------------------------------------------------------------- | | | -12.0 | -6.4 | -30.7 | -12.7 | -29.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net operating income | 36.4 | 20.1 | 76.8 | 40.6 | 87.6 | -------------------------------------------------------------------------------- | Profit/loss on sales of | -0.2 | - | 1.1 | - | - | | investment properties | | | | | | -------------------------------------------------------------------------------- | Valuation gains/losses | 9.4 | 5.0 | 56.4 | 10.2 | 26.2 | -------------------------------------------------------------------------------- | Proceeds from sale of | 16.9 | - | 209.2 | - | 11.6 | | trading properties | | | | | | -------------------------------------------------------------------------------- | Carrying amount of | -11.7 | - | -182.4 | - | -10.0 | | trading properties sold | | | | | | -------------------------------------------------------------------------------- | Profit/loss on sales of | 5.2 | - | 26.8 | - | 1.6 | | trading properties | | | | | | -------------------------------------------------------------------------------- | Sales and marketing | -0.4 | -0.3 | -0.9 | -0.6 | -1.1 | | expenses | | | | | | -------------------------------------------------------------------------------- | Administrative expenses | -7.7 | -2.0 | -14.5 | -4.2 | -10.8 | -------------------------------------------------------------------------------- | Other operating income | 0.5 | 0.3 | 1.0 | 0.3 | 0.9 | -------------------------------------------------------------------------------- | Other operating expenses | -0.1 | - | -0.2 | - | -0.5 | -------------------------------------------------------------------------------- | Operating profit | 43.1 | 23.1 | 146.5 | 46.3 | 103.9 | -------------------------------------------------------------------------------- | Financial income | 1.5 | 0.3 | 3.3 | 0.3 | 3.7 | -------------------------------------------------------------------------------- | Financial expenses | -14.9 | -8.0 | -42.0 | -14.7 | -34.7 | -------------------------------------------------------------------------------- | Provision for interest | - | - | - | - | -7.5 | | expenses | | | | | | -------------------------------------------------------------------------------- | Financial income and | -13.4 | -7.7 | -38.7 | -14.4 | -38.5 | | expenses, net | | | | | | -------------------------------------------------------------------------------- | Profit before taxes | 29.7 | 15.4 | 107.8 | 31.9 | 65.4 | -------------------------------------------------------------------------------- | Income taxes for current | - | -0.4 | - | -0.4 | -0.4 | | and previous fiscal years | | | | | | -------------------------------------------------------------------------------- | Deferred taxes | -7.7 | -3.9 | -28.1 | -7.9 | -16.7 | -------------------------------------------------------------------------------- | Income taxes, total | -7.7 | -4.3 | -28.1 | -8.3 | -17.1 | -------------------------------------------------------------------------------- | Profit for the period | 22.0 | 11.1 | 79.7 | 23.6 | 48.3 | -------------------------------------------------------------------------------- | Attributable to: | | | | | | -------------------------------------------------------------------------------- | Equity holders of the | 21.8 | 11.1 | 79.6 | 23.6 | 48.4 | | parent company | | | | | | -------------------------------------------------------------------------------- | Minority interest | 0.2 | - | 0.1 | - | -0.1 | -------------------------------------------------------------------------------- | Profit for the period | 22.0 | 11.1 | 79.7 | 23.6 | 48.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Earnings per share | | | | | | | | based on profit | | | | | | | | attributable to equity | | | | | | | | holders of the parent | | | | | | | | company: | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Earnings per share, | | | 0.76 | 0.30 | 0.61 | | | basic, € | | | | | | -------------------------------------------------------------------------------- | | Earnings per share, | | | 0.76 | 0.30 | 0.61 | | | diluted, € | | | | | | -------------------------------------------------------------------------------- | | Average number of | | | | | | | | shares, million | | | | | | -------------------------------------------------------------------------------- | | Basic | | | 104.7 | 79.2 | 79.3 | -------------------------------------------------------------------------------- | | Diluted | | | 104.7 | 79.2 | 79.3 | -------------------------------------------------------------------------------- Consolidated balance sheet (IFRS) Me -------------------------------------------------------------------------------- | | 30.6.2007 | 31.12.2006 | 30.6.2006 | -------------------------------------------------------------------------------- | ASSETS | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current assets | | | | -------------------------------------------------------------------------------- | Investment properties | 2 305.4 | 2 455.1 | 1 339.5 | -------------------------------------------------------------------------------- | Investments in real estate funds | 26.2 | 19.4 | 2.5 | -------------------------------------------------------------------------------- | Property, plant and equipment | 15.8 | 19.5 | 8.9 | -------------------------------------------------------------------------------- | Goodwill | 27.5 | 27.5 | - | -------------------------------------------------------------------------------- | Other intangible assets | 4.6 | 5.2 | 0.4 | -------------------------------------------------------------------------------- | Finance lease receivables | 2.7 | 2.7 | - | -------------------------------------------------------------------------------- | Non-current receivables | 33.1 | 5.2 | 3.4 | -------------------------------------------------------------------------------- | Deferred tax assts | 60.3 | 110.5 | 0.2 | -------------------------------------------------------------------------------- | Total non-current assets | 2 475.6 | 2 645.1 | 1 354.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | | -------------------------------------------------------------------------------- | Trading properties | 48.4 | 231.1 | - | -------------------------------------------------------------------------------- | Trade and other receivables | 24.3 | 39.6 | 4.7 | -------------------------------------------------------------------------------- | Cash and cash equivalents | 6.9 | 23.6 | 1.2 | -------------------------------------------------------------------------------- | Total current assets | 79.6 | 294.3 | 5.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets | 2 555.2 | 2 939.4 | 1 360.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | SHAREHOLDERS' EQUITY AND | | | | | LIABILITIES | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity attributable to equity | | | | | holders | | | | -------------------------------------------------------------------------------- | of the parent company | | | | -------------------------------------------------------------------------------- | Share capital | 111.0 | 79.3 | 79.3 | -------------------------------------------------------------------------------- | Share premium reserve | 159.5 | 159.5 | 159.1 | -------------------------------------------------------------------------------- | Fair value reserve | 16.0 | 2.3 | 1.4 | -------------------------------------------------------------------------------- | Revaluation reserve | 0.6 | 0.6 | - | -------------------------------------------------------------------------------- | Invested non-restricted equity | 209.7 | - | - | | reserve | | | | -------------------------------------------------------------------------------- | Retained earnings | 384.3 | 349.3 | 324.5 | -------------------------------------------------------------------------------- | | 881.1 | 591.0 | 564.3 | -------------------------------------------------------------------------------- | Minority interest | 1.6 | 1.8 | - | -------------------------------------------------------------------------------- | Total shareholders' equity | 882.7 | 592.8 | 564.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current liabilities | | | | -------------------------------------------------------------------------------- | Interest-bearing loans and | 1 100.6 | 658.2 | 479.1 | | borrowings | | | | -------------------------------------------------------------------------------- | Provisions | 14.5 | 22.7 | 0.8 | -------------------------------------------------------------------------------- | Deferred tax liabilities | 199.2 | 218.7 | 71.2 | -------------------------------------------------------------------------------- | Total non-current liabilities | 1 314.3 | 899.6 | 551.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current liabilities | | | | -------------------------------------------------------------------------------- | Current interest-bearing loans and | 309.0 | 1 347.4 | 202.1 | | borrowings | | | | -------------------------------------------------------------------------------- | Trade and other payables | 49.2 | 99.6 | 43.3 | -------------------------------------------------------------------------------- | Total current liabilities | 358.2 | 1 447.0 | 245.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total liabilities | 1 672.5 | 2 346.6 | 796.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total shareholders' equity and | 2 555.2 | 2 939.4 | 1 360.8 | | liabilities | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest-bearing loans and | 1 409.6 | 2 005.6 | 681.2 | | borrowings | | | | -------------------------------------------------------------------------------- Consolidated statement of cash flows (IFRS) Me -------------------------------------------------------------------------------- | | | 1-6/2007 | 1-12/2006 | 1-6/2006 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operating | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Profit for the period | | 79.7 | 48.3 | 23.6 | -------------------------------------------------------------------------------- | Adjustments | | 1.7 | 29.6 | 12.1 | -------------------------------------------------------------------------------- | Change in net working capital | 1) | 189.2 | 8.6 | 4.4 | -------------------------------------------------------------------------------- | Interest received | | 2.6 | 0.8 | 0.1 | -------------------------------------------------------------------------------- | Interest paid | | -45.8 | -34.3 | -18.5 | -------------------------------------------------------------------------------- | Other financial items | | -1.0 | -6.7 | -0.5 | -------------------------------------------------------------------------------- | Taxes received/paid | | 0.7 | -0.9 | -0.6 | -------------------------------------------------------------------------------- | Net cash from operating | | 227.1 | 45.4 | 20.6 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from investing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Acquisition of Kapiteeli | | -15.1 | -929.1 | - | -------------------------------------------------------------------------------- | Acquisition of investment | | -85.6 | -110.0 | -43.1 | | properties | | | | | -------------------------------------------------------------------------------- | Capital expenditure on real | | -6.8 | -19.4 | -2.5 | | estate funds | | | | | -------------------------------------------------------------------------------- | Acquisition of tangible and | | | | | -------------------------------------------------------------------------------- | intangible assets | | -0.9 | -0.6 | -0.5 | -------------------------------------------------------------------------------- | Proceeds from sale of | | 277.7 | 37.8 | 0.2 | | investment properties | | | | | -------------------------------------------------------------------------------- | Loans granted | | - | -0.9 | -0.6 | -------------------------------------------------------------------------------- | Repayments of loan receivables | | 0.6 | 1.3 | - | -------------------------------------------------------------------------------- | Net cash from investment | | 169.9 | -1 020.9 | -46.5 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from financing | | | | | | activities | | | | | -------------------------------------------------------------------------------- | Proceeds from the issue of | | 239.5 | 0.7 | 0.4 | | shares | | | | | -------------------------------------------------------------------------------- | Non-current loans, raised | | 680.5 | 300.0 | 280.0 | -------------------------------------------------------------------------------- | Non-current loans, | | | | | -------------------------------------------------------------------------------- | repayments | | -337.4 | -250.0 | -250.0 | -------------------------------------------------------------------------------- | Current loans, | | | | | -------------------------------------------------------------------------------- | raised/repayments | | -951.7 | 987.2 | 35.5 | -------------------------------------------------------------------------------- | Dividends paid | | -44.6 | -39.6 | -39.6 | -------------------------------------------------------------------------------- | Net cash from financing | | -413.7 | 998.3 | 26.3 | | activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Change in cash and cash | | -16.7 | 22.8 | 0.4 | | equivalents | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents, | | 23.6 | 0.8 | 0.8 | | beginning of period | | | | | -------------------------------------------------------------------------------- | Cash and cash equivalents, end | | 6.9 | 23.6 | 1.2 | | of period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1) Includes deductions for | | 182.4 | 10.0 | - | | trading | | | | | -------------------------------------------------------------------------------- | properties | | | | | -------------------------------------------------------------------------------- Changes in Group shareholders' equity Me -------------------------------------------------------------------------------- | | | Share | Share | Trans- | Fair | Re- | | | | capital | premium | lation | value | valua | | | | | reserve | differ- | reserve | tion | | | | | | rences | | reserve | -------------------------------------------------------------------------------- | Equity at 31 Dec. 2005 | 79.2 | 158.8 | - | -4.2 | - | -------------------------------------------------------------------------------- | Cash flow hedges: | | | | | | -------------------------------------------------------------------------------- | | Amount taken to | | | | 7.5 | | | | equity | | | | | | -------------------------------------------------------------------------------- | | Amount recognized in | | | | 0.1 | | | | income statement | | | | | | -------------------------------------------------------------------------------- | Taxes on items | | | | -2.0 | | | recognized in equity or | | | | | | | transferred from equity | | | | | | -------------------------------------------------------------------------------- | Total income and | | | | 5.6 | | | expenses recognized | | | | | | | directly in equity | | | | | | -------------------------------------------------------------------------------- | Profit for the period | | | | | | -------------------------------------------------------------------------------- | Total income and | | | | 5.6 | | | expenses for the period | | | | | | -------------------------------------------------------------------------------- | Dividends | | | | | | -------------------------------------------------------------------------------- | Share issue | 0.1 | 0.3 | | | | -------------------------------------------------------------------------------- | Equity at 30 June 2006 | 79.3 | 159.1 | - | 1.4 | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | Investe | Retained | Total | Minorit | Total | | | | d | earnings | | y | share- | | | | non-res | | | interes | ho | | | | tricted | | | t | lders' | | | | equity | | | | equity | | | | reserve | | | | | -------------------------------------------------------------------------------- | Equity at 31 Dec. 2005 | - | 340.5 | 574.3 | - | 574.3 | -------------------------------------------------------------------------------- | Cash flow hedges: | | | | | | -------------------------------------------------------------------------------- | | Amount taken to | | | 7.5 | | 7,5 | | | equity | | | | | | -------------------------------------------------------------------------------- | | Amount recognized in | | | 0.1 | | 0,1 | | | income statement | | | | | | -------------------------------------------------------------------------------- | Taxes on items | | | -2.0 | | -2.0 | | recognized in equity or | | | | | | | transferred from equity | | | | | | -------------------------------------------------------------------------------- | Total income and | | | 5.6 | | 5.6 | | expense recognized | | | | | | | directly in equity | | | | | | -------------------------------------------------------------------------------- | Profit for the period | | 23.6 | 23.6 | | 23.6 | -------------------------------------------------------------------------------- | Total income and | | 23.6 | 29.2 | | 29.2 | | expense for the period | | | | | | -------------------------------------------------------------------------------- | Dividends | | -39.6 | -39.6 | | -39.6 | -------------------------------------------------------------------------------- | Share issue | | | 0.4 | | 0.4 | -------------------------------------------------------------------------------- | Equity at 30 June 2006 | - | 324.5 | 564.3 | - | 564.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Changes in Group | | | | | | | shareholders' equity | | | | | | -------------------------------------------------------------------------------- | | | Share | Share | Trans- | Fair | Re- | | | | capital | premium | lation | value | valua | | | | | reserve | differ- | reserve | tion | | | | | | rences | | reserve | -------------------------------------------------------------------------------- | Equity at 31 Dec. 2006 | 79.3 | 159.5 | - | 2.3 | 0.6 | -------------------------------------------------------------------------------- | Cash flow hedges: | | | | | | -------------------------------------------------------------------------------- | | Amount taken to | | | | 17.9 | | | | equity | | | | | | -------------------------------------------------------------------------------- | | Amount recognized in | | | | 0.3 | | | | income statement | | | | | | -------------------------------------------------------------------------------- | | Instruments of | | | | 0.3 | | | | reversed hedge | | | | | | | | accounting | | | | | | -------------------------------------------------------------------------------- | Taxes on items | | | | -4.8 | | | recognized in equity or | | | | | | | transferred from equity | | | | | | -------------------------------------------------------------------------------- | Total income and | | | | 13.7 | | | expense recognized | | | | | | | directly in equity | | | | | | -------------------------------------------------------------------------------- | Profit for the period | | | | | | -------------------------------------------------------------------------------- | Total income and | | | | 13.7 | | | expense for the period | | | | | | -------------------------------------------------------------------------------- | Dividends | | | | | | -------------------------------------------------------------------------------- | Share issue | 31.7 | | | | | -------------------------------------------------------------------------------- | Equity 30 June 2007 | 111.0 | 159.5 | - | 16.0 | 0.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | Investe | Retained | Total | Minorit | Total | | | | d | earnings | | y | share- | | | | non-res | | | interes | ho | | | | tricted | | | t | lders' | | | | equity | | | | equity | | | | reserve | | | | | -------------------------------------------------------------------------------- | Equity 31 Dec. 2006 | - | 349.3 | 591.0 | 1.8 | 592.8 | -------------------------------------------------------------------------------- | Cash flow hedges: | | | | | | -------------------------------------------------------------------------------- | | Amount taken to | | | 17.9 | | 17.9 | | | equity | | | | | | -------------------------------------------------------------------------------- | | Amount recognized in | | | 0.3 | | 0.3 | | | income statement | | | | | | -------------------------------------------------------------------------------- | | Instruments of | | | 0.3 | | 0.3 | | | reversed hedge | | | | | | | | accounting | | | | | | -------------------------------------------------------------------------------- | Taxes on items | | | -4.8 | | -4.8 | | recognized in equity or | | | | | | | transferred from equity | | | | | | -------------------------------------------------------------------------------- | Total income and | | | 13.7 | | 13.7 | | expense recognized | | | | | | | directly in equity | | | | | | -------------------------------------------------------------------------------- | Profit for the period | | 79.6 | 79.6 | 0.1 | 79.7 | -------------------------------------------------------------------------------- | Total income and | | 79.6 | 93.3 | 0.1 | 93.4 | | expense for the period | | | | | | -------------------------------------------------------------------------------- | Dividends | | -44.6 | -44.6 | -0.3 | -44.9 | -------------------------------------------------------------------------------- | Share issue | 209.7 | | 241.4 | | 241.4 | -------------------------------------------------------------------------------- | Equity 30 June 2007 | 209.7 | 384.3 | 881.1 | 1.6 | 882.7 | -------------------------------------------------------------------------------- Notes to the Group's interim report Accounting principles The Group has adopted on 1 January 2007 the IFRS 7 standard: ‘Financial instruments: disclosures in financial statements' and the amendment to the IAS 1 standard concerning presentation of equity. The adoption of both standards will mainly affect the information to be presented in the notes to the Group's financial statements. In other respects the accounting principles for the financial statements are the same as those used for the financial statements of 31 December 2006. Income statement by business area, Me -------------------------------------------------------------------------------- | Income | Office | Logis | Proper | Russia | Funds | Other | Group, | | statement | & | -tics | ty | / | | | total | | 1-6/ | retail | | devel- | Balt | | | | | 2007 | | | opment | ic | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total revenue | 80.9 | 14.9 | 0.8 | 0.7 | 5.1 | 5.1 | 107.5 | -------------------------------------------------------------------------------- | Maintenance | -22.2 | -4.1 | -0.7 | -0.1 | -2.4 | -1.4 | -30.8 | | expenses and | | | | | | | | | direct fund | | | | | | | | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Net operating | 58.8 | 10.8 | 0.2 | 0.6 | 2.7 | 3.7 | 76.8 | | income | | | | | | | | -------------------------------------------------------------------------------- | Profit on sale | -0.7 | 1.8 | 0.0 | 0.0 | 0.0 | 0.0 | 1.1 | | of investment | | | | | | | | | properties | | | | | | | | -------------------------------------------------------------------------------- | Profit/loss on | 20.7 | 0.0 | 6.6 | 0.0 | -0.5 | 0.0 | 26.8 | | sale of | | | | | | | | | trading | | | | | | | | | properties | | | | | | | | -------------------------------------------------------------------------------- | Valuation | 41.7 | 14.8 | 0.0 | 0.0 | 0.0 | 0.0 | 56.4 | | gains and | | | | | | | | | losses | | | | | | | | -------------------------------------------------------------------------------- | Administration | -4.9 | -1.4 | -1.7 | -1.0 | -1.3 | -5.1 | -15.4 | | and marketing | | | | | | | | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Other income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.8 | 0.8 | | and expenses | | | | | | | | -------------------------------------------------------------------------------- | Operating | 115.6 | 25.9 | 5.0 | -0.4 | 0.9 | -0.6 | 146.5 | | profit | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | Office | Logis | Proper | Russia | Funds | Other | Group, | | statement | & | -tics | ty | / | | | total | | 1-6/2006 | retail | | devel- | Balt | | | | | | | | opment | ic | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total revenue | 37.6 | 15.1 | 0.0 | 0.0 | 0.0 | 0.0 | 52.7 | -------------------------------------------------------------------------------- | Maintenance | -9.5 | -3.1 | 0.0 | 0.0 | 0.0 | 0.0 | -12.6 | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Net operating | 28.1 | 12.0 | 0.0 | 0.0 | 0.0 | 0.0 | 40.1 | | income | | | | | | | | -------------------------------------------------------------------------------- | Valuation | 9.9 | 0.3 | 0.0 | 0.0 | 0.0 | 0.0 | 10.2 | | gains and | | | | | | | | | losses | | | | | | | | -------------------------------------------------------------------------------- | Administration | -3.2 | -1.1 | -0.6 | 0.0 | -0.7 | 0.7 | -4.9 | | and marketing | | | | | | | | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Other income | 0.0 | 0.0 | 0.0 | 0.0 | 0.6 | 0.3 | 0.9 | | and expenses | | | | | | | | -------------------------------------------------------------------------------- | Operating | 34.8 | 11.2 | -0.6 | 0.0 | -0.1 | 1.0 | 46.3 | | profit | | | | | | | | -------------------------------------------------------------------------------- Investment properties -------------------------------------------------------------------------------- | | 1-6/2007 | 1-12/2006 | 1-6/2006 | -------------------------------------------------------------------------------- | Fair value of investment | 2 455.1 | 1 259.7 | 1 259.7 | | properties, start of period | | | | -------------------------------------------------------------------------------- | Kapiteeli acquisition | - | 1 070.0 | - | -------------------------------------------------------------------------------- | Purchase of investment properties | 18.8 | 94.3 | 30.9 | -------------------------------------------------------------------------------- | Other capital expenditure on | 48.0 | 43.3 | 38.9 | | investment properties | | | | -------------------------------------------------------------------------------- | Disposal of investment properties | -276.7 | -37.7 | -0.2 | -------------------------------------------------------------------------------- | Transfers to/from property, plant | 3.2 | -1.5 | - | | and equipment | | | | -------------------------------------------------------------------------------- | Transfers from trading properties | 0.3 | - | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fair value adjustment for property | 0.3 | 0.8 | - | | in own use | | | | -------------------------------------------------------------------------------- | Valuation gains/losses | 56.4 | 26.2 | 10.2 | -------------------------------------------------------------------------------- | Fair value of investment | 2 305.4 | 2 455.1 | 1 339.5 | | properties, end of period | | | | -------------------------------------------------------------------------------- Investment properties are properties held by the company for the purpose of earning rental revenue or for capital appreciation. Sponda has chosen the fair value method to measure its investment properties, recognizing changes in their fair value in the income statement. The fair value of Sponda's investment properties is confirmed using the company's own calculations in which Sponda applies the yield method based on cash flow analysis. The method is in compliance with the International Valuation Standard (IVS). All the figures used in calculating the fair value of properties are examined at least once a year by an external expert, to ensure that the parameters and values used in the calculations are based on market observations. The Group's most significant investment commitments are in the following projects: Renovation work on the City-Center complex, which continues as planned. The underground basement facilities were completed in spring 2007. The first phase in the renovation of the retail premises was be completed in May and the second phase has begun. This phase should be completed at the beginning of 2008. Construction of the logistics area, gatehouse building, parking building and passenger terminal at Vuosaari Harbour has begun as planned. The project has a total investment value of roughly EUR 140 million. The harbour will be taken into operation in November 2008. Office building in the Ruoholahti district of Helsinki which has an investment cost of roughly EUR 29 million and a leasable area of 13 500 m². The expected completion date is autumn 2008. Retail property in the Itäkeskus district of Helsinki with a leasable area of about 21 500 m². The total investment value is roughly EUR 56 million. The building will be completed by November 2008. Office building in the Sörnäinen district of Helsinki, which has a total investment cost of roughly EUR 22 million. The leasable area is about 9 200 m². The estimated completion date is towards the end of 2008. Property, plant and equipment -------------------------------------------------------------------------------- | | 1-6/2007 | 1-12/2006 | 1-6/2006 | -------------------------------------------------------------------------------- | Carrying amount, start of period | 19.5 | 8.8 | 8.8 | -------------------------------------------------------------------------------- | Kapiteeli acquisition | - | 5.2 | - | -------------------------------------------------------------------------------- | Additions | 1.6 | 4.5 | 0.3 | -------------------------------------------------------------------------------- | Disposals | -1.7 | - | - | -------------------------------------------------------------------------------- | Reclassifications to/from | | | | -------------------------------------------------------------------------------- | investment properties | -3.2 | 1.5 | - | -------------------------------------------------------------------------------- | Depreciation for the period | -0.4 | -0.5 | -0.2 | -------------------------------------------------------------------------------- | Carrying amount, end of period | 15.8 | 19.5 | 8.9 | -------------------------------------------------------------------------------- Trading properties -------------------------------------------------------------------------------- | | 1-6/2007 | 1-12/2006 | 1-6/2006 | -------------------------------------------------------------------------------- | Carrying amount, start of period | 231.1 | - | - | -------------------------------------------------------------------------------- | Kapiteeli acquisition | - | 241.8 | | -------------------------------------------------------------------------------- | Disposals and other changes | -182.7 | -10.7 | | -------------------------------------------------------------------------------- | Carrying amount, end of period | 48.4 | 231.1 | - | -------------------------------------------------------------------------------- Sampo Bank's suit for payment In its ruling, the Helsinki city court ordered Sponda Plc to pay interest, penal interest and court costs totalling EUR 7.6 million to Sampo Bank Plc based on a credit agreement. Sponda appealed the decision to the Helsinki court of appeal on 9 February 2007. The amount of Sampo Bank's suit for payment, EUR 7.6 million, was recognized as an expense under provisions in the 2006 financial statements. Contingent liabilities Collateral and commitments given by Group Me -------------------------------------------------------------------------------- | | 30.6.2007 | 30.6.2006 | 31.12.2006 | -------------------------------------------------------------------------------- | Loans from financial institutions, | 0 | 0.1 | 0.1 | | covered by collateral | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Mortgages | 0.2 | 0.1 | 0.1 | -------------------------------------------------------------------------------- | Book value of pledged shares | 0 | - | - | -------------------------------------------------------------------------------- | Guarantees given | 25.8 | - | - | -------------------------------------------------------------------------------- | Total collateral | 26.0 | 0.1 | 0.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Lease and other liabilities | | | | -------------------------------------------------------------------------------- | Lease liability | 20.2 | 21.3 | 23.0 | -------------------------------------------------------------------------------- | Other liabilities | 0.1 | - | 0.1 | -------------------------------------------------------------------------------- | Mortgages | 2.3 | 2.2 | 2.3 | -------------------------------------------------------------------------------- | Guarantees given | 0.1 | - | 0.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest derivatives | | | | -------------------------------------------------------------------------------- | Swap contracts, notional value | 605.0 | 306.8 | 541.8 | -------------------------------------------------------------------------------- | Swap contracts, fair value | 14.8 | 2.7 | 2.3 | -------------------------------------------------------------------------------- | Interest rate cap options, bought, | 557.0 | | | | notional value | | | | -------------------------------------------------------------------------------- | Interest rate cap options, bought, fair | 17.6 | | | | value | | | | -------------------------------------------------------------------------------- Key indicators -------------------------------------------------------------------------------- | | 4-6/2007 | 4-6/2006 | 1-6/2007 | 1-6/2006 | 1-12/2006 | -------------------------------------------------------------------------------- | Earnings/share, e | 0.20 | 0.14 | 0.76 | 0.30 | 0.61 | -------------------------------------------------------------------------------- | Equity ratio, % | | | 35 | 41 | 20 | -------------------------------------------------------------------------------- | Gearing, % | | | 159 | 120 | 334 | -------------------------------------------------------------------------------- | Net assets per | | | 7.94 | 7.12 | 7.45 | | share, e | | | | | | -------------------------------------------------------------------------------- | Cash flow from | 0.17 | 0.13 | 0.45 | 0.27 | 0.56 | | operations/share, e | | | | | | -------------------------------------------------------------------------------- Calculation of financial ratios -------------------------------------------------------------------------------- | Earnings/share, € | Share of profit for the period | | | attributable to equity holders of the | | | parent company / adjusted average number | | | of shares during the period | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity ratio, % = 100 x | Shareholders' equity / (Balance sheet | | | total - advances received) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Gearing, % = 100 x | (Interest-bearing liabilities - cash | | | and cash equivalents) / Shareholders' | | | equity | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity per share,€ = | Equity attributable to equity holders of | | | parent company on 30 June / Adjusted | | | number of shares on 30 June | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from | (Operating profit -/+ Valuation gains and | | operations/ | losses +/- Changes in provisions +/- | | share 1) = | Defined benefit pension expenses - | | | Financial income and expenses affecting | | | cash flow - Taxes affecting cash flow) / | | | Average adjusted number of shares during | | | the period | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 1) Profit on the sale of non-current assets | | | has been deducted and losses from their | | | sale have been added to the operating | | | profit for the years 2004-2006. | -------------------------------------------------------------------------------- Related party transactions The following transactions took place with related parties: Rental income from state institutions and companies totalled EUR 11.1 million in the January-June 2007 period (1-12/2006: EUR 13.6 million). Management employee benefits -------------------------------------------------------------------------------- | | 1-6/2007 | 1-6/2006 | 1-12/2006 | -------------------------------------------------------------------------------- | Salaries and bonuses | 0.9 | 0.6 | 1.0 | -------------------------------------------------------------------------------- | Incentive bonuses | 0.1 | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Share-based payments | 0.6 | - | 1.1 | -------------------------------------------------------------------------------- | Total | 1.6 | 0.7 | 2.3 | -------------------------------------------------------------------------------- There were no outstanding loans receivable from key management on 30 June 2007 or 31 December 2006. Members of the Board of Directors held 2170 shares and members of the Executive Board 31,368 shares on 30 June 2007 (31 Dec. 2006: 48,009 and 7682 shares). The Finnish State held 34.3 % of Sponda's shares on 30 June 2007 (31 Dec. 2006: 34.3 %). Sponda sold three land areas for about EUR 65 million in accordance with a purchase option agreed with the Finnish State in February 2007. Major property transaction In a transaction signed on 30 March 2007, Sponda sold shares in real estate companies, business properties and land sites that were outside its strategic focus to Whitehall Street Real Estate Limited and Niam Nordic Investment Fund III for EUR 401.1 million. The sale comprised in total 564 real estate items, of which 43 were investment properties. Sponda recorded a profit on the sale of EUR 18.5 million. A review of the selling price reduced the profit by EUR 1.3 million, and this had an impact on investment properties of EUR - 1.9 million. Events after the close of the period No significant events have occurred since the close of period. |
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