2013-05-03 09:30:00 CEST
2013-05-03 09:30:04 CEST
REGULATED INFORMATION
Sponda - Interim report (Q1 and Q3)
Sponda Plc’s interim report January–March 2013
Sponda Plc Interim report 3 May 2013, 10:30 a.m.
Sponda Plc's interim report January-March 2013
Result of operations and financial position 1 January - 31 March 2013 (compared
with 1 January - 31 March 2012)
-- Total revenue was EUR 66.0 (66.0) million.
-- Net operating income was EUR 45.4 (46.1) million. The decrease was due to
higher maintenance costs resulting from the severe winter.
-- Operating profit was EUR 44.8 (43.7) million. This includes a fair value
change of EUR 5.5 (2.8) million.
-- Cash flow from operations per share was EUR 0.09 (0.09).
-- The fair value of the investment properties amounted to EUR 3,274.3
(3,177.4) million.
-- Net assets per share totalled EUR 4.38 (4.17).
-- The economic occupancy rate was 88.2% (88.4%).
-- The prospects remain unchanged.
-- Net financing costs for the period totalled EUR -13.5 (-14.0) million.
Financial income and expenses include EUR 1.0 (2.7) million in unrealised
change in the fair value of derivatives. Excluding the aforementioned
change in fair value, financial income and expenses totalled EUR -14.5
(-16.7) million.
-- Sponda has changed its accounting principles with regard to IAS 12 Income
Taxes. The change took effect at the beginning of 2013. The change had a
positive effect of approximately 1.5%-points on the Group's equity ratio.
The comparison figures for 2012 have been adjusted accordingly.
Key figures 1-3/2013 1-3/2012 1-12/2012
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Total revenue, M€ 66.0 66.0 264.6
Net operating income, M€ 45.4 46.1 192.2
Operating profit, M€ 44.8 43.7 210.5
Earnings per share, € 0.07 0.07 0.37
Cash flow from operations per share, € 0.09 0.09 0.40
Net assets per share, € 4.38 4.17 4.45
Equity ratio, % 40.8 38.8 41.3
Interest cover ratio 2.9 2.6 2.8
Key figures according to EPRA Best Practices Recommendations
1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------
EPRA Earnings, M€ 20.3 18.8 83.1
EPRA Earnings per share, € 0.07 0.07 0.29
EPRA NAV/share, € 5.07 4.77 5.12
EPRA Net Initial Yield (NIY), % 6.64 6.58 6.61
EPRA, "topped-up" NIY, % 6.65 6.59 6.63
President and CEO Kari Inkinen
Sponda's result for the first quarter of 2013 was stable, with the exception of
a seasonal increase in maintenance costs. The Group's economic occupancy rate
was in line with earlier forecasts. I am particularly pleased with the positive
development in occupancy rates in Helsinki's central business district and
shopping centres. This supports our view of the importance of property
locations. Our challenge remains the vacancy rate of logistics properties,
which has increased from the beginning of the year. Finnish exports remained
very low in the first quarter, which contributed to the slow demand for
logistics premises.
Our aim is to reduce the proportion of logistics premises and non-strategic
properties in our portfolio. Under the prevailing market conditions, the demand
for properties for sale is low and transactions are slow to materialise.
Nevertheless, I believe that our planned disposals will realise in 2013.
With the Citycenter and Ruoholahti projects now completed, Sponda does not
have any property development projects with the exception of maintenance
investments. We remain active with regard to the Ratina shopping centre
project, and the first preliminary agreements have already been signed. Our
goal is to begin the project during summer 2013. The start of construction of
the Ratina shopping centre will be announced when the investment decision has
been made.
Business conditions - Finland
The European economy continues to be plagued by uncertainty, and the effects
are also reflected in the Finnish economy. The Finnish GDP contracted by 0.2%
in 2012. The current forecasts indicate GDP growth of 0.4% in 2013. The
predicted growth is based on the expectation of increased exports, which
depends on Finnish export countries seeing positive economic development. The
forecast inflation rate for 2012 is approximately 2.8%, with inflation expected
to slow down to a rate of 2.1% in 2013. (Ministry of Finance)
The uncertainty in the global economy is reflected in the Finnish property
market. The total transaction volume in 2012, EUR 2.1 billion, was only
slightly higher than in the previous year (EUR 1.8 billion). According to a
preliminary estimate by KTI Property Information, the transaction volume in the
first quarter of 2013 was only EUR 0.3 billion, which is substantially lower
than in the previous year(approximately EUR 0.5 billion).
Some 120,000m² of new office space was completed in the Helsinki metropolitan
area in 2012. The vacancy rate rose to approximately 11% in the same period.
The total amount of new office space completed in 2013 will be largely
unchanged from 2012. As the current economic conditions do not support an
increase in the demand for office premises, the vacancy rate is likely to
continue rising. This will also lead to downward pressure on market rents.
Business conditions - Russia
The Russian GDP is estimated to have grown by 3.4% in 2012 and the growth rate
is expected to slow down in 2013. The estimate is based on the decline in oil
prices and slower growth in private consumption. (Ministry of Economy)
The total transaction volume in the Russian property market in 2012 stood at
approximately USD 7 billion. The total volume in 2013 is predicted to be
slightly lower.
The vacancy rate for office properties in Moscow decreased slightly in 2012,
and this trend is expected to continue in 2013. The average vacancy rate
currently stands at approximately 12%. Rental levels are expected to remain
stable in 2013. The high-end rent for Class A office space is currently at
approximately USD 1,200/m²/year.
Operations and property assets 1 January - 31 March 2013
Sponda owns, leases and develops business properties in the Helsinki
metropolitan area and the largest cities in Finland, as well as in Russia.
Sponda's operations are organised into four business units: Investment
Properties, Property Development, Russia, and Real Estate Funds. The Investment
Properties unit is divided into three segments: Office and Retail Properties,
Shopping Centres and Logistics Properties. The other segments are Property
Development, Russia and Real Estate Funds.
Net operating income from all of Sponda's property assets totalled EUR 45.4
(46.1) million in January-March 2013. Of this total, office and retail premises
accounted for 54%, shopping centres for 17%, logistics premises for 13%, Russia
for 13% and the Real Estate Funds unit for 3%.
On 31 March 2013, Sponda had a total of 185 properties, with an aggregate
leasable area of approximately 1.5 million m². Of this, some 53% is office and
retail premises, 11% shopping centres and 33% logistics premises. Some 3% of
the leasable area of the properties is located in Russia.
The fair values of Sponda's investment properties are confirmed as a result of
the company's own cash flow-based yield value calculations. The assessment
method complies with International Valuation Standards (IVS). The data used in
the calculations of fair value is audited, at a minimum, twice annually by
external experts to ensure that the parameters and values used in calculations
are based on market observations.
At the end of March 2013, the fair value of Sponda's properties was assessed
internally for both Finland and Russia. The change in fair value of the
investment properties in January-March was EUR 5.0 (0.9) million. The positive
change in the value in Finland was mainly due to successful renting and changes
in market rents. In Russia, the main factor behind the positive change was
exchange rate fluctuations. The changes in fair values are itemised in the
table “Valuation gains/losses on fair value assessment”.
Valuation gains/losses on fair value assessment
M€ 1-3/13 1-3/12 1-12/12
Changes in yield requirements (Finland) 0.0 0.0 20.9
Changes in yield requirements (Russia) 0.0 0.0 6.5
Development gains on property development projects 0.2 -1.2 -0.7
Modernisation investments -4.6 -6.8 -28.5
Change in market rents and maintenance costs (Finland) 4.7 8.2 26.4
Change in market rents and maintenance costs (Russia) 1.3 0.6 -0.1
Change in currency exchange rates 3.3 0.1 0.4
Investment properties, total 5.0 0.9 24.9
Real Estate Funds -1.9 0.0 0.6
Realised shares of profit from real estate funds 2.4 1.9 7.5
Group, total 5.5 2.8 33.0
The changes in Sponda's investment portfolio assets were as follows:
Investment Properties Total Office Shopping Logist Property Russia
1.1-31.3.2013, M€ and centres ics developmen
retail t
Operating income 64.0 35.6 11.1 9.5 0.1 7.7
Maintenance costs -19.9 -11.0 -2.8 -3.8 -0.4 -1.9
--------------------------------------------------------------------------------
Net operating income 44.1 24.6 8.3 5.7 -0.3 5.8
Investment properties 3,261.3 1,705.7 736.7 414.4 135.1 269.4
at 1 January 2013
Capitalised interest 0.1 0.1 0.0 0.0 0.0 0.0
2013
Acquisitions 0.0 0.0 0.0 0.0 0.0 0.0
Investments 7.9 5.8 0.4 0.5 1.2 0.1
Transfers between 0.0 0.0 0.0 0.0 0.0 0.0
segments
Sales 0.0 0.0 0.0 0.0 0.0 0.0
Change in fair value, 5.0 -0.4 1.3 -0.5 0.0 4.6
%
--------------------------------------------------------------------------------
Investment properties 3,274.3 1,711.2 738.5 414.3 136.3 274.0
at 31 March 2013
Change in fair value, 0.2 0.0 0.2 -0.1 0.0 1.7
%
Weighted average 6.8 6.5 5.6 8.2 9.7
yield requirement %
Weighted average 6.5
yield requirement %,
Finland
Rental operations
Sponda calculates the growth in rental yield for its properties according to
EPRA Best Practices Recommendations by using a like-for-like net rental growth
formula based on a comparable property portfolio owned by the company for two
years. Like-for-like net rental growth was 1.5% (9.7%) for office and retail
premises, 0.4% (-8.2%) for shopping centres, -16.2% (4.0%) for logistics
premises and -1.3% (5.4%) for properties in Russia. The negative growth rate
for logistics premises is due to an increased vacancy rate compared to
January-March 2012. All of Sponda's lease agreements in Finland are tied to the
cost of living index.
The economic occupancy rates by type of property and geographical area were as
follows:
Type of property 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2013 2012 2012 2012 2012
Office and retail, % 89.2 89.4 89.3 89.2 88.7
Shopping centres, % 94.1 93.0 93.1 93.8 93.9
Logistics, % 74.8 75.6 76.7 78.0 78.1
Russia, % 96.8 95.4 93.5 99.0 98.7
Total property 88.2 88.1 88.0 88.9 88.4
portfolio, %
Geographical area 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2013 2012 2012 2012 2012
Helsinki Business 89.0 88.3 87.9 87.8 87.9
District, %
Helsinki Metropolitan 84.3 85.0 85.5 86.2 85.6
Area, %
Turku, Tampere, Oulu, 96.3 95.7 94.8 94.2 94.3
%
Russia, % 96.8 95.4 93.5 99.0 98.7
Total property 88.2 88.1 88.0 88.9 88.4
portfolio, %
Investments and divestments
Sponda did not purchase or sell properties during the period under review.
Sponda's investments totalled EUR 7.9 million in January-March 2013.
Investments in property maintenance represented EUR 4.6 million and investments
in property development EUR 3.4 million of this total. Property development
investments were directed to the development of an office property in
Ruoholahti, which was completed in April 2013.
Cash flow and financing
Sponda's net cash flow from operations in the period under review totalled EUR
35.9 (31.6) million. Net cash flow from investing activities was EUR -15.6
(-10.3) million and the net cash flow from financing activities was EUR -28.9
(-16.1) million. Net financing costs for the period totalled EUR -13.5 (-14.0)
million. Financial income and expenses include EUR 1.0 (2.7) million in
unrealised change in the fair value of derivatives. Excluding the
aforementioned change in fair value, financial income and expenses totalled EUR
-14.5 (-16.7) million. Interest expenses of EUR 0.1 (0.1) million were
capitalised.
Sponda's equity ratio on 31 March 2013 stood at 40.8% (38.8%) and the gearing
ratio was 122.1% (133.8%). Interest-bearing debt amounted to EUR 1,765.5
(1,787.0) million and the average maturity of loans was 2.4 (2.8) years. The
average interest rate was 3.4% (3.7%) including interest derivatives.
Fixed-rate and interest-hedged loans accounted for 70% (75%) of the loan
portfolio. The average interest-bearing period of the entire debt portfolio was
1.7 (1.9) years. The interest cover ratio, which describes the company's
solvency, was 2.9 (2.6).
Sponda applies hedge accounting to those interest derivatives that meet the
criteria for hedge accounting. Changes in the fair value of interest
derivatives that fall under hedge accounting are recognised in equity on the
balance sheet. Changes in the fair value of other interest derivatives and
currency options are recorded on the income statement.
Sponda Group's debt portfolio on 31 March 2013 comprised EUR 675 million in
syndicated loans, EUR 328 million in bonds, EUR 289 million in issued
commercial papers, and EUR 474 million in loans from financial institutions.
Sponda had EUR 510 million in unused credit limits. Sponda Group had mortgaged
loans of EUR 141.0 million, or 4.0% of the consolidated balance sheet.
Sponda has two hybrid bonds outstanding. The first one, issued in 2008, amounts
to EUR 92.8 million and is callable on 27 June 2013. The new hybrid bond,
issued on 21 November 2012, amounts to EUR 95 million and the first call date
is 5 December 2017. The EUR 92.8 million hybrid bond callable in June 2013 has
an effect on the Group's equity ratio of approximately 2.5 percentage points.
Events after the end of the period
In April 2013, pursuant to Chapter 9, Section 5 of the Finnish Securities
Markets Act, Ilmarinen announced that, as of 15 April 2013, its share of
ownership of Sponda Plc fell below the 1/20 (5%) threshold and that its current
share of ownership of Sponda Plc is 0%.
In April 2013, pursuant to Chapter 9, Section 5 of the Finnish Securities
Markets Act, HC LPN Holding Oy Ab (Hartwall Capital Oy Ab) announced that, as
of 15 April 2013, its share of ownership of Sponda Plc rose above the 1/20 (5%)
threshold and that its current share of ownership of Sponda Plc is 9.56%.
Prospects
Sponda expects the vacancy rates of its investment properties at year's end
2013 to be largely unchanged from the end of 2012. The estimate is based on the
leases already signed and forecast changes in rental agreements.
Comparable net operating income (excluding disposals) in 2013 is expected to
increase slightly from 2012. This increase is based on rising rent levels for
business premises in Helsinki's central business district and the completion of
property development projects.
Risks and uncertainty factors in the near future
Sponda believes that the risks in the current financial year will be largely
unchanged from the previous year. The key risks and uncertainty factors arise
from the ongoing European economic crisis. These risks relate to a decline in
economic occupancy rates and a fall in rental income in both Finland and
Russia, resulting from the insolvency of tenants.
The development of the Finnish economy will be particularly affected by the
continuation of the public debt crisis in Europe. The slowing of growth may
affect the operations of Finnish companies and thereby increase the vacancy
rates of office properties.
For Sponda's property development projects, the key risks are related to the
degree of success in leasing premises and the potential increase in
construction costs. Higher than expected vacancy rates in newly completed
business premises would have an impact on the Group's total vacancy rate and,
as a result, have a negative effect on the Group's net operating income.
The differences between Russian and Finnish legislation and the way the
authorities operate in the two countries may cause additional risks for Sponda.
The operations in Russia increase Sponda's foreign exchange risk. Changes in
exchange rates may cause exchange rate losses that have a negative impact on
the company's financial result.
Significant changes in market interest rates and margins may have a negative
effect on Sponda's financial result and contribute to slower growth in the
property business.
Capital Markets Day
Sponda will organise a Capital Markets Day for investors, analysts and
journalists on 15 May 2013 in Helsinki. The main themes for the day will be, in
addition to a company update, the Finnish economy and property sector financing
in Finland. In addition to Sponda's representatives, there will be guest
speakers who will give their insight to the market. At the end of the day,
participants will have an opportunity to visit Sponda's properties, Citycenter
and Fennia Block, in Helsinki.
3 May 2013
Sponda Plc
Board of Directors
Additional information:
Kari Inkinen, President and CEO, tel. +358 20-431 3311 or +358 400-402 653,
CFO Erik Hjelt, tel. +358 20-431 3318 or +358 400-472 313 and
Pia Arrhenius, SVP, Corporate Communications and IR, tel. +358 20-431 3454 or
+358 40-527 4462.
Distribution:
NASDAQ OMX Helsinki
Media
www.sponda.fi
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