2016-08-04 07:30:01 CEST
2016-08-04 07:30:01 CEST
REGULATED INFORMATION
Sponda - Half Year financial report
Sponda Plc’s half year financial report January–June 2016
Sponda Plc Half year financial report 4 August 2016 at 8:30 a.m.
Sponda Plc’s half year financial report January–June 2016
JANUARY–JUNE 2016 IN BRIEF (compared with 1 January – 30 June 2015)
-- Total revenue increased to EUR 126.9 (116.6) million, primarily due to a
property transaction completed in February 2016.
-- Net operating income increased by more than 12% and totalled EUR 92.3
(82.1) million.
-- Operating profit was EUR 95.6 (91.9) million. This includes a fair value
change of EUR 3.0 (12.4) million.
-- Cash flow from operations per share was EUR 0.21 (0.19).
-- The fair value of the investment properties amounted to EUR 3,713.2
(3,143.2) million.
-- Net assets (NAV) per share totalled EUR 5.04 (4.65).
-- The economic occupancy rate was 89.1% (86.3%).
-- The prospects were revised.
APRIL–JUNE 2016 IN BRIEF (compared with 1 April – 30 June 2015)
-- Total revenue was EUR 67.6 (59.4) million.
-- Net operating income was EUR 50.2 (42.5) million.
-- Operating profit was EUR 48.8 (64.4) million. This includes a fair value
change of EUR 5.0 (22.3) million.
-- Cash flow from operations per share was EUR 0.09 (0.11).
KEY FIGURES
4-6/2016 4-6/2015 1-6/2016 1-6/201 1-12/201
5 5
Total revenue, M€ 67.6 59.4 126.9 116.6 230.5
Net operating income, M€ 50.2 42.5 92.3 82.1 165.7
Operating profit, M€ 48.8 64.4 95.6 91.9 178.1
Earnings per share, € 0.09 0.14 0.18 0.17 0.78
Cash flow from operations per 0.09 0.11 0.21 0.19 0.36
share, €
Equity per share, € 5.04 4.65 5.26
Equity ratio, % 46.3 40.7 46.2
KEY FIGURES ACCORDING TO EPRA BEST PRACTICES RECOMMENDATIONS
4-6/201 4-6/201 1-6/201 1-6/201 1-12/20
6 5 6 5 15
EPRA Earnings, M€ 33.1 26.4 53.9 51.3 232.0
EPRA Earnings per share, € 0.10 0.09 0.17 0.18 0.82
Company adjusted EPRA Earnings, M€ 33.2 28.9 54.9 53.5 98.6
Company adjusted EPRA Earnings per 0.10 0.10 0.17 0.19 0.35
share, €
EPRA NAV/share, € 5.35 5.47 5.60
EPRA NNNAV/share, € 4.96 4.50 5.15
EPRA Net Initial Yield (NIY), % 5.55 5.48 5.62
EPRA “topped-up” NIY, % 5.57 5.49 5.63
EPRA Vacancy rate, % 10.94 13.68 12.26
EPRA Cost Ratio (including direct 17.68
vacancy costs), %
EPRA Cost Ratio (excluding direct 12.90
vacancy costs), %
PRESIDENT AND CEO KARI INKINEN
Sponda’s result for January–June 2016 result is strong considering the slow
growth of the Finnish economy. The six properties acquired at the start of the
year in Helsinki’s central business district have been integrated into Sponda,
and we have achieved synergies from the acquisition; for example, in the form
of lower property maintenance costs. I am also very pleased that our economic
occupancy rate has increased compared to the end of March. We have improved the
occupancy rate of both office properties and shopping centres following the
Forum acquisition, which supports our strategy of focusing on prime areas in
Helsinki and Tampere. We also improved the occupancy rate of our non-strategic
logistics properties.
We finalised the sale of one shopping centre, Solnechniy I in Moscow, in July.
After the sale, Sponda’s Russian property portfolio comprises two office
properties in Moscow and one logistics property in St. Petersburg. We also sold
a property located on Yliopistonkatu in Turku, Finland. Following this sale,
Sponda owns no properties in Turku.
In June, we announced that we are starting the development of a new office and
retail complex in Vantaa’s Tikkurila district. Excavation work has already
begun and the project will be completed in spring 2018. The construction of the
Ratina shopping centre in Tampere is also moving ahead on schedule, and
pre-letting has progressed to the point where the pre-let rate for the property
now stands at approximately 38%. The property will be completed in spring 2018.
BUSINESS CONDITIONS – FINLAND
According to preliminary data from Statistics Finland, Finland’s GDP grew by
0.6% compared to the preceding quarter. The Ministry of Finance has increased
its 2016 growth forecast for the Finnish economy. According to the revised
forecast, Finland’s GDP will grow by 1.4% in 2016. The growth is largely based
on the favourable development of private consumption and investments. Exports
are expected to grow by only 0.8% this year, but the rate of export growth is
predicted to increase slightly next year. The forecast for GDP growth in 2017
is 1.0%. The forecast does not take into account the effects of Brexit.
The transaction market remained active in the second quarter with a volume of
EUR 1.46 billion according to KTI Property Information. The volume for the
first half of the year was EUR 3.63 billion. The property type with the highest
trading activity was residential portfolios, with 38% of the total volume. The
share of international buyers have come down and accounted for approximately
21% of the total.
The high vacancy rate of office properties in the Helsinki metropolitan area
has led to a decrease in new construction. Nevertheless, new projects have been
started during the first half of the year in locations including Kalasatama,
Ilmala and Leppävaara areas. At the end of March, there were some 90,000 m² of
new office space under construction. The amount of retail space currently under
construction in the Helsinki metropolitan area is approximately 180,000 m².
The vacancy rates for office premises in the Helsinki metropolitan area
decreased last winter but remain high. The vacancy rate was 18.3% in March.
According to KTI Property Information, the situation improved in Helsinki and
Espoo, while in Vantaa, the amount of vacant space increased. The vacancy rate
for retail space in the Helsinki metropolitan area was 4.9% in March according
to KTI Property Information.
GROUP RESULT IN JANUARY–JUNE 2016
Sponda Group’s result for January–June was EUR 58.5 (51.2) million, while the
result before taxes was EUR 70.2 (68.1) million and operating profit was EUR
95.6 (91.9) million.
Net operating income for the period was EUR 92.3 (82.1) million. The increase
in net operating income was primarily attributable to the Forum property
acquisition and completed property development projects. Net operating income
was reduced by property divestments made last year. The effect of the Forum
acquisition is included in the consolidated figures starting from 1 March 2016.
Marketing and administration expenses and other operating income and expenses
amounted to EUR 11.0 (10.5) million, which represents an increase of EUR 0.5
million compared to the previous year. The increase was mainly attributable to
the Forum acquisition and timing differences. The net operating income for the
second quarter of 2016 amounted to EUR 50.2 (42.5) million, including the
effect of the Forum acquisition for the full quarter.
During the period, the Group recognised profit on sales of EUR 12.6 (1.1)
million, primarily from the sale of land in trading properties. The change in
fair value of the investment properties was EUR 3.0 (12.4) million due to
positive development in Finland. The Group’s result was weighed down by
amortisation of goodwill amounting to EUR 1.3 (0.0) million. The result for the
comparison period includes EUR 6.8 million attributable to the Group’s share of
the result of Certeum Oy, an associated company that was divested in September
2015.
Financial income and expenses for the period totalled EUR -25.4 (-23.8)
million. The increase in expenses is related to an unrealised change in the
fair value of derivatives and loan arrangements pertaining to the Forum
acquisition.
In accordance with IFRIC 21, the company recognises a liability in the balance
sheet when the obligating event occurs. The company periodises real estate
taxes in the profit and loss statement during the financial year.
PROPERTY ASSETS 1 JANUARY – 30 JUNE 2016
At the end of June 2016, an external consultant assessed the values of Sponda’s
investment properties in Finland (Catella Property Oy) and in Russia (CB
Richard Ellis). The change in the fair value of the investment properties in
January–June 2016 was EUR 3.0 (12.4) million and in April–June EUR 5.0 (22.3)
million. The value of Sponda’s properties in Finland developed favourably
primarily due to a decrease in yield requirements. Yield requirements decreased
the most in office properties in Helsinki’s central business district and in
the Shopping Centres -unit. Other factors contributing to the increase in fair
value included the development margin of property development. The change in
the fair value of the properties in Russia was negative. The change was mainly
due to a decrease in market rents and an increase in the yield requirement.
Valuation gains/losses on fair value assessment
M€
4-6/16 4-6/15 1-6/16 1-6/15 1-12/1
5
Changes in yield requirements (Finland) 17.1 32.2 17.1 32.2 39.2
Changes in yield requirements (Russia) -2.3 -7.4 -4.1 -7.4 -7.4
Development gains on property 2.1 1.8 3.9 2.9 25.4
development projects
Modernisation investments -5.6 -9.7 -12.5 -20.7 -37.8
Change in market rents and maintenance 5.4 9.2 13.7 18.4 30.2
costs (Finland)
Change in market rents and maintenance -9.6 -2.8 -10.7 -15.3 -26.8
costs (Russia)
Change in currency exchange rates -0.2 -1.1 -2.4 2.2 0.3
Investment properties, total 7.0 22.3 5.0 12.4 23.2
Property investment companies -2.0 0.0 -2.0 0.0 0.0
Group, total 5.0 22.3 3.0 12.4 23.2
RENTAL OPERATIONS
Sponda calculates the growth in net 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 0.9% (1.8%) for office
premises, 6.0% (2.5%) for shopping centres, 7.1% (18.8%) for logistics premises
and -2.9% (-4.6%) for properties in Russia. 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 30.6.2016 31.3.2016 31.12.2015 30.9.2015 30.6.2015
Office properties, % 88.3 88.1 88.2 88.0 88.1
Shopping centres, % 94.2 93.8 91.3 90.6 89.8
Logistics properties, % 73.4 68.9 68.3 67.8 68.6
Russia, % 81.9 82.9 84.6 82.3 84.5
Total property 89.1 88.7 87.7 86.2 86.3
portfolio, %
Geographical area 30.6.2016 31.3.2016 31.12.2015 30.9.2015 30.6.2015
Helsinki business 92.6 92.4 90.1 89.3 88.3
district, %
Helsinki Metropolitan 86.1 85.3 85.7 83.5 83.7
Area, %
Turku, Tampere, Oulu, % 89.9 89.4 90.8 91.1 92.3
Russia, % 81.9 82.9 84.6 82.3 84.5
Total property 89.1 88.7 87.7 86.2 86.3
portfolio, %
DIVESTMENTS AND INVESTMENTS
Divestments M€
1.4.- 1.4.- 1.1.- 1.1.- 1.1.-
30.6.2016 30.6.2015 30.6.2016 30.6.2015 31.12.2015
Properties sold
Selling price 3.3 50.1 8.3 56.4 157.6
Profit/loss on sale* -0.2 -1.1 0.0 -1.4 -4.3
Balance sheet value 3.5 51.2 8.3 57.8 161.9
*) Includes sales costs
Investments M€
1.4.- 1.4.- 1.1.- 1.1.- 1.1.-
30.6.2016 30.6.2015 30.6.2016 30.6.201 31.12.201
5 5
Properties acquired -1.9 - -589.5 - -4.7
Modernisation investments -5.6 -9.7 -12.5 -20.7 -37.8
Property development -12.3 -14.7 -24.3 -25.5 -65.2
investments
Investments, total -19.7 -24.4 -626.2 -46.2 -107.7
Property development investments were mainly directed to the construction of
the Ratina shopping centre.
PROPERTY DEVELOPMENT
The balance sheet value of Sponda’s property development portfolio stood at EUR
149.4 million at the end of June 2016. Of this total, EUR 53.4 million was in
undeveloped land sites and the remaining EUR 95.9 million was tied up in
property development projects in progress. The value of unused building rights
is presented in the assets of the segment concerned for investment properties
that have a building, and as part of the Property Development segment for
building rights for unbuilt land.
Sponda’s property development operations comprise new construction projects and
the refurbishment of existing properties. At the end of the review period, the
Property Development unit had invested a total of EUR 24.3 million, of which
EUR 12.3 million was invested in April–June. The investments were primarily
directed to the construction of the Ratina shopping centre.
The construction of the Ratina shopping centre in Tampere began in April 2015.
The excavation, foundation and construction work on the Ratina shopping centre
has progressed according to plan. The construction of the frame of the
Valo-Ratina building will proceed with roofing work on the first section
starting in August 2016 and work on building service systems beginning in
September 2016. The shopping centre is expected to be completed in spring 2018.
The complex comprises a total of approximately 53,000 m² of retail and service
premises for more than 150 businesses. The project’s total investment,
including the land value, is estimated at approximately EUR 240 million, with
some EUR 73.3 million invested to date. The project’s target development margin
is 15% and the estimated net yield on cost is 7.5%. The shopping centre’s
signed and agreed lease agreements cover approximately 38% of the leasable
area.
At the end of June, Sponda announced it will develop an office and retail
complex at Tikkurila railway station in Vantaa. The construction of the
six-storey office and retail property at Väritehtaankatu 8 will be implemented
in two phases, the first of which began with excavation work in July 2016. The
first phase will comprise a total of 9,500 m² of leasable space, half of which
will be office space and the other half retail and service premises. The
property will have indoor and outdoor parking for 210 cars. The plan for the
project’s second phase involves the construction of approximately a further
4,000 m² of leasable business premises. The decision on commencing the second
phase will be made later based on the occupancy rate. The investment size for
the first phase is approximately EUR 31 million and the property is 57%
pre-let. The project’s yield on cost is estimated at approximately 7.3%. The
project will be completed in March 2018.
RISKS AND UNCERTAINTY FACTORS IN THE NEAR FUTURE
Sponda estimates that the risks and uncertainty factors in the current
financial year are related to the development of the Finnish and Russian
economies.
In Russia, these risks are related to the depreciation of the Russian rouble,
which may cause tenant insolvency and a decrease in property values. The
operations in Russia present a foreign exchange risk to Sponda. Changes in
exchange rates may cause exchange rate losses that have a negative impact on
the company’s financial result. The uncertain situation in the Russian market
may slow down the sale of Sponda’s properties in Russia in 2016.
The slow positive development of the Finnish economy may cause a decline in net
operating income and tenant insolvency.
For Sponda’s property development projects, the key risk is related to the
degree of success in leasing premises.
PROSPECTS FOR 2016
Sponda provides prospects for 2016 with regard to the development of the
company’s net operating income and adjusted EPRA Earnings. Sponda is revising
its prospects for 2016.
Net operating income
Sponda estimates that the net operating income for 2016 will amount to EUR
182-192 million (previously EUR 175-190 million). The change is primarily due
to the development of the occupancy rate being more favourable than expected,
as well as the timing of property sales in 2016.
Adjusted EPRA Earnings
Sponda estimates that company adjusted EPRA Earnings in 2016 will amount to EUR
102-114 million (previously EUR 94-110 million). The change is primarily due to
the development of the occupancy rate being more favourable than expected, as
well as the timing of property sales in 2016.
EVENTS AFTER THE PERIOD
In July 2016, Sponda sold the Solnechniy I shopping centre located in Moscow to
LLC IT Development at a price of approximately USD 11 million, corresponding to
the property's fair value measurement at the end of June. The sale of the
Solnechniy I shopping centre is a part of Sponda's strategy to sell the
properties it owns in Russia.
4 August 2016
Sponda Plc
Board of Directors
Additional information:
Kari Inkinen, President and CEO, tel. +358 20 431 3311 or +358 400 402 653,
Pia Arrhenius, SVP, Corporate Planning and IR, tel. +358 20 431 3454
or +358 40 527 4462
Niklas Nylander, CFO, tel. +358 20 431 3480 or +358 40 754 5961.
Distribution:
NASDAQ OMX Helsinki
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