2013-02-01 07:30:02 CET
2013-02-01 07:30:08 CET
REGULATED INFORMATION
Sponda - Financial Statement Release
Sponda Plc Financial Statements Bulletin 1 January - 31 December 2012
Sponda Plc Financial Statements Bulletin 1 February 2013 at 8:30
Sponda Plc Financial Statements Bulletin 1 January - 31 December 2012
Result of operations and financial position 1 January - 31 December 2012
(compared with 1 January - 31 December 2011)
-- Total revenue was EUR 264.6 (248.2) million, representing a 6.6% increase
on the reference period.
-- Net operating income increased by approximately 7%, totalling EUR 192.2
(179.4) million.
-- Operating profit was EUR 210.3 (209.6) million. This includes a fair value
change of EUR 33.0 (39.6) million.
-- Cash flow from operations per share was EUR 0.40 (0.37).
-- The fair value of the investment properties amounted to EUR 3,261.3
(3,165.7) million.
-- Net assets per share totalled EUR 4.27 (4.06).
-- The economic occupancy rate was 88.1% (88.2%).
-- Future prospects are provided with regard to the development of economic
occupancy rates and net operating income for the current financial year.
-- Net financing costs for the period totalled EUR -58.8 (-75.6) million.
Financial income and expenses include EUR 4.8 (-11.2) million in unrealised
change in the fair value of derivatives. Excluding the aforementioned
change in fair value, financial income and expenses totalled EUR -63.5
(-64.4) million.
-- The Board proposes to the Annual General Meeting that a dividend of 0.17
per share be paid.
Result of operations and financial position 1 October - 31 December 2012
(compared with 1 October - 31 December 2011)
-- Total revenue was EUR 66.4 (64.9) million.
-- Net operating income was EUR 47.4 (47.6) million.
-- Operating profit was EUR 69.5 (55.1) million. The operating profit includes
a fair value change of EUR 21.3 (6.8) million.
-- Cash flow from operations per share was EUR 0.12 (0.10).
-- Financial income and expenses amounted to EUR -14.4 (-20.4) million.
Financial income and expenses include EUR 0.7 (-3.7) million in unrealised
change in the fair value of derivatives. Excluding the aforementioned
change in fair value, financial income and expenses totalled EUR -15.1
(-16.7) million.
Key figures
10-12/2012 10-12/201 1-12/2012 1-12/2011
1
--------------------------------------------------------------------------------
Total revenue, M€ 66.4 64.9 264.6 248.2
Net operating income, M€ 47.4 47.6 192.2 179.4
Operating profit, M€ 69.5 55.1 210.3 209.6
Earnings per share, € 0.14 0.14 0.37 0.39
Cash flow from operations per 0.12 0.10 0.40 0.37
share, €
Net assets per share, € 4.27 4.06
Equity ratio, % 40 38
Interest cover ratio 2.8 2.7
Key figures according to EPRA Best Practices Recommendations
10-12/2012 10-12/2011 1-12/2012 1-12/2011
-----------------------------------------------------------------------------
EPRA Earnings, M€ 21.4 19.7 82.9 75.4
EPRA Earnings per share, € 0.08 0.07 0.29 0.27
EPRA NAV/share, € 5.12 4.84
EPRA Net Initial Yield (NIY), % 6.61 6.39
EPRA, "topped-up" NIY, % 6.63 6.40
President and CEO Kari Inkinen
Sponda achieved a strong result in 2012. Total revenue and net operating income
were the highest in the company's history, and the economic occupancy rate of
Sponda's investment properties remained stable despite the economic conditions.
Our strategy is geared towards profitable growth. In 2012, we kept a close eye
on market development and selected the focal points of our operations
accordingly. We improved the quality of our property portfolio further in 2012
by selling properties for over EUR 60 million. Our equity ratio remained stable
despite property development investments. As anticipated, the economic
occupancy rate remained largely unchanged from the end of 2011 despite the
challenging operating environment, thanks in no small part to our strengthened
rental organisation.
The final phase of the Citycenter project has progressed according to plan,
with the property now assigned to the portfolio of the Shopping Centres
segment. The project will be fully completed in spring 2013 once the remaining
tenant improvements are concluded. The Citycenter end of Keskuskatu will also
be converted into a pedestrian street by the City of Helsinki in the summer.
Tenant negotiations for the Ratina shopping centre are well underway. We have
raised our level of preparedness to begin construction and expect the project
to start in summer 2013.
Business conditions - Finland
The growth prospects of the Finnish economy did not improve at the end of 2012
despite the stabilisation of the eurozone crisis. The Finnish Ministry of
Finance adjusted its gross production forecasts to estimate a GDP decline of
-0.1% for 2012 and growth of 0.5% for 2013. Finnish exports fell by 1.7% in
2012, but are expected to increase by 1% this year. Forecasts indicate that the
growth rate of imports will be slightly below that of exports in 2013. Private
consumption increased by 1.5% last year. This year, private consumption is
expected to be weakened by the employment situation and tax increases. The
unemployment rate in 2012 was approximately 7.7%.
Real estate transactions were largely focused on the Helsinki metropolitan
area, with an emphasis on prime properties with steady cash flow. According to
an estimate by KTI Property Information, the transaction volume for 2012 was
EUR 2.1 billion, an increase of over 15% on the previous year (2011: EUR 1.8
billion). International investors represented slightly over 20% of the total
transaction volume, down from the year before.
According to preliminary information from Catella Property Oy, the vacancy
rates for office properties in the Helsinki metropolitan area have seen an
expected increase in late 2012. The primary reasons for this are the weak
economic conditions and the high rate of new construction. Vacancy rates in the
Helsinki metropolitan area stood at 11% at the end of 2012, compared to 10.2%
six months earlier. Vacancy rates also began to rise in central Helsinki in
late 2012, reaching 4.8% at the end of the year.
Rental demand in Helsinki's central business district was largely unchanged
through the year-end, with rental levels reaching record highs of over EUR
370/m²/year at the upper end of the market. Rental levels in other key
districts for office properties began to decline slightly. Rental levels are
expected to remain stable in 2013.
Over 120,000 m² of new office space was completed in the Helsinki metropolitan
area in 2012. A further 145,000 m² is currently under construction, most of
which is scheduled for completion in 2013.
Business conditions - Russia
According to the Bank of Finland's autumn forecast, Russian GDP growth slowed
down to 3.7% in 2012. The current forecast for Russian economic growth in 2013
is also 3.7%. Import growth in 2013 is estimated at approximately 10%. Private
consumption remains strong, but growth is expected to slow down.
The total transaction volume in the Russian property market in 2012 stood at
approximately USD 7 billion. Cushman & Wakefield estimates that the average
vacancy rate for office properties in Moscow was relatively stable throughout
2012 and stood at 11-12% at the end of the year. Vacancy rates are expected to
remain stable in 2013. New office construction in 2013 is estimated at some
600,000 m².
Rental levels were unchanged. The rents for high-end office properties remained
at approximately USD 1,200/m²/year. Rental levels were approximately USD 800/m²
for Class A office space and USD 450/m²/year for Class B office space. Rents
are expected to remain stable or increase slightly in 2013.
According to CB Richard Ellis, the market for office properties in St.
Petersburg is showing a moderate positive change. The average vacancy rate
declined slightly in 2012. The vacancy rates of Class A properties decreased
and stood at approximately 13% in September 2012. The vacancy rates of Class B
also fell slightly and stood at roughly 8% in September 2012.
Rents for Class A properties remained stable throughout 2012 despite the
decline in vacancy rates. In Class B properties, the fall in vacancy rates
contributed to a slight increase in rental levels. Some 200,000m² of new office
space was completed in 2012, representing 10% of the market total.
Operations and property assets 1 January - 31 December 2012
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 192.2
(179.4) million in 2012. Of this total, office and retail premises accounted
for 54%, shopping centres for 17%, logistics premises for 15%, Russia for 11%
and the Real Estate Funds unit for 3%.
On 31 December 2012, 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 least twice a year by external
experts to ensure that the parameters and values used in calculations are based
on market observations.
At the end of 2012, an external consultant assessed the values of Sponda's
investment properties in Finland and in Russia. The change in the fair value of
investment properties in 2012 was EUR 24.9 (39.0) million for the full year and
EUR 18.9 (7.7) million for October-December. The positive change in the value
in Finland was mainly due to changes in yield requirements. The fair value of
investment properties was assessed in Finland by Catella Property Oy and in
Russia by CB Richard Ellis. The changes in fair values are itemised in the
table “Valuation gains/losses on fair value assessment”.
Valuation gains/losses on fair value assessment
10-12/1 10-12/1 1-12/1 1-12/1
2 1 2 1
Changes in yield requirements (Finland) 22.6 2.5 20.9 16.2
Changes in yield requirements (Russia) 6.5 0.0 6.5 17.5
Development gains on property development -0.9 0.1 -0.7 8.2
projects
Modernisation investments -11.5 -13.3 -28.5 -50.6
Change in market rents and maintenance costs 5.7 12.4 26.4 44.7
(Finland)
Change in market rents and maintenance costs -1.6 1.7 -0.1 2.7
(Russia)
Change in currency exchange rates -1.9 4.2 0.4 0.4
Investment properties, total 18.9 7.7 24.9 39.0
Real estate funds 0.0 -1.5 0.6 -4.4
Realised share of fund profits 2.5 0.6 7.5 5.0
Group total 21.3 6.8 33.0 39.6
The changes in Sponda's investment property assets were as follows:
Investment Properties Total Office Shopping Logist Property Russia
1 Jan - 31 Dec 2012 and centres ics developmen
M€ retail t
Operating income 257.3 143.9 42.0 42.3 0.4 28.7
Maintenance costs -70.7 -39.0 -9.7 -13.6 -1.9 -6.5
--------------------------------------------------------------------------------
Net operating income 186.6 104.9 32.3 28.7 -1.5 22.2
Investment properties 3,165.7 1,644.0 586.1 449.0 262.0 224.6
on 1 January 2012
Capitalised interest 0.8 0.2 0.0 0.0 0.6 0.0
2012
Acquisitions 53.1 15.2 0.0 0.0 0.0 37.8
Investments 76.0 30.7 21.3 1.9 21.5 0.6
Transfers between 0.0 -1.5 135.3 0.0 -133.7 0.0
segments
Sales -59.3 -14.4 -0.6 -31.5 -12.7 0.0
Change in fair value 24.9 31.4 -5.3 -4.9 -2.6 6.4
--------------------------------------------------------------------------------
Investment properties 3,261.3 1,705.7 736.7 414.4 135.1 269.4
on 31 December 2012
Change in fair value, 0.8 1.9 -0.9 -1.1 -1.0 2.8
%
Weighted average 6.8 6.5 5.6 8.1 9.7
yield requirement %
Weighted average 6.5
yield requirement %,
Finland
Rental operations
The economic occupancy rates by type of property and geographical area were as
follows:
Type of property 31.12.12 30.9.12 30.6.12 31.3.12 31.12.11
Office and retail properties, % 89.4 89.3 89.2 88.7 88.4
Shopping centres, % 93.0 93.1 93.8 93.9 94.1
Logistics properties, % 75.6 76.7 78.0 78.1 78.1
Russia, % 95.4 93.5 99.0 98.7 98.7
Total property portfolio, % 88.1 88.0 88.9 88.4 88.2
Geographical area 31.12.12 30.9.12 30.6.12 31.3.12 31.12.11
Helsinki business district, % 88.3 87.9 87.8 87.9 85.6
Helsinki Metropolitan Area, % 85.0 85.5 86.2 85.6 86.2
Turku, Tampere, Oulu, % 95.7 94.8 94.2 94.3 96.1
Russia, % 95.4 93.5 99.0 98.7 98.7
Total property portfolio, % 88.1 88.0 88.9 88.4 88.2
Investments and divestments
In 2012, Sponda sold properties for a total of EUR 61.8 million and recorded a
profit of EUR 2.5 million on the sales transactions. The balance sheet value of
the properties sold was EUR 59.3 million. Sales of properties in the fourth
quarter totalled EUR 8.1 million, with a profit of EUR 0.8 million recorded on
the sales transactions. During the period under review, Sponda bought
properties for EUR 53.1 million. No properties were purchased in the final
quarter of the year.
Investments in property maintenance in 2012 totalled EUR 28.4 million, with EUR
11.4 million of this in the fourth quarter. The company invested EUR 47.5
million in property development, of which EUR 24.5 million was invested in
October-December. Property development investments were primarily directed to
the modernisation of the Citycenter property in Helsinki's central business
district and the development of an office property in Ruoholahti.
Cash flow and financing
Sponda's net cash flow from operations in the period under review totalled EUR
112.8 (99.2) million. Net cash flow from investing activities was EUR -75.3
(-222.9) million and the net cash flow from financing activities was EUR -34.4
(123.6) million. Net financing costs for the period totalled EUR -58.8 (-75.6)
million. Financial income and expenses include EUR 4.8 (-11.2) million in
unrealised change in the fair value of derivatives. Excluding the
aforementioned change in fair value, financial income and expenses totalled EUR
-63.5 (-64.4) million. Interest expenses of EUR 0.8 (3.6) million were
capitalised.
Sponda's equity ratio on 31 December 2012 was 40% (38%) and gearing was 122%
(135%). As of the beginning of 2013, Sponda will change its accounting
principles with regard to IAS 12 Income Taxes. The change will have a
1.3-1.5%-point positive effect on the Group's equity ratio.
Interest-bearing debt amounted to EUR 1,736.2 (1,754.8) million and the average
maturity of Sponda's loans was 2.8 (3.1) years. The average interest rate was
3.4% (4.0%) including interest derivatives. Fixed-rate and interest-hedged
loans accounted for 72% (77%) of the loan portfolio. The average interest-rate
period of the entire debt portfolio was 1.9 (2.2) years. The interest cover
ratio, which describes the company's solvency, was 2.8 (2.7).
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 December 2012 comprised EUR 675 million in
syndicated loans, EUR 326 million in bonds, EUR 251 million in issued
commercial papers, and EUR 485 million in loans from financial institutions.
Sponda had EUR 510 million in unused credit limits. Sponda Group had mortgaged
loans of EUR 141.8 million, or 4.0% of the consolidated balance sheet.
Sponda issued a EUR 95 million hybrid bond in November 2012. The coupon rate of
the bond is 6.75% per annum. The bond has no maturity, but the company may
exercise a redemption option after five years. The settlement date of the bond
was 5 December 2012.
A hybrid bond is an instrument that is subordinated to other debt obligations.
It is treated as equity in the IFRS financial statements. A hybrid bond does
not confer upon its holder the right to vote at shareholder meetings and does
not dilute the holdings of the current shareholders.
In conjunction with the hybrid bond issue, Sponda completed a partial
repurchase for its hybrid bond issued in 2008. Sponda repurchased a nominal
amount of EUR 37.2 million in exchange for cash, which represents 28.6% of the
original EUR 130 million notional amount issued in 2008. The repurchase price
was 102% of the nominal amount.
After completing the repurchase, Sponda has two hybrid bonds outstanding. The
first one, issued in 2008, amounts post-repurchase to EUR 92.8 million and is
callable on 27 June 2013. The new hybrid bond, announced 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
Sponda Plc's Shareholders' Nomination Board has decided to propose to the
Annual General Meeting on 18 March 2013 that the number of members of the Board
of Directors be confirmed as seven and that the current members, Klaus Cawén,
Tuula Entelä, Arja Talma and Raimo Valo, be re-elected, with Kaj-Gustaf Bergh,
Christian Elfving and Juha Laaksonen elected as new members.
The Nomination Board proposes to the Annual General Meeting that the members of
the Board of Directors elected in the Annual General Meeting be paid the
following annual remunerations for the term concluding at the 2014 Annual
General Meeting: Chairman of the Board, EUR 60,000, Vice Chairman of the Board,
EUR 36,000 and each member EUR 31,200. The Nomination Board further
proposes that all members of the Board of Directors be paid meeting fees as
follows: Chairman of the Board, EUR 1,000 per meeting and members of the Board,
EUR 600 per meeting. The Nomination Board proposes that members of the Board be
paid EUR 600 per committee meeting and the Chairman of the Audit Committee EUR
1,000 per Audit Committee meeting. The Nomination Board proposes that 40% of
the annual remuneration be paid in Sponda Plc shares acquired on the market.
The shares will be acquired within two weeks of the date of publication of the
interim report for the period 1 January-31 March 2013.
The three largest shareholders on 1 October 2012 were represented in the
Nomination Board:
Solidium Oy, represented by Kaj-Gustaf Bergh, Oy Palsk Ab
Ilmarinen Mutual Pension Insurance Company, Timo Ritakallio
Varma Mutual Pension Insurance Company, Risto Murto.
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
changes in rental agreements and leases already signed.
Comparable net operating income (excluding disposals) in 2013 is expected to
increase slightly from 2012. Reasons for this expected increase are rising rent
levels in Helsinki's central business district and the completion of the
company's property development projects.
Risks and uncertainty factors in the near future
Sponda believes that the risks in the current financial year are 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.
Annual General Meeting and Dividend
The Board of Directors of Sponda Plc is convening the Annual General Meeting on
18 March 2013 and proposes to the Annual General Meeting that a dividend of EUR
0.17 per share be paid.
1 February 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
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