2011-08-05 07:40:00 CEST
2011-08-05 07:40:07 CEST
REGULATED INFORMATION
Sponda - Interim report (Q1 and Q3)
Sponda Plc's interim report January-June 2011
Sponda Plc Interim report 5 August 2011 at 8.40 am
Sponda Plc's interim report January-June 2011
Sponda Plc's total revenue in the first six months of 2011 was EUR 120.2
million (30 June 2010: EUR 115.9 million). Net operating income after property
maintenance costs and direct costs for funds increased to EUR 84.5 (83.4)
million. Sponda's operating profit was EUR 107.4 (93.0) million. The economic
occupancy rate of Sponda's property portfolio remained at the previous
quarter's level, at 88.2% (87.3%).
Result of operations and financial position January-June 2011 (compared with
the same period in 2010)
-- Total revenue increased by approximately 4% from the reference period to
EUR 120.2 (115.9) million.
-- Net operating income was EUR 84.5 (83.4) million.
-- Operating profit improved to EUR 107.4 (93.0) million.
The operating profit includes a fair value change of EUR 28.3 (10.0)
million, and profit from the sale of Ovenia's shares of EUR 7.8 million.
-- Cash flow from operations per share was EUR 0.18 (0.19).
-- The fair value of the investment properties amounted to EUR 3,098.5
(2,798.0) million.
-- Net assets per share totalled EUR 3.92 (3.55).
-- -The economic occupancy rate was 88.2% (87.3%).
-- The prospects for 2011 remained unchanged, guidance on net operating income
growth was specified.
Result of operations and financial position April-June 2011 (compared with the
same period in 2010)
-- Total revenue was EUR 61.6 (58.3) million.
-- Net operating income was EUR 44.9 (43.0) million.
-- Operating profit improved to EUR 70.0 (56.7) million.
The operating profit includes a fair value change of EUR 25.2 (10.1)
million.
-- Cash flow from operations per share was EUR 0.11 (0.11).
Key figures
4-6/11 4-6/10 1-6/11 1-6/10 1-12/10
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Total revenue, M€ 61.6 58.3 120.2 115.9 232.1
Net operating income, M€ 44.9 43.0 84.5 83.4 168.7
Operating profit, M€ 70.0 56.7 107.4 93.0 216.2
Earnings per share, € 0.13 0.11 0.19 0.15 0.40
Cash flow from operations per share, € 0.11 0.11 0.18 0.19 0.37
Net assets per share, € 3.92 3.55 3.86
Equity ratio, % 38 37 39
Interest cover ratio 2.9 2.9 3.0
Key figures according to EPRA Best Practices Recommendations
4-6/11 4-6/10 1-6/11 1-6/10 1-12/10
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EPRA Earnings, M€ 20.0 18.9 37.2 34.5 74.0
EPRA Earnings per share, € 0.07 0.07 0.13 0.12 0.27
EPRA NAV/share, € 4.66 4.19 4.59
EPRA Net Initial Yield (NIY), % 6.32 N/A 6.37
EPRA, "topped-up" NIY, % 6.32 N/A 6.38
CEO Kari Inkinen
Sponda's net operating income increased in comparison with both the previous
quarter and the previous year. Growth is expected to continue until the end of
the year. Maintenance expenses returned to normal levels after an increase in
the early part of the year. The vacancy rate remained at the previous quarter's
level, but we believe we can reduce it further by the end of 2011.
The fair value change of our investment properties in the second quarter was
EUR 26.2 million, primarily due to increased market rents and a decline in
yield requirements. The increase in property valuation was particularly
pronounced in Russia.
Demand for business properties in the Helsinki central business district has
been active, and rents have increased relatively rapidly. Companies are
interested in higher-quality business premises than before. However, the
increased demand is still relatively vulnerable to any difficulties in the euro
area and in the exports and imports sector in Finland.
Sponda's strategy continues to be geared towards profitable growth. This means
that in Finland our focus is on property development projects and development
of our property portfolio by selling properties in non-strategic areas and by
continuing to acquire prime properties. In addition, we will invest 1-2% of the
value of our property portfolio in the maintenance and modernisation of our
strategic properties. In Russia, too, we are looking for potential acquisition
targets primarily among office and retail properties. Our target is still to
invest 10-20% of the company's balance sheet total in Russia. However, we will
take the unstable nature of the Russian market into account, and we have not
yet set a specific deadline to our investments.
Business conditions - Finland
Finnish GDP is estimated to grow by slightly less than 4% this year. The growth
is related primarily to industrial production and construction volume growth.
Inflation is estimated to be 3.5-4.0% in 2011.
Rents for office properties have increased particularly in the centre of
Helsinki and other prime locations. The prime rents of logistics properties
have increased moderately. According to KTI Property Information Ltd, the rents
for office space in the Helsinki central business area have increased by over
6%. In the outskirts of the Helsinki metropolitan area, high vacancy rates
prevent increases in rents.
The Finnish economy continues to develop positively, and this is also reflected
in the business property market. However, the uncertainty in the global economy
may have a negative impact on the Finnish economy and on the operation of
companies and therefore the vacancy rates of business premises.
Business conditions - Russia
The Russian economy is estimated to grow by over 4% in 2011. Economic growth is
supported particularly by increases in the price of oil and other commodities.
The property market has also developed positively. The vacancy rate of office
premises in Moscow is expected to decline, since there is a lack of good A
class office premises in particular. This has also lead to an increase in
rents. According to an estimate by Cushman & Wakefield, present lease
agreements for prime properties in Moscow are agreed at prices in excess off
USD 1000/m²/year. The office properties being built at the moment will be
completed in 2012-2013, after which there is no significant construction of new
buildings in sight in the Moscow central area. The vacancy rate of office
premises is expected to be at the level of 13%.
The yield requirements for properties in Moscow are declining, the average
present yield requirement for office properties being 9-10.5%. The transaction
market is still awaiting foreign investors, as almost all property deals are
made among local market participants.
In St. Petersburg, market changes have been moderate, and rises in prices and
rents have not been observed yet.
Operations and property assets January - June 2011
Sponda owns, leases and develops business properties in the Helsinki
metropolitan area and the largest cities in Finland, and in Russia. Sponda's
operations are organized in 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 84.5
(83.4) million in January-June. Office and retail premises accounted for 52%,
shopping centres for 18%, logistics premises for 16%, Russia for 11% and the
Real Estate Funds unit for 3%.
On 30 June 2011, Sponda had a total of 202 properties, with an aggregate
leasable area of approximately 1.5 million m². Of this, some 52% is office and
retail premises, 9% shopping centres and 36% logistics premises. 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.
An external consultant assessed the fair value of Sponda's properties at the
end of the second quarter of 2011. The change in fair value of the properties
in January-June 2011 was EUR 27.9 (8.5) million and in April-June alone EUR
26.2 (9.7) million. The positive change in the value was mainly due to changes
in market rents and a reduction in yield requirements. The changes in fair
values are itemised in the table ”Valuation gains/losses on fair value
assessment”. The fair value of investment properties is assessed in Finland by
Catella Property Oy and in Russia by CB Richard Ellis. The statements of the
property assessments conducted in Finland and Russia are available on Sponda's
website at www.sponda.fi>Investors>Performance.
Rental operations
The economic occupancy rates by type of property and geographical area were as
follows:
Type of property 30.6.2011 31.3.2011 31.12.2010 30.9.2010 30.6.2010
Office and retail, % 88.5 87.7 87.7 87.7 87.7
Shopping centres 94.3 97.4 98.1 98.2 96.7
Logistics, % 78.3 77.8 75.8 74.8 75.9
Russia % 98.3 98.3 96.4 93.3 91.5
Total property 88.2 88.2 88.0 87.4 87.3
portfolio, %
Geographical area 30.6.2011 31.3.2011 31.12.2010 30.9.2010 30.6.2010
Helsinki Business 86.7 88.0 89.8 89.4 88.6
District, %
Helsinki Metropolitan 86.0 85.3 84.3 84.3 84.2
Area, %
Turku, Tampere, Oulu 95.7 95.7 96.8 96.0 96.7
Russia 98.3 98.3 96.4 93.3 91.5
Total property 88.2 88.2 88.0 87.4 87.3
portfolio, %
The occupancy rate of the Shopping Centres unit declined from the first quarter
by approximately 3 percentage points. This was because an office tenant in
City-Center moved to another Sponda office property located elsewhere. Sponda's
properties are categorised according to their main use, and hence the entire
City-Center belongs to shopping centres.
Sponda's share and shareholders
The weighted average price of Sponda's share in January-June 2011 was EUR 3.90.
The highest quotation on NASDAQ OMX Helsinki Ltd was EUR 4.12 and the lowest
EUR 3.51. Turnover during the year totalled 58.9 million shares or EUR 229.7
million. The closing price of the share on 30.06.11 was EUR 4.01 and the market
capitalisation of the company's share capital was EUR 1,089.2 million.
The Annual General Meeting on 16.03.11 authorised the Board of Directors to
purchasethe company's own shares. The authorisation is valid until the next
Annual General Meeting.Sponda's Board of Directors decided to pay a part of the
purchase price of Fennia quarterthrough an issue of 5,500,000 new shares in
Sponda directed to Suomi Mutual basedon the share issue. Suomi Mutual
subscribed for all the shares at a subscriptionprice of EUR 4.00 per share.
New shares were incorporated in the book-entry system and became subject to
public trading on the official list of Nasdaq OMX Helsinki Ltd on 6 May 2011.
Sponda issued the following flagging notices in January-June 2011:
-- 29.4.2011:
Solidium Oy announced that its holding of shares represented 14.89 % of the
total number of shares and votes in Sponda Plc.
Prospects
Sponda expects the vacancy rates of its investment properties to continue
falling in 2011. This assessment is based the 2011 growth forecasts for the
Finnish economy and increased demand for properties in prime locations.
Net operating income in 2011 is expected to increase by over 4% in comparison
with 2010. This expected increase is based on the predicted fall in vacancy
rates, the completion of property development projects during the year and
property acquisitions.
Risks and uncertainty factors in the near future
Sponda believes that the key risks and uncertainty factors in the current
financial period arise from the possibility of the economy growing at a slower
rate than expected and relate to a decline in economic occupancy rates and a
fall in rental income resulting from the insolvency of tenants.
The Finnish economy continues to develop positively, and this is reflected in
the business property market. However, the uncertainty in the global economy
may have an impact on the Finnish economy and on the operation of companies and
therefore increase the vacancy rates of business premises.
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.
5.8.2011
Sponda Plc
Board
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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