2017-08-16 07:00:45 CEST
2017-08-16 07:00:45 CEST
REGULATED INFORMATION
SATO Oyj - Half Year financial report
SATO Corporation's half year financial report 1 January 2017-30 June 2017: Customer focus boosts occupancy rate increase
SATO Corporation, Half year financial report, 16(th) August 2017 at 8:00 a.m.
Summary of 1 January 2017-30 June 2017 (1 January 2016-30 June 2016)
* Profit before taxes stood at EUR 75.2 (108.9) million.
* Earnings per share were EUR 1.06 (1.66).
* The change in the fair value of rental apartments included in the result was
EUR 23.9 (63.0) million.
* Equity was EUR 1,322.1 (1,155.8) million, or EUR 23.35 (20.41) per share.
* Return on equity was 9.3 (16.1) per cent.
* Return on investment was 6.1 (9.1) per cent.
* Net sales stood at EUR 137.6 (126.5) million.
* Investments in rental apartments stood at EUR 62.6 (444.8) million.
* A total of 505 (2,412) rental apartments were acquired or completed.
* The occupancy rate in Finland was 96.3 (94.9) per cent.
* A total of 1,298 rental homes are under construction.
Summary of 1 April 2017-30 June 2017 (1 April 2016-30 June 2016)
* Profit before taxes stood at EUR 16.6 (45.6) million.
* Earnings per share were EUR 0.23 (0.68).
* The change in the fair value of rental apartments included in the result was
EUR -8.4 (23.1) million.
* Net sales stood at EUR 69.5 (65.4) million.
* Investments in rental apartments stood at EUR 36.2 (407.6) million.
* A total of 190 (2,182) rental apartments were acquired or completed.
* The occupancy rate in Finland was 96.5 (95.1) per cent.
* A total of 1,298 rental homes are under construction.
Operating environment
The Finnish economy has resumed growth. Near-term growth outlooks have been
adjusted upwards, to more than 2 per cent. The growth is mainly based on private
consumption and investments in construction. However, investments in production
machinery and equipment have also increased, and exports have picked up, which
facilitates economic growth and supports growth expectations. Inflation has
shown signs of acceleration, but the central banks' loose monetary policy is
keeping short reference rates at an unusually low level. Longer rates are
expected to increase. Consumer trust in the economy has remained at a record
high, and consumers are optimistic about the development of employment.
Demand for rental apartments has remained high. Housing construction is active
in SATO's main areas of operation. Many developing residential areas are being
built in the Helsinki metropolitan area, such as Kalasatama and Jätkäsaari in
Helsinki, Niittykumpu in Espoo, and Tikkurila and Martinlaakso in Vantaa.
Härmälänranta is being built in Tampere and the Kakola area in Turku, among
other sites. Due to the high number of new apartments to be completed, the
rental apartment market is in balance in many places and the rents have
increased moderately.
There is more activity in the real estate investment market than ever before
(KTI). The number of apartments purchased by investors has remained high, and
consumers also picked up the pace during the first half of the year. This was
evident in the increase in loan applications, among other aspects.
The Russian economy is expected to resume moderate growth.
CEO Saku Sipola:
-In the first half of 2017, our personnel succeeded in implementing our
customer-driven strategy. This reflected in the continuous increase in the
economic occupancy rate. The economic occupancy rate was 96,3 (94.9) for the
review period.
- The review period marked a good start for the new customer service
organisation, which was created in the "Customer first" development programme.
More than 30 new customer service professionals, together with experienced SATO
employees, have adopted an energetic, in-depth approach to further improving
customer service, which was also enhanced by the reorganisation of our customer
service centre, in addition to training provided for SATO employees.
- Changes in the exchange rate for the Russian ruble had a negative impact in
fair value of investment properties and thus also in the profitability in the
second quarter.
- SATO implemented its goal of changing its financial structure towards
unsecured financing by signing an agreement on a seven-year unsecured loan of
EUR 100 million with OP Corporate Bank on 29 May 2017. With regard to its key
conditions, this bilateral bank loan is in line with our outstanding unsecured
bonds and with our chosen direction. This financing agreement is a continuation
of our earlier loans with Aktia and EIP. After the review period, on 4 August
2017, SATO Corporation and Swedbank signed an agreement on an unsecured loan of
EUR 100 million. This strengthened the change in our financial structure
further.
- In June, SATO completed the Find a Home project, which was the first phase of
the implementation of our digital services. The project created a digital
service platform for home-seekers and a strong technological foundation for the
further development of digital services.
- The results of the first SATO Pulssi resident panel survey were published in
June. The survey examined the most important features of a rental home, with
responses from 178 SATO residents. In their opinion, location, price and
condition of the home are the most important qualities in choosing rental home.
The mobile customer panel helps us further deepen our resident insight. We also
wanted to provide our customers with a channel that would enable them to affect
the development of their living environments. In addition, the panel provides
with quick research information that supports our business development.
REVIEW PERIOD 1 January 2017-30 June 2017 (1 January 2016-30 June 2016)
Net sales and profit
In January-June 2017, consolidated net sales stood at EUR 137.6 (126.5) million,
showing a change of 8.8 per cent from the reference period. The growth was
mainly due to the favourable development of the occupancy rate.
The operating profit was EUR 98.6 (131.8) million. The operating profit without
the change in fair value of rental apartments was EUR 74.7 (68.8) million. The
change in fair value amounted to EUR 23.9 (63.0) million. The positive
development was mainly driven by an increase in the prices of apartments in
SATO's target areas and the deregulation of some sites. The exchange rate for
the Russian ruble had a positive effect in the first quarter, but a negative
effect in the second quarter.
Profit before taxes was EUR 75.2 (108.9) million. Cash flow from operations
(free cash flow after taxes excluding change in fair value) in January-June
amounted to EUR 33.7 (34.7) million.
Financial position and financing
The consolidated balance sheet total was EUR 3,565.7 (3,498.3) million at the
end of June. Equity was EUR 1,322.1 (1,155.8) million. Equity per share was EUR
23.35 (20.41).
The Group's equity ratio was 37.1 (33.0) per cent at the end of June as the
minimum target is an equity ratio of 35 per cent. EUR 54.2 million of new long-
term financing was withdrawn during the review period and the solvency ratio was
53.1 (56.1) per cent at the end of June. The improvement in key figures
reflecting the equity ratio and solvency ratio was due to an increase in value
of investment properties and a long-term good progress in profitability. SATO's
annual general meeting 8 March 2017 decided not to distribute any dividend for
year 2016.
The Group's annual return on equity was 9.3 (16.1) per cent. The return on
investment was 6.1 (9.1) per cent.
Interest-bearing liabilities at the end of June totalled EUR 1,895.1 (1,998.4)
million, of which loans subject to market terms accounted for EUR 1461.5
(1518.0) million. The average interest rate was 2.3 (2.5) per cent. Net
financing costs totalled EUR 23.4 (22.9) million.
The calculated impact of changes in the market value of interest hedging on
equity was EUR 9.5 (-12.1) million.
Housing assets and fair value
On 30 June 2017, SATO owned a total of 25,487 (25,437) apartments. A total of
505 rental apartments were acquired or completed. The total number of divested
rental apartments and shared ownership apartments redeemed by the owner
occupants was 269.
The fair value of rental apartments was EUR 3,430.5 (3,248.6) million at the end
of June. The change in the value of investment assets, including the rental
apartments acquired and divested during the review period, was EUR 47.2 (495.7)
million.
Of the value of apartments, the Helsinki metropolitan area accounted for some
79 per cent, Tampere and Turku made up 13 per cent, Jyväskylä and Oulu 4 per
cent and St Petersburg covered 4 per cent at the end of June.
Investments and divestments
Investments in rental apartments stood at EUR 62.6 (444.8) million, investments
in the Helsinki region represented 83 per cent. New apartments accounted for 75
per cent of all investments.
On 30 June 2017, binding purchase agreements in Finland totalled EUR 79.3
(163.4) million.
During the review period, 269 (128) rental apartments were divested in Finland.
Their total value was EUR 39.2 (12.2) million.
Rental activities
Following the apartments acquired and the increase in the occupancy rate, rental
income increased by 8.8 per cent to EUR 137.6 (126.5) million. The economic
occupancy rate of apartments in Finland was 96.3 (94.9) per cent on average, and
the tenant turnover rate was 38.5 (40.8) per cent. During the past 12 months,
the decrease in the tenant turnover rate and the increase in the occupancy rate
have been driven by activities carried out in accordance with the "Customer
first" strategy programme, closer and better quality communications with
customers, and more effective rental activities.
The average rent of SATO's rental apartments in Finland was EUR 16.61 (16.12)
per m(2) per month at the end of the review period. The average rent is
increased by investments in small apartments in growth centres. Rent increases
remained moderate.
Net rental income from apartments stood at EUR 88.5 (81.4) million, and the net
rental income rate was 5.4 (5.7) per cent on an annual level.
Property development
The book value of owned plot reserves totalled EUR 57.8 (64.0) million at the
end of June. The value of new plots acquired by the end of June totalled EUR
0.0 (9.6) million.
The permitted building volume for around 2,350 apartments is being developed for
the plots of the company's own stock of buildings. As a result, SATO can utilise
the existing infrastructure, and it allows for a denser urban structure and,
thereby, serves to ensure the availability of services.
In Finland, a total of 488 (98) rental homes and 57 (0) homes for sale were
completed. On 30 June 2017, a total of 1,298 (1,446) rental and 0 (76) owner-
occupied homes were under construction.
A total of EUR 19.0 (19.4) million was spent on repairing apartments and
improving their quality.
A total of 21 (76) new apartments were sold in January-June. At the end of the
review period, a total of 6 (13) completed apartments and 0 (19) apartments
under construction remained unsold. The total purchase value of these unsold
apartments amounted to EUR 4.0 (13.7) million. SATO has made a strategic
decision to discontinue its production of owner-occupied apartments and focus on
business operations related to rental apartments.
Business operations in St Petersburg
At the end of June, housing assets in St Petersburg totalled EUR 122.9 (118.7)
million. The total amount of binding purchase agreements was EUR 0.0 (0.0)
million.
At the end of June, SATO owned 534 (460) completed and 0 (74) homes under
construction in St Petersburg.
The economic occupancy rate of rental apartments was 87.6 (79.8) per cent on
average. The increase in the occupancy rate from the previous year was mainly
attributable to the positive development of the occupancy rate in the newest
buildings.
For the time being, SATO will refrain from making new investment decisions in
Russia.
Personnel
At the end of June, the Group employed 217 (166) people, of whom 197 (154) had a
permanent contract of employment. The average number of personnel was 197 (165)
in January-June.
PERIOD 1 April 2017-30 June 2017 (1 April 2016-30 June 2016)
Net sales and profit
In April-June 2017, consolidated net sales stood at EUR 69.5 (65.4) million,
showing a change of 6.3 per cent from the reference period.
The operating profit was EUR 28.3 (58.9) million. The operating profit without
the change in fair value of rental apartments was EUR 36.6 (35.7) million. The
change in fair value amounted to EUR -8.4 (23.2) million. The change in fair
value was negative mainly due to negative development of ruble exchange rate.
Profit before taxes was EUR 16.6 (45.6) million. Cash flow from operations (free
cash flow after taxes excluding change in fair value) in April-June amounted to
EUR 14.5 (13.8) million.
Housing assets and fair value
On 30 June 2017, SATO owned a total of 25,487 (25,437) apartments. A total of
190 rental apartments were acquired or completed. The total number of divested
rental apartments and shared ownership apartments redeemed by the owner
occupants was 152.
The fair value of rental apartments was EUR 3,430.5 (3,248.6) million at the end
of June. The change in the value of investment assets, including the rental
apartments acquired and divested during the review period, was EUR 16.3 (425.2)
million.
Of the value of homes, the Helsinki metropolitan area accounted for some 79 per
cent, Tampere and Turku made up 13 per cent, Jyväskylä and Oulu 4 per cent and
St Petersburg covered 4 per cent at the end of June.
Investments and divestments
Investments in rental apartments stood at EUR 36.2 (407.6) million, Investments
in the Helsinki region represented 82 per cent. New apartments accounted for 75
per cent of all investments.
On 30 June 2017, binding purchase agreements in Finland totalled EUR 79.3
(163.4) million.
During the review period, 152 (62) rental apartments were divested in Finland.
Their total value was EUR 10.1 (5.7) million.
Rental activities
Following the apartments acquired and the increase in the occupancy rate in
2016, rental income increased by 6.3 per cent to EUR 69.5 (65.4) million. The
economic occupancy rate of apartments in Finland was 96.5 (95.1) per cent on
average, and the rental apartment turnover rate was 39.9 (40.6) per cent.
The average rent of SATO's rental apartments in Finland was EUR 16.61 (16.12)
per m(2) per month at the end of the first half of the year.
Net rental income from apartments stood at EUR 45.4 (43.2) million, and the net
rental income rate was 5.4 (6.0) per cent on an annual level.
Property development
The book value of owned plot reserves totalled EUR 57.8 (64.0) million at the
end of June. The value of new plots acquired by the end of June totalled EUR
0.0 (5.7) million.
The permitted building volume for around 2,350 apartments is being developed for
the plots of the company's own stock of buildings.
In Finland, a total of 190 (66) rental homes and 0 (0) homes for sale were
completed. On 30 June 2017, a total of 1,298 (1,446) rental and 0 (76) owner-
occupied homes were under construction.
A total of EUR 10.2 (14.3) million was spent on repairing apartments and
improving their quality.
A total of 3 (20) new apartments were sold in April-June. At the end of the
period, a total of 6 (13) completed apartments and 0 (19) apartments under
construction remained unsold. The total purchase value of these unsold
apartments amounted to EUR 4.0 (13.7) million.
Business operations in St Petersburg
At the end of June, housing assets in St Petersburg totalled EUR 122.9 (118.7)
million. The total amount of binding purchase agreements was EUR 0.0 (0.0)
million.
At the end of June, SATO owned 534 (460) completed and 0 (74) homes under
construction in St Petersburg.
The economic occupancy rate of rental apartments was 87.5 (82.6) per cent on
average.
Personnel
At the end of June, the Group employed 217 (166) people, of whom 197 (154) had a
permanent contract of employment. The average number of personnel was 212 (164)
in April-June.
Events after the review period
On 4 August 2017, SATO Corporation and Swedbank signed an agreement on an
unsecured loan of EUR 100 million. Unsecured loan is a loan without any asset-
based security.
Future risks and uncertainties
The most significant risks in the rental of apartments are related to economic
cycles and fluctuations in demand. The positive development of the value of
SATO's housing assets and its rental capacity of apartments are secured by
focusing on growth centres.
Changes in energy efficiency and environmental requirements may increase the
repair costs of SATO's investment apartments.
Risks in housing investments in St Petersburg are associated with the operating
environment and currency risks. About four per cent of SATO's housing assets are
located in St Petersburg. For the time being, SATO will refrain from making new
investment decisions in Russia.
In accordance with the Group's financing policy, the aim is to ensure that at
least 60 per cent of all loans are fixed-rate loans. The Group has set an equity
ratio target of at least 35 per cent.
A more detailed description of risks and risk management is available in the
Group's annual report for 2016 and on the company's website at www.sato.fi.
Outlook
In the operating environment, SATO's business activities are mainly influenced
by consumer confidence, the development of purchasing power, the rent and price
development for apartments, general competition and interest rates.
The Finnish economy is expected to continue with its slow growth, and general
confidence is estimated to be higher than on average. Interest rates are
expected to remain low in 2017, which will have a positive impact on SATO's
financing costs. Long term interest rates are expected to increase.
According to the Bank of Finland, steady growth in the global economy and the
light financing conditions will support the positive development of the eurozone
in the near future, even though these expectations are shadowed by the
uncertainties related to Brexit, other political events that may slow down
economic growth, and concerns related to the state of the banking sector in
certain countries in the eurozone and to the outlook on public economy.
Growing urbanisation provides good long-term conditions for continued
investments in Finland. Net immigration is expected to be the highest form of
population increase in SATO's operating areas. Some 80 per cent of SATO's
housing assets are located in the Helsinki metropolitan area, where price
development is expected to be more positive than in the rest of Finland.
According to estimates of Pellervo Economic Research (PTT), prices and rents
will continue to increase, demand for owner occupied apartments will grow
higher, and the accelerating of housing sales will decrease the pressure in the
rental market.
SATO's net rental income is expected to remain at the 2016 level.
It will take several years to fulfil the estimated lack of 20,000 apartments in
the Helsinki Metropolitan Area and 3,000 apartments in Tampere. There is
constant demand for new housing investments. According to VTT Technical Research
Centre of Finland, Finland will require 25,000-30,000 new apartments every year
in its growth centres by 2040.
The Russian economy is expected to develop slowly.
SATO Corporation's shareholders on 1 August 2017
Largest shareholders and their holdings
shares %
· Balder Finska Otas AB (owner: Fastighets Ab Balder, 100%) 30,460,686 53.6%
· Stichting Depositary APG Strategic Real Estate Pool
(owner: Stichting Pensioenfonds ABP, >95%; 12,811,647 22.6%
manager: APG Asset Management NV)
· Elo Mutual Pension Insurance Company 7,233,081 12.7%
· The State Pension Fund 2,796,200 4.9%
· The Finnish Construction Trade Union 619,300 1.1%
· Valkila Erkka 390,000 0.7%
· Unemployment Fund of the Construction Sector 330,000 0.6%
· The Research Foundation of the Pulmonary Diseases 227,000 0.4%
· Rausanne Oy 194,920 0.3%
· Entelä Tuula 179,000 0.3%
· Others (92 shareholders) 1,541,233 2.8%
On 1 August 2017, SATO had 56,783,067 shares and 102 shareholders registered in
the book-entry system. The share turnover rate was 0.05 per cent for the period
1 January 2017- 1 August 2017.
Key figures, Group
Key financial 1-6 1-6 1-12 1-12 1-12 1-12 1-12
indicators /2017 /2016 /2016 /2015 /2014 /2013** /2012**
-------------------------------------------------------------------------------
Net sales,
MEUR 137.6 126.5 262.7 249.4 243.2 229.5 212.7
Net rental
income, MEUR 88.5 81.4 166.2 151.8 146.2 131.8 122.1
Net rental
income, % 5.4% 5.7% 5.6% 6.0% 6.3% 6.2% 6.3%
Profit before
taxes, MEUR 75.2 108.9 219.4 159.4 152.2 140.8 121.0
Balance sheet
total, MEUR 3,565.7 3,498.3 3,562.2 2,979.6 2,801.6 2,596.0 2,360.0
Shareholders'
equity, MEUR 1,322.1 1,155.8 1,252.6 993.2 892.3 823.0 693.0
Intrest
bearing
liabilities,
MEUR 1,895.1 1,998.4 1,943.0 1,676.2 1,584.9 1,501.3 1,375.3
Return on
invested
capital, %
(ROI) 6.1% 9.1% 9.1% 7.6% 7.7% 7.7% 7.7%
Return on
equity, %
(ROE) 9.3% 16.1% 15.6% 13.5% 14.0% 15.5% 13.5%
Equity ratio,
% 37.1% 33.0% 35.2% 33.3% 31.8% 31.7% 29.4%
Personnel,
average*** 197 165 170 172 165 156 152
Personnel at
the end of
period 217 166 175 170 169 156 150
Key indicators
per share
Earnings per
share, EUR 1.06 1.66 3.22 2.49 2.37 2.34 1.78
Equity per
share, EUR
**** 23.35 20.41 22.12 19.53 17.55 16.16 13.72
Number of
shares,
million * 56.6 56.6 56.6 50.8 50.8 50.8 50.8
Key figures
according to EPRA
recommendations and
operational cash
earnings
EPRA Earnings,
MEUR 37.5 33.1 69.5 64.5 65.1 62.7 44.4
EPRA Earnings
per share, EUR 0.66 0.64 1.28 1.27 1.28 1.23 0.87
EPRA Net Asset
Value,
MEUR***** 1,582.2 1,419.6 1,517.5 1,227.8 1,120.3 1,006.9 900.5
EPRA Net Asset
Value per
share,
EUR***** 27.94 25.07 26.80 24.15 22.04 19.80 17.71
Cash earnings,
MEUR 33.7 34.7 86.2 78.1 72.9 66.1 61.6
Cash earnings
per share, EUR 0.59 0.67 1.59 1.54 1.43 1.30 1.21
Quarter key
financial
indicators Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
-------------------------------------------------------------------------------
Net sales,
MEUR 69.5 68.1 67.9 68.3 65.4 61.1
Net rental
income, MEUR 45.4 43.1 40.9 44.7 43.2 38.2
Net rental
income, % 5.4% 5.2% 5.1% 5.7% 6.0% 5.7%
Operating
profit, MEUR 28.3 70.3 59.3 76.1 58.9 72.9
Profit and
losses from
changes of
fair value -8.4 32.3 22.7 38.5 23.2 39.8
Net financing
expenses, MEUR -11.7 -11.7 -12.7 -12.1 -13.3 -9.6
Profit before
taxes, MEUR 16.6 58.6 46.5 64.0 45.6 63.3
Earnings per
share, EUR 0.23 0.83 0.66 0.90 0.68 0.99
Average number
of shares,
million * 56.6 56.6 56.6 56.6 53.3 50.8
Gross
investments,
MEUR 62.6 26.4 63.8 64.0 407.6 37.2
as percentage
of net sales 90.0% 38.8% 73.2% 88.3% 510.4 % 47.4%
Key figures according to EPRA recommendations
and operational cash earnings
EPRA Earnings,
MEUR 18.3 19.2 16.3 20.1 16.4 16.7
EPRA Earnings
per share, EUR 0.32 0.34 0.29 0.36 0.31 0.33
Cash earnings,
MEUR 14.5 19.2 27.7 24.0 13.8 21.0
Cash earnings
per share, EUR 0.26 0.34 0.49 0.42 0.27 0.41
* The 160,000 shares held by the Group have
been deducted from the number of shares.
** Adoption of IAS 40 Investment properties -standard fair value model has
been taken into account retrospectively in key figures. Retrospectively
adjusted figures are unaudited.
*** Including
summer
trainees
**** Equity
excluding non-
controlling
interests
***** Includes
items valued at
their carrying
amount
More information:
Saku Sipola, President and CEO, tel. +358 201 34 4001
Markku Honkasalo, CFO, tel. +358 201 34 4226
www.sato.fi
APPENDICES
Half year financial report 1 January 2017 - 30 June 2017
Half year financial report presentation 1 January 2017 - 30 June 2017
SATO is one of Finland's leading lessors of rental apartments. SATO aims to
offer full options for rental housing and an excellent customer experience. At
the end of 2016, SATO owned a total of 25,300 rental apartments in Finland's
largest growth centres and in St Petersburg.
We contribute to sustainable development and initiative through our operations,
and engage in open interaction with our stakeholders in order to produce added
value. We operate over the long term and profitably. We increase the value of
housing assets through investments and divestments and through our repair
activities.
SATO Group's net sales in 2016 stood at EUR 263.0 million* in accordance with
the new reporting practices, its operating profit stood at EUR 267.2 million and
its profit before taxes was EUR 219.4 million. The value of SATO's investment
assets is EUR 3.4 billion.
*Net sales have been adjusted in accordance with the new reporting practices.
[]
© 2024 Nasdaq, Inc. All Rights Reserved |