2015-07-31 11:02:01 CEST
2015-07-31 11:03:12 CEST
REGULATED INFORMATION
SATO Oyj - Interim report (Q1 and Q3)
SATO continued to grow steadily
Helsinki, Finland, 2015-07-31 11:02 CEST (GLOBE NEWSWIRE) -- SATO Corporation,
Interim report, July 31 2015, 12:02
Summary of 1 January - 30 June 2015 (1 January - 30 June 2014)
-- Profit before taxes stood at EUR 93.0 (96.7) million.
-- The change in the fair value of rental homes included in the result was EUR
44.7 (42.9) million.
-- Shareholders' e
quity stood at EUR 945.0 (859.5) million, or EUR 18.59 (16.91) per share.
-- The return on equity was 16.1% (18.4%).
-- Rental income amounted to EUR 125.0 (120.4) million.
-- Investments in rental homes stood at EUR 96.1 (100.8) million.
-- A total
of
485 (509) rental homes were acquired or completed.
-- The occupancy rate was 96.5% (96.5%).
Summary of 1 April - 30 June 2015 (1 April - 30 June 2014)
-- Profit before taxes stood at EUR 34.7 (46.0) million.
-- The change in the fair value of rental homes included in the result was EUR
8.1 (18.5) million.
-- Rental income amounted to EUR 62.9 (60.6) million.
-- Investments in rental homes stood at EUR 66.8 (41.6) million.
-- The occupancy rate was 96.6% (96.8%).
Operating environment
The Finnish economy is expected to remain weak in 2015. Consumer confidence has
decreased over the summer, and purchasing power continues to grow at a low
rate. Inflation and interest rates are expected to remain at exceptionally low
levels.
The supply of rental homes has increased in SATO's areas of operation, but more
small, low-cost rental homes are needed, particularly in the Helsinki region.
Rents are increasing moderately.
The demand for owner-occupied housing picked up during the spring, and the
prices of small homes are projected to remain stable in the Helsinki
Metropolitan Area throughout the year.
The Russian economy is predicted to decrease in 2015.
Erkka Valkila, President and CEO:
-- SATO's business operations continued to be stable in the second quarter.
Urbanisation and the growing number of small households create favourable
conditions for growth in the demand for rental homes and in SATO's
business. We continue to strongly invest in order to increase our offering
of rental homes.
-- The development of the Helsinki Metropolitan Area calls for new housing
policy initiatives and alternative housing models. To identify new
perspectives, SATO organised a discussion forum on housing policy in April.
SATO welcomes the government's plans to ease norms and accelerate the
construction of rental homes.
-- SATO launched the StudioHome concept in June to offer an alternative
solution to the shortage of small, affordable homes in the Helsinki
Metropolitan Area
. The concept combines high-quality living with affordable housing costs.
Each studio home is around 16 square metres in area and has a sleeping
loft. In addition, the residents have access to well-equipped common areas.
The model home being showcased at Housing Fair 2015 in Vantaa has been well
received.
Review period 1 January - 30 June 2015 (1 January - 30 June 2014)
Net sales and profit
The Group's net sales increased by 10.6 percent from the reference period and
totalled EUR 175.5 million (EUR 158.6 million in January-June 2014). Of the
net sales, rental income accounted for EUR 125.0 (120.4) million.
The operating profit was EUR 111.9 (116.1) million.
Profit before taxes stood at EUR 93.0 (96.7) million. The change in the fair
value of rental homes included in the result was EUR 44.7 (42.9) million. This
change was positively affected by the expiry of restrictions on some properties
and the increase in the value of the Russian rouble. The result was affected by
a cost provision of EUR 4.3 million made on the basis of a decision by the
Court of Appeal on the construction of Asunto Oy Helsingin Tila.
Financial position and financing
The consolidated balance sheet totalled EUR 2,909.6 (2,718.3) million at the
end of June. Equity was EUR 945.0 (859.5) million. Equity per share was EUR
18.59 (16.91).
The Group's equity ratio was 32.5 (31.7) percent at the end of June.
The Group's annualized return on equity was 16.1 (18.4) percent. The return on
investment was 8.8 (9.5) percent.
Interest-bearing liabilities at the end of June totalled EUR 1,654.0 (1,567.3)
million, of which market based loans accounted for EUR 1,282.7 (1,187.2)
million. The average interest rate was 2.4 (2.7) percent. Net financing costs
totalled EUR 18.8 (19.4) million.
EUR 97.7 million of new long-term financing was acquired during the review
period, and the Loan-to-Value (LTV) ratio was 56 (57) percent at the end of
June.
The calculated impact of changes in the market value of interest hedging was
EUR 7.8 (-9.3) million on equity and EUR 0.4 (0.3) million on profit before
taxes.
Housing assets and fair value
The development of the value of rental homes is a key factor for SATO. Its
housing assets are located in areas where the demand for rental homes will
increase in the long term. The allocation of building repairs is based on
life-cycle plans and repair-need specifications.
On 30 June 2015, SATO owned a total of 24,356 (24,061) homes. The number of
homes increased by 183 in January-June.
The fair value of rental homes was EUR 2,652.9 (2,443.4) million at the end of
June. The change in the fair value was EUR 124.9 (127.4) million.
Of the value of homes, the Helsinki region accounted for some 80 percent,
Tampere, Turku, Oulu and Jyväskylä made up 15 percent, and St. Petersburg
covered 5 percent at the end of June.
Investments and divestments
Investment activities prepare the ground for growth. Since 2000, SATO has
invested a total of EUR 2.0 billion in rental homes. SATO acquires and builds
entire rental buildings and single rental homes.
Investments in rental homes were EUR 96.1 (100.8) million. Investments in the
Helsinki Metropolitan Area represented 73 percent and investments in new homes
represented 75 percent of all investments in the first half of 2015.
At the end of June, binding purchase agreements in Finland totalled EUR 245.7
(82.6) million.
During the first half of the year, 302 (276) homes with a total value of EUR
19.4 (17.5) million were divested in Finland. The divested homes were mainly
located outside SATO's primary operating area.
Rental activities
Effective rental activities provide homeseekers with quick access to a home and
the Group with a steadily increasing cash flow. Rental services are mainly
offered by SATO's rental offices. In addition, web-based initiatives produce an
excellent match between customers' needs and homes available.
Rental income increased by 3.8 percent to EUR 125.0 (120.4) million. The
economic occupancy rate of homes in Finland was 96.5 (96.5) percent on average,
and the rental home turnover rate was 40.0 (38.0) percent.
The average rent per square metre was EUR 16.14 (15.54) per month in SATO's
rental homes in Finland and EUR 8.66 (9.54) per month in shared ownership homes
during the review period.
Net rental income from homes was EUR 78.6 (77.5) million, and the net rental
income rate was 6.0 (6.1) percent on an annual level.
Property development
Property development allows for new investments in rental homes and the
production of owner-occupied homes in Finland. The rental capacity and value of
rental homes owned by SATO are developed through renovation activities.
The book value of owned plot reserves totalled EUR 67.6 (76.2) million at the
end of June. The value of new plots acquired in January-June totalled EUR 6.6
(2.8) million.
In Finland, a total of 359 (384) rental homes and 99 (79) homes for sale were
completed. On 30 June 2015, a total of 878 (672) rental homes and 98 (247)
owner-occupied homes were under construction.
A total of EUR 23.9 (17.6) million was spent on repairing homes and improving
the quality of homes.
A total of 76 (146) owner-occupied homes were sold in January-June. At the end
of the review period, a total of 134 (234) owner occupied homes remained
unsold, of which 44 (90) were completed and 90 (140) were under construction.
The total purchase value of those unsold homes amounted to EUR 66.2 (105.0)
million. SATO mainly sells its owner-occupied homes after completion.
Business operations in St. Petersburg
The housing market in St. Petersburg corresponds to that of the whole of
Finland in terms of volume. SATO is following its growth strategy by investing
in rental homes in St. Petersburg. Homes are acquired in central locations in
the city.
At the end of June, housing assets in St. Petersburg totalled EUR 131.0 (130.3)
million. The total amount of binding purchase agreements was EUR 4.7 (22.3)
million.
On 30 June 2015, SATO owned 313 (237) completed and 217 (293) homes under
construction in St. Petersburg.
The economic occupancy rate of rental homes was 91.8 (96.0) percent on average.
Review period 1 April - 30 June 2015 (1 April - 30 June 2014)
Net sales and profit
The Group's net sales decreased by 6.9 percent year-on-year and totalled EUR
79.2 million (EUR 85.0 million in April-June 2014). Of the net sales, rental
income accounted for EUR 62.9 (60.6) million.
The operating profit was EUR 44.4 (56.0) million.
Profit before taxes was EUR 34.7 (46.0) million. The change in the fair value
of rental homes included in the result was EUR 8.1 (18.5) million.
EUR 55.0 million of new long-term financing was acquired during the review
period.
Housing assets and fair value
The number of homes increased by 115 in April-June. The change in the fair
value was EUR 67.6 (50.3) million.
Investments in rental homes totalled EUR 66.8 (41.6) million. A total of 183
(190) homes were divested in Finland at a total value of EUR 10.7 (9.9)
million.
Rental activities
Rental income increased by 3.8 percent to EUR 62.9 (60.6) million. The economic
occupancy rate of homes in Finland was 96.6 (96.8) percent on average, and the
rental home turnover rate was 40.4 (37.7) percent.
Net rental income from homes was EUR 38.6 (39.8) million, and the net rental
income rate in rental homes was 6.0 (6.1) percent on an annual level.
Property development
The value of new plots acquired in April-June totalled EUR 5.1 (2.8) million.
In Finland, a total of 205 (86) rental homes and 34 (45) owner-occupied homes
were completed.
A total of EUR 12.2 (9.4) million was spent on repairing homes and improving
the quality of homes.
A total of 42 (53) owner-occupied homes were sold in April-June.
Business operations in St. Petersburg
In April-June, the value of housing assets in St. Petersburg increased by EUR
5.8 (15.3) million. No new acquisitions were made.
The economic occupancy rate of rental homes was 91.6 (95.5) percent on average.
Credit rating
In May, SATO Corporation was issued a rating of Baa3 with a stable outlook by
Moody's Investor Service. A public credit rating enables the company to benefit
from international financial markets, which enhances the flexibility and
efficiency of financing arrangements. The rating also supports the intention to
increase the proportion of unsecured debt. A diverse funding base helps the
Company to keep its financial costs at a competitive level.
Appointment of President and CEO
Erkka Valkila, President and CEO of SATO, will retire in late 2015. In 2013, he
reached the age of retirement determined in his employment contract, but his
contract was extended by a period of two years. Saku Sipola, M.Sc. (Tech.), was
appointed as the new President and CEO in June. He will assume his duties
towards the end of the current year on a date to be announced later on.
Personnel
At the end of June, the Group employed 171 (158) people, of whom 163 were
full-time employees. The average number of personnel was 171 (161) in
April-June.
Legal proceedings
On the basis of the decision of the Court of Appeal, the company has made a
cost provision regarding the completion of the Asunto Oy Helsingin Tila
building project, reducing the profit for the review period. The company has
applied for leave to appeal to the Supreme Court.
Future risks and uncertainties
The economy continues to grow slowly, which is reflected in the housing and
financing markets.
The change in the market value of homes affects the value of SATO's housing
assets. The positive development of the value of housing assets and the rental
capacity of homes are secured by focusing on growth centres.
Risks in housing investment activities in St. Petersburg are associated with
the development of the market value of homes, fluctuations in exchange rates
and other changes in the operating environment. St. Petersburg is limited to a
maximum of 10 percent of the Group's housing assets. The current value of
housing assets in St. Petersburg accounts for 5 percent of the Group's entire
housing assets.
Changes in interest rates affect SATO's profit and balance sheet through
changes in interest expenses and the market value of interest hedging. In
accordance with the Group's financing policy, at least 60 percent of all loans
are fixed-rate loans. The adequacy of financing is monitored using a rolling
liquidity estimate.
A more detailed description of risks and risk management is available in the
Group's 2014 annual report and on the company's website at www.sato.fi.
Outlook
Finnish economic growth and the general climate of confidence are expected to
remain poor. In the operating environment, SATO's business operations are
mainly affected by consumer confidence, the rental and price development of
homes, and the interest rate.
The demand for rental homes is expected to remain good in SATO's areas of
operation, focusing mainly on small homes. Some 80 percent of SATO's housing
assets are located in the Helsinki region, where the rental and price
development is more stable than in other regions. SATO's product range
responds to the demand for small homes, with the average area of homes being 57
square metres.
Increasing urbanisation and immigration offer good potential for continued
investments in Finland. Owing to good demand and new investments, SATO's net
rental income is expected to improve from the year before. However, increases
in rents are expected to be more moderate than in the previous years.
Interest rates are estimated to remain low, which will have a positive impact
on SATO's business operations.
The Russian economy is expected to decrease. Some 5 percent of SATO's housing
assets are located in St. Petersburg. Due to the unstable economic and
political situation in Russia, SATO is refraining from making new investment
decisions in Russia for the time being.
SATO Corporation's shareholders on 24 July 2015
Largest shareholders and their holdings
Varma Mutual Pension Insurance Company 22.8%
APG Asset Management NV 22.8%
Balder Finska Otas AB 16.1%
Danske Bank Plc (nominee-registered) 13.7%
Elo Mutual Pension Insurance Company 12.9%
The State Pension Fund 5.0%
The Finnish Construction Trade Union 0.9%
Other (71 shareholders) 5.8%
100%
On 24 July 2015, SATO had 51,001,842 shares and 78 shareholders registered in
the book-entry system. The share turnover rate was 31.7 percent for the period
1 January - 24 July 2015.
Key figures, Group
KEY FINANCIAL INDICATORS 1-6/201 1-6/201 1-12/20 1-12/20 1-12/20 1-12/201
5 4 14 13** 12*** 1**
Net sales, MEUR 175.5 158.6 312.3 311.5 286.9 232.0
Profit before taxes, MEUR 93.0 96.7 152.0 141.0 121.0 174.0
Earnings per share, EUR 1.45 1.52 2.37 2.34 1.78 2.63
Balance sheet total, MEUR 2,909.6 2,718.3 2,802.0 2,596.0 2,360.0 2,167.0
Shareholders' equity, 945.1 860.7 892.0 823.0 693.0 635.0
MEUR
Intrest bearing 1,654.0 1,567.3 1,584.9 1,501.3 1,375.3 1,255.4
liabilities, MEUR
Equity per share, EUR 18.59 16.91 17.55 16.16 13.72 12.59
****
Number of shares, million 50.8 50.8 50.8 50.8 50.8 50.8
*
Return on invested 8.8 % 9.5 % 7.7 % 7.7 % 7.7 % 10.9 %
capital, % (ROI)
Return on equity, % (ROE) 16.1 % 18.4 % 14.0 % 15.5 % 13.5 % 22.8 %
Equity ratio, % 32.5 % 31.7 % 31.8 % 31.7 % 29.4 % 29.5 %
Personnel, average*** 172 161 165 156 152 137
Personnel at the end of 171 158 169 156 150 141
period
KEY FIGURES ACCORDING TO EPRA
RECOMMENDATIONS AND OPERATIONAL CASH
EARNINGS
EPRA Earnings, MEUR 31.8 36.4 65.1 62.7 44.4 43.2
EPRA Earnings per share, 0.63 0.72 1.28 1.23 0.87 0.85
EUR
EPRA Net Asset Value, 1,171.6 1,065.6 1,120.3 1,006.9 900.5 825.1
MEUR
EPRA Net Asset Value per 23.0 21.0 22.0 19.8 17.7 16.2
share, EUR
Cash earnings, MEUR 32.7 41.8 72.9 66.1 61.6 51.9
Cash earnings per share, 0.64 0.82 1.43 1.30 1.21 1.02
EUR
QUARTER KEY FINANCIAL Q2/2015 Q1/2015 Q4/2014 Q3/2014 Q2/2014 Q1/2014
INDICATORS
Net sales, MEUR 79.2 96.3 76.4 77.3 85.0 73.6
Operating profit, MEUR 44.4 67.5 38.4 36.8 56.0 60.1
Profit and losses from 8.1 36.6 16.1 4.8 18.5 24.4
changes of fair value
Net financing expenses, -9.6 -9.2 -9.9 -9.8 -9.9 -9.5
MEUR
Profit before taxes, MEUR 34.7 58.3 28.5 27.1 46.0 50.7
Earnings per share, EUR 0.55 0.90 0.42 0.42 0.72 0.80
Gross investments, MEUR 66.8 29.3 30.6 42.6 41.6 59.2
as percentage of net 84.4 % 30.4 % 40.1 % 55.1 % 48.9 % 80.4 %
sales
Economic occupancy rate, 96.6 % 96.4 % 97.9 % 97.8 % 96.8 % 96.2 %
%
KEY FIGURES ACCORDING TO EPRA
RECOMMENDATIONS AND OPERATIONAL CASH
EARNINGS
EPRA Earnings, MEUR 17.3 14.5 12.0 16.7 18.5 17.9
EPRA Earnings per share, 0.34 0.29 0.24 0.33 0.36 0.35
EUR
Cash earnings, MEUR 11.1 21.6 10.8 20.3 18.5 23.3
Cash earnings per share, 0.22 0.42 0.21 0.40 0.36 0.46
EUR
*) 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
interest
Additional information:
Erkka Valkila, President and CEO, tel. +358 201 34 4001, +358 50 62 050
Esa Neuvonen, CFO, tel. +358 201 34 4005, +358 40 5001 003
www.sato.fi
SATO is one of Finland's leading housing investment companies. SATO aims to
offer full options for rental housing and an excellent customer experience.
SATO owns a total of 24,400 rental homes 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 2014 totalled EUR 312.3 million, operating profit
stood at EUR 191.3 million, and profit before taxes was EUR 152.2 million. The
value of SATO's investment assets is EUR 2.7 billion.
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