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2007-10-18 09:40:00 CEST 2007-10-18 09:40:00 CEST REGULATED INFORMATION Technopolis - Quarterly reportTECHNOPOLIS GROUP INTERIM REPORT, January 1 - September 30, 2007Highlights of 1-9/2007 compared with the corresponding period of 2006: - The Group's net sales rose to EUR 41.2 million (EUR 30.6 million), an increase of 34.6 %. - The Group's EBITDA (Earnings before interest, taxes, depreciation and amortization) rose to EUR 21.5 million (EUR 16.2 million), an increase of 32.9 %. - Profit before taxes totaled EUR 23.6 million (EUR 24.1 million), a decrease of 1.9 %. - The effect on the pre-tax profit of the change in the fair value of investment property was EUR 9.3 million (EUR 11.9 million). Business The Group's net sales for the review period were EUR 41.2 million (EUR 30.6 million in 1-9/2006), representing growth of 34.6 %. EBITDA (Earnings before interest, taxes, depreciation and amortization) for the review period was EUR 21.5 million (EUR 16.2 million), an increase of 32.9 %. Operating profit for the review period was EUR 30.4 million (EUR 27.8 million). Profit before taxes for the review period was EUR 23.6 million (EUR 24.1 million). The balance sheet total was EUR 513.7 million (EUR 377.1 million), an increase of 36.2 %. The Group's equity to assets ratio at the end of the period was 36.9 % (39.5 %). The fair value of the Group's investment property at the end of the review period was EUR 464.2 million (EUR 355.1 million). The change in the fair value of investment property was due to the effect of the fair value of property bought and constructed, a reduction in the return requirements of the market, changes in future returns and modernization costs, the revaluation of property owned throughout the review period, and increases in acquisition cost recognized in separate companies during the review period. The effect on profit of the change in the fair value of investment property was EUR 9.3 million (EUR 11.9 million). The Group's total rentable surface area was 366,045 floor square meters at the end of the review period (303,171 floor square meters at September 30, 2006). The Group's average financial occupancy ratio at the end of the review period was 96.6 % (93.7 %). The financial occupancy ratio describes the rental revenue from the properties as a percentage of the combined total of the rent for the leased space and the estimated market rent for the vacant space. The Group's leases at the end of the review period totaled EUR 119.8 million (EUR 101.5 million). Group structure The Technopolis Group includes the parent company, Technopolis Plc, which has operations in Espoo, Jyväskylä, Lappeenranta, Oulu, Tampere and Vantaa, and its subsidiaries Innopoli Oy in Espoo (100 % owned), Kiinteistö Oy Innopoli II in Espoo (100 % owned), Medipolis Oy in Oulu (100 % owned) and other subsidiaries. The Group has executed a merger of the following Group subsidiaries with their respective parent companies: Technopolis JSP Ltd, Technopolis JSPF Oy, Technopolis Kareltek Ltd, Technopolis TSP Oy, Kiinteistö Oy Hermia Kymppi, Kiinteistö- ja Sijoitusyhtiö Joreco Oy, Kiinteistöosakeyhtiö Teknologiantie 11, Kiinteistö Oy Oulun Teknologiatalot, Kiinteistö Oy Oulun Moderava and Kiinteistö Oy Oulun Mediaani. In addition, the Group has commenced the merger of its subsidiary Medipolis Oy with its parent company. The purpose of the mergers is to increase the cost efficiency of the companies' operations and streamline Group administration. The parent company also has a minority holding in the associates Technocenter Kempele Oy (48.5 %), Iin Micropolis Ltd (25.7 %), Jyväskylä Innovation Ltd (24 %) and Lappeenranta Innovation Ltd (20 %). Technopolis Plc has a 13 % holding in Oulu Innovation Ltd. The Group also includes Technopolis Ventures Oy in Espoo (fully owned by Innopoli Oy). Technopolis Ventures Oy has the following wholly-owned subsidiaries: Technopolis Ventures Kareltek Ltd in Lappeenranta (100 % owned), Technopolis Ventures JSP Ltd in Jyväskylä (100 % owned) and Technopolis Ventures Oulutech Oy in Oulu (70 % owned). Technopolis Ventures Oy also has a 25 % holding in Otaniemi Development Ltd. Technopolis has two Russian companies in St. Petersburg, Technopolis Neudorf LLC and Technopolis St. Petersburg LLC, both fully owned by Technopolis. Principal investments and development projects In February, Technopolis decided to commence the construction of the Hermia 12 property in Tampere. The project's cost estimate is EUR 9 million and the gross area is 8,600 square meters, which includes a parking facility for 115 vehicles. 63 % of the facilities have so far been rented. Its total size is 5,000 floor square meters and it is expected to reach completion before the end of February 2008. In February, Technopolis reached a result in negotiations with the City of Oulu and the Northern Ostrobothnia Hospital District concerning the purchase of a total of 19,250 shares in Medipolis Oy. Following transactions with the said parties and minority shareholders, Technopolis is the sole owner of Medipolis Oy. In May, Technopolis launched the construction of the first stage of its technology center in Ruoholahti, Helsinki. The size of the stage is 6,600 floor square meters and the cost estimate is somewhat over EUR 20 million, which includes the costs of parking spaces and site costs. The first stage is estimated to be completed in August 2008. In May, Technopolis launched the construction of the first stage of its Lappeenranta City project. The stage measures 3,150 floor square meters and is estimated to cost approximately EUR 6.5 million. 64 % of the facilities have so far been rented. The planned completion is by the end of March 2008. In spring, Technopolis commenced planning a new technology center in the heart of Tampere, adjacent to the University of Tampere. In its meeting on June 4, 2007, the City Board of Tampere approved Technopolis's request to reserve a plot of land containing the building rights to around 30,000 floor square meters for Technopolis, for the purpose of implementing a new technology center. In June, Technopolis commenced the third and fourth extension stages of the Kontinkangas technology center in Oulu. The size of the third extension is 3,500 gross square meters and the investment totals approximately EUR 5 million. 84 % of the third extension have so far been rented. Its estimated time of completion is August 2008. The size of the fourth extension is 4,290 gross square meters and the investment totals approximately EUR 7.5 million. Its estimated time of completion is September 2008. Approximately 70 % of the fourth extension has been rented. In June, Technopolis Plc signed a preliminary agreement with the City of Espoo, the Etera Mutual Pension Insurance Company, and Sitra (the Finnish Innovation Fund) on the acquisition of the entire stock of Kiinteistö Oy Innopoli II (Innopoli II real estate company). The transaction price was EUR 54.2 million. About 19.4 % of the price was paid in new shares of Technopolis Plc and the rest in cash. Kiinteistö Oy Innopoli II comprises a building of 20,625 floor square meters and 1.9 hectares of land owned by the company and located in the Otaniemi district of the City of Espoo. Completed in 2002, the property houses some 90 high tech companies. Implementation of the fifth stage of the Technopolis Helsinki-Vantaa technology center commenced in September. The size of the stage is about 6,700 gross square meters and the investment will amount to about EUR 15 million. The fifth stage is expected to reach completion in late fall 2008. In June, Technopolis signed an agreement with Stockmann plc to lease some 4,300 square meters of office space in the Nevsky Centre shopping center currently under construction in St. Petersburg for the purpose of subletting it to its customer companies. Located in Nevski Prospekt in downtown St. Petersburg, the shopping center and office space will be completed in the spring of 2009. The district plan for the Pulkovo technology center in St. Petersburg is expected to be ready by the end of this year. The estimate is that the prerequisites for commencing work on the approximately 22,000-square-meter first stage will be met in the first half of 2008. Technopolis has commenced preliminary inquiries on launching technology centre operations in the Moscow area. A memorandum of understanding concerning the collaboration was signed with the City of Moscow in October. Events related to the Technopolis share At its meeting on January 4, 2007, the Board of Directors resolved, in accordance with the authorization granted by the Annual General Meeting of March 24, 2006, to increase the company's share capital by a maximum of EUR 1,162,652.40, a total of 687,960 shares, through accepting subscriptions by institutional investors. The purpose of the share offering was to finance the investments included in the company's investment plan, to secure the company's growth and to maintain the company's equity-to-assets ratio. The shares were offered in deviation from the pre-emptive subscription rights of shareholders for subscription by Finnish and international institutional investors. The share offering was implemented through a "book building" process, in which institutional investors subscribed for the shares to be issued in accordance with their subscription commitments made during the reception period for such commitments, January 3-4, 2007. The demand was about 3.5 times higher than the number of shares offered. The subscription price was set at EUR 7.70 per share. The increase in share capital was entered in the Trade Register on January 8, 2007, and trading in the shares began on January 9, 2007. In December 2006, a total of 26,131 Technopolis shares were subscribed with year 2001 options. An increase in the share capital of EUR 44,161.39 was entered in the Trade Register on February 13, 2007. Including earlier subscriptions, a total of 98,399 Technopolis shares were subscribed by April 30, 2007 with year 2001 options. An increase in share capital of EUR 166,294.31 was entered in the Trade Register on June 12, 2007. The subscription period for all of the year 2001 options expired on April 30, 2007. The Board of Directors of Technopolis decided in August, pursuant to an authorization by the Annual General Meeting of March 24, 2006, to issue through a share offering to the City of Espoo, the Etera Mutual Pension Insurance Company and Sitra (Finnish Innovation Fund) a total of 1,581,429 shares as payment for the shares in Kiinteistö Oy Innopoli II. The resulting share capital increase of EUR 2,672,615.01 was entered in the Trade Register on August 20, 2007. Trading in the new shares commenced on August 21, 2007. Following these increases, the Technopolis share capital is EUR 71,364,476.69 and there are 42,227,501 shares. Financing The Group's net financial expenses totaled EUR 6.8 million (EUR 3.7 million). The Group's balance sheet total was EUR 513.7 million (EUR 377.1 million), of which liabilities accounted for EUR 324.9 million (EUR 228.8 million). The Group's equity to assets ratio was 36.9 % (39.5 %). The Group's equity per share was EUR 4.47 (EUR 3.78). The Group's interest-bearing liabilities at the end of the review period were EUR 280.1 million (EUR 197.6 million). The average interest rate of loans was 4.68 % on September 30, 2007 (3.74 %). Technopolis supplements its financing with a EUR 60.0 million domestic commercial paper program which allows the company to issue commercial papers with a maturity of less than a year. The commercial papers in issue totaled EUR 35.2 million on September 30, 2007. Organization and personnel The Group Executive Board includes the President and CEO Pertti Huuskonen, the directors Jukka Akselin, Satu Eskelinen, Marjut Hannelin, Martti Launonen, Seppo Selmgren, Keith Silverang, Reijo Tauriainen, and Jarkko Ojala who commenced as CFO on August 1, 2007. The Group employed an average of 142 (93) people during the review period. In premises activities there were 50 (29) people, in business services 32 (20) people and in development services 60 (44) people. Decisions of the Annual General Meeting The Annual General Meeting of March 29, 2007 confirmed the consolidated and parent company income statements and balance sheets for the year 2006, released those responsible for accounts from further liability and decided on the distribution of a dividend of EUR 0.14 per share for the year that ended on December 31, 2006. The Board of Directors appointed by the Annual General Meeting comprises Timo Parmasuo, chairman, Matti Pennanen, vice chairman, and Pekka Korhonen, Erkki Veikkolainen and Juha Yli-Rajala. Pertti Huuskonen is the President and CEO of Technopolis. The Group's auditor is KPMG Oy Ab, Authorized Public Accountants, and the principally responsible auditor is Tapio Raappana, APA. The Annual General Meeting decided to amend the Group's articles of association. The amendments are largely the result of the Companies Act that came into force on September 1, 2006, and are mostly technical in nature. In addition, the Annual General meeting decided to authorize the Board of Directors to decide on acquiring the company's own shares, a share issue and granting options and other special rights entitling to shares of the company, granting options for the year 2007 to Group key personnel and annulment of the 2005C options. Evaluation of operational risks and uncertainty factors The most significant risks to Technopolis' business operations are mainly financial risks and customer risks. Technopolis' main financial risk is the interest rate risk on the loan portfolio. The objective of interest rate risk management is to lower or remove the negative impact of market rate fluctuations on the Group's performance, balance sheet and cash flow. The company's financing policy aims to diversify the interest rate risk of loan contracts over various loan periods on the basis of the market situation reigning at any particular time and the interest rate prognosis created in the company. If necessary, the company will employ forward rate agreements, interest rate swaps and interest rate options. In order to manage financial risk, Technopolis uses a wide range of financing companies and maintains a high capital adequacy level. Technopolis only uses derivatives to reduce or remove financial risks in the balance sheet. With the structure of the Technopolis loan portfolio at the end of the review period, a one percentage point increase in money market rates would increase interest rate costs by EUR 1.2 million per annum. Due to the interest rate risk related to loans, a policy of diversification has been followed. On September 30, 2007, 73.3 % of the loan portfolio was bound either to the 3-12 month Euribor rate or the base rate. Of the loans, 26.7 % were fixed-interest loans of 13 to 60 months. The average capital-weighted outstanding loan period was 9.9 years. Technopolis supplements its total financing with a EUR 60.0 million domestic commercial paper program which allows the company to issue commercial papers with a maturity of less than a year. The commercial papers in issue totaled EUR 35.2 million on September 30, 2007. Changes in the exchange rates between the Russian ruble and euro may have an effect on the company's financial situation and operations. Business transactions denominated in rubles are recorded at the exchange rate of the transaction date. Any translation differences are entered in the income statement under other operating expenses or financial income and expenses depending on the nature of the transaction. The purchase of land in St. Petersburg was financed in local currency. Currency risks have been minimized by applying a currency swap. Customer risk management aims to minimize the negative impact of any changes in customers' financial situation on the business and the company's profit. In customer risk management, the emphasis is on familiarity with the customer's business and active monitoring of customer information. As part of customer risk management, Technopolis's leases include rent collateral arrangements. Properties are insured with full value insurance. The Group's property portfolio is divided geographically between the Helsinki metropolitan area, Jyväskylä, Lappeenranta, Tampere and the Oulu region. No single customer accounts for more than 13 % of the Group's net sales. The Group has arranged the leases of its biggest customers to end at different times. The Group has a total of more than 1,000 customers, which operate in several different sectors. Technopolis is protected against business-cycle fluctuations by fixed leases which totaled EUR 119.8 million on September 30, 2007. Of the leases, 0.5 % will expire in 2007, 23.5 % will expire in 2008-2010, 33 % in 2011-2013, 5 % in 2014-2016, and 38 % in 2017 or later. In new building projects, Technopolis focuses on quality determination and the manageability of the property's entire lifecycle. In the design phase, all the building's maintenance and repair requirements are taken into account, with the aim of implementing environmentally friendly solutions in terms of energy consumption, the adaptability of office facilities, and recycling possibilities. In connection with property purchases, Technopolis carries out the normal property and environmental assessments before committing to the transaction. Changes in market return requirements may have a substantial effect on profit performance. When return requirements increase, the fair value of properties decreases and when they decrease, the fair value of properties increases. The changes have either an increasing or decreasing effect on the Group operating profit. Outlook for the future Technopolis management expects that demand for the company's high tech operating environments will be satisfactory in 2007 and that the occupancy ratio of its facilities and demand for their services will remain good. Technopolis estimates that its net sales and EBITDA for 2007 will grow by 22-26 % on the previous year. As part of its strategy for growth, Technopolis aims to operate in top high technology cities in Finland, as well as in Russia and 1-2 other countries by 2010. The Group aims to increase its net sales by an average of 15 % annually. It seeks to grow organically as well as through acquisitions. The Group's financial performance is dependent on trends in the general operating environment, in customer business, in the financial markets and in the return requirements for properties. Factors in these areas may affect the Group's result through changes in occupancy ratios, the use of services, financing costs, the fair values of properties and office rent levels. Oulu, October 18, 2007 TECHNOPOLIS PLC Board of Directors Pertti Huuskonen President and CEO Further information: Pertti Huuskonen, tel. +358 400 680 816 or +358 8 551 3213 A PDF version of this interim report is available at www.technopolis.fi. Requests for a printed version can be made to Teija Koskela, tel. +358 8 511 3242. Technopolis Plc has a news release service, which can be subscribed to on the Internet. Service subscribers will receive the Group's releases by email. Investment properties are measured at fair value. The direct internal and external costs of construction are included in the acquisition cost of investment properties during the period of construction, as provided for in the IAS 16 standard. Interest expenses on loans for the construction period are allocated to the acquisition cost of properties under construction, as provided for in the IAS 23 standard. The figures are unaudited. INCOME STATEMENT EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ 2007 2006 2007 2006 2006 Net sales 13.32 11.92 41.15 30.58 44.84 Other operating income 1) 1.30 0.78 3.91 2.17 3.86 Other operating expenses -6.71 -6.44 -23.51 -16.54 -26.00 Change in fair value of investment properties 3.92 1.41 9.34 11.92 16.07 Depreciation according to plan -0.17 -0.17 -0.49 -0.36 -0.56 Operating profit 11.66 7.49 30.40 27.77 38.21 Financial income and expense -2.49 -1.48 -6.77 -3.69 -5.17 Profit before taxes 9.17 6.02 23.63 24.08 33.05 Income taxes -2.52 -1.81 -6.33 -6.21 -8.46 Net profit for the period 6.65 4.21 17.30 17.88 24.59 Distribution of profit for the period: To parent company shareholders 6.64 4.11 17.27 17.37 23.74 To minority shareholders 0.01 0.10 0.03 0.51 0.85 BALANCE SHEET, ASSETS EUR MILLION Sept 30, Sept 30, Dec 31, 2007 2006 2006 Non-current assets Intangible assets 2.50 2.64 2.63 Tangible assets 14.77 3.40 2.44 Investment property 464.19 355.11 392.16 Investments 22.41 2.06 21.82 Deferred tax assets 1.83 1.79 1.77 Total non-current assets 505.70 365.00 420.83 Current assets 7.99 12.09 10.57 Total assets 513.69 377.09 431.39 BALANCE SHEET, SHAREHOLDERS' EQUITY AND LIABILITIES EUR million Equity Share capital 71.36 64.41 67.32 Premium fund 18.49 18.55 18.55 Other funds 19.44 0.03 7.37 Other shareholders' equity 0.17 0.32 Retained earnings 62.09 43.40 43.40 Net profit for the period 17.27 17.37 23.74 Parent company's shareholders' interests 188.66 143.92 160.70 Minority interests 0.16 4.41 4.58 Total shareholders' equity 188.82 148.33 165.28 Liabilities Long-term liabilities Interest-bearing liabilities 233.59 155.53 183.16 Non-interest-bearing liabilities 1.44 1.53 1.51 Deferred tax liabilities 32.87 18.47 22.68 Short-term liabilities Interest-bearing liabilities 46.53 42.03 46.33 Non-interest-bearing liabilities 10.44 11.20 12.44 Total liabilities 324.86 228.76 266.12 Total shareholders' equity and liabilities 513.69 377.09 431.39 CONSOLIDATED STATEMENT OF CASH FLOWS EUR million 1-9/ 1-9/ 1-12/ 2007 2006 2006 Cash flows from operating activities Operating profit 30.40 27.77 38.21 Change in fair value of investment properties -9.34 -11.92 -16.07 Depreciation 0.49 0.36 0.56 Other non-cash adjustments to operating profit 0.38 0.19 0.32 Increase/decrease in working capital 0.91 1.35 0.46 Interests received 0.63 0.03 0.29 Interests and fees paid -7.77 -3.81 -5.50 Income from other investments in non-current assets 0.01 0.01 Taxes paid -2.13 -1.35 -1.92 Net cash provided by operating activities 13.58 12.62 16.35 Cash flows from investing activities Investments in other securities -1.56 -0.02 Investments in investment properties -16.68 -26.30 -40.66 Investments in tangible and intangible assets -0.28 -0.16 -0.44 Repayments of loan receivables 0.01 0.03 0.04 Sales proceeds from other investments 0.04 0.09 0.15 Acquisition of subsidiaries -47.66 -7.53 -18.17 Net cash used in investing activities -66.13 -33.88 -59.10 Cash flows from financing activities Increase in long-term loans 67.89 15.00 31.49 Decrease in long-term loans -17.34 -8.91 -12.39 Dividends paid -5.68 -4.66 -4.66 Paid share issue 5.51 1.12 1.12 Change in short-term loans 0.40 22.79 27.60 Net cash provided by financing activities 50.77 25.33 43.16 Net increase/decrease in liquid assets -1.77 4.08 0.40 Liquid assets at beginning of period 2.80 2.40 2.40 Liquid assets at end of period 1.03 6.48 2.80 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY EUR million Share Premium Other Retained Minority Share- capital fund funds earnings interest holders' equity Shareholders' equity Dec 31, 2005 60.59 12.73 0.02 48.07 3.39 124.81 Share capital increase 3.82 3.82 Share offering 5.85 5.85 Dividend distribution -4.66 -4.66 Net profit for the period 17.37 0.50 17.87 Other changes -0.03 0.16 0.52 0.65 Shareholders' equity Sept 30, 2006 64.41 18.55 0.02 60.94 4.41 148.33 Share capital increase 2.91 2.91 Share offering 7.32 7.32 Net profit for the period 6.36 0.35 6.71 Other changes 0.03 0.16 -0.18 0.01 Shareholders' equity Dec 31, 2006 67.32 18.55 7.37 67.46 4.58 165.28 Share capital increase 0.21 0.21 Share offering 3.84 12.05 15.89 Dividend distribution -5.68 -5.68 Net profit for the period 17.27 0.03 17.30 Other changes -0.06 0.02 0.31 -4.44 -4.17 Shareholders' equity Sept. 30, 2007 71.36 18.49 19.44 79.36 0.16 188.82 KEY INDICATORS 1-9/ 1-9/ 1-12/ 2007 2006 2006 Change in net sales, % 34.6 33.6 41.3 Operating profit/net sales, % 73.9 90.8 85.2 Equity to assets ratio, % 36.9 39.5 38.5 Employees in Group companies 142 93 113 Gross expenditure on non-current assets, EUR 1,000 66,179 33,995 59,286 Net rental income of property portfolio, % 2) 7.8 7.9 7.7 Financial occupancy ratio, % 96.6 93.7 94.4 Earnings/share, EUR undiluted, EUR 0.42 0.47 0.63 diluted, EUR 0.42 0.47 0.63 Average (issue-adjusted) no. of shares undiluted 40,800,453 36,858,338 37,472,329 diluted 40,840,228 36,997,000 37,619,867 CONTINGENT LIABILITIES EUR million Sept 30, Sept 30, Dec 31, 2007 2006 2006 Pledges and guarantees on own debt Mortgages 200.22 186.49 195.50 Land lease liabilities 1.06 0.59 0.53 Other mortgage liabilities 0.93 0.93 0.93 Pledged investment properties 97.65 9.26 35.21 Interest rate and currency swaps: nominal values 7.28 8.00 11.26 market values 0.15 -0.09 -0.07 VAT return liability 20.96 17.84 13.27 Project liabilities 0.32 2.10 0.01 Collateral given on behalf of associates Guarantee 0.50 0.50 0.50 Other guarantee liabilities 0.10 0.10 0.10 Leasing liabilities, machinery and equipment 0.48 0.33 0.38 1) Other operating income comprises operating subsidies received for development services, for which the same amount of development service expenses have been recorded as operating expenses. 2) Does not include properties taken into use and acquired during the year. Distribution: OMX Nordic Exchange Helsinki Main news media www.technopolis.fi |
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