Technopolis - Half Year financial report

Technopolis Group Half-Year Financial Report January–June 2017

TECHNOPOLIS PLC            HALF YEAR FINANCIAL REPORT               August 29, 2017 at 9:00 a.m.

Technopolis Group Half-Year Financial Report January–June 2017

STRONG NUMBERS ACROSS THE BOARD

H1/2017

- Net sales in January–June up 6.9% y-o-y to EUR 90.1 (84.3) million
- EBITDA up 8.2% y-o-y to EUR 49.1 (45.4) million
- Financial occupancy rate rose to 94.4% (93.4%)
- EPRA Earnings up 14.6% y-o-y to EUR 30.1 (26.3) million
- EPRA Earnings per share were EUR 0.19 (0.22)
- EPRA NAV per share was EUR 4.30 (4.19)
- Fair value of investment properties at the end of the period was EUR 1,631.5 (12/16: 1,624.2) million
- Technopolis released its revised strategy and new financial targets at the beginning of June

Q2/2017

- Net sales in Q2/17 up 5.9% y-o-y to EUR 45.8 (43.2) million
- EBITDA up 8.7% y-o-y to EUR 25.5 (23.5) million
- EPRA Earnings up 14.3% y-o-y to EUR 16.0 (14.0) million
- EPRA Earnings per share were EUR 0.10 (0.12)

The numbers in brackets refer to a value in the corresponding period a year earlier unless otherwise stated. 

Key Indicators
  

	Q2/ 2017	Q2/ 2016	Change %	H1/ 2017	H1/ 2016	Change %	2016
FINANCIAL (IFRS)
Net sales, EURm	45.8	43.2	5.9	90.1	84.3	6.9	172.1
EBITDA, EURm	25.5	23.5	8.7	49.1	45.4	8.2	93.1
Equity ratio, %	-	-	-	43.9	36.5	-	41.5
Loan-to-value (LTV), %	-	-	-	53.2	59.4	-	58.2
FINANCIAL (EPRA)
EPRA Earnings, EURm	16.0	14.0	14.3	30.1	26.3	14.6	52.6
EPRA Earnings / share, EUR	0.10	0.12	-12.5	0.19	0.22	-12.2	0.40
Return on equity, %*	-	-	-	9.6	10.0	-	8.6
Financial occupancy rate, %	-	-	-	94.4	93.4	-	93.4
Net rental yield, %	-	-	-	7.0	7.3	-	7.4
EPRA NAV / share, EUR	-	-	-	4.30	4.19	2.6	4.24
* Rolling 12 months. Based on EPRA Earnings.
Note: Share related indicators have been adjusted for the rights issue in September 2016.

  
EPRA (European Public Real Estate Association) Earnings do not include unrealized exchange rate gains and losses, fair value changes or any non-recurring items, such as gains and losses on disposals.

The guidelines of the European Securities and Markets Authority (ESMA) regarding Alternative Performance Measures (APMs, performance measures not based on financial statements standards) entered into force in July, 2016. Technopolis reports APMs, such as EPRA performance measures, to reflect the underlying business performance and to enhance comparability between financial periods. APMs may not be considered as a substitute for measures of performance in accordance with IFRS.

Near-Term Outlook Unchanged

Technopolis is keeping its near-term outlook unchanged. The company expects its net sales and EBITDA to improve from 2016 based on its current investment property portfolio and foreign exchange rates.

The Group’s financial performance depends on the development of the overall business environment, customer operations, financial markets, market yields, and exchange rates. Furthermore, any changes in the property portfolio may have an impact on the guidance.

From the CEO

“We had a very solid first half both in terms of net sales growth and profitability. Our net sales in January–June grew nearly 7 per cent year-on-year and Group EBITDA over 8 per cent. And as pleased as I am about this, we must remember that the Gårda acquisition in Gothenburg, the completion of a new building on our Yliopistonrinne campus in Tampere and the completion of our Delta campus in Vilnius all had a positive influence on these numbers. Rising occupancy rates, especially in Finland, also gave us a positive push. Like-for-like growth rates for the first half of the year were 4.9% and 6.0% for Group net sales and EBITDA, respectively. Fair value changes on investment properties were EUR 9.6 (-1.5) million, which in turn was a significant contributor on the operating profit level.

Another highlight of the first six months was the finalization of a thorough strategy review process that we worked on the entire spring. To summarize, the focus of the revised strategy is shareholder value creation.

In recent years we have heavily invested in building up our network in the Baltic Sea area and in the fine-tuning of our business concept. We can now leverage the platform we have built and move more towards a more organic growth phase. Firstly, we will accelerate organic expansion of current campuses; secondly we will focus on the expansion and increasing profitability of our service business; and thirdly, we will start a serious build-up of our UMA coworking network. We will continue selective acquisition activity as opportunities arise.

In total, we expect to spend EUR 200–250 million on organic development projects over the 2017–2020 timeframe. Of this amount, projects worth nearly EUR 130 million in total are either completed or under construction. But, to put the potential in perspective, we currently have a total rentable area of 758,200 square meters and our existing building rights enable approximately a 60% increase in that. So, there is plenty of growth potential for the coming years along the organic growth path. Also, we are in a position, thanks to both improving market conditions and technical readiness, to start a number of projects with rather aggressive timetables. In the second quarter, we started an Aviapolis expansion project in Vantaa, Finland. This EUR 15.1 million project was launched in June and is due for completion in November 2018.

Our service business is playing an increasingly important role in our business, and it continues to grow steadily, even faster than planned. Services are rapidly becoming a material contributor to our numbers, reaching EUR 12.8 million in service income (+16.7% y-o-y growth) and EUR 1.6 million in EBITDA (+81.0% y-o-y growth) in the first half of the year. Our target is to grow the service business to 20% of Group’s net sales by 2020 and we nearly reached 15% penetration now in the second quarter. Our best-performing units show a penetration of clearly above 20%. The EBITDA margin target for services is 20%. In Q2, we were at 13.4% (8.3%). All product groups and campuses showed an improvement in their service margin in the first half of the year.

We have allocated approximately EUR 30 million for the next five years to the growth of the UMA network. We will be ready and able to move fast once good locations are found. The plan is to open 20 UMAs by the end of 2020.

As I mentioned, selected acquisitions will also play a role, but the  idea is to invest in emerging hot-spots in assets that secure the organic development potential for the years extending beyond our current strategy period. We foresee spending EUR 100–200 million for acquisitions, should compelling value creation opportunities present themselves.

We have also noted that the market and our sector are being bolstered by a macroeconomic tail-wind for the first time in a long time. Finland, in particular, has shown signs of robust economic performance. This is visible, for example, in rising occupancy rates supported by higher demand and a decline in market yields, and all this translates positively into our financial performance.”

Additional information:
Keith Silverang
CEO
tel. +358 40 566 7785


Webcast on August 29 at 10:00 a.m.

The webcast briefing in English for investors, analysts and media will be held today on August 29 at 10:00 a.m. Finnish time. The link to the webcast is www.technopolis.fi/webcast. The other details regarding conference call and webcast can be found on the publication release.

Technopolis Q3 2017 results will be published on October 31, 2017.

 

 

Technopolis provides the best addresses for success in six countries in the Nordic-Baltic region. The company develops, owns and operates a chain of 20 smart business parks that combine services with flexible and modern office space. The company’s core value is to continuously exceed customer expectations by providing outstanding solutions to 1,700 companies and their 50,000 employees in Finland, Sweden, Norway, Estonia, Russia and Lithuania. The Technopolis Plc share (TPS1V) is listed on Nasdaq Helsinki.

 

 

 

Attachments:

Half Year Financial Report_eng.pdf