Sponda Plc Financial Statements Bulletin 4 February 2005, at 9 am

Transcription

1 Sponda Plc Financial Statements Bulletin 4 February 2005, at 9 am SPONDA S RESULT IMPROVED 10 % IN 2004 Sponda Group s result in 2004 was better than the previous year s due to profits on property sales. The result of leasing operations weakened slightly on the previous year. Result in brief (comparison period is January-December 2003): - Sponda derives its revenue from rental income. Total revenue in 2004 was EUR 99.2 (100.4) million. The economic occupancy rate decreased by 1.1 % to 87.5 % (88.6 %) at the end of the year. Net operating income was EUR 74.5 (76.1) million. - The operating profit was EUR 68.1 (62.7) million. This included a total profit of EUR 13.8 million on property sales. - Earnings per share (EPS) were EUR 0.43 (0.39). The Board of Directors proposes a dividend of EUR 0.50 (0.30) per share. - Sponda Group s net profit for 2004 was EUR 33.8 (30.7) million. The book value of Sponda s property portfolio on the balance sheet date was EUR ( ) million and the balance sheet totalled EUR ( ) million. The market value of the property portfolio was EUR 1.22 (1.24) billion. Net assets per share before deductions for deferred tax amounted to EUR 7.92 (8.35). Net assets per share after deductions for deferred tax amounted to EUR 7.54 (7.76). Shareholders equity per share was EUR 6.45 (6.33). Cash flow from leasing operations in 2005 is forecast to remain at the 2004 level. The economic occupancy rate of the properties is expected to reach or slightly exceed 2004 levels. Rent levels are forecast to remain stable. Business conditions Forecasts expect the Finnish economy to grow by an annual 3 % between 2004 and The outlook for employment has improved slightly and in 2004 unemployment was 8.8 %. according to Statistics Finland. Inflation is forecast to rise during 2005 to 1.3 % on average. while the real purchasing power of households is expected to grow by 2.3 % and private consumption by 3.0 %. The improvement in the economy has not raised demand for office premises, the vacancy rate of which is rising. In 2004 the vacancy rate throughout the Helsinki metropolitan area was approximately 9 % with the situation worst in the city of Espoo and the Pitäjänmäki district of Helsinki. Companies tend to prefer modern office premises in which space is used efficiently. Demand for retail space continues to be lively despite an increase in supply in the Helsinki metropolitan area. The occupancy rate of logistics premises corresponds with last year s level. Rent levels for office premises have remained stable in the centre of Helsinki but in Espoo the pressure to reduce rents has been

2 considerable. Rent levels for retail and logistics premises are stable. Leasing activities Net operating income from Sponda s properties totalled EUR 74.5 (76.1) million, of which 70 % was derived from office premises, 4 % from retail premises and 26 % from logistics properties. The economic occupancy rate of Sponda s entire property portfolio decreased on the previous year to 87.5 % (88.6 %), but improved slightly during the final quarter. The economic occupancy rate was 85.5 % (87.9 %) for Sponda s office premises, 96.0 % (93.6 %) for the company s retail premises, and 92.0 % (89.7 %) for its logistics premises. The value of Sponda s portfolio of leasing contracts on 31 December 2004 was EUR 474 (406) million and the average length of the contracts was 4.6 (3.7) years. Altogether 193 contracts were signed. This included 63 ( m2) renewed contracts and 130 ( m2) new contracts, totalling approximately m2. The number of expired contracts was 223 ( m2). Rent levels in Sponda s office premises in Länsiväylä (Espoo) and the area along Ringroad 1 decreased by %. In Helsinki Business District, rent levels fell by about 10 % in the Kaartinkaupunki district but remained unchanged in the City-Center complex. Rent levels in Sponda s own retail and logistics premises were stable. Property portfolio The market value of Sponda s property portfolio on 31 December 2004 was EUR 1.22 (1.24) billion. The comparable change of the market value in the portfolio value was approximately EUR million and 1.9 %. Roughly half of this change was due new accounting principles resulting from the adoption of IFRS, and the rest to changes in rent levels and the occupancy rate. Sponda owns altogether 87 properties, 45 of which are office buildings and 10 are used for retail purposes. The portfolio also includes 32 logistics properties. The aggregate leasable area of these properties is m2, comprising m2 of office space (49 % of total leasable area), m2 (3 %) of retail premises, and m2 (48 %) of logistics properties. Maintenance and repairs Sponda s investments in maintenance and upgrading of its real estate totalled EUR 31.1 (14.2) million in 2004.

3 The office floors in the City-Center building are being renovated and will completed in spring In 2004 Sponda invested EUR 15.5 million in renovations of leased premises based on leasing agreements. The bulk of this work (EUR 11.8 million) was done at the Havis Business Center, where the space previously used by a bank was converted into restaurants and a conference centre. Property acquisitions and sales Sponda bought three office buildings from Elisa Corporation for altogether EUR 25.5 million. These buildings, located at Korkeavuorenkatu 35 and 37 and at Kasarmikatu 36, form a complete entity through the block, supporting Sponda s strategic objectives in the Kaartinkaupunki distict. In April 2004 Sponda sold the office building at Eteläesplanadi 22 for EUR 33 million to Tapio Mutual Pension Insurance Company. Sponda recorded a profit of EUR 11.7 million on this deal. Sponda also sold other properties totalling EUR 3.5 million during the year, entering a total profit on these deals of EUR 2.1 million. Property improvements Sponda s most important development projects at the moment are City- Center, Havis Business Center and the Honkatalo building in Hakkila (Vantaa). Renewal of the City-Center complex continued with work concentrating on the inside of the building. At the tunnel level Arcade I is complete and its new retail stores opened. The office floors are in the process of being renovated with completion scheduled for spring The façade plan has been on public display and it goes before Helsinki s City Planning Board in February The estimated completion date for the project in assuming the plan is approved in autumn The underground service access tunnel is expected to be complete at the end of 2008, allowing Keskuskatu street to be converted into a pedestrian precinct. A restaurant and conference centre called Bank was opened in the Havis Business Center in Kaartinkaupunki in October. The Havis Business Center, with a total area of almost m2, comprises the buildings at Unioninkatu 18, 20, 22 and 24 and Fabianinkatu 23. Further development of this site requires a change in the zoning plan. Financing Financial income and expenses totalled EUR (-23.1) million. Sponda s equity ratio at the close of the period was 45.5 % (45.4 %). Interest-bearing debt amounted to EUR (582.8) million and net interest expenses were EUR 26.5 (22.8) million. The average maturity of Sponda s loans was 3.7 (2.6) years, the average interest rate was 4.3 % (4.4) %, and the average interest-bearing period was 2.6 (2.7) years. Secured loans represented 6.8 % of the balance sheet total.

4 Sponda signed a EUR 300 million syndicated credit facility in July. The facility consists of one 5-year EUR 100 million credit instalment and one 7-year EUR 100 million credit instalment, as well as a 5-year EUR 100 million credit limit. The facility was used to refinance an earlier EUR 195 million syndicated credit facility. Group structure Sponda Group comprises the parent company, Sponda Plc, and its wholly owned subsidiaries, all of which are mutual property companies. During 2004 Sponda Plc sold its Kiinteistö Oy Hauki and Kiinteistö Oy Vanha Talvitie 12 properties. The property companies Kiinteistö Oy Vantaan Beta and Kiinteistö Oy Vantaan Gamma were merged during 2004 with Kiinteistö Oy Vantaan Alfa, Tamwell Oy was merged with Sponda Plc, and Perkkaanpuiston Paikoitustalo II Oy with Kiinteistö Oy Upseerinkatu 1. IFRS reporting Sponda Plc has applied IFRS accounting since the beginning of The largest change to Sponda Plc s financial reporting relates to the valuation of property investments under IAS 40. Sponda Plc enters its properties in the balance sheet at their market value and any changes to this value during the reporting period in the income statement. Other changes to Sponda s accounting principles arise from the IAS rules on recording deferred tax assets and liabilities, the valuation of financial instruments, and employment benefits. Sponda Plc s 2004 income statement and balance sheet adjusted according to IFRS are given below. Sponda s IFRS result in 2004 was EUR 30.6 million lower than under FAS (Finnish Accounting Standards) owing to the difference in calculating the market value of the properties. Of this total, the change in the market value of the properties was EUR million, and the change in deferred tax liabilities arising from the change in the market value improved the result by EUR 20.4 million. The IFRS balance sheet at the end of 2004 was EUR million higher than the FAS balance sheet because the market value of the properties was higher than their book value. This figure was divided between shareholders equity (EUR 93.1 million) and deferred tax liabilities (EUR 32.7 million). The market value of the properties and the acquisition cost used for taxation purposes also differ from the book value of the properties to the extent of the goodwill (positive and negative) on consolidation arising at the time of acquisition. The impact on taxation calculated from goodwill (positive and negative) add a further EUR 16.8 million to deferred tax liabilities. These liabilities are not realized if the properties are sold as property companies. The market value of Sponda s properties is based on a valuation model specific to each property and developed by the company. Sponda calculates this value together with an independent external property assessor who has also audited Sponda s internal accounting procedures

5 and examined the parameters used by Sponda and the values these have generated. The valuation method used is the yield method based on cash flow analysis. Sponda Plc s valuation process and reporting, and the calculation software used for this purpose, meet the IFRS property valuation criteria as well as the International Valuation Standards and the criteria of the Finnish Association of Property Assessors AKA. Organization and personnel The Sponda Group had 50 (52) employees on average between 1 January and 31 December 2004, which included 45 (51) in the parent company. At the end of December personnel totalled 50 (52), which included 45 (50) in the parent company. Wages and salaries paid by the parent company amounted to EUR 2,731,199.15, which included EUR 114, in bonuses. Remuneration paid to the Board of Directors and the CEO totalled EUR 305, The Sponda Group paid EUR 3,021, in wages and salaries during the review period. Of this, remuneration to the Board of Directors and the President totalled EUR 305, and wages and salaries to other employees amounted to EUR 2,716, Sponda has employees only in Finland. Corporate Governance In its administration and management Sponda complies with the provisions of Finnish legislation. the company s Articles of Association. and the corporate governance recommendation for public listed companies prepared by the Helsinki Stock Exchange. the Central Chamber of Commerce and the Confederation of Finnish Industries EK (formerly the Confederation of Industry and Employers). Sponda applies the Insider Guidelines issued by the Helsinki Stock Exchange. The members of the Board of Directors are Kaj-Gustaf Bergh. Maija- Liisa Friman. Jarmo Laiho. Harri Pynnä. Anssi Soila and Jarmo Väisänen. The chairman of the Board is Anssi Soila and the deputy chairman is Jarmo Väisänen. The company s president and CEO is Kari Kolu. Kari Kolu resigned from the company on 30 November 2004 but has agreed to handle the responsibilities of the president of the company until his successor is appointed and takes up the post. Shareholders Nomination Committee The proposal for the composition of the Board of Directors and the remuneration to be paid to its members was prepared by a Nomination Committee appointed by the Annual General Meeting on 7 April The Committee is convened by the chairman of Sponda s Board of Directors and its members represent the two principal shareholders. The Nomination Committee submitted its proposal to the Board of Directors by 1 February 2005.

6 The Nomination Committee proposes that six members again be elected to Sponda Plc s Board of Directors. The Nomination Committee further propose that. in accordance with consents received. Kaj-Gustaf Bergh. Maija-Liisa Friman. Harri Pynnä. Anssi Soila and Jarmo Väisänen of the current members be re-elected and that Tuula Entelä be elected as a new member of the Board of Directors. Fees paid to the Board of Directors in 2005 The Annual General Meeting confirms the fees paid to the Board of Directors one year in advance. The Nomination Committee proposes that in 2005 the Board of Directors be paid the following fees: - A monthly fee of EUR (2.500) to the chairman - A monthly fee of EUR (1.500) to the deputy chairman - A monthly fee of EUR (1.250) to each of the Board s other members - A fee of EUR 300 (300) to each member for attendance at each meeting. Auditors Sixten Nyman APA and KPMG Oy Ab are the company s auditors. and Fredrik Westerholm APA is the deputy auditor. The Sponda share The price of the Sponda share was slightly below the HEX property investment index in The average price during the year was EUR the lowest price being EUR the highest price was EUR 7.40 and the closing price on 31 December 2004 was EUR The market capitalization of the company's share capital at the close of the period was EUR 566 million. A total of new shares were subscribed for on 16 June 2004 and 12 October 2004 following conversion of B series bonds under Sponda Plc's 2000 Convertible Bond. The corresponding increase in the share capital. EUR has been recorded in the Trade Register. Following this increase Sponda's share capital amounts to EUR divided into shares. The Annual General Meeting on 7 April 2004 authorized the Board of Directors for one year from the meeting to purchase at most of the company's own shares. This authorization was not exercised during the reporting period. Taxation Tax changes introduced in Finland during 2004 mean for Sponda the double taxation of the dividends it has paid. The amount of income tax payable by Sponda depends on the amount of depreciation made in the taxation of its properties. Earlier, Sponda had only deducted depreciation according to plan in its tax declaration. In 2004 Sponda entered both planned depreciation and the maximum depreciation permitted under the Business Taxation Act. The additional depreciation amounted to approximately EUR 25.6 million, and reduced

7 the tax payable by Sponda by EUR 7.4 million. The company recorded a deferred tax liability on this additional depreciation of EUR 6.7 million in the consolidated balance sheet. Events after the period On 21 January 2005 Sponda Plc has bought a logistics and office property at Ruosilantie 16 in the Konala district of Helsinki. The seller was the Finnish subsidiary of the trust fund European Property Investors, LP. The purchase price including capital transfer tax was EUR 28.4 million. The property. with an annual yield of 11 %, has a total leasable area of m2, which is fully leased. Prospects in 2005 Demand for retail and logistics premises in the Helsinki Metropolitan Area is expected to remain good. Leasing conditions for office properties in the area remain challenging. Cash flow from leasing operations in 2005 is forecast to remain at the 2004 level. The property occupancy rate is expected to reach or slightly exceed 2004 levels. Rent levels are forecast to remain stable. Annual General Meeting and dividend Sponda Plc s Board of Directors has decided that the Annual General Meeting will be held on 23 March 2005, commencing at 2.00 pm. The Board will propose a dividend of EUR 0.50 per share on the financial year The Board will propose that the dividend be paid on 6 April February 2005 Sponda Plc Board of Directors Further information: Kari Kolu, President and CEO, Sponda Plc Sari Aitokallio, CFO,Sponda Plc ENCLOSURES Consolidated Income Statement 1 January 31 December 2004 Consolidated Balance Sheet 31 December 2004 Cash Flow Statement Contingent Liabilities Key Indicators Comparison of FAS and IFRS financial statements SPONDA PLC CONSOLIDATED INCOME STATEMENT 1-12/ /03 MEUR Total revenue Expenses from leasing operations Gross profit

8 Sales and marketing expenses Administrative expenses Other operating expenses Other operating income Operating profit Share of associated companies result Financial income and expenses Profit before taxes Income taxes Net income for the period CONSOLIDATED BALANCE SHEET MEUR 31 Dec Dec 03 ASSETS Non-current assets Intangible assets Tangible assets Land and water Buildings Machinery and equipment Other tangible assets Advance payments and work in progress Investments Holdings in assoc. companies Other investments Non-current assets, total Current assets Trade receivables Cash and bank deposits Current assets, total Assets, total SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity

9 Deferred tax liability Long-term liabilities Short-term liabilities Liabilities, total Shareholders equity and Liabilities, total Interest bearing debts COMMITMENTS COLLATERAL AND COMMITMENTS GIVEN BY THE GROUP MEUR 31 Dec Dec 2003 Loans from financial institutions Assets pledged Mortgages pledged as collateral, total Rental liabilities Assets pledged Interest derivatives Interest rate swap contracts, notional value Interest rate swap contracts, market value Interest rate cap contracts, notional value Interest rate cap contracts, market value CONSOLIDATED CASH FLOW STATEMENT MEUR 1-12/ /03 Cash flow from operating activities Operating profit Adjustments to operating profit Change in net working capital Interest received and other financial income Interest paid and other financial expenses Dividends received Income taxes paid Cash flow from operating activities Cash flow from investing activities Group companies acquired Investments in other investments

10 Investments in tangible and intangible assets Group companies sold Associated companies sold Proceeds from sale of other investments Proceeds from sale of tangible and intangible assets Loans granted Repayment of loans Cash flow from investing activities Cash flow from financing activities Increase in share capital related to convertible bonds Buybacks of own shares Long-term loans raised Long-term loans/repayment of principal Short-term loans raised/ repayment of principal Dividends paid Cash flow from financing activities Change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period CHANGES IN FIXED ASSETS AND LOANS MEUR Changes in fixed assets 1-12/ /03 Book value at Beginning of period Increases Group companies acquired Group companies divested Decreases and transfers Depreciation Book value at end of period Changes in loans Long-term loans Short-term loans

11 At beginning of period Loans raised Repayment of loans At end of period KEY RATIOS 31 Dec Dec 2003 Shareholders equity per share, EUR Equity ratio, % Earnings per share, EUR Gearing, % Net assets per share, EUR Return on investment, % Return on equity, % IFRS COMPARISON OF SPONDA S FINANCIAL STATEMENTS 2004 Sponda adopted the accounting rules of the International Financial Reporting Standards (IFRS) on 1 January The purpose of this comparison is to present the company s financial statements for the period 1 January 31 December 2004 in accordance with IFRS. The reconciliation statements below show the differences between IFRS and FAS (Finnish Accounting Standards) as they relate to Sponda s accounts. The statements are the IFRS income statement for 2004, the opening IFRS balance sheet at 1 January 2004 and the closing IFRS balance sheet at 31 December The quarterly IFRS comparison figures will be shown in Sponda s quarterly interim reports in The purpose of these IFRS comparison figures is to describe the main impacts of IFRS on Sponda s income statement and balance sheet. These relate to the valuation of Sponda s real estate investments, deferred taxes and employment benefits, and from the beginning of 2005 also the valuation of the financial instruments used by the company. A summary of the IFRS accounting principles of major significance to Sponda Group is given at the end of this release. The adoption of IFRS has no effect on the company s cash flow statement. The opening IFRS balance sheet and the comparison figures for 2004 have been compiled applying the latest IFRS standards. However, the adoption date for IAS 39 (Financial Instruments: Recognition and Measurement) and IAS 32 (Financial Instruments: Disclosure and Presentation) is 1 January Before 2005 Sponda Group s financial statements were based on Finnish Accounting Standards (FAS). The accounting principles under FAS are included in Sponda Group s financial statements for 2003.

12 The IFRS figures are unaudited. CONSOLIDATED INCOME STATEMENT FAS IFRS IFRS MEUR Note 1-12/04 changes 1-12/04 Total revenue Maintenance costs Net leasing income Depreciation Change in valuation of investment properties Gross profit Other operating income Sales and marketing expenses Administrative expenses Other operating expenses Operating profit Financial income and expenses Share of associated companies results Profit before taxes Taxes in the year Taxes from the previous year Deferred taxes Taxes, total Net income for the financial year CONSOLIDATED BALANCE SHEET FAS IFRS IFRS MEUR Note 31 Dec. 03 changes 1 Jan. 04 Assets Non-current assets Tangible assets Intangible assets Investment properties Investments Long-term receivables Deferred tax assets Non-current assets. total Current assets Sales receivable

13 and other receivables Cash reserves Current assets, total Assets. total Shareholders equity and liabilities Shareholders equity Share capital Share premium fund Retained earnings Shareholders equity, total Liabilities Non-current liabilities Interest-bearing debt Pension commitments Deferred tax liabilities Non-current liabilities, total Current liabilities Accounts payable and other liabilities Current interest-bearing debt Current liabilities, total Liabilities, total Shareholders equity and liabilities, total CONSOLIDATED BALANCE SHEET FAS IFRS IFRS MEUR Note 31 Dec 04 changes 31 Dec 04 Assets Non-current assets Tangible assets Intangible assets Investment properties Investments Receivables Deferred tax assets Non-current assets, total Current assets Sales receivable and other receivables Cash reserves Current assets. total

14 Assets, total Shareholders equity and liabilities Shareholders equity Share capital Share premium fund Retained earnings Shareholders equity, total Liabilities Non-current liabilities Interest-bearing debt Pension commitments Provisions Deferred tax liabilities Non-current liabilities, total Current liabilities Accounts payable and other liabilities 4, Current interest-bearing debt Current liabilities, total Liabilities, total Shareholders equity and Liabilities, total Note 1 Items related to investment properties have been removed from planned depreciation and non-current assets. Note 2 Investment properties are valued at their fair value and the change is entered in the income statement and under shareholders equity in the opening balance sheet. Note 3 Deferred taxes are entered as required by IAS 12 Income Taxes. Note 4 Debt-reducing periodized interest income from interest rate derivatives has been moved to receivables, as required by IAS 1 Presentation of Financial Statements Note 5 Pension commitments are entered as required by IAS 19 Employee Benefits. Note 6 Adjustments to profits and losses on sales under FAS Note 7 Rent commitments are entered as required by IAS 37: Provisions. Contingent Liabilities and Contingent Assets. Reconciliation of shareholders equity MEUR 31 Dec Jan Shareholders equity under FAS Impacts of adoption of IFRS Valuation of properties at their fair value Deferred taxes

15 Reversal of revaluation Pension commitments Shareholders equity under IFRS Reconciliation of net income for the year MEUR 1 Jan. 31 Dec Net income for the year under FAS 33.8 Impacts of IFRS Reversal of depreciation on investment properties 14.8 Revaluation of investment properties Adjustments to sales profits / losses Change in provisions -1.4 Change in pension commitments 0.1 Change in deferred taxes 13.5 Change in tax rate for deferred taxes 6.9 Net income for the year under IFRS 3.2 Key ratios FAS IFRS Shareholders equity per share, EUR Earnings per share, EUR Equity ratio, % Gearing, % Net asset value per share, EUR