Sponda Plc FINANCIAL STATEMENTS bulletin 1 January – 31 December 2010
Financial Statements Bulletin
3 February 2011 at 8.30 am
Sponda Plc financial statements bulletin 1 January – 31 December 2010
Sponda Plc’s total revenue in 2010 was EUR 232.1 million (31 December 2009: EUR 237.2 million). Net operating income after property maintenance costs and direct costs for funds decreased, as expected, to EUR 168.7 (175.8) million. Sales of properties executed in 2009 and 2010 and higher maintenance costs were significant factors in the decrease in net operating income. Sponda’s operating profit was EUR 216.2 (-13.3) million.
Recording the share of profits from property funds under change in fair value instead of revenue had an effect on the revenue shown on the income statement. The share of profits in 2010 was EUR 5.6 million for the full year and EUR 1.4 million in October-December. The comparison figures have been adjusted accordingly.
Result of operations and financial position January – December 2010 (compared with figures for January – December 2009)
— Total revenue was EUR 232.1 (237.2) million. The decrease from the previous year was caused by sales of properties and a rise in vacancy rates at the beginning of the year.
— Net operating income was EUR 168.7 (175.8) million.
— Operating profit was EUR 216.2 (-13.3) million. The figure includes a change in fair value of EUR 44.4 (-169.3) million.
— The result after tax was EUR 120.4 (-81.6) million.
— Earnings per share were EUR 0.40 (-0.40).
— Cash flow from operations per share was EUR 0.37 (0.45).
— The fair value of investment properties amounted to EUR 2,870.6 (2,767.5) million.
— Net assets per share totalled EUR 3.86 (3.54).
— The economic occupancy rate was 88.0 (86.6) %.
— The Board of Directors proposes to the AGM that a dividend of EUR 0.15 per share be paid for the 2010 financial year.
Result of operations and financial position October – December 2010 (compared with the same period in 2009)
— Total revenue was EUR 58.5 (58.3) million.
— Net operating income was EUR 42.5 (43.0) million.
— Operating profit was EUR 83.0 (23.5) million. This includes a change in fair value of EUR 33.4 (-12.9) million.
— The result after tax was EUR 54.2 (6.3) million.
— Earnings per share were EUR 0.19 (0.01).
— Cash flow from operations per share was EUR 0.09 (0.07).
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CEO Kari Inkinen
I am pleased that the vacancy rate for Sponda’s properties fell in 2010 despite challenging market conditions. The vacancy rate for the company’s office properties in the Helsinki metropolitan area has been below the market average. We have seen particularly positive developments in vacancy rates for our Russian properties, which are nearly fully occupied at present. The vacancy rate for logistics properties also decreased. At the end of the year, the vacancy rate for Sponda’s investment properties was 12.0% in total and 3.6% in
A large number of properties went on sale in the Finnish property market in 2010, particularly in the second half of the year. Potential buyers included both Finnish and foreign operators. This was also reflected in property values, as they began to rise in Helsinki’s central business district and other prime locations in the metropolitan area. Property values are also increasing in Russia, but thus far the change has only been evident in the Moscow area.
Sponda is continuing to be active in its property development operations. In addition to the development of two existing projects, the Hakkila production facility and the City-Center shopping complex in central Helsinki, the early part of 2011 will see work begin on expanding the Zeppelin shopping complex in Oulu. Sponda will renovate in 2011 an office property on Hämeenkatu in Tampere, which will be bought from the City of Tampere. We also aim to have construction started on the Ratina shopping complex in Tampere’s central business district in the coming summer.
Business conditions – Finland
The number of completed property transactions increased towards the end of 2010 and, according to the Institute for Real Estate Economics (KTI), the total volume of transactions stood at approximately EUR 1.7 billion at the end of November. The volume for the whole year is expected to reach EUR 2.0 billion, which would be slightly higher than the previous year. The availability of financing for property transactions has improved, but banks continue to offer reasonable loan-to-value ratios only for low risk properties.
The rise in vacancy rates for office properties in the Helsinki metropolitan area is estimated to have stopped at the end of 2010. The vacancy rates are predicted to begin to fall in 2011.
The fall in the rental levels for office properties ended in spring-summer 2010. Rental rates remain below pre-crisis levels, but they have held up well in some segments such as office properties in Helsinki’s central business district and Ruoholahti and retail properties in the Helsinki metropolitan area. Rental levels are estimated to have begun increasing in late 2010.
Business conditions – Russia
According to the estimates of the Bank of Finland, the annual growth in the Russian economy in 2010 was approximately 4%. Growth in Russia is driven by the increase in oil prices, falling unemployment and improved consumer confidence.
Property values have begun to slowly increase in Moscow. CB Richard Ellis estimates the vacancy rate in Moscow to be around 16-18%. While the net take-up is positive, the market for office properties in Moscow is set to have increased supply with the completion of new premises that have not been leased as-of-yet. In St Petersburg the vacancy rate for office properties is approximately 20% depending on location and quality. Rental levels have slowly begun to increase in Moscow, while in St Petersburg they have remained stable.
Operations and property portfolio 1 January – 31 December 2010
Sponda owns, leases and develops business properties in the Helsinki metropolitan area and the largest cities in Finland, and in Russia. Sponda’s operations are organized in four business units: Investment Properties, Property Development, Russia, and Real Estate Funds. The Investment Properties unit is divided into three segments: Office and Retail Properties, Shopping Centres and Logistics Properties. The other segments are Property Development, Russia and Real Estate Funds.
Net operating income from all of Sponda’s property assets totalled EUR 168.7 (175.8) million during the year. Office and retail premises accounted for 53% of this, shopping centres for 19%, logistics premises for 15%, Russia for 10% and the Real Estate Funds unit for 3%.
On 31 December 2010 Sponda had a total of 192 properties, with an aggregate leasable area of about 1.5 million m². Of this, some 52% is office and retail premises, 10% shopping centres and 35% logistics premises. Approximately 3% of the leasable area of the properties is located in Russia.
The fair values of Sponda’s investment properties are confirmed as a result of the company’s own cash flow based yield assessment calculations. The assessment method complies with International Valuation Standards (IVS). The data used in the calculations of fair value is audited, at a minimum, twice a year by external experts to ensure that the parameters and values used in calculations are based on market observations.
At the end of 2010, Catella Property Oy assessed the values of Sponda’s investment properties in Finland and CB Richard Ellis assessed the values of the company’s properties in Russia. The change in the fair value of Sponda’s investment properties in 2010 was EUR 40.5 (-166.8) million for the full year and EUR 32.3 (-11.7) million for October-December. Sponda’s largest project, the City-Center shopping complex in Helsinki, was assessed at fair value as an incomplete project in the end of 2010 and did not have a material impact on the company’s result.
The change in the fair value of the company’s Russian properties in the final quarter of the year,EUR 13.8million, is almost entirely the result of changes in the yield requirements for properties in Moscow. The change in the fair values of properties held by the company’s real estate funds was EUR -1.7 (-8.3) million in 2010. The assessments of the fair values of properties owned by the company’s real estate funds were made by Jones Lang LaSalle for Sponda Fund I and Kiinteistötaito Peltola for Sponda Fund II. The realised share of profit from real estate funds was EUR 5.6 million for the full year and EUR 1.4 million for October-December. The valuation statements of both Finnish and Russian properties are available in Sponda’s internet-pages at www.sponda.fi >Investors>Performance.
Events after the end of the period
Sponda Plc’s Shareholders’ Nomination Committee decided on its proposal to the Annual General Meeting of 16 March 2011 regarding the composition and fees of the Board of Directors. More information on the proposal is provided in the section on the Shareholders’ Nomination Committee.
Sponda expects the vacancy rates of its investment properties to continue falling in 2011. This assessment is based on the 2011 growth forecasts for the Finnish economy and increased demand for properties in prime locations.
The company expects net operating income in 2011 to exceed that of 2010. This expected increase is based on the predicted fall in vacancy rates and the completion of property development projects during the year.
Annual General Meeting and dividend
The Board of Directors of Sponda Plc proposes that the Annual General Meeting be held on 16 March 2011 and proposes to the Annual General Meeting that a dividend of EUR 0.15 per share be paid.
New disclosure procedure
Sponda Plc follows the new disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its financial statement bulletin enclosed to this stock exchange release. Sponda Plc’s financial statement bulletin is attached to this release in pdf format and is also available on the company’s web site at www.sponda.fi.
3 February 2011
Board of Directors
Kari Inkinen, President and CEO, tel. +358 20-431 3311 or +358 400-402 653,
CFO Erik Hjelt, tel. +358 20-431 3318 or +358 400-472 313 and
Pia Arrhenius, SVP, Corporate Communications and IR, tel. +358 20-431 3454 or
+358 40-527 4462.
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