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SPONDA PLC’S FULL YEAR RESULT JANUARY-DECEMBER 2018

Sponda Plc                              
Stock Exchange Release                     
March 21, 2019 at 08:30am

SPONDA PLC’S FULL YEAR RESULT JANUARY-DECEMBER 2018:

YEAR 2018 IN BRIEF (COMPARED WITH YEAR 2017)

  • Total revenue decreased to EUR 259.2 (263.7) million.
  • Net operating income totalled EUR 182.8 (193.7) million.
  • Operating profit was EUR 155.1 (173.5) million. This includes a fair value change of EUR -8.4 (4.9) million.
  • Earnings per share were EUR 0.10 (0.21).
  • The fair value of the investment properties amounted to EUR 3,755.8 (3,935.3) million.

JULY-DECEMBER IN BRIEF (COMPARED WITH 1 JULY-31 DECEMBER 2017)

  • Total revenue decreased to EUR 130.3 (130.7) million
  • Net operating income was EUR 100.2 (104.9) million
  • Operating profit was EUR 72.2 (109.4) million. This includes a fair value change of EUR -27.4 (25.7) million
  • Earnings per share were EUR 0.05 (0.11).

KEY FIGURES

 7-12/20187-12/20171-12/20181-12/2017
Total revenue, M€130.3130.7259.2263.7
Net operating income, M€100.2104.9182.8193.7
Operating profit, M€72.2109.4155.1173.5
Earnings per share, €0.050.110.100.21
Equity per share, €  3.673.97
Equity ratio, %  29.828.5

Due to a revised accounting principle, group recognised the full year’s property taxes as expenses during the review period. The comparison figures have been adjusted to reflect the change and the effect to the H2 2017 maintenance expenses is EUR +7.6 million. The change doesn’t have an effect to the 2017 full year figures.

Sponda also changed its accounting principles concerning deferred taxes during H2 2018 and has restated H1 2018 figures and financial year 2017 figures to make them comparable. The restated figures are presented as comparison figures.

BUSINESS CONDITIONS

Economic growth in Finland has remained strong and is expected to continue in 2019, albeit at a more moderate pace. According to the Ministry of Finance’s forecast, the Finnish GDP will grow by 1.5% in 2019. The improvement of the economy also has a positive impact on employment. According to Statistics Finland, the unemployment rate was 7.4% at the end of 2018

GROUP RESULT IN 2018

Sponda Group’s result for 2018 was EUR 33.8 (76.6) million, while the result before taxes was EUR 47.1 (98.3) million. Operating profit was EUR 155.1 (173.5) million.

Net operating profit decreased by approximately 5.6% to EUR 182.8 (193.7) million.  Items that had a negative effect on the development of net operating income included a small number of properties being vacated due to property development as well as property sales. Marketing and administration expenses and other operating income and expenses totalled EUR 32.4 (32.9) million. Marketing and administration expenses represented EUR 29.5 (25.5) million of this total. This figure was affected by the increase in the number of personnel as well as non-recurring personnel expenses.

Kai Aejmelaeus was appointed as Sponda’s new President and Chief Executive Officer on 12 February 2018 and he subsequently took up his post in April. Aejmelaeus succeeds Kari Inkinen, who moved into a new role as Senior Advisor and board member of Sponda.

During the period, the Group recognised profit on sales of EUR 16.4 (12.9) million from sales of investment and trading properties. The change in fair value of the investment properties and real estate funds were EUR -8.4 (4.9) million. The negative change in fair value was primarily attributable to property investments in Russia. The Group’s result was weighed down by amortisation of goodwill amounting to EUR 3.3 (5.2) million. The item was related to the Ratina shopping centre project and was written off once the project was completed. 

Financial income and expenses for the period totalled EUR -107.9 (-75.2) million. Financial expenses increased due to the termination of old financing agreements in the final quarter of the previous financial year. Deferred tax expense increased approximately to EUR -12.7 million during the period due to a change in the accounting policies concerning deferred taxes related to investment properties. More information is provided in the Accounting policies section in the financial statements.

PROPERTY ASSETS 1 JANUARY-31 DECEMBER 2018

At the end of 2018, Sponda had a total of 165 leasable properties, with an aggregate leasable area of approximately 1.2 million m². Of this total, approximately 57% is office premises, 25% shopping centres and 16% logistics premises. Approximately 1% of the total area is located in Russia.

The fair values of Sponda’s investment properties located in Finland are confirmed as a result of the company’s own cash flow-based yield value calculations. The assessment method complies with International Valuation Standards (IVS). The data used in the calculations of fair value is audited at least twice a year by external experts to ensure that the parameters and values used in the calculations are based on market observations.

At the end of 2018, an external consultant (Catella Property Oy) audited the values of Sponda’s investment properties in Finland.  The properties in Russia were assessed by an external consultant (CB Richard Ellis). The fair value of our investment properties was approximately EUR 3.8 billion at the end of 2018.

Valuation gains/losses on fair value assessment

M€7-12/20187-12/20171-12/20181-12/2017
Changes in yield requirements (Finland)7.231.031.046.2
Development gains on property development projects8.524.813.9
Modernisation investments-28.1-19.3-42.3-37.8
Change in market rents and maintenance costs (Finland)2.412.4-2.72.8
Change in value (Russia)-4.4-5.1-14.6-18.4
Investment properties, total-22.827.4-3.86.7
Real estate funds-4.6-1.7-4.6-1.7
Realised share of fund profits0.00.00.0
Group, total-27.425.6-8.44.9

FINANCING AND BALANCE SHEET KEY FIGURES

Interest-bearing debt amounted to EUR 2,706 (3,186) million at the end of December 2018. The Group’s cash funds totalled EUR 107 (729) million and net debt was EUR 2,599 (2,457) million. The debt portfolio comprised EUR 170 million in bonds and EUR 2,534 million in loans from financial institutions. At the end of the period, Sponda had EUR 47 million in credit limits for investment projects. The Group’s new financing arrangements moved to secured lending, which resulted in a significant increase in collateralised loans. Total mortgaged loans amounted to EUR 2,551 million, or approximately 61% of the consolidated balance sheet, at the end of 2018.

Sponda’s equity ratio on 31 December 2018 stood at 29.8 (28.5) %. Loan to Value (LTV), based on net debt, was 64.4% (61.8%). The weighted average maturity of Sponda’s loans was 1.8 (1.8) years. There are certain extension options in loans from financial institutions that Sponda can exercise. The average interest rate was 3.6 (3.4) % including interest derivatives and periodized arrangement fees. Fixed-rate and interest-hedged loans accounted for 56 (56) % of the loan portfolio.

Sponda’s net financing costs for the period totalled EUR -108.0 (-75.2) million. Interest expenses of EUR 1.9 (3.3) million were capitalised. Net cash flow from operations in the period under review totalled EUR 67.3 (61.8) million. Net cash flow from investing activities was EUR -51.7 (-132.1) million and the net cash flow from financing activities was EUR -637.2 (787.2) million.

Balance sheet key figures

 31.12.201830.6.201831.12.201730.6.2017
Equity ratio, %29.825.128.545.7
Loan to Value (LTV)*, %64.469.361.849.3
Interest-bearing debt, EUR million**2,7062,8933,1861,939
Cash reserves, EUR million1076972933
Credit limits for investment projects, EUR million4727470

*) Based on net debt
**) December 2018 figure includes EUR 189.7 million of interest-bearing liabilities associated with non-current assets held for sale

SPONDA GROUP

Sponda Plc is part of Polar TopCo S.à r.l. Group, based in Luxembourg.

Sponda Group comprises the parent company Sponda Plc and its wholly- or partly-owned Finnish limited liability companies and property companies. The Group also includes the foreign subsidiaries owned by Sponda Russia Ltd.

SPONDA’S MANAGEMENT

Kai Aejmelaeus was appointed as Sponda’s new President and Chief Executive Officer on 12 February 2018 and he subsequently took up his post in April. Aejmelaeus succeeds Kari Inkinen, who moved into a new role as Senior Advisor and board member of Sponda.

Sponda made changes to its Executive Board in late 2018. In addition to the President and CEO, the Executive Board consists of Martti Savenius (Chief Operating Officer), Joonas Mäkipeska (Chief Financial Officer), Timo Pantsari (Chief Information Officer) and Ari Käkelä (Chief Legal Officer).

RISKS AND UNCERTAINTY FACTORS IN THE NEAR FUTURE

Sponda estimates that the risks and uncertainty factors for 2019 are mainly related to the following areas:

Change in demand for space, caused by reasons such as technological development, may have a negative impact on the development of occupancy rate and net operating income.

In Russia, the risks are mainly related to the development of the Russian economy and its impact on the potential sales of Sponda’s properties in Russia.

PROSPECTS FOR 2019

Sponda has decided not to give prospects for the financial year 2019.

EVENTS AFTER THE PERIOD

In January and February, Sponda sold properties with a total balance sheet value of EUR 241.4 million.

On 8 February 2019, the company distributed dividends of EUR 77 million on earnings accumulated in 2017. The Annual General Meeting approved the Board of Directors’ dividend proposal at a meeting held on 7 February 2019.

THE BOARD’S DIVIDEND PROPOSAL

The Board of Directors proposes to the general meeting that no dividend shall be paid for the financial year 2018.

21 March 2019
Sponda Plc
Board of Directors

For further information, please contact: 
Kai Aejmelaeus, President and CEO, tel. +358 20 431 3340
Joonas Mäkipeska, CFO, tel. +358 20 431 3480

Distribution:
NASDAQ OMX Helsinki
Media
www.sponda.fi

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