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  • Sponda Financial Results Q3 2015 3 November 2015

  • 1. Highlights for the Period Kari Inkinen

    2. Strategy Implementation Pia Arrhenius

    3. Business environment and Business Update

    Kari Inkinen

    4. Financials Kari Inkinen

    2

  • 1. Highlights for the period

  • Spondas Q3 2015

    in brief

    Core portfolio performance is

    strong. - Confirms the companys transformation

    strategy.

    The decline in NOI is due to the

    realized property disposals.

    Like-for-like rents are positive

    except in Russia.

    Occupancy rate at 86.2%

    (Q3 2014: 86.5%). - Disposal of assets in Russia at the end of

    June had a slightly negative impact on the

    occupancy rate (40 bps).

    4

  • Spondas Q3 2015

    in brief

    Keskuskatu 1 renovation

    completed at the end of

    September.

    Divestment of Certeums shares

    agreed in October. - Transaction price EUR 190 million including

    EUR 7 million profit.

    - Transaction set to close by 16 December

    2015.

    - Income from Certeum will cease at the end

    of September.

    5

  • Development and modernization investments For the two greenfield projects Sponda expects 15% development gain.

    6

    Leasable

    area

    m

    Estimated

    completion

    Total

    investment

    M

    Investment

    by the end

    of

    September

    2015

    Pre-let

    %

    Estimated

    market rent

    Eur/m/month

    Greenfield developments

    Ratina shopping centre, Tampere 53,000 Summer 2018 240.0 44.7 30 N/A

    Ilmala office property, Helsinki 18,500 End of 2015 57.0 40.3 100 22-24

    Modernization investments

    Keskuskatu 1b, Helsinki 2,048

    September

    2015 6.4 6.3 82 34-36

    Total 73,548 303.4 91.3

  • Sponda Q3 2015: Performance highlights

    7-9/15 Change, %

    7-9/14 1-9/15 Change, %

    1-9/14 1-12/14

    Total revenue, M 56.7 (10.3) 63.2 173.3 (8.5) 189.4 246.7

    Net Operating Income, M 42.2 (8.7) 46.2 124.4 (8.3) 135.6 176.0

    Operating profit, M 38.3 (9.2) 42.2 130.3 9.4 118.8 151.7

    Cash flow from

    operations/share,

    0.10 (9.0) 0.11 0.29 3.6 0.28 0.37

    Earnings/share, 0.06 (14.2) 0.07 0.23 15.0 0.20 0.24

    NAV/share, 4.71 1.7 4.63 4.65

    EPRA NAV/share, 5.58 3.5 5.39 5.45

    Economic occupancy rate, % 86.2 (0.3) 86.5 87.0

    7

  • Risk allocation of Spondas portfolio

    44%

    22%

    Espoo total 7.0%

    Rest of HMA 14%

    Vantaa total 0.5%

    Total of the office and shopping centres properties portfolio, EUR 2.6 billion (excl. Russia, Property Development,

    Logistics)

    8

    Oulu 3.0%

    Tampere 9.5%

  • 9

  • Spondas priorities in 2015

    Occupancy rate

    development

    Our target is to keep occupancy rate at the end-of-2014 level at minimum.

    Implementing our strategy

    We will continue the non-core property divestments.

    Stable cash flow from

    operations per share

    We aim to maintain our ability to pay stable dividend.

    Focus in property

    development

    During 2015, four large property development projects will be completed. Our target is to start at least one large development project in 2015.

    In March we announced a start of Ratina shopping centre.

    10

    Dividend paid for

    fy 2014 was

    EUR 0.19.

    To-date we

    have sold

    properties for

    EUR 57.8 m.

    At the end of

    Sep 2015, our

    occupancy rate

    was 86.2%.

  • 2. Strategy Implementation

  • What we set out to do in 2013

    12

    Sell our Property Funds business

    Sell our logistics property portfolio We have sold logistics properties for EUR 220 million to-date.

    We sold the Funds business and the properties in the Fund to new logistics company Certeum. Our shares in Certeum will be sold by the end of 2015.

    The main goals are to simplify the business structure, more focused property ownership and

    profitable growth. The timeline for these goals was originally set to 3-5 years.

    After two years this is where we are:

    - 50% of the targeted sales has been completed.

    - We have made total profit from the sales for EUR 10 million.

    We have sold all but one small office property.

    Sell our properties in Turku

    Sell our properties in Russia We have sold properties for EUR 49 million.

  • What we set out to do in 2013

    13

    We have acquired an office property in Tampere for EUR 63.7 million.

    Property acquisitions

    Property development business We have active development projects ongoing in Helsinki and Tampere for about EUR 300 million.

    The capital received from the disposals will be invested in Spondas main markets in

    Helsinki and Tampere.

    Investments include both property development projects and office and shopping centre properties.

    The investments we have made and will make are:

  • 3. Business Environment and

    Business Update

  • Finnish Market

    Growth in Finland is still limited

    with an estimated 0.2% GDP

    growth for 2015. - However, MofF estimates a slightly

    positive turn for the second half of the

    year.

    Property transaction volume

    has remained record-high at

    EUR 4.1 billion during the nine

    months of the year. - International investors accounted for 30%

    of the deals.

    15 Sources: KTI, Mof F

  • Market Vacancy Rate in HMA, office

    properties

    16 Source: Catella Property

  • Segment performance

    17

    Office Shopping

    Centres

    Logistics Russia

    1-9/15 1-9/14 1-9/15 1-9/14 1-9/15 1-9/14 1-9/15 1-9/14

    Net Operating Income, M 81.9 76.6 26.8 26.4 6.8 17.1 10.1

    12.1

    Fair Value of Properties, M 1,891.6 1.834.7 732.3 721.3 199.0 207.7 162.7 238.4

    Change in Fair Value of

    Properties, m

    30.2 6.2 1.1 0.9 (6.6) (2.6) (21.9) (9.9)

    Economic Occupancy Rate, % 88.0 88.3 90.6 89.3 67.8 65.6 82.3 89.4

    Divestments, M 17.7 14.8 - - - 216.7 38.7 -

    Acquisitions, M - 65.0 - - - - - -

  • Like-for-like development in Q3 2015 Like-for-like net rental growth has been calculated from a portfolio that Sponda has held for 2 years excluding acquisitions, disposals

    and property development.

    18

    Like-for-like net rental growth, M

    Like-for-like net rental growth, %

    3,4

    0,6 0,9

    -1,5

    0,7

    0,2 0,0 -0,9

    2,7

    0,5

    0,9

    -0,6

    -2,0

    -1,0

    0,0

    1,0

    2,0

    3,0

    4,0

    Office Retail Logistics Russia

    Change in turnover Change in maintenance Net change

    3,7 % 1,7 %

    16,2 %

    -6,9 %

    -10,0 %

    -5,0 %

    0,0 %

    5,0 %

    10,0 %

    15,0 %

    20,0 %

    Office Retail Logistics Russia

  • Economic vacancy rate 2009 Q3 2015

    19

    0

    2

    4

    6

    8

    10

    12

    14

    16

    18

    20

    22

    24

    26

    28

    30

    32

    34

    Q4/2009 Q4/2010 Q4/2011 Q4/12 Q4/13 Q4/14 Q3/15

    Office 12.0%

    Shopping Centres 9.4 %

    Logistics 32.2 %

    Russia 17.7 %

    Total property portfolio 13.8 %

    HMA market office vacancy 13.4 %

  • Lease agreements in Q3 2015

    Pcs M /m/month

    (avg)*

    New agreements that came into force

    during the period

    37

    11 161

    17.20

    Agreements that ended during the period 61 21 123 11.10

    Agreements that were extended during

    the period

    34 13 496 17.10

    *) Agreements that came into force and ended do not necessarily correlate with same sector or space.

    All lease agreements in Finland are linked to CPI.

    Ten largest tenants account for 31 % of rental income.

    20

  • Investment portfolio development

    M 2011 2012 2013 2014 Q3 2015

    Property development

    investments

    58.5 47.5 14.0 22.0 39.8

    Maintenance investments/

    Tenant improvements

    50.5 28.4 22.6 42.0 27.5

    Acquisitions 150.4 53.1 3.1 65.0 0.0

    Divestments 14.1 61.8 33.1 237.2 57.8

    We are creating value by property development and active portfolio

    management.

    Our aim is to sell non-core assets classified as such either by

    location or development potential.

    21

  • 4. Financials

  • 23

    M 7-9/2015 7-9/2014 1-9/2015 1-9/2014 1-12/2014

    Total revenue 56.7 63.2 173.3 189.4 246.7

    Expenses (14.5) (17.1) (48.9) (53.7) (70.6)

    Net operating income 42.2 46.2 124.4 135.6 176.0

    Profit on sale of inv. properties 0.0 0.0 (1.5) 0.6 0.6

    Valuation gain / loss 0.5 0.1 12.9 (1.8) (0.2)

    Amortisation of goodwill (2.6) 0.0. (2.6) 0.0 0.0

    Profit on sale of trading properties 0.0 1.8 2.6 1.9 2.0

    SGA expenses (5.2) (5.5) (16.1) (16.5) (22.1)

    Share of profit from associated companies 3.4 0.0 10.2 0.0 (3.5)

    Other operating income/expenses 0.0 (0.5) 0.3 (1.1) (1.2)

    Operating profit 38.3 42.2 130.3 118.8 151.7

    Financial income and expenses (13.0) (14.4) (36.8) (44.3) (55.9)

    Profit before taxes 25.3 27.8 93.4 74.5 95.7

    Taxes from previous and current fin. years (0.3) (0.5) (1.7) (1.7) (1.8)

    Deferred taxes (7.1) (5.4) (22.5) (12.5) (20.4)

    Profit for the period 18.0 21.8 69.2 60.3 73.6

    Profit & loss statement

  • 24

    M 7-9/2015 7-9/2014 1-9/2015 1-9/2014 1-12/2014

    Changes in yield requirements (Finland) 0.0 0.0 32.2 3.3 15.7

    Changes in yield requirements (Russia) 0.0 0.0 (7.4) 0.0 (10.0)

    Profit/loss from property development projects 6.7 1.9 9.7 1.9 5.5

    Modernization investments (6.8) (11.5) (27.5) (27.7) (42.0)

    Change in market rents and maintenance costs

    (Finland)

    1.9 11.1 20.4 26.5 40.3

    Change in market rents and maintenance costs

    (Russia)

    1.0 (8.2) (14.3) (15.1) (19.3)

    Change in exchange rates (2.4) 4.1 (0.2) 5.7 5.9

    Investment properties, total 0.5 (2.6) 12.9 (5.3) (3.9)

    Real estate funds 0.0 0.7 0.0 (1.9) (1.8)

    Realised gains/losses in re funds 0.0 2.0 0.0 5.5 5.5

    Group, total 0.5 0.1 12.9 (1.8) (0.2)

    Valuation gains/losses

  • 25

    Financing

    Q3/2015 Q2/2015 Q1/2015 Q4/2014 Q3/2014

    Equity ratio, % 41 41 40 41 40

    Average interest rate, % 2.9 2.9 2.8 2.9 2.8

    Hedging, % 86 86 76 76 76

    Average loan maturity, yrs 2.3 2.5 1.9 2.1 1.6

    Average fixed interest rate period, yrs 2.3 2.5 2.1 2.3 2.2

    Interest cover ratio 3.4x 3.4x 3.5x 3.3x 3.3x

    Loan to Value, % 51 53 53 52 55

    Covenants at:

    Equity ratio, 28%

    (long-term ER target: 40%

    ICR 1.75x

  • 0

    100

    200

    300

    400

    500

    600

    2015 2016 2017 2018 2019 2020

    M

    Bank loans

    Syndicated loans

    Bonds

    Commercial papers

    Loan maturities, 30 September 2015

    Interest-bearing debt EUR 1,724.7million

    Unused financing limits EUR 510 million

    26

  • Syndicated credit limit

    On 2 November, Sponda signed a syndicated credit

    limit with three Nordic banks.

    Limit is for EUR 80 million and maturity is for 5 years.

    Replaces a maturing EUR 150 million credit limit.

    27

  • Prospects and financial targets

    Net operating income

    Sponda estimates that the net operating income for 2015 will amount to EUR

    160166 (previously 158-168) million. The estimate is based on the companys view

    of property sales to be completed and the development of rental operations during

    the year.

    EPRA Earnings

    Sponda estimates that company adjusted EPRA Earnings in 2015 will amount to

    EUR 97103 (previously 95-105) million. This outlook is based on the development

    of net operating income and the companys estimate of the development of financial

    expenses.

    Financial targets

    Long-term equity ratio target is 40 %.

    Dividend policy is to pay approx. 50 % of the operational cash earnings per share, taking into account of the economic situation and companys development needs.

    28

  • Strategy

    Main goals of Spondas strategy are to simplify the business as a

    whole, to have more focused property portfolio, and to grow profitably.

    To achieve the strategic goals, Sponda is:

    - Selling the logistics portfolio;

    - Selling the Russian portfolio; and

    - Investing in prime properties in

    Helsinki and Tampere.

    30

  • Largest Shareholders 30 September 2015

    Major shareholders No. of shares Holding %

    1. Oy PALSK Ab 42,163,745 14.89

    2. Varma Mutual Pension Insurance Company 29,083,070 10.27

    3. HC Fastigheter Holding Oy Ab 28,484,310 10.06

    4. The State Pension Fund 3,200,000 1.17

    5. Tiiviste-Group Oy 1,000,000 0.35

    6. OP-Finland Value Fund 980,237 0.35

    7. Norvestia plc 718,196 0.25

    8. Danske Bank AS Helsinki Branch 689,419 0.24

    9. I.A. von Julins STB 570,000 0.20

    10. Odin Eiendom 569,182 0.20

    Nominee-registered shareholders 50.0% of the total

    31

  • Overview of the current reporting segments

    Shopping Centres

    Logistics

    Property

    Development

    Russia

    Office

    Property

    Investment

    Companies

    % of portfolio4

    1 891.6 M

    732.3 M

    199.0 M

    175.8 M

    162.7 M

    21.4 M

    (Equity invested)

    6.2%

    5.7%

    8.3%

    n/m

    10.4%

    Fair value1 Valuation yield2

    7%

    5%

    23%

    5%

    60%

    Notes: 1) Fair value of investment properties as at 30 September 2015.

    2) Average valuation yield requirement as at 30 September 2015.

    3) Net initial yield of the segment as at 30 September 2015.

    4) Share of total fair value of properties as 30 September 2015.

    5.8%

    4.8%

    4.4%

    n/m

    4.81%

    Net initial yield3

    32

  • Vacancy 11.2%

    Rental level avg 144-180/m/yr

    Yield avg 7.50-8.50%

    Vacancy 11.0%

    Rental levels 168-216/m/yr

    Yield avg 6.75-8%

    Vacancy avg 13.0%

    Rental levels 190-378/m/yr

    Yield 4.8-8.0%

    Vacancy avg 17%

    Rental levels $275-650/m/yr

    Yield 10-15%

    Office market statistics and Spondas

    holdings Source: Catella Property, Sponda

    3%

    8%

    85%

  • Lease agreement composition Q3 2015

    Lease maturity profile,

    % of rental income

    Average lease maturity

    Note 1: Based on rental income

    Tenant breakdown by sector

    34

    0

    5

    10

    15

    20

    25

    0,0 2,0 4,0 6,0

    Total

    Russia

    Logistics

    Shopping centres

    Office

    Q3 2015

    Q3 2014

  • 35

    Balance sheet

    M 30.9.2015 30.9.2014 31.12.2014

    ASSETS

    Investment properties 3,161.4 3,122.3 3,142.1

    Other non-current assets 78.7 255.9 250.9

    Fixed assets & other non-current assets, total 3240.1 3,378.2 3,393.0

    Current assets, total 35.7 149.4 56.2

    Non-current assets held for sale 185.1 0.0 0.0

    Assets, total 3,461.0 3,527.6 3,449.2

    SHAREHOLDERS EQUITY AND LIABILITIES

    Shareholders equity, total 1,430.4 1,406.2 1,411.5

    Non-current liabilities, total 1,645.6 1,536.5 1,413.6

    Current liabilities, total 385.0 584.8 624.1

    Shareholders equity and liabilities, total 3,461.0 3,527.6 3,449.2

  • NAV/share and EPRA NAV/share

    36

    3,09

    2,48

    3,56

    3,88 4,01 4,01

    2,82

    3,12 3,09 2,95

    3,19

    3,60 3,68 3,62

    3,82

    3,42 3,45

    3,90

    3,58

    3,99

    3,49 3,46 3,55

    3,63

    3,82 3,92 3,93

    4,06 4,17

    4,03

    4,12 4,45 4,38 4,43

    4,50 4,64

    4,49 4,56

    4,63 4,50

    4,71

    4,10 4,19

    4,27

    4,59 4,56 4,66 4,68

    4,83 4,77 4,82 4,88 4,84

    5,07 5,12 5,22

    5,29 5,18

    5,31 5,39

    5,30

    5,58

    2

    2,5

    3

    3,5

    4

    4,5

    5

    5,5

    6

    Closing price

    NAV

    EPRANAV

  • EPRA NAV calculation 5.58 /share

    *) Deferred tax relating to fair valuation of property and interest rate derivatives 37

    1428,6

    1579

    94

    39,8 12

    199,1 17,4 0,1

    1200

    1250

    1300

    1350

    1400

    1450

    1500

    1550

    1600

    Equityattributable to

    equity holders ofparent company

    Other equityreserve

    Fair value offinancial

    instruments

    Goodwill relatingto deferred tax

    liability onproperties

    Deferred taxfrom investment

    properties*)

    Deferred taxfrom shares in

    associatedcompanies*)

    Capitalizedborrowing cost

    Total