Sponda Plc Financial Statements Bulletin 16 February 2007, 9.00 (EET)
Sponda Plc's Financial Statements Bulletin January - December 2006
Sponda's result and economic occupancy rate showed clear improvement in 2006
Sponda Group's total revenue in the financial period 1 January - 31 December 2006
was EUR 116.9 (31 Dec. 2005: 103.1) million. Sponda's operating profit increased
to EUR 103.9 (65.5) million and net operating income rose to EUR 87.1 (77.5)
million. The economic occupancy rate, which is calculated from Sponda's property
portfolio before the Kapiteeli acquisition, improved to 88.8 (87.7) %. Rent
levels were stable except in Helsinki Central Business District, where a slight
increase in office rents was evident.
All the figures in this bulletin include the operations of Kapiteeli for December
unless otherwise stated. Investment properties refer to Sponda's portfolio
excluding trading.
Highlights of 2006 (comparison figures are for 2005):
. Total revenue rose to EUR 116.9 (103.1) million.
. Net operating income was EUR 87.1 (77.5) million.
. Operating profit increased to EUR 103.9 (65.5) million. The figure includes
the change in the fair value of the property portfolio, EUR 26.2 million.
. The profit after tax in 2006 was EUR 48.4 (29.6) million.
. Earnings per share (EPS) were EUR 0.61 (0.37).
. Cash flow from operations per share was EUR 0.56 (0.57).
. The fair value of the property portfolio doubled as a result of the
Kapiteeli acquisition and totalled EUR 2,686.2 (1,259.7) million. This
comprised investment properties totalling EUR 2,455.1 million and trading
properties EUR 231.1 million.
. Net assets per share amounted to EUR 7.45 (7.25).
Highlights of the fourth-quarter result (comparison figures are for Q4/2005):
. Net sales increased to EUR 37.1 (25.6) million.
. Net operating income was EUR 26.2 (18.8) million.
. Operating profit rose to EUR 30.8 (23.5) million and included an increase in
the value of the property portfolio of EUR 7.1 million.
. The net profit between October and December was EUR 10.7 (13.1) million.
. Earnings per share (EPS) were EUR 0.13 (0.17).
. Operating cash flow per share was EUR 0.17 (0.14).
Key figures
10-12/06 10-12/05 1-12/06 1-12/05
Economic occupancy rate, %* 88.8 87.7
Total revenue, Me 37.1 25.6 116.9 103.1
Net operating income, Me 26.2 18.8 87.1 77.5
Operating profit, Me 30.8 23.5 103.9 65.5
Earnings/share (EPS), e 0.13 0.17 0.61 0.37
Cash flow from operations/share, e 0.17 0.14 0.56 0.57
Net assets/share, e 7.45 7.25
Equity ratio, % 20 45
Gearing, % 334 107
Dividend/share, e** 0.40 0.50
Total dividend, Me 44.4 39.6
* The figure is for Sponda's property portfolio before the Kapiteeli acquisition
** Board proposal
Prospects
Sponda expects its earnings per share and economic occupancy rate to improve in
2007. Likewise cash flow from operations per share, including estimated profits
and losses on property sales, are forecast to improve in 2007.
Business conditions
2006 was a year of record activity in the Finnish real estate development market.
According to the Finnish Real Estate Federation, investments during the year
totalled EUR 5.6 billion, more than half of which were made by international
investors. According to Catella Property Ltd, the yields from Helsinki CBD
properties are still above 5 %. They are, however, expected to come down below 5
% in the near future.
Demand for leased office premises continued to be strong. The vacancy rate for
office premises in the Helsinki Metropolitan Area came down in 2006. In
particular, the demand for modern office space is continued to increase. The
market rent levels were stable except in Helsinki Central Business District,
where a slight increase in office rents was evident.
The vacancy rate for retail premises remained low in the Helsinki Metropolitan
Area. Rent levels were largely unchanged from the previous year.
The vacancy rate for logistics properties was low in the entire Helsinki
Metropolitan Area and the interest for modern premises was high. The Vuosaari
Harbour will activate construction in logistics premises and also generate new,
flexible space. Rent levels, likewise, remained stable in logistics properties.
Business operations: full-year 2006 and fourth quarter (compared with
corresponding figures in 2005)
Sponda owns, leases and develops business properties in Finland, mainly in the
Helsinki Metropolitan Area. The company's operations were organized into five
business units at the end of 2006: Office & Retail, Logistics, Property
Development, New Business Areas, and Sales Properties, the latter due to the
Kapteeli acquisition. New Business Areas comprises both Sponda's real estate
funds business and its operations in Russia and the Baltic countries.
On 20 October 2006 Sponda announced its acquisition of the entire share capital
of Kapiteeli Plc for EUR 943 million, which represents an enterprise value of
roughly EUR 1.3 billion. Kapiteeli's office and retail properties were worth
about EUR 1 billion on the acquisition date and its development and trading
properties approximately EUR 0.3 billion. The Finnish Competition Authority
approved the acquisition on 16 November 2006 and the transaction was completed on
14 December 2006.
The Kapiteeli acquisition was financed with a short-term loan which Sponda plans
to refinance. The company has set itself an equity ratio target of 33 % by the
end of 2007, which it plans to reach with the proceeds of a share issue, proceeds
from the sale of properties, and long-term financing arrangements. The property
sales will be put into effect in one or several instalments by the end of 2007
and they will have an estimated aggregate value of EUR 300-500 million.
Net operating income from Sponda's property portfolio was EUR 87.1 (77.5)
million. This comprised 73 % for Office & Retail, 25 % for Logistics, 1 % for New
Business Areas, and 1 % for Sales Properties. The economic occupancy rate of the
properties was divided by type of property and geographical location as follows
(the figures are for Sponda's property portfolio before the Kapiteeli
acquisition):
By type of property 31 Dec. 30 Sep. 30 June 31 March 31 Dec.
2006 2006 2006 2006 2005
Office and retail, % 88.8 87.4 86.3 85.6 86.2
Logistics, % 88.6 90.1 92.5 92.3 91.9
Total property portfolio, % 88.8 88.2 88.0 87.5 87.7
By geographical area 31 Dec. 30 Sep. 30 June 31 March 31 Dec.
2006 2006 2006 2006
2005
Helsinki Business District, 89.7 88.3 87.8 87.2 88.9
%
Helsinki Metropolitan Area, 87.5 86.0 83.9 82.8 80.8
%
HMA, logistics, % 87.1 87.3 90.4 90.3 89.6
Rest of Finland, % 93.4 96.4 96.1 95.9 95.0
Total property portfolio, % 88.8 88.2 88.0 87.5 87.7
The aggregate cash flow from lease agreements on 31 December 2006 was EUR 896 (31
December 2005: 461) million and the average length of the agreements was 4.0 (4.6
) years. A total of 332 new leases (130,000 m2) were signed during the year, and
464 leases (103,000 m2) expired. The largest customer sectors represented in
Sponda's business premises were retailers (29 % of total rental income), other
services (15 %) and banking and investment (11 %). The lease agreements matured
as follows:
Year of expiry % of rental
income
2007 11.7
2008 13.4
2009 11.0
2010 9.1
2011 11.9
2012 3.1
2013 20.9
Open-ended 19.0
Property portfolio
On 31 December 2006 Sponda had roughly 250 investment properties with an
aggregate leasable area of about 1.6 million m². Of this total, roughly 76 % were
office and retail properties, and 24 % were logistics premises. Sponda also had
576 properties in its Sales Properties portfolio with an aggregate leasable area
of about 300,000 m².
The fair values of Sponda's investment properties are confirmed based on the
company's own calculations in which Sponda applies the yield method based on cash
flow analysis. The assessment method meets the requirements of the IVS
(International Valuation Standards). All the material used to calculate the fair
values of the properties is audited at least once a year by a qualified
independent assessor to ensure that the parameters used by Sponda and the values
these have generated are consistent with market trends.
The comparable fair value of the investment properties rose in 2006 by EUR 51.3
million prior to the acquisition of Kapiteeli. Investments during the year in
property maintenance and quality improvements amounted to EUR 25.3 million. The
Kapiteeli properties were measured at acquisition cost and they will be assessed
using Sponda's measurement principles during the first quarter of 2007.
The comparable fair value of the investment properties during the final quarter
of the year rose by EUR 17 million. Fourth-quarter investments in property
maintenance and quality improvements totalled EUR 10.1 million.
Factors instrumental in the increase in the fair value of the investment
properties were the new leases signed in 2006 and Sponda's investments in quality
improvements in the properties. A further positive factor was a decline in market
yield requirements in all business areas. Rent levels did not change
significantly.
Sponda's investment properties
1 Jan. -31 Dec. 2006, Me
(excl. trading properties)
Total Office & Logistics Property New
Retail Development Business
Areas
Operating income 114.2 83.7 28.7 0.6 1.2
Maintenance costs -28.2 -21.0 -6.5 -0.3 -0.4
Net operating income 86.0 62.7 22.2 0.3 0.8
Investment 1,259.7 966.4 252.3 41.0 0.0
properties 1 Jan.
2006
Acquisitions in 2006 94.3 39.1 24.2 20.3 10.7
Kapiteeli 1,070.0 979.0 0.0 91.0 0.0
acquisition
Investments 44.1 20.3 5.4 18.4 0.0
Other transfer -1.5 -2.2 -3.4 4.1 0.0
Sales in 2006 -37.7 0.0 -37.7 0.0 0.0
Fair value 26.2 21.3 4.8 0.1 0.0
adjustment
Investment 2,455.1 2,023.9 245.6 174.9 10.7
properties 31 Dec.
2006
Fair value 2.1 2.2 1.9 0.3 0.0
adjustment, %
Annual net operating 6.4 %* 5.7 % 8.9 %
income / investment
properties 31 Dec.
2006
Yield requirement 5.8-8.0 8.0-11.5
used in calculating
fair value, %
* Does not include development properties
Investments and divestments (excluding Kapteeli figures)
Sponda purchased investment properties for altogether EUR 94.3 million in 2006.
Property purchases in the final quarter amounted to EUR 26.2 million. Sponda sold
properties during 2006 for a total value of EUR 37.7 million.
Investments in property maintenance and quality improvements totalled EUR 25.3
million in the full year and EUR 10.1 million in the final quarter. Altogether
EUR 18.4 was investment in property development, EUR 6.8 million of this in the
final quarter. Property development investments were mainly allocated to the
renovation of the City-Center complex in Helsinki city centre.
Office & Retail Properties
The year-end economic occupancy rate of the office and retail properties was 88.8
% (30 September 2006: 87.4 %). This figure does not include the office and retail
properties gained by Sponda through the Kapiteeli acquisition. The comparable
change in fair value compared to the beginning of 2006 was EUR 21.3 million. The
unit's total revenue, net operating income and operating profit were distributed
as follows:
Office and retail, Me 10-12/2006 10-12/2005 1-12/2006 1-12/2005
Total revenue 27.9 18.3 84.7 73.5
Net operating income 20.2 13.3 63.1 54.5
Operating profit 29.6 19.3 78.0 36.7
In October 2006 Sponda purchased an office property for EUR 10.4 million in the
Ruoholahti district of Helsinki. The price will be on 30 June 2008. The Kapiteeli
deal was confirmed in December, giving Sponda office and retail investment
properties worth EUR 979 million and trading properties worth EUR 49.1 million.
Sponda did not sell any office or retail properties during the year.
Office & Retail's investments in property maintenance and quality improvements
amounted to EUR 20.3 million in 2006, EUR 7.8 million of this in the final
quarter.
Logistics Properties
The economic occupancy rate of the logistics properties declined on the previous
quarter to 88.6 (90.1) %, owing to the sale of seven fully leased properties to
the logistics properties fund Sponda Real Estate Fund I Ky. The comparable change
in fair value from the beginning of the year was EUR 4.8 million.
The net sales, net operating income and operating profit of the Logistics
Properties unit was distributed as follows:
Logistics, Me 10-12/2006 10-12/2005 1-12/2006 1-12/2005
Total revenue 6.6 7.3 28.7 29.6
Net operating income 4.7 5.5 22.2 23.0
Operating profit 0.0 5.2 24.9 30.5
Sponda purchased a logistics property in the town of Hyvinkää for EUR 4.2 million
in December. The property has a total leasable area of 6,900 m2 and it is fully
leased for 15 years.
Sponda sold logistics properties in October 2006 to the Sponda Real Estate Fund I
Ky, in which the company holds a 47 % stake. These properties are situated
outside the Helsinki Metropolitan Area in the cities of Tampere, Turku and Lahti.
The fair value of these properties was roughly EUR 37 million.
The investments of the Logistics Properties unit in property maintenance and
quality improvements at the end of 2006 totalled EUR 3.1 million, EUR 0.6 million
of this in the final quarter.
Property Development
The year-end fair value of the investment properties in Sponda's Property
Development portfolio totalled EUR 174.9 million, in addition to which this
portfolio also contained trading properties, mainly land sites, gained through
the Kapiteeli acquisition and worth EUR 55.2 million. Investments in property
development and acquisitions during the period totalled EUR 38.7 million.
Renovation of the City-Centre project continued as planned and the underground
basement facilities will be completed in spring 2007. The first stage in the
renovation of the retail premises has started and these will be completed by the
end of April 2007. The second stage of their renovation, which includes the
Kaivokatu street-level premises and station tunnel premises, will be started at
the same time, for completion around the beginning of 2008.
In the final quarter of 2006 Sponda and the Port of Helsinki signed an agreement
covering the construction of the logistics area, the gatehouse building, parking
building and passenger terminal for the new Vuosaari harbour. This has a total
investment value of roughly EUR 140 million and construction will commence in
April 2007 with the harbour taken into operation in November 2008. Sponda is
responsible for developing, leasing and managing all the buildings.
In October 2006 Sponda concluded an agreement with the pension fund of the
Finnish Broadcasting Company (Yle) under which the two parties will jointly
develop an office site in the Länsi-Pasila district of Helsinki. The project has
a total value of roughly EUR 95 million, Sponda's share being 60 % of this.
Planning has been started and construction will begin in September 2007 at the
earliest.
The Kapiteeli acquisition gave Sponda a large number of new sites. Of these,
construction of a retail property in the Itäkeskus district of Helsinki and an
office building in the Ruoholahti district is expected to start during 2007. The
overall investment value of the retail property is roughly EUR 52 million and it
has a total leasable area of about 21,000 m². The office property has an
investment cost of roughly EUR 25 million and a total leasable area of about
13,500 m².
New Business Areas
The New Business Areas unit included the operations of both the real estate funds
and Sponda's activities in Russia and the Baltic countries. Sponda is a minority
holder in two real estate funds, First Top LuxCo and Sponda Real Estate Fund I
Ky.
First Top LuxCo (Sponda's holding 20 %) invests in office and retail properties
outside Finland's largest cities. At the end of the year the fund's property
investments had a fair value of roughly EUR 90 million. The fund has a target
size of EUR 150-400 million. Sponda Real Estate Fund I Ky (Sponda's holding 47 %)
invests in logistics sites outside the Helsinki Metropolitan Area. At the end of
the year this fund's property investments had a fair value of EUR 88.5 million.
Sponda is responsible for managing both the funds and their properties and
receives management fees.
Opening up new business ventures in Russia and the Baltic region requires a broad
network of contacts and a good knowledge of the area. Sponda is studying various
candidate properties for investment and development in St. Petersburg and Moscow
together with companies that already have experience of operating in Russia, or
which are seeking business opportunities in Russia. Sponda owns one logistics
property in the Vsevolozhsk district of St. Petersburg which is fully leased to
the St. Petersburg subsidiary of the Finnish company Onninen Oy.
Sales Properties
Sponda gained a new business unit, Sales Properties, as a result of the Kapiteeli
acquisition in December. The properties in this unit are treated as inventories,
i.e. properties available for trading, and in line with Sponda's strategy the
plan is to sell these by the end of 2008. At the end of 2006 the Sales Properties
portfolio contained 576 properties with a total leasable area of around 300,000
m². The fair value of the properties was EUR 126.8 million.
Cash flow and financing
Sponda's business operations generated net operating income on 31 December 2006
totalling EUR 45.4 (31 December 2005: 46.5) million. Net cash flow after
investing activities was EUR -1,020.9 (-43.9) million and after financing
activities EUR 998.3 (-3.5) million.
On 5 December Sponda signed an agreement for a one-year syndicated credit
facility totalling EUR 1.5 billion to finance the acquisition of Kapiteeli's
share capital, to reorganize the company's debt portfolio, and to cover the costs
of the acquisition.
Financial income and expenses at the end of the year amounted to EUR -38.5 (-
26.3) million and in the final quarter EUR -16.4 (-6.7) million. Financial
expenses included a provision to cover the interest and penalty costs, EUR 7.5
million, payable to Sampo bank based on a ruling by the Helsinki district court.
Sponda's equity ratio on 31 December 2006 was 20 (31 December 2005: 45) % and
gearing was 334 (107) %. Interest-bearing liabilities totalled EUR 2,016.9
(615.7) million, the average maturity of the credit facilities was 1.7 (3.2)
years and the average interest rate was 4.6 (4.2) %. Fixed-coupon and hedged
loans represented 74 % of the debt portfolio. The average interest-bearing period
for the whole debt portfolio was 1.7 (2.1) years. The interest margin, which
describes the company's solvency, was 2.5 (2.7).
Sponda Group's debt portfolio comprises EUR 300 million in syndicated loans, EUR
397 million in serial bonds, EUR 136.5 million in issued commercial certificates,
and EUR 223.4 million in bank loans. Sponda also has a EUR 960 million short-term
loan for financing the Kapiteeli acquisition. Unused credit limits total EUR 200
million. Sponda Group has secured loans totalling EUR 15.8 million.
Risk management
Sponda's most important risks are those related to its customers and capital
adequacy. At the end of the period Sponda had 2,063 customers and 3,055 separate
lease agreements. In addition to spreading the customer base, a central aspect of
risk management in Sponda is knowing the businesses of the company's customers
and monitoring information on these companies. Sponda also manages customer risk
by broadening the customer base and varying the length of its lease contracts.
Rents are increased twice a year either in relation to changes in the cost-of-
living index or based on a percentage increase stipulated in the leasing
agreements. Leases include normal clauses covering rent in advance. Sponda owns
properties in Finland as well as a property in Russia. All are insured for their
full value. The company had no significant foreign currency exposure.
The refinancing risk is reduced by using credit agreements of varying lengths.
Fixed-coupon loans and interest derivatives are used to balance the interest rate
risk associated with changes in market interest rates. At the end of 2006 74 % of
Sponda's debt portfolio was hedged. Sponda's creditors are protected by covenants
attached to its financing agreements. These covenants apply, among
other things, to the use of collateral, the equal status of the financiers, and
various financial indicators.
The main environmental impacts caused by property investment activities relate to
land use, the energy consumed by the properties, waste disposal for the
properties, and the quality of the built-up environment around them. The increase
in Sponda's property development business is further emphasizing lifecycle
thinking in the company's operations. Sponda's real estate portfolio also
contains a number of national heritage properties that Sponda maintains with
special regard for their history. The company includes environmental
responsibilities in all its business operations and decision-making processes.
Priority is given in the properties owned by Sponda to the choice of building
materials, monitoring energy consumption, reducing exhaust gas emissions caused
by service traffic, and maintenance of the environment around the properties.
Personnel
Sponda Group had 63 (54) employees on average during 2006, which included 57 (51)
in the parent company Sponda Plc. The year-end number of employees was 225 (54),
which included 62 (51) in the parent company. Sponda has employees in Finland and
Russia.
All Sponda employees are included in the company's incentive bonus scheme, under
which bonuses are indexed to the company's targets. The company also operates a
share-based incentive scheme for its senior executives that was launched on 1
January 2006. Bonuses under this scheme are based on cash flow from operations
per share and return on equity, and Sponda shares are bought with these bonuses.
These shares also carry a restriction forbidding their disposal within two years
of their issue. The bonus is paid annually.
Group structure
Sponda Group comprises the parent company, the subsidiary Kapiteeli Oy and
Kapiteeli's 50.9 %-owned subsidiary Ovenia Oy, as well as the mutually owned
property companies, which are either wholly or majority-owned by Sponda Plc or
Kapiteeli Oy. Sponda Group also includes the company Sponda Russia Ltd and Sponda
Asset Management Oy.
The Sponda share
The weighted average price of the Sponda share during 2006 was EUR 9.08. The
highest quotation on the Helsinki Stock Exchange was EUR 13.00 and the lowest was
EUR 7.44. Turnover during the year totalled 41,938,011 shares. The closing price
of the share on 29 December 2006 was EUR 12.00, and the market capitalization of
the company's share capital was EUR 952 million.
The Annual General Meeting on 29 March 2006 authorized the Board of Directors to
purchase the company's own shares. This authorization was not exercised during
the review year.
Sponda issued the following flagging announcements during 2006:
- 27 January 2006: Stichting Pensioenfonds ABP announced that its holding of
shares represented 5.05 % of the total number of shares and votes in Sponda
Plc.
- 8 March 2006: Stichting Pensioenfonds ABP announced that its holding of
shares represented 4.88 % of the total number of shares and votes in Sponda
Plc.
- 3 November 2006: Stichting Pensioenfonds ABP announced that its holding of
shares represented 5.19 % of the total number of shares and votes in Sponda
Plc.
At the close of the financial year on 31 December 2006 Sponda's ownership
structure was as follows:
No. of % of total
shares
The Finnish State (Ministry of Finance) 27,189,642 34.3
Private persons 4,729,538 6.0
Finnish institutions 3,560,952 4.4
Foreign institutions 43,827,143 55.3
No. of shares, total 79,307,275 100.0
Board of Directors and President
Sponda's Board of Directors has six members: Tuula Entelä, Maija-Liisa Friman,
Timo Korvenpää, Harri Pynnä, Anssi Soila and Jarmo Väisänen. The chairman of the
Board is Anssi Soila and the deputy chairman is Jarmo Väisänen. Sponda's
president and CEO is Kari Inkinen.
All the members of the Board of Directors are independent of the company and five
of the six are also independent of the company's major shareholders.
Auditors
Sponda Plc's auditors are Sixten Nyman APA and the firm of public auditors KPMG
Oy Ab under the supervision of principal auditor Raija-Leena Hankonen APA. The
deputy auditor is Riitta Pyykkö APA.
Nomination Committee of the shareholders
The Nomination Committee of the shareholders has prepared a proposal for
candidate members of the Board of Directors and their compensation. The members
represented the three principal shareholders, who on 1 November 2006 were:
1. THe Finnish State, 34.3 % of the shares and votes, represented by Ilpo
Nuutinen (Ministry of Finance),
2. The State Pension Fund, 0.6 % of the shares and votes, no representative on
the Nomination Committee, and
3. The Pension Fund of the Finnish Broadcasting Company (Yle), 0.4 % of the
shares and votes, represented by Managing Director Harri Lemmetti.
The Nomination Committee will propose to the Annual General Meeting on 4 April
2007 that the number of members of the Board of Directors be confirmed as six and
that of the existing members Tuula Entelä, Timo Korvenpää, Harri Pynnä and Jarmo
Väisänen be re-elected and that Lauri Ratia and Arja Talma be elected as new
members.
The Annual General Meeting confirms the fees paid to the Board members for one
year at a time. The Nomination Committee proposes that the following fees be paid
to the Board members in 2007 (figures in brackets are fees paid in 2006):
- to the chairman a monthly fee of EUR 5,000 (3,520)
- to the deputy chairman a monthly fee of EUR 3,000 (2,100)
- to the ordinary members a monthly fee of EUR 2,600 (1,840)
- a separate fee of EUR 500 (500) to each member for attendance at Board
meetings.
Organization
On 14 December 2006 Sponda introduced a new organization and Executive Board.
Sponda was reorganized into five business units with effect from 1 January 2007:
Office & Retail, Logistics, Property Development, Russia & Baltic, and Real
Estate Funds. From 1 January 2007 members of the Executive Board have been
President and CEO Kari Inkisen, CFO Robert Öhman, SVP Legal Affairs and Treasury
Erik Hjelt, and the heads of the business units Ossi Hynynen (Office & Retail),
Pasi Viitaniemi (Logistics), Joni Mikkola (Property Development), Sirpa Sara-aho
(Russia & Baltic), and Kari Koivu (Real Estate Funds).
Demand for payment
In a ruling issued on 11 January 2007 the Helsinki district court ordered Sponda
Plc to pay interest, penalty interest and court costs totalling roughly EUR 7.6
million to Sampo Bank Plc based on a credit agreement signed on 2 July 1999.
Sponda appealed the decision to the Helsinki Court of Appeal on 9 February 2007.
The impact on the ruling on the 2006 result was roughly EUR 7.6 million.
Events after the close of the financial year
An extraordinary general meeting of Sponda Plc shareholders on 5 January 2007
authorized the Board of Directors to launch a paid share issue in the maximum
amount of EUR 250 million and the Board decided to arrange the issue on 9 January
2007. The share issue took place between 17 January and 2 February 2007 and
Sponda's shareholders had the pre-emptive right to subscribe for new shares at a
price of EUR 7.80 per share. Roughly 31.6 million shares were subscribed in the
issue, which represented roughly 99.5 % of the total number of shares offered.
About 5,200 shareholders subscribed for shares. The lead managers of the issue
obtained buyers for the remaining shares, roughly 160,000, at an average price of
EUR 11.83 per share.
On 6 February 2007 Sponda's Board of Directors approved all the subscriptions.
The gross proceeds of the issue totalled roughly EUR 247 million before
deductions for costs and fees. Sponda's share capital will increase to EUR
111,030,185 and the number of shares to 111,030,185 as a result of the increase
in share capital due to the share issue. The shares subscribed in the issue carry
full dividend rights and other shareholder rights in Sponda from the date when
the share capital increase is recorded in the Trade Register. The new shares were
combined with Sponda's existing share series on 9 February 2007.
On 31 January 2007 the Ministry of Finance announced that the Finnish government
will exercise its repurchasing right with respect to two land sites, with an
aggregate area of 58 hectares, in the Hakuninmaa and Honkasuo districts of
Helsinki. The Ministry also announced that the Finnish government will not
exercise its repurchasing right with respect to the land sites in Vantaa and
Jyväskylä itself but will indicate as the purchasers of these sites the local
governments that have announced their willingness to exercise the government's
repurchasing right.
The sites in question have a total sales price of EUR 67.3 million. The
transaction will have no impact on Sponda's result. The agreements concerning the
transactions will be signed by the end of February. Selling these sites is part
of Sponda's strategy to sell certain property assets for EUR 300-500 million in
order to refinance the loan raised to finance the Kapiteeli acquisition.
Sponda issued the following flagging announcement:
- 5 February 2007: Cohen & Steers, Inc. announced that its shareholding
represents 5.23 % of Sponda Plc's share capital and votes.
- 12 February 2007: Cohen & Steers, Inc. announced that its shareholding
represents 4.53 % of Sponda Plc's share capital and votes.
Prospects in 2007
Sponda expects its earnings per share and economic occupancy rate to improve in
2007. Likewise Cash flow from operations per share, including estimated profits
and losses on property sales, are forecast to improve in 2007.
Annual General Meeting and dividend
The Board of Directors of Sponda Plc plans to hold the Annual General Meeting, on
4 April 2007, proposes to the Annual General Meeting that a dividend of EUR 0.40
per share be paid on the financial year 2006. The Board proposes that the
dividend be paid on 18 April 2007.
16 February 2007
Sponda Plc
Board of Directors
Further information: Kari Inkinen, President and CEO, tel. +358 (0)9 6805 8202 or
+358 (0)400 402 653 and
Robert Öhman, CFO, tel. +358 (0) 9 6805 8206 or +358 (0) 40 540 0741.
Distribution:
Helsinki Stock Exchange
The media
www.sponda.fi
Sponda Plc
Key indicators
10-12/06 10-12/05 1-12/06 1-12/05
Earnings/share, e 0.13 0.17 0.61 0.37
Equity ratio, % 20 45
Gearing, % 334 107
Net assets/share (NAV), e 7.45 7.25
Cash flow from operations/share, e 0.17 0.14 0.56 0.57
Consolidated income statement (IFRS)
Me
10-12/2006 10-12/2005 1-12/2006 1-12/2005
Total revenue
Rental income and recoverables 36.4 25.6 115.4 103,1
Fund management fees and share 0.7 - 1.5 -
of profits
37.1 25.6 116.9 103,1
Expenses
Maintenance expenses -10.7 -6.8 -29.4 -25,6
Direct fund expenses -0.2 - -0.4 -
-10.9 -6.8 -29.8 -25,6
Net operating income 26.2 18.8 87.1 77.5
Profit/loss from sales of - - - -0.2
investment properties
Fair 7.1 6.1 26.2 -5.1
value adjustment
Proceeds from sale of trading 11.6 - 11.6 -
properties
Book value of sold trading -10.0 - -10.0 -
properties
Profit/loss from sale of 1.6 - 1.6 -
trading properties
Sales and marketing expenses -0.3 -0.5 -1.1 -1.2
Administrative expenses -4.4 -1.0 -10.8 -5.8
Other financial income 1.1 0.1 1.4 0.4
Other financial expenses -0.5 - -0.5 -0.1
Operating profit 30.8 23.5 103.9 65.5
Financial income 3.6 - 3.7 0.2
Financial expenses -12.5 -6.7 -34.7 -26.5
Provision for interest expenses -7.5 -7.5
Financial income and expenses, -16.4 -6.7 -38.5 -26.3
total
Profit before taxes 14.4 16.8 65.4 39.2
Taxes for current and previous 0.5 - -0.4 -0.1
financial years
Deferred taxes -4.3 -3.7 -16.7 -9.5
Income taxes, total -3.8 -3.7 -17.1 -9.6
Profit for the period 10.6 13.1 48.3 29.6
Distribution:
To the parent company owners 10.6 13.1 48.3 29.6
To minority interests 0.1 - 0.1 -
Net profit for the period 10.7 13.1 48.4 29.6
WPS calculated on net profit to
the parent company owners
Earnings per share, basic, e 0.61 0.37
Earnings per share, diluted, e 0.61 0.37
No. of shares on average,
million
Basic 79.3 79.0
Diluted 79.3 80.3
Consolidated balance sheet (IFRS)
Me
31 Dec. 2006 31 Dec. 2005
ASSETS
Non-current assets
Investment properties 2,455.1 1,259.7
Investments in real estate funds 19.4 -
Property, plant and equipment 19.5 8.8
Goodwill 27.5 -
Other intangible assets 5.2 0.1
Finance lease receivables 2.7 -
Other investments - 0.1
Long-term receivables 5.2 0.1
Deferred tax assets 110.5 2.5
Total non-current assets 2,645.1 1,271.3
Current assets
Trading properties 231.1 -
Trade and other receivables 39.6 6.6
Cash and cash equivalents 23.6 0.8
Total current assets 294.3 7.4
Total assets 2,939.4 1,278.7
SHAREHOLDERS' EQUITY AND
LIABILITIES
Equity owed to the parent company
Share capital 79.3 79.2
Share premium fund 159.5 158.8
Fair value fund for hedging 2.3 -4.2
instruments
Revaluation fund 0.6 -
Retained earnings 349.3 340.5
591.0 574.3
Minority interest 1.8 -
Total shareholders' equity 592.8 574.3
Liabilities
Non-current liabilities
Interest-bearing debt 658.2 549.2
Provisions 22.7 1.1
Other liabilities - 5.8
Deferred tax liabilities 218.7 63.4
Total non-current liabilities 899.6 619.5
Current liabilities
Current interest-bearing 1,347.4 66.5
liabilities
Trade and other payables 99.6 18.4
Total current liabilities 1,447.0 84.9
Total liabilities 2,346.6 704.4
Total shareholders' equity and 2,939.4 1,278.7
liabilities
Total interest-bearing debt 2,005.6 615.7
Income statement and balance sheet by segment
Me
Business areas
Income statement Office Logisti Property New Sales Other Group,
1-12/2006 & cs Develop- Busines Propert total
Retail ment s Areas ies
Total revenue 84.7 28.7 0.6 1.2 1.5 0.2 116.9
Maintenance -21.6 -6.5 -0.3 -0.4 -1.0 -29.8
expenses and
direct fund
management
expenses
Net operating 63.1 22.2 0.3 0.8 0.5 0.2 87.1
income
Profit/loss on -
sale of investment
properties
Profit/loss on 0.2 1.4 1.6
sale of trading
properties
Fair value 21.3 4.8 0.1 26.2
adjustment
Administration and -6.6 -2.1 -0.9 -1.6 -0.7 -11.9
marketing
Other operating -0.1 1.0 0.9
income and
expenses
Operating profit 78.0 24.9 -0.5 -0.8 1.1 1.2 103.9
Financial income -38.5 -38.5
and expenses
Profit before -37.3 65.4
taxes
Income taxes -17.1 -17.1
Profit for the -54.4 48.3
period
Capital 1 088.5 29.6 212.4 30.1 137.0 3.4 1 501.0
expenditure
Depreciation -0.6 -0.6
Segment assets 2 104.7 276.1 217.6 49.1 126.8 165.1 2 939.4
Segment 30.4 3.5 22.3 0.3 15.5 27.6 99.6
liabilities
Business areas Office Logisti Property New Sales Other Group,
1-12/2005 & cs Develop- Busines Propert total
Retail s Areas ies
ment
Total revenue 73.5 29.6 103.1
Maintenance -19.0 -6.6 -25.6
expenses
Net operating 54.5 23.0 77.5
income
Profit/loss on -0.6 0.3 0.1 -0.2
sale of investment
properties
Fair value -14.3 9.2 -5.1
adjustment
Administration and -5.7 -1.7 -0.9 -0.3 1.6 -7.0
marketing
Other operating 2.8 -0.3 -2.2 0.3
income and
expenses
Operating profit 36.7 30.5 -0.9 -0.3 -0.5 65.5
Financial income -26.3 -26.3
and expenses
Profit before -26.8 39.2
taxes
Income taxes -9.6 -9.6
Profit for the -36.4 29.6
year
Capital 15.8 34.3 1.8 - - 51.9
expenditure
Depreciation -0.5 -0.5
Segment assets 974.9 255.1 41.0 - - 7.7 1 278.7
Segment 3.4 1.9 - - - 13.1 18.4
liabilities
Geographical areas 31 Dec. 31 Dec.
2006 2005
Me Me
Total revenue
Helsinki 102.3 94.5
Metropolitan Area
Rest of Finland 14.4 8.6
Other 0.2 -
Group, total 116.9 103.1
Capital
expenditure
Helsinki 871.8 51.1
Metropolitan Area
Rest of Finland 595.7 0.8
Other 33.5 -
Group, total 1 501.0 51.9
Segment assets
Helsinki 2,102.7 1,198.5
Metropolitan Area
Rest of Finland 622.6 72.5
Other 214.1 7.7
Group, total 2,939.4 1,278.7
Consolidated cash flow statement (IFRS)
Me
1-12/2006 1-12/2005
Cash flow from operating activities
Net profit for the period 48.4 29.6
Adjustments 29.5 41.7
Change in net working capital 8.6 0.2
Interest received 0.8 0.2
Interest paid -34.3 -25.7
Other financial items -6.7 -0.3
Taxes received/paid -0.9 0.8
Net cash from operating activities 45.4 46.5
Cash flow from investing activities
Acquisition of Kapiteeli less
cash and equivalents at acquisition -929.1 -
date
Investments in investment -110.0 -53.1
properties
Investments in real estate funds -19.4 -
Investments in tangible and
intangible assets -0.6 -0.2
Proceeds from sale of investment 37.8 9.2
properties
Proceeds from disposal of tangible
and intangible assets - 0.2
Loans granted -0.9 -
Repayments of loan receivables 1.3 -
Net cash from investment activities -1,020.9 -43.9
Cash flow from financing activities
Share issue related to conversion
of
convertible bonds 0.7 1.6
Long-term loans, raised 300.0 100.0
Long-term loans, repayments -250.0 -75.7
Short-term loans, raised /
repayments 987.2 10.0
Dividends paid -39.6 -39.4
Net cash from financing activities 998.3 -3.5
Change in cash and cash equivalents 22.8 -0.9
Cash and cash equivalents, start of 0.8 1.7
period
Cash and cash equivalents, end of 23.6 0.8
period
Fair value of investment properties (IFRS)
Me
31.12.2006 31.12.2005
Fair value of investment 1,259.7 1,221.5
properties, 1 Jan.
Investment properties transferred
through Kapiteeli acquisition 1,070.0 -
Investment properties purchased 94.3 28.4
Other investments in
investment properties 43.3 23.5
Investment properties sold -37.7 -8.6
Transfers to/from property, plant
and equipment -1.5 -
Fair value of property in own use 0.8 -
Fair value adjustment 26.2 -5.1
Fair value of investment 2,455.1 1,259.7
properties, 31 Dec.
Changes in Group shareholders' equity
Me
Share Share Fair Re- Re- Mino- Equity,
capital premium value valu- tained rity total
fund fund ear- interes
for ation nings t
hedgin fund
g
instru
ments
Equity at 31 Dec. 2004 78.8 157.5 - - 350.3 - 586.6
Impact of IAS 39 -6.1 -6.1
Adjusted equity at 1 78.8 157.5 -6.1 - 350.3 - 580.5
Jan. 2005
Cash flow hedging:
Amount recognized in 2.4 2.4
equity
Amount transferred to 0.1 0.1
income statement
Taxes included in items -0.6 -0.6
recognized in or moved
from equity
Total income and 1.9 1.9
expenses entered in
equity
Profit for the period 29.6 29.6
Total income and 1.9 29.6 31.5
expenses in the period
Dividend payment -39.4 -39.4
Increase in share 0.4 1.3 1.7
capital
Equity at 31 Dec. 2005 79.2 158.8 -4.2 - 340.5 - 574.3
Equity at 31 Dec. 2005 79.2 158.8 -4.2 - 340.5 - 574.3
Cash flow hedging:
mount recognized in 8.5 8.5
equity
Amount transferred to 0.1 0.1
income statement
Reversed hedging 0.2 0.2
instruments
Increase 0.8 0.8
Taxes included in items -2.3 -0.2 -2.5
recognized in or moved
from equity
Total income and 6.5 0.6 7.1
expenses entered in
equity
Profit for the period 48.4 -0.1 48.3
Total income and 6.5 0.6 48.4 -0.1 55.4
expenses in the period
Increase 1.9 1.9
Dividend payment -39.6 -39.6
Increase in share 0.1 0.7 0.8
capital
Equity at 31 Dec. 2006 79.3 159.5 2.3 0.6 349.3 1.8 592.8
Contingent liabilities
Collateral and commitments given by the Group
Me
31 Dec. 31 Dec. 2005
2006
Loans from financial instruments covered 15.8 0.1
by collateral
Mortgages 0.2 0.1
Book value of pledged shares 149.7 -
Guarantees 17.1 -
Total collateral 167.0 0.0
Lease liability 22.9 20.9
Other liabilities 0.1
Mortgages 2.3 2.2
Guarantees 0.1
Interest derivatives:
Swap contracts, notional value 541.8 305.9
Swap contracts, fair value 2.3 -5.8
Interest cap options bought, notional 737.0
value
Interest cap options bought, fair value 10.0
Foreign currency derivatives:
Swap contracts, notional value JPY 3,000
Swap contracts, fair value EUR -8.7