Highlights of 1-6/2007 compared with corresponding period of 2006:
- Group's net sales rose to EUR 27.8 million (EUR 18.7 million), an increase of
49.1 %
- The Group's EBITDA (Earnings before interest, taxes, depreciation and
amortization) rose to EUR 13.6 million (EUR 10.0 million), an increase of 36.9
%.
- Profit before taxes totaled EUR 14.5 million (EUR 18.1 million), a decrease
of 20,0 %.
- Effect on profit before taxes of the change in the fair value of investment
property was EUR 5.4 million (EUR 10.5 million).
Business
The Group's net sales for the review period were EUR 27.8 million (EUR 18.7
million in 1-6/2006), representing growth of 49.1 %. EBITDA (Earnings before
interest, taxes, depreciation and amortization) for the review period was EUR
13.6 million (EUR 10.0 million), an increase of 36.9 %. Group EBITDA increased
slower than net sales due to increase in personnel, development and expert
costs associated with business expansion and in net sales from business
development services and regional development programs. Operating profit for
the review period was EUR 18.7 million (EUR 20.3 million). Profit before taxes
for the review period was EUR 14.5 million (EUR 18.1 million).
The balance sheet total was EUR 443.7 million (EUR 368.9 million), an increase
of 20.3 %. The Group's equity to assets ratio at the end of the period was 38.9
% (39.4 %).
The fair value of the Group's investment property at the end of the review
period was EUR 398.2 million (EUR 326,8 million). The change in the fair value
of investment property was due to the effect of the fair value of property
bought and completed, a reduction in the return requirements of the market,
changes in future returns and modernization costs, the revaluation of property
owned throughout the review period, and increases in acquisition cost
recognized in separate companies during the review period. The effect on profit
of the change in the fair value of investment property was EUR 5.4 million (EUR
10.5 million).
The Group's total rentable surface area was 346,077 floor square meters at the
end of review period (287,913 floor square meters at June 30, 2006). The
Group's average financial occupancy ratio at the end of the period was 95.4 %
(94.1 %). The financial occupancy ratio describes the rental revenue from the
properties as a percentage of the combined total of the rent for the leased
space and the estimated market rent for the vacant space. The Group's leases at
the end of the review period totaled EUR 121.2 million (EUR 104.7 million).
Group structure
The Technopolis Group includes the parent company, Technopolis Plc, which has
operations in Oulu, Vantaa and Lappeenranta, and its subsidiaries Innopoli Oy
in Espoo (100 % owned), Technopolis JSP Oy in Jyväskylä (100 % owned),
Technopolis TSP Oy in Tampere (100 % owned), Medipolis Oy in Oulu (100 % owned)
and other subsidiaries.
The Group has carried out the merger of the following Group subsidiaries with
their respective parent companies: Technopolis JSPF Oy, Kiinteistö- ja
Sijoitusyhtiö Joreco Oy, Kiinteistöosakeyhtiö Teknologiantie 11, Technopolis
Kareltek Oy, Kiinteistö Oy Oulun Teknologiatalot, Kiinteistö Oy Oulun Moderava
and Kiinteistö Oy Oulun Mediaani. In addition, the Group has commenced the
merger of the following Group subsidiaries with their respective parent
companies: Technopolis JSP Oy, Technopolis TSP Oy, Kiinteistö Oy Hermia Kymppi
and Medipolis Oy. The purpose of the mergers is to increase the cost efficiency
of the companies' operations and streamline Group administration.
The parent company also has a minority holding in the affiliated companies
Technocenter Kempele Oy (48.5 %), Iin Micropolis Ltd (25.7 %), Jyväskylä
Innovation Ltd (24 %) and Lappeenranta Innovation Ltd (20 %). Technopolis Plc
has a 13 % holding in Oulu Innovation Ltd.
The Group also includes Technopolis Ventures Oy in Espoo (fully owned by
Innopoli Oy). Technopolis Ventures Oy has a wholly-owned subsidiary,
Technopolis Ventures Kareltek Oy (100 % owned) and the subsidiaries Technopolis
Ventures JSP Oy and Technopolis Ventures Oulutech Oy (70 % owned). Technopolis
Ventures Oy also has a 25 % holding in Otaniemen kehitys Oy.
Technopolis has established two Russian companies in St. Petersburg,
Technopolis Neudorf LLC and Technopolis St. Petersburg LLC, both fully owned by
Technopolis.
Principal investments and development projects
In February, Technopolis decided to commence the construction of the Hermia 12
property in Tampere. The project's cost estimate is EUR 9 million and the gross
area is 8,600 square meters, which includes a parking facility for 115
vehicles. 63 % of the facilities have so far been rented. Its total size is
5,000 floor square meters and it is expected to reach completion before the end
of February 2008.
In February, Technopolis reached a result in negotiations with the City of Oulu
and the Northern Ostrobothnia Hospital District concerning the purchase of a
total of 19,250 shares in Medipolis Oy. Following transactions with the said
parties and minority shareholders, Technopolis is the sole owner of Medipolis
Oy.
In May, Technopolis launched the construction of the first stage of its
technology center in Ruoholahti, Helsinki. The size of the stage is 6,600 floor
square meters and the cost estimate is somewhat over EUR 20 million, which
includes the costs of parking spaces and site costs. The first stage is
estimated to be completed in summer 2008.
In May, Technopolis launched the construction of the first stage of its
Lappeenranta City project. The stage measures 3,150 floor square meters and is
estimated to cost approximately EUR 6.5 million. 54 % of the facilities have so
far been rented. Planned completion is before the end of March 2008.
Technopolis has commenced planning a new technology center in the heart of
Tampere at the corner of Kalevantie and Kanslerinrinne, adjacent to the
University of Tampere. In its meeting on June 4, 2007, the City Board of
Tampere approved Technopolis's request to reserve a plot of land containing the
building rights to around 30,000 floor square meters for Technopolis Plc, for
the purpose of implementing a new technology center.
In June, Technopolis commenced the third and fourth expansion stages of the
Kontinkangas technology center in Oulu. The size of the third expansion is
3,500 gross square meters and the investment totals approximately EUR 5
million. 84 % of the third expansion have so far been rented. Its estimated
time of completion is August 2008. The size of the fourth expansion is 4,290
gross square meters and the investment totals approximately EUR 7.5 million.
Its estimated time of completion is September 2008. Approximately 70 % of the
fourth expansion has been rented.
In June, Technopolis signed a preliminary agreement with the City of Espoo, the
Etera Mutual Pension Insurance Company, and Sitra (the Finnish Innovation Fund)
on the acquisition of the entire stock of Kiinteistö Oy Innopoli II (Innopoli
II real estate company). Kiinteistö Oy Innopoli II comprises a building of
20,625 floor square meters and 1.9 hectares of land owned by the company and
located in the Otaniemi district of the City of Espoo. Completed in 2002, the
property houses some 90 high tech companies. According to the preliminary
agreement, the transaction price of EUR 54.2 million will be revised on the
basis of Kiinteistö Oy Innopoli II's net debt position. About 20 % of the price
will be paid in new shares of Technopolis Plc and the rest in cash. The
intention is to close the deal in August 2007. Closure of the transaction will
require, for example, that no new significant information that would prevent
the transaction from taking place is revealed either in the due diligence
process carried out and ordered by Technopolis Plc or otherwise and that the
final deed of sale is signed by August 31, 2007.
In June, Technopolis has signed an agreement with Stockmann plc to lease some
4,300 square meters of office space in the Nevsky Centre shopping center
currently under construction in St. Petersburg for the purpose of subletting it
to its customer companies. Located in Nevski Prospekt in downtown St.
Petersburg, the shopping center and office space will be completed in the
spring of 2009.
The territorial plan for the Pulkovo technology center in St. Petersburg is
expected to be complete by the end of 2007. The estimate is that the conditions
for commencing work on the approximately 15,000-square-meter first stage will
be in place in the first half of 2008.
Technopolis has commenced preliminary inquiries on launching technology centre
operations in the Moscow area.
Events related to the Technopolis share
At its meeting on January 4, 2007, the Board of Directors resolved, in
accordance with the authorization granted by the Annual General Meeting of
March 24, 2006, to increase the company's share capital by a maximum of EUR
1,162,652.40, a total of 687,960 shares, through accepting the subscriptions of
institutional investors. The purpose of the share offering was to finance the
investments included in the company's investment plan, to secure the company's
growth and to maintain the company's equity-to-asset ratio.
The shares were offered in deviation from the pre-emptive subscription rights
of shareholders for subscription by Finnish and international institutional
investors. The share offering was implemented through a "book building"
process, in which institutional investors subscribes the shares to be issued in
accordance with their subscription commitments made during the reception period
for such commitments, January 3-4, 2007. The demand was about 3.5 times larger
than the number of shares offered. The subscription price was set at EUR 7.70
per share. The increase in share capital was entered in the Trade Register on
January 8, 2007, and trading in the shares began on January 9, 2007.
In December 2006, a total of 26,131 Technopolis shares were subscribed with
year 2001 options. An increase in share capital of EUR 44,161.39 was entered in
the Trade Register on February 13, 2007. Including earlier subscriptions, a
total of 98,399 Technopolis shares were subscribed by April 30, 2007 with year
2001 options. An increase in share capital of EUR 166,294.31 was entered in the
Trade Register on June 12, 2007. The subscription period for all year 2001
options expired on April 30, 2007.
Following these increases, the Technopolis share capital is EUR 68,691,861.68
and there are 40,646,072 shares.
Financing
The Group's net financial expenses at the end of the review period totaled EUR
4.3 million (EUR 2.2 million). The Group's balance sheet total was EUR 443.7
million (EUR 368.9 million), of which liabilities accounted for EUR 272.2
million (EUR 224.3 million). The Group's equity to assets ratio was 38.9 %
(39.4 %). The Group's equity per share was EUR 4.22 (EUR 3.81).
The Group's long-term liabilities at the end of the review period were EUR
208.1 million (EUR 162.3 million). The average interest rate of loans was 4.34
% on June 30, 2007 (3.55 %).
Technopolis supplements its financing with a EUR 60.0 million domestic
commercial paper program which allows the company to issue commercial papers
with a maturity of less than a year. Total commercial papers issues were EUR
41.7 million on June 30, 2007.
Organization and personnel
The Group Executive Board includes the President and CEO Pertti Huuskonen, the
directors Jukka Akselin, Satu Eskelinen, Marjut Hannelin, Martti Launonen,
Seppo Selmgren, Keith Silverang, Reijo Tauriainen and Jarkko Ojala, who will
commence as CFO on August 1, 2007.
The Group employed an average of 140 (95) people during the period. In premises
activities there were 48 (28) people, in business services 32 (23) people and
in development services 60 (44) people.
Decisions of the Annual General Meeting
The Annual General Meeting of March 29, 2007 confirmed the consolidated and
parent company income statements and balance sheets for the year 2006, released
those responsible for accounts from further liability and decided on the
distribution of a dividend of EUR 0.14 per share for the year that ended on
December 31, 2006.
The Board of Directors appointed by the Annual General Meeting comprises Timo
Parmasuo, chairman, and Matti Pennanen, vice chairman, and the members Pekka
Korhonen, Erkki Veikkolainen and Juha Yli-Rajala. Pertti Huuskonen is the
President and CEO of Technopolis. The Group's auditor is KPMG Oy Ab, Authorized
Public Accountants, and the principally responsible auditor is Tapio Raappana,
APA.
The Annual General Meeting decided to amend the Group's articles of
association. The amendments are largely the result of the Companies Act that
came into force on September 1, 2006, and are mostly technical in nature. In
addition, the Annual General meeting decided to authorize the Board of
Directors to decide on acquiring Group shares, a share issue and granting
options and other special rights entitling to Group shares, granting options
for the year 2007 to Group key personnel and annulment of the 2005C options.
Evaluation of operational risks and uncertainty factors
The most significant risks to Technopolis' business operations are mainly
financial risks and customer risks.
Technopolis' main financial risk is the interest rate risk on the loan
portfolio. The objective of interest rate risk management is to lower or remove
the negative impact of market rate fluctuation on the Group's performance,
balance sheet and cash flow. The company's financing policy aims to diversify
the interest rate risk of loan contracts over various loan periods on the basis
of the market situation reigning at any particular time and the interest rate
prognosis created in the company. If necessary, the company will employ forward
rate agreements, interest rate swaps and interest rate options. In order to
manage financial risk, Technopolis uses a wide range of financing companies and
maintains a high capital adequacy level.
Technopolis only uses derivatives to reduce remove financial risks in the
balance sheet.
Because of the structure of the Technopolis loan portfolio at the end of the
review period, a one percentage point increase in money market rates would
increase interest rate costs by EUR 1.0 million per annum.
Due to the related interest rate risk, a policy of diversification has been
followed. On June 30, 2007, 74.1 % of the loan portfolio was bound either to
the 3-12 month Euribor rate or the base rate. Of the loans, 25.9 % were
fixed-interest loans of 13 to 60 months. The average capital-weighted
outstanding loan period was 12 years. Technopolis supplements its total
financing with a EUR 60.0 million domestic commercial paper program which
allows the company to issue commercial papers with a maturity of less than a
year. Total commercial papers issues were EUR 41.7 million on June 30, 2007.
Changes in the exchange rates between the Russian ruble and euro may have an
effect on the company's financial situation and operations. Business
transactions denominated in rubles are recorded at the exchange rate of the
transaction date. Any translation differences are entered in the income
statement under other operating expenses or financial income and expenses
depending on the nature of the transaction. The purchase of land in St.
Petersburg was financed in local currency. Currency risks have been minimized
by applying a currency swap.
Customer risk management aims to minimize the negative impact of any changes in
customers' financial situation on the business and the company's profit. In
customer risk management, emphasis is on familiarity with the customer's
business and active monitoring of customer information. As part of customer
risk management, Technopolis' leasing agreements include rent collateral
arrangements. Properties are insured with full value insurance.
The Group's property portfolio is divided geographically between the Helsinki
metropolitan area, Jyväskylä, Lappeenranta, Tampere and the Oulu region. No
single customer accounts for more than 12 % of the Group's net sales. The Group
has arranged the leases of its biggest customers to end at different times. The
Group has a total of 950 customers, which operate in several different sectors.
Technopolis is protected against business-cycle fluctuations by long-term
leases which totaled EUR 121.2 million on June 30, 2007. Of the lease
agreements, 3 % will expire in 2007, 21 % in 2008-2010, 31 % in 2011-2013, 5 %
in 2014-2016 and 40 % in 2017 or later.
In new building projects, Technopolis focuses on quality determination and the
manageability of the property's entire lifecycle. In the design phase, all the
building's maintenance and repair requirements are taken into account, in the
aim of implementing environmentally friendly solutions in terms of energy
consumption, the adaptability of office facilities, and recycling
possibilities. In connection with property purchases, Technopolis carries out
the normal property and environmental assessments before committing to the
transaction.
Changes in market return requirements may have substantial effect on profit
development. When return requirements increase, the fair value of properties
decreases and when they decrease, the fair value of properties increases. The
changes have either an increasing or decreasing effect the Group operating
profit.
Outlook for the future
Technopolis management expects that demand for the company's high tech
operating environments will be satisfactory in 2007 and that the occupancy
ratio of its facilities and demand for their services will remain good. The
Group estimates that its net sales and EBITDA will increase in 2007 by 22-26 %
on the previous year, providing that the Kiinteistö Oy Innopoli II deal is
closed according to plan.
As part of its strategy for growth, Technopolis aims to operate in top high
technology cities in Finland, as well as in Russia and 1-2 other countries by
2010. The Group aims to increase its net sales by an average of 15 % annually.
It seeks to grow organically as well as through acquisitions.
The Group's financial performance is dependent on trends in the general
operating environment, in customer business, in the financial markets and in
the return requirements for properties. Factors in these areas may affect the
Group's result through changes in occupancy ratios, the use of services,
financing costs, the fair values of properties and office rent levels.
Oulu, July 20, 2007
TECHNOPOLIS PLC
Board of Directors
Pertti Huuskonen
President and CEO
Further information:
Pertti Huuskonen, tel. +358 400 680 816 or +358 8 551 3213
A PDF version of this interim report can be found at www.technopolis.fi.
Requests for a printed version can be made to Teija Koskela, tel. +358 8 511
3242.
Technopolis Plc has an information bulletin service, which can be subscribed to
on the Internet. Service subscribers will receive the Group's information
bulletins by email.
Investment properties are measured according to the fair value model. The
internal and external construction period costs from investment properties are
included immediately in the acquisition cost in accordance with the IAS 16
standard. In accordance with the IAS 23 standard, borrowing costs for
construction periods have been entered under the acquisition cost of properties
under construction.
The figures are unaudited.
INCOME STATEMENT
EUR million 4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2007 2006 2007 2006 2006
Net sales 14.23 9.43 27.82 18.66 44.84
Other operating income 1) 1.38 0.85 2.62 1.39 3.86
Other operating income -8.35 -5.26 -16.80 -10.09 -26.00
Change in fair value of
investment properties 3.27 -3.02 5.42 10.51 16.07
Depreciation according to plan -0.17 -0.10 -0.32 -0.19 -0.56
Operating profit 10.37 1.90 18.73 20.28 38.21
Financial income and expenses -2.38 -1.28 -4.28 -2.21 -5.17
Profit before taxes 7.99 0.62 14.46 18.07 33.05
Income taxes -2.22 -0.18 -3.80 -4.40 -8.46
Net profit for the period 5.77 0.44 10.65 13.67 24.59
Distribution of profit for the period:
To parent company shareholders 5.76 0.39 10.63 13.26 23.74
To minority shareholders 0.01 0.05 0.03 0.41 0.85
BALANCE SHEET, ASSETS
EUR million Jun 30, Jun 30, Dec 31,
2007 2006 2006
Non-current assets
Intangible assets 2.55 2.71 2.63
Tangible assets 8.94 22.45 2.44
Investment property 398.21 326.83 392.16
Investments 22.61 2.06 21.82
Deferred tax assets 2.04 2.37 1.77
Total non-current assets 434.35 356.42 420.83
Current assets 9.36 12.48 10.57
Total assets 443.71 368.91 431.39
BALANCE SHEET, SHAREHOLDERS' EQUITY AND LIABILITIES
EUR million
Equity
Share capital 68.69 61.75 67.32
Share issue 2.54
Premium fund 18.49 18.28 18.55
Other funds 11.51 0.01 7.37
Other shareholders' equity 0.11 0.32
Retained earnings 62.07 43.41 43.40
Net profit for the period 10.63 13.26 23.74
Parent company's shareholders' interests 171.39 139.35 160.70
Minority interests 0.16 5.21 4.58
Total shareholders' equity 171.54 144.57 165.28
Liabilities
Long-term liabilities
Interest-bearing liabilities 181.03 143.10 183.16
Non-interest-bearing liabilities 1.46 1.55 1.51
Deferred tax liabilities 25.66 17.70 22.68
Short-term liabilities
Interest-bearing liabilities 53.35 49.06 46.33
Non-interest-bearing liabilities 10.67 12.93 12.44
Total liabilities 272.16 224.34 266.12
Total shareholders'
equity and liabilities 443.71 368.91 431.39
CONSOLIDATED STATEMENT OF CASH FLOWS
EUR million 1-6/ 1-6/ 1-12/
2007 2006 2006
Net cash provided by operating activities
Operating profit 18.73 20.28 38.21
Revaluation of investment properties -5.42 -10.51 -16.07
Depreciation 0.32 0.19 0.56
Other adjustments to operating profit
non-cash transactions 0.28 0.13 0.32
Increase/decrease in working capital 1.81 0.89 0.46
Interest received 0.42 0.02 0.29
Interests paid and fees -4.81 -2.29 -5.50
Income from other investments
of non-current assets 0.01 0.01
Taxes paid -1.40 -0.89 -1.92
Net cash provided by operating activities 9.95 7.81 16.35
Net cash used in investing activities
Investments in other instruments -1.55 -0.01 -0.02
Investments in investment properties -9.74 -19.31 -40.66
Investments in tangible and
intangible assets -0.27 -0.06 -0.44
To minority shareholders 0.01 0.02 0.04
Income from other investments
of non-current assets 0.04 0.08 0.15
Acquisition of subsidiaries -4.10 -4.84 -18.17
Net cash used in investing activities -15.62 -24.13 -59.10
Cash flows from financing activities
Increase in long-term loans 12.89 31.49
Decrease in long-term loans -14.85 -5.91 -12.39
Dividends paid -5.67 -4.66 -4.66
Paid share issue 5.30 1.12 1.12
Change in short-term loans 6.90 29.71 27.60
Cash flows from financing activities 4.56 20.25 43.16
Net increase/decrease in cash assets -1.11 3.94 0.40
Cash assets at beginning of period 2.80 2.40 2.40
Cash assets at end of period 1.69 6.34 2.80
ACCOUNT OF CHANGES IN SHAREHOLDERS' EQUITY
EUR million
Share Share Other Accum- Minor- Share-
capital premium funds ulated ity holders'
fund related int. equity
earning
Shareholders' equity
Dec 31, 2005 60.59 12.73 0.02 48.07 3.39 124.81
Increase of share capital 1.16 1.16
Directed share issue 5.58 5.58
Dividend distribution -4.66 -4.66
Net profit for the period 13.26 0.41 13.67
Share issue
(not registered) 2.54 2.54
Other changes -0.03 0.10 1.41 1.48
Shareholders' equity
Jun 30, 2006 64.28 18.28 0.02 56.77 5.21 144.57
Increase of share capital 5.57 5.57
Directed share issue 0.27 7.32 7.59
Net profit for the period 10.48 0.44 10.92
Other changes -2.54 0.03 0.21 -1.07 -3.37
Shareholders' equity
Dec 31, 2006 67.32 18.55 7.37 67.46 4.58 165.28
Increase of share capital 0.21 0.21
Directed share issue 1.16 4.13 5.29
Dividend distribution -5.68 -5.68
Net profit for the period 10.63 0.03 10.65
Other changes -0.06 0.01 0.28 -4.45 -4.22
Shareholders' equity
Jun 30, 2007 68.69 18.49 11.51 72.69 0.16 171.54
KEY INDICATORS
1-6/ 1-6/ 1-12/
2007 2006 2006
Change in net sales, % 49.1 22.3 41.3
Operating profit/net sales, % 67.3 108.7 85.2
Equity to assets ratio, % 38.9 39.4 38.5
Employees in Group companies 140 95 113
Gross investments in non-current
assets in balance sheet, EUR 1 000 15 669 24 210 59 286
Net rental income of
property portfolio, % 2) 7.5 7.9 7.7
Financial occupancy ratio, % 95.4 94.1 94.4
Earnings/share,
undiluted, EUR 0.26 0.36 0.63
diluted, EUR 0.26 0.36 0.63
Average (issue-adjusted)
number of shares
undiluted 40,520,699 36,485,162 37,472,329
diluted 40,691,940 36,617,079 37,619,867
CONTINGENT LIABILITIES
EUR million Jun 30, Jun 20, Dec 31,
2007 2006 2006
Pledges and guarantees on own debt
Mortgages 177.39 191.49 195.50
Land lease liabilities 1.06 0.59 0.53
Other mortgage liabilities 0.93 0.93 0.93
Pledged investment properties 36.55 9.35 35.21
Nominal values of interest rate swaps 4.00 8.00 4.00
Fair values of interest rate swaps -0.03 -0.17 -0.04
VAT return liability 13.29 13.50 13.27
Project liabilities 0.26 2.05 0.01
Collateral given on behalf of
affiliated companies
Guarantee 0.50 0.50 0.50
Other mortgage liabilities 0.10 0.10 0.10
Leasing liabilities, machinery and
equipment 0.25 0.43 0.38
1) Other operating income comprises operating subsidies received for
development services, for which the same amount of development service expenses
have been recorded as operating expenses.
2) Does not include properties taken into use and acquired during the year.
Distribution:
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