Helsinki, Finland, 2015-07-31 11:02 CEST (GLOBE NEWSWIRE) -- SATO Corporation, Interim report, July 31 2015, 12:02
Summary of 1 January – 30 June 2015 (1 January – 30 June 2014)
- Profit before taxes stood at EUR 93.0 (96.7) million.
- The change in the fair value of rental homes included in the result was EUR 44.7 (42.9) million.
- Shareholders’ equity stood at EUR 945.0 (859.5) million, or EUR 18.59 (16.91) per share.
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The return on equity was 16.1% (18.4%).
- Rental income amounted to EUR 125.0 (120.4) million.
- Investments in rental homes stood at EUR 96.1 (100.8) million.
- A total of 485 (509) rental homes were acquired or completed.
- The occupancy rate was 96.5% (96.5%).
Summary of 1 April – 30 June 2015 (1 April – 30 June 2014)
- Profit before taxes stood at EUR 34.7 (46.0) million.
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The change in the fair value of rental homes included in the result was EUR 8.1 (18.5) million.
- Rental income amounted to EUR 62.9 (60.6) million.
- Investments in rental homes stood at EUR 66.8 (41.6) million.
- The occupancy rate was 96.6% (96.8%).
Operating environment
The Finnish economy is expected to remain weak in 2015. Consumer confidence has decreased over the summer, and purchasing power continues to grow at a low rate. Inflation and interest rates are expected to remain at exceptionally low levels.
The supply of rental homes has increased in SATO’s areas of operation, but more small, low-cost rental homes are needed, particularly in the Helsinki region. Rents are increasing moderately.
The demand for owner-occupied housing picked up during the spring, and the prices of small homes are projected to remain stable in the Helsinki Metropolitan Area throughout the year.
The Russian economy is predicted to decrease in 2015.
Erkka Valkila, President and CEO:
- SATO’s business operations continued to be stable in the second quarter. Urbanisation and the growing number of small households create favourable conditions for growth in the demand for rental homes and in SATO’s business. We continue to strongly invest in order to increase our offering of rental homes.
- The development of the Helsinki Metropolitan Area calls for new housing policy initiatives and alternative housing models. To identify new perspectives, SATO organised a discussion forum on housing policy in April. SATO welcomes the government’s plans to ease norms and accelerate the construction of rental homes.
- SATO launched the StudioHome concept in June to offer an alternative solution to the shortage of small, affordable homes in the Helsinki Metropolitan Area. The concept combines high-quality living with affordable housing costs. Each studio home is around 16 square metres in area and has a sleeping loft. In addition, the residents have access to well-equipped common areas. The model home being showcased at Housing Fair 2015 in Vantaa has been well received.
Review period 1 January – 30 June 2015 (1 January – 30 June 2014)
Net sales and profit
The Group’s net sales increased by 10.6 percent from the reference period and totalled EUR 175.5 million (EUR 158.6 million in January–June 2014). Of the net sales, rental income accounted for EUR 125.0 (120.4) million.
The operating profit was EUR 111.9 (116.1) million.
Profit before taxes stood at EUR 93.0 (96.7) million. The change in the fair value of rental homes included in the result was EUR 44.7 (42.9) million. This change was positively affected by the expiry of restrictions on some properties and the increase in the value of the Russian rouble. The result was affected by a cost provision of EUR 4.3 million made on the basis of a decision by the Court of Appeal on the construction of Asunto Oy Helsingin Tila.
Financial position and financing
The consolidated balance sheet totalled EUR 2,909.6 (2,718.3) million at the end of June. Equity was EUR 945.0 (859.5) million. Equity per share was EUR 18.59 (16.91).
The Group’s equity ratio was 32.5 (31.7) percent at the end of June.
The Group’s annualized return on equity was 16.1 (18.4) percent. The return on investment was 8.8 (9.5) percent.
Interest-bearing liabilities at the end of June totalled EUR 1,654.0 (1,567.3) million, of which market based loans accounted for EUR 1,282.7 (1,187.2) million. The average interest rate was 2.4 (2.7) percent. Net financing costs totalled EUR 18.8 (19.4) million.
EUR 97.7 million of new long-term financing was acquired during the review period, and the Loan-to-Value (LTV) ratio was 56 (57) percent at the end of June.
The calculated impact of changes in the market value of interest hedging was EUR 7.8 (-9.3) million on equity and EUR 0.4 (0.3) million on profit before taxes.
Housing assets and fair value
The development of the value of rental homes is a key factor for SATO. Its housing assets are located in areas where the demand for rental homes will increase in the long term. The allocation of building repairs is based on life-cycle plans and repair-need specifications.
On 30 June 2015, SATO owned a total of 24,356 (24,061) homes. The number of homes increased by 183 in January–June.
The fair value of rental homes was EUR 2,652.9 (2,443.4) million at the end of June. The change in the fair value was EUR 124.9 (127.4) million.
Of the value of homes, the Helsinki region accounted for some 80 percent, Tampere, Turku, Oulu and Jyväskylä made up 15 percent, and St. Petersburg covered 5 percent at the end of June.
Investments and divestments
Investment activities prepare the ground for growth. Since 2000, SATO has invested a total of EUR 2.0 billion in rental homes. SATO acquires and builds entire rental buildings and single rental homes.
Investments in rental homes were EUR 96.1 (100.8) million. Investments in the Helsinki Metropolitan Area represented 73 percent and investments in new homes represented 75 percent of all investments in the first half of 2015.
At the end of June, binding purchase agreements in Finland totalled EUR 245.7 (82.6) million.
During the first half of the year, 302 (276) homes with a total value of EUR 19.4 (17.5) million were divested in Finland. The divested homes were mainly located outside SATO’s primary operating area.
Rental activities
Effective rental activities provide homeseekers with quick access to a home and the Group with a steadily increasing cash flow. Rental services are mainly offered by SATO’s rental offices. In addition, web-based initiatives produce an excellent match between customers’ needs and homes available.
Rental income increased by 3.8 percent to EUR 125.0 (120.4) million. The economic occupancy rate of homes in Finland was 96.5 (96.5) percent on average, and the rental home turnover rate was 40.0 (38.0) percent.
The average rent per square metre was EUR 16.14 (15.54) per month in SATO’s rental homes in Finland and EUR 8.66 (9.54) per month in shared ownership homes during the review period.
Net rental income from homes was EUR 78.6 (77.5) million, and the net rental income rate was 6.0 (6.1) percent on an annual level.
Property development
Property development allows for new investments in rental homes and the production of owner-occupied homes in Finland. The rental capacity and value of rental homes owned by SATO are developed through renovation activities.
The book value of owned plot reserves totalled EUR 67.6 (76.2) million at the end of June. The value of new plots acquired in January–June totalled EUR 6.6 (2.8) million.
In Finland, a total of 359 (384) rental homes and 99 (79) homes for sale were completed. On 30 June 2015, a total of 878 (672) rental homes and 98 (247) owner-occupied homes were under construction.
A total of EUR 23.9 (17.6) million was spent on repairing homes and improving the quality of homes.
A total of 76 (146) owner-occupied homes were sold in January–June. At the end of the review period, a total of 134 (234) owner occupied homes remained unsold, of which 44 (90) were completed and 90 (140) were under construction. The total purchase value of those unsold homes amounted to EUR 66.2 (105.0) million. SATO mainly sells its owner-occupied homes after completion.
Business operations in St. Petersburg
The housing market in St. Petersburg corresponds to that of the whole of Finland in terms of volume. SATO is following its growth strategy by investing in rental homes in St. Petersburg. Homes are acquired in central locations in the city.
At the end of June, housing assets in St. Petersburg totalled EUR 131.0 (130.3) million. The total amount of binding purchase agreements was EUR 4.7 (22.3) million.
On 30 June 2015, SATO owned 313 (237) completed and 217 (293) homes under construction in St. Petersburg.
The economic occupancy rate of rental homes was 91.8 (96.0) percent on average.
Review period 1 April – 30 June 2015 (1 April – 30 June 2014)
Net sales and profit
The Group’s net sales decreased by 6.9 percent year-on-year and totalled EUR 79.2 million (EUR 85.0 million in April–June 2014). Of the net sales, rental income accounted for EUR 62.9 (60.6) million.
The operating profit was EUR 44.4 (56.0) million.
Profit before taxes was EUR 34.7 (46.0) million. The change in the fair value of rental homes included in the result was EUR 8.1 (18.5) million.
EUR 55.0 million of new long-term financing was acquired during the review period.
Housing assets and fair value
The number of homes increased by 115 in April–June. The change in the fair value was EUR 67.6 (50.3) million.
Investments in rental homes totalled EUR 66.8 (41.6) million. A total of 183 (190) homes were divested in Finland at a total value of EUR 10.7 (9.9) million.
Rental activities
Rental income increased by 3.8 percent to EUR 62.9 (60.6) million. The economic occupancy rate of homes in Finland was 96.6 (96.8) percent on average, and the rental home turnover rate was 40.4 (37.7) percent.
Net rental income from homes was EUR 38.6 (39.8) million, and the net rental income rate in rental homes was 6.0 (6.1) percent on an annual level.
Property development
The value of new plots acquired in April–June totalled EUR 5.1 (2.8) million.
In Finland, a total of 205 (86) rental homes and 34 (45) owner-occupied homes were completed.
A total of EUR 12.2 (9.4) million was spent on repairing homes and improving the quality of homes.
A total of 42 (53) owner-occupied homes were sold in April–June.
Business operations in St. Petersburg
In April–June, the value of housing assets in St. Petersburg increased by EUR 5.8 (15.3) million. No new acquisitions were made.
The economic occupancy rate of rental homes was 91.6 (95.5) percent on average.
Credit rating
In May, SATO Corporation was issued a rating of Baa3 with a stable outlook by Moody’s Investor Service. A public credit rating enables the company to benefit from international financial markets, which enhances the flexibility and efficiency of financing arrangements. The rating also supports the intention to increase the proportion of unsecured debt. A diverse funding base helps the Company to keep its financial costs at a competitive level.
Appointment of President and CEO
Erkka Valkila, President and CEO of SATO, will retire in late 2015. In 2013, he reached the age of retirement determined in his employment contract, but his contract was extended by a period of two years. Saku Sipola, M.Sc. (Tech.), was appointed as the new President and CEO in June. He will assume his duties towards the end of the current year on a date to be announced later on.
Personnel
At the end of June, the Group employed 171 (158) people, of whom 163 were full-time employees. The average number of personnel was 171 (161) in April–June.
Legal proceedings
On the basis of the decision of the Court of Appeal, the company has made a cost provision regarding the completion of the Asunto Oy Helsingin Tila building project, reducing the profit for the review period. The company has applied for leave to appeal to the Supreme Court.
Future risks and uncertainties
The economy continues to grow slowly, which is reflected in the housing and financing markets.
The change in the market value of homes affects the value of SATO’s housing assets. The positive development of the value of housing assets and the rental capacity of homes are secured by focusing on growth centres.
Risks in housing investment activities in St. Petersburg are associated with the development of the market value of homes, fluctuations in exchange rates and other changes in the operating environment. St. Petersburg is limited to a maximum of 10 percent of the Group’s housing assets. The current value of housing assets in St. Petersburg accounts for 5 percent of the Group’s entire housing assets.
Changes in interest rates affect SATO’s profit and balance sheet through changes in interest expenses and the market value of interest hedging. In accordance with the Group’s financing policy, at least 60 percent of all loans are fixed-rate loans. The adequacy of financing is monitored using a rolling liquidity estimate.
A more detailed description of risks and risk management is available in the Group’s 2014 annual report and on the company's website at www.sato.fi.
Outlook
Finnish economic growth and the general climate of confidence are expected to remain poor. In the operating environment, SATO’s business operations are mainly affected by consumer confidence, the rental and price development of homes, and the interest rate.
The demand for rental homes is expected to remain good in SATO’s areas of operation, focusing mainly on small homes. Some 80 percent of SATO’s housing assets are located in the Helsinki region, where the rental and price development is more stable than in other regions. SATO’s product range responds to the demand for small homes, with the average area of homes being 57 square metres.
Increasing urbanisation and immigration offer good potential for continued investments in Finland. Owing to good demand and new investments, SATO’s net rental income is expected to improve from the year before. However, increases in rents are expected to be more moderate than in the previous years.
Interest rates are estimated to remain low, which will have a positive impact on SATO’s business operations.
The Russian economy is expected to decrease. Some 5 percent of SATO’s housing assets are located in St. Petersburg. Due to the unstable economic and political situation in Russia, SATO is refraining from making new investment decisions in Russia for the time being.
SATO Corporation’s shareholders on 24 July 2015
Largest shareholders and their holdings
| Varma Mutual Pension Insurance Company | 22.8% |
| APG Asset Management NV | 22.8% |
| Balder Finska Otas AB | 16.1% |
| Danske Bank Plc (nominee-registered) | 13.7% |
| Elo Mutual Pension Insurance Company | 12.9% |
| The State Pension Fund | 5.0% |
| The Finnish Construction Trade Union | 0.9% |
| Other (71 shareholders) | 5.8% |
|
100% |
On 24 July 2015, SATO had 51,001,842 shares and 78 shareholders registered in the book-entry system. The share turnover rate was 31.7 percent for the period 1 January - 24 July 2015.
Key figures, Group
| KEY FINANCIAL INDICATORS | 1-6/2015 | 1-6/2014 | 1-12/2014 | 1-12/2013** | 1-12/2012*** | 1-12/2011** | ||||||||||
| Net sales, MEUR | 175.5 | 158.6 | 312.3 | 311.5 | 286.9 | 232.0 | ||||||||||
| Profit before taxes, MEUR | 93.0 | 96.7 | 152.0 | 141.0 | 121.0 | 174.0 | ||||||||||
| Earnings per share, EUR | 1.45 | 1.52 | 2.37 | 2.34 | 1.78 | 2.63 | ||||||||||
| Balance sheet total, MEUR | 2,909.6 | 2,718.3 | 2,802.0 | 2,596.0 | 2,360.0 | 2,167.0 | ||||||||||
| Shareholders' equity, MEUR | 945.1 | 860.7 | 892.0 | 823.0 | 693.0 | 635.0 | ||||||||||
| Intrest bearing liabilities, MEUR | 1,654.0 | 1,567.3 | 1,584.9 | 1,501.3 | 1,375.3 | 1,255.4 | ||||||||||
| Equity per share, EUR **** | 18.59 | 16.91 | 17.55 | 16.16 | 13.72 | 12.59 | ||||||||||
| Number of shares, million * | 50.8 | 50.8 | 50.8 | 50.8 | 50.8 | 50.8 | ||||||||||
| Return on invested capital, % (ROI) | 8.8 % | 9.5 % | 7.7 % | 7.7 % | 7.7 % | 10.9 % | ||||||||||
| Return on equity, % (ROE) | 16.1 % | 18.4 % | 14.0 % | 15.5 % | 13.5 % | 22.8 % | ||||||||||
| Equity ratio, % | 32.5 % | 31.7 % | 31.8 % | 31.7 % | 29.4 % | 29.5 % | ||||||||||
| Personnel, average*** | 172 | 161 | 165 | 156 | 152 | 137 | ||||||||||
| Personnel at the end of period | 171 | 158 | 169 | 156 | 150 | 141 | ||||||||||
| KEY FIGURES ACCORDING TO EPRA RECOMMENDATIONS AND OPERATIONAL CASH EARNINGS | ||||||||||||||||
| EPRA Earnings, MEUR | 31.8 | 36.4 | 65.1 | 62.7 | 44.4 | 43.2 | ||||||||||
| EPRA Earnings per share, EUR | 0.63 | 0.72 | 1.28 | 1.23 | 0.87 | 0.85 | ||||||||||
| EPRA Net Asset Value, MEUR | 1,171.6 | 1,065.6 | 1,120.3 | 1,006.9 | 900.5 | 825.1 | ||||||||||
| EPRA Net Asset Value per share, EUR | 23.0 | 21.0 | 22.0 | 19.8 | 17.7 | 16.2 | ||||||||||
| Cash earnings, MEUR | 32.7 | 41.8 | 72.9 | 66.1 | 61.6 | 51.9 | ||||||||||
| Cash earnings per share, EUR | 0.64 | 0.82 | 1.43 | 1.30 | 1.21 | 1.02 | ||||||||||
| QUARTER KEY FINANCIAL INDICATORS | Q2/2015 | Q1/2015 | Q4/2014 | Q3/2014 | Q2/2014 | Q1/2014 | ||||||||||
| Net sales, MEUR | 79.2 | 96.3 | 76.4 | 77.3 | 85.0 | 73.6 | ||||||||||
| Operating profit, MEUR | 44.4 | 67.5 | 38.4 | 36.8 | 56.0 | 60.1 | ||||||||||
| Profit and losses from changes of fair value | 8.1 | 36.6 | 16.1 | 4.8 | 18.5 | 24.4 | ||||||||||
| Net financing expenses, MEUR | -9.6 | -9.2 | -9.9 | -9.8 | -9.9 | -9.5 | ||||||||||
| Profit before taxes, MEUR | 34.7 | 58.3 | 28.5 | 27.1 | 46.0 | 50.7 | ||||||||||
| Earnings per share, EUR | 0.55 | 0.90 | 0.42 | 0.42 | 0.72 | 0.80 | ||||||||||
| Gross investments, MEUR | 66.8 | 29.3 | 30.6 | 42.6 | 41.6 | 59.2 | ||||||||||
| as percentage of net sales | 84.4 % | 30.4 % | 40.1 % | 55.1 % | 48.9 % | 80.4 % | ||||||||||
| Economic occupancy rate, % | 96.6 % | 96.4 % | 97.9 % | 97.8 % | 96.8 % | 96.2 % | ||||||||||
| KEY FIGURES ACCORDING TO EPRA RECOMMENDATIONS AND OPERATIONAL CASH EARNINGS | ||||||||||||||||
| EPRA Earnings, MEUR | 17.3 | 14.5 | 12.0 | 16.7 | 18.5 | 17.9 | ||||||||||
| EPRA Earnings per share, EUR | 0.34 | 0.29 | 0.24 | 0.33 | 0.36 | 0.35 | ||||||||||
| Cash earnings, MEUR | 11.1 | 21.6 | 10.8 | 20.3 | 18.5 | 23.3 | ||||||||||
| Cash earnings per share, EUR | 0.22 | 0.42 | 0.21 | 0.40 | 0.36 | 0.46 | ||||||||||
| *) | The 160,000 shares held by the Group have been deducted from the number of shares. | |||||||||||||||
| **) | Adoption of IAS 40 Investment properties -standard fair value model has been taken into account retrospectively in key figures. Retrospectively adjusted figures are unaudited. | |||||||||||||||
| ***) | Including summer trainees | |||||||||||||||
| ****) | Equity excluding non-controlling interest | |||||||||||||||
Additional information:
Erkka Valkila, President and CEO, tel. +358 201 34 4001, +358 50 62 050
Esa Neuvonen, CFO, tel. +358 201 34 4005, +358 40 5001 003
www.sato.fi
SATO is one of Finland's leading housing investment companies. SATO aims to offer full options for rental housing and an excellent customer experience. SATO owns a total of 24,400 rental homes in Finland's largest growth centres and in St. Petersburg.
We contribute to sustainable development and initiative through our operations, and engage in open interaction with our stakeholders in order to produce added value. We operate over the long term and profitably. We increase the value of housing assets through investments and divestments and through our repair activities.
SATO Group’s net sales in 2014 totalled EUR 312.3 million, operating profit stood at EUR 191.3 million, and profit before taxes was EUR 152.2 million. The value of SATO's investment assets is EUR 2.7 billion.
