- Income from operations amounted to ISK 4,240 million.
- EBITDA amounted to ISK 2,680 million.
- Profit amounted to ISK 1,496 million.
- Changes in value of investment properties totalled ISK 1,326 million at end of period.
- The book value of investment properties amounted to ISK 94,590 million.
- The book value of assets for own use amounted to ISK 3,916 million at end of period.
- Interest-bearing debt amounted to ISK 59,724 million at end of period.
- Net cash from operations was ISK 1,359 million.
- Equity ratio was 30.8%.
- Earnings per share were ISK 0.44.
The Condensed Consolidated Interim Financial Statement of Eik fasteignafélag hf. (“Eik” or the “Company”) for the period 1 January to 30 June 2019 were approved by the Company's Board of Directors and CEO on 28 August 2019.
Attached are the Condensed Consolidated Interim Financial Statement for the first six months of the year.
Company operations
The Company performed in general well in the first half of the year 2019. Operating income for the period amounted to ISK 4,240 million, an increase of 7.8% YoY. Of this amount, lease income was ISK 3,636 million. EBITDA amounted to ISK 2,680 million, an increase of 5.7% YoY. EBITDA was at the lower level of 1% margin of error in management's forecasts. Profit before income tax amounted to ISK 1,870 million and net profit to ISK 1,496 million, an increase of 57% YoY.
The Net Operating Income (NOI) ratio (i.e. operating profit before revaluation and depreciation as a ratio of lease income) was 72.8% for the first half of the year 2019, compared to 74.1% for the first half of year 2018.
The Company's investment properties are valued at fair value in accordance with International Financial Reporting Standards (IFRS), based in part on the discounted future cash flows of individual assets. Changes in fair value are recognised in changes in value of investment properties, which amounted to ISK 1,326 million for the period.
Balance Sheet
The Company's total assets amounted to ISK 101,062 million as at 30 June 2019. Of this, investment properties valued at ISK 94,590 million, consist of real estate leased to tenants amounting to ISK 91,595 million, leased assets (property utilisation rights) of ISK 1,947 million, real estate in development of ISK 587 million, building rights and lots of ISK 448 million and pre-paid street construction fees in the amount of ISK 13 million. Assets for own use amounted to ISK 3,916 million. The Company's equity amounted to ISK 31,169 million at the end of June 2019 and its equity ratio was 30.8%. Total liabilities amounted to ISK 69,893 million as at 30 June 2019, of which interest-bearing debt was ISK 59,724 million and deferred tax liabilities ISK 6,879 million.
H&M opens a store at Glerártorg
The Company has signed an agreement with H&M to open a 1,300 square meters store at Glerártorg. The store is scheduled to open in the fall of 2020.
The Company’s leasing has been going well throughout the year and the Company’s economic occupancy rate was 95.3% at the end of the first half of the year, an increase of 0.1% from the beginning of the year.
Dividend policy
The Company's Annual General Meeting (AGM) on 10 April 2019 agreed to pay a dividend of ISK 1,020 million to shareholders. The dividend was paid to shareholders on 30 April 2019. The Board's policy is to pay an annual dividend equivalent to 35% of cash from operations for the year, net of the amount to be used for the purchase of treasury shares until the next AGM is convened. Cash from operations for the first half of this year amounted to ISK 1,359 million. The Company purchased treasury shares with a nominal value of ISK 23,551,000 in the first half of the year for ISK 210,243,210.
Acquisition of properties during the year
The Company has purchased two properties during the year, Vatnagarðar 14, which is a well located 1,300 square meters warehouse and approximately 200 square meter store at Skólavörðustígur 42. The properties were delivered in June. Both properties are fully leased out with long-term lease agreements.
Refinancing
At the beginning of July, the Company refinanced all liabilities of the subsidiary EF1 hf. The refinancing was a combination of bank loans and bond issue. The Company issued two new classes of bonds, EIK 050726 and EIK 050749. Offers in the amount of ISK 1,400 million were accepted in EIK 050726 with a 2.73% rate of return and ISK 2,500 million with a 3.1% rate of return in EIK 050749. Bank loans amounted to about ISK 10 billion. Also, the project financing for Suðurlandsbraut 10 was repaid in full in July.
Weighted average interest percentage of non-current indexed liabilities after the refinancing is little less than 3.7% but was 3.88% before.
Merger of subsidiaries
Two subsidiaries are currently being merged with Eik fasteignafélag. A merger of two subsidiaries of Landfestar is also in process. These mergers are expected to be finalized in coming weeks. The mergers will be effective as of 1 January 2019.
IFRS 16
The Group has adopted the International Financial Reporting Standard (IFRS) 16 for lease agreements. The implementation of the standard has a minor impact on the Group. The standard requires the Company to recognise utilisation rights in the amount of ISK 1,947 million for third-party premises lease agreements recognised among the Group's investment properties as leased assets and, on the other hand, the obligations, lease liabilities, under the Group's liabilities in the same amount. The standard also affects the Company's operations, as finance expenses are increased by ISK 91 million on an annualised basis, while the Company’s operating profit before changes in value and depreciation increases by the same amount.
Outlook
The Company has reviewed its earnings forecast for 2019. It is evident that the uncertainty on the labour market and in the tourism industry this year in addition to improvements on rooms at Hotel 1919 has had negative impact on the operation and forecast of the hotel.
Despite that, the Company expects EBITDA for the year to be within a 1% margin of error, but the outcome of the year is likely to be at the lower limit of the forecast.
Company Portfolio
Properties owned by the Group number just over 100 and total almost 310,000 square meters in 600 units leased to over 400 tenants. The Company's principal properties are Borgartún 21, 21a and 26; Suðurlandsbraut 8 and 10; Mýrargata 2-16; Pósthússtræti 2; Álfheimar; Grjótháls 1-3 and Austurstræti 5, 6, 7 and 17 in Reykjavík; Smáratorg 1 and 3 in Kópavogur and Glerártorg in Akureyri. Its largest tenants are Húsasmiðjan, Flugleiðahótel, Fasteignir ríkissjóðs, Rúmfatalagerinn, Sýn, Landsbankinn, Síminn, Össur, Míla and Deloitte.
The largest share of Eik's real estate portfolio is office space, 46%, followed by commercial premises (24%), warehouses (13%), hotels (11%) and restaurants (3%). Around 92% of the Company's real estate is located in the capital region, of which 36% is in financial and business districts of Reykjavík (mainly in postal codes 105 and 108), 21% in downtown Reykjavik and 19% in the Smárinn-Mjódd shopping centres. Of the remaining 8% located outside the capital region almost 8% is in Akureyri.
Presentation of Results
An open presentation of the results will be held on Thursday, 29 August 2019 at 8:30 am in the meeting hall Goðafoss in Hotel1919, Pósthússtræti 2, Reykjavík. A light breakfast will be served, commencing at 8:00 am. Garðar Hannes Friðjónsson, CEO of Eik and Lýður H. Gunnarsson, CFO, will present the results and respond to questions following the presentation.
2019 Financial Calendar
- Quarterly results Q3 2019 31 October 2019
- Management report for 2019 and budget for 2020 13 February 2020
- 2019 Annual Results 10 March 2020
For further information contact:
Garðar Hannes Friðjónsson, CEO, gardar@eik.is, s. 590-2200
Lýður H. Gunnarsson, CFO, lydur@eik.is, s. 590-2200 / 820-8980
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