- Income from operations amounted to ISK 6,471 million.
- EBITDA amounted to ISK 4,188 million.
- Profit amounted to ISK 2,142 million.
- Changes in value of investment properties totalled ISK 1,522 million.
- The book value of investment properties amounted to ISK 95,034 million.
- The book value of assets for own use amounted to ISK 3,908 million at end of period.
- Interest-bearing debt amounted to ISK 59,484 million at end of period.
- Net cash from operations was ISK 2,388 million.
- Equity ratio was 31.3%.
- Earnings per share were ISK 0.63.
The Condensed Consolidated Interim Financial Statement of Eik fasteignafélag hf. (“Eik” or the “Company”) for the period 1 January to 30 September 2019 were approved by the Company's Board of Directors and CEO on 31 October 2019.
Attached are the Condensed Consolidated Interim Financial Statement for the first nine months of the year.
Company operations
The Company performed well in the first nine months of the year 2019 and in line with management forecasts. Operating income for the period amounted to ISK 6,471 million, an increase of 7.1% YoY. Of this amount, lease income was ISK 5,507 million. EBITDA amounted to ISK 4,188 million, an increase of 6.7% YoY. EBITDA was at the lower level of 1% margin of error in management’s forecasts. Profit before income tax amounted to ISK 2,678 million and net profit to ISK 2,142 million, an increase of over 26% YoY.
The Net Operating Income (NOI) ratio (i.e. operating profit before revaluation and depreciation as a ratio of lease income) was 74.2% for the first nine months of the year 2019, compared to 74.9% for the first nine months 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 1,522 million for the period.
Balance Sheet
The Company's total assets amounted to ISK 101,496 million as at 30 September 2019. Of this, investment properties valued at ISK 95,034 million, consist of real estate leased to tenants amounting to ISK 92,036 million, leased assets (property utilisation rights) of ISK 1,950 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 3,908 million. Properties amounted to ISK 96,733 million. The Company's equity amounted to ISK 31,727 million at the end of September 2019 and its equity ratio was 31.3%. Total liabilities amounted to ISK 69,769 million as at 30 September 2019, of which interest-bearing debt was ISK 59,484 million and deferred tax liabilities ISK 7,036 million.
Economic occupancy rate
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 nine months 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 nine months of this year amounted to ISK 2,388 million. The Company purchased treasury shares with a nominal value of ISK 33,883,000 in the first nine months of the year for ISK 298,117,280.
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. Under the class EIK 050726 bonds have been issued for a nominal value of ISK 1,500 million with a 2.73% rate of return and under EIK 050749 for a nominal value of ISK 3,700 million with a 3.1% rate of return. Also, the project financing for Suðurlandsbraut 10 was repaid in full in July.
The Company continues to consider its options with respect to the potential refinancing of debt. The Company is permitted to repay debt of just over ISK 25 billion according to applicable terms. That debt consists of non-indexed loans amounting to just under ISK 3,900 million, indexed loans amounting to over ISK 8,700 million and a bond issue amounting to just under ISK 12,600 million.
Weighted average interest percentage of non-current indexed liabilities after the refinancing and interest rate changes is 3.67% but was 3.88% at the end of June 2019.
Merger of subsidiaries
Two subsidiaries of Eik, EF12 ehf. and EF14 ehf. have been merged with the Company. Also, LF11 ehf., a subsidiary of Landfestar ehf., has merged with another subsidiary of Landfestar ehf., LF1 ehf.. The mergers are effective as of 1st of January 2019.
IFRS 16
The Company has adopted the International Financial Reporting Standard (IFRS) 16 for lease agreements. The implementation of the standard has a minor impact on the Company. The standard requires the Company to recognise utilisation rights in the amount of ISK 1,950 million for third-party premises lease agreements recognised among the Company's investment properties as leased assets and, on the other hand, the obligations, lease liabilities, under the Company'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 Company number just over 100 and total over 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 74; 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, Landsbankinn, Sýn, 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 18% 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 Friday, 1 November 2019 at 8:30 am in the meeting hall Goðafoss in Hotel 1919, 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
- 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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