Sponda Plc Stock Exchange Release 1.11.2007, 8.35 am
Sponda Plc's interim report January - September 2007
Result of operations and financial position January - September 2007 (compared
with same period in 2006):
Total revenue grew to EUR 157.4 (79.8) million.
Net operating income was EUR 113.7 (60.9) million.
Operating profit was EUR 215.2 (73.1) million, including a positive change in
the value of the investment properties of EUR 92.4 (19.1) million and profit on
the disposal of properties of EUR 28.2 (-) million.
Profit after taxes rose to EUR 118.7 (37.7) million.
Earnings per share was EUR 1.11 (0.48).
The cash flow from operations per share rose to EUR 0.59 (0.40).
The fair value of investment properties was EUR 2 386.2 (1 372.5) million.
Net assets per share were EUR 8.23 (7.28)
EPRA net assets per share were EUR 9.80 (8.24)
Economic occupancy rate rose to 90.3 %
Result of operations and financial position July - September 2007 (compared with
July - September in 2006):
Total revenue rose to EUR 49.2 (26.5) million.
Net operating income was EUR 36.2 (20.3) million.
Operating profit was EUR 68.7 (26.8) million, including a positive change in the
value of the investment properties of EUR 36.0 million and profit on the
disposal of properties of EUR 0.3 million.
Profit after taxes was EUR 39.0 (14.1) million.
Earnings per share was EUR 0.35 (0.18).
The cash flow from operations per share was EUR 0.15 (0.12).
Key figures
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| | 7-9/07 | 7-9/06 | 1-9/07 | 1-9/06 | 1-12/06 |
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| Economic occupancy rate, | | | 90.3 | 88.2* | 88.8* |
| % | | | | | |
--------------------------------------------------------------------------------
| Total revenue, Me | 49.2 | 26.5 | 157.4 | 79.8 | 117.4 |
--------------------------------------------------------------------------------
| Net operating income, Me | 36.2 | 20.3 | 113.7 | 60.9 | 87.6 |
--------------------------------------------------------------------------------
| Operating profit, Me | 68.7 | 26.8 | 215.2 | 73.1 | 103.9 |
--------------------------------------------------------------------------------
| Earnings per share, e | 0.35 | 0.18 | 1.11 | 0.48 | 0.61 |
--------------------------------------------------------------------------------
| Cash flow from | 0.15 | 0.12 | 0.59 | 0.40 | 0.56 |
| operations per share, | | | | | |
| e** | | | | | |
--------------------------------------------------------------------------------
| Net assets per share, e | | | 8.23 | 7.28 | 7.45 |
--------------------------------------------------------------------------------
| EPRA net assets per | | | 9.80 | 8.24 | 9.57 |
| share, e | | | | | |
--------------------------------------------------------------------------------
| Equity ratio, % | | | 35 | 41 | 20 |
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| Gearing, % | | | 155 | 121 | 334 |
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* The figure is based on Sponda's property portfolio before the Kapiteeli
acquisition.
** Cash flow from operations per share includes sales profits and losses.
President and CEO Kari Inkinen
”The Board of Directors of Sponda has today revised its strategy emphasizing the
company's stronger growth. During the coming years particular focus will be on
increasing investment in property development and on stronger growth in
operations in Russia. The target for growth in Russia is to invest 10-20 % of
the company's balance sheet, EUR 300-400 million, by the end of 2009.
Developments in Sponda's leasing business continued to be positive in the third
quarter. The economic occupancy rate of the property portfolio improved further
and the occupancy rate passed the 90 % threshold during the quarter. All
business units achieved a positive performance, especially in the Helsinki
Metropolitan Area.
I am also very pleased with the rapid progress in property development projects.
Another two new projects were started during the July - September period:
construction of an office building in Sörnäinen, Helsinki, and construction of
logistics premises in Hakkila, in Vantaa.”
Prospects
Sponda forecasts that the earnings per share will improve significantly in 2007
from the previous year. The economic occupancy rate of its properties and the
cash flow from operations per share, including profit and losses from the sale
of properties, are also expected to improve in 2007. These views are based on
favourable developments in Finland's property market, positive change in the
value of properties, and profit on the disposal of property so far this year.
Business conditions
Finland's property market continued to be very active, and the volume of real
estate investment in the January - September period is estimated at about EUR 4
billion (according to KTI Kiinteistötalouden instituutti ry). International
investors accounted for just over 70 % of this. Total investment in 2007 is
forecast to be at the same level as in the previous year, ie. about EUR 5.5
billion. Yield requirements for office, retail and logistics premises continued
to fall in the Helsinki Metropolitan Area and in growth centres.
Vacancy rates in the leasing market in the Helsinki Metropolitan Area remained
quite stable in all sectors. According to Catella Property Oy, the vacancy rate
for office premises rose 0.5 percentage points to 8.4 %. The main reason for the
increase was tenants vacating premises that have not been refurbished. The
vacancy rate for retail premises remained unchanged at 1.7 %. The vacancy rate
for logistics premises was also low, at 2.5 %. Rent levels rose in all sectors,
especially for office and logistics properties.
Sponda's operations in January - September 2007
Sponda owns, leases and develops business properties, mainly in the Helsinki
Metropolitan Area and in the largest cities in Finland, and in Russia. Sponda
has organized its operations in five business units: Office and Retail Property,
Logistics Property, Property Development, Real Estate Funds, and Russia & the
Baltic States.
Net operating income from Sponda's property assets totalled EUR 113.7 (60.9)
million at the end of September. Office and retail premises accounted for 75 %
of this, logistics premises for 15 %, the Real Estate Funds unit 4 %, and the
Russia & the Baltic States unit for 1 %. Other net operating income, including
income from the subsidiary Ovenia, accounted for 5 %. The economic occupancy
rate continued to improve and by type of property and geographical area was as
follows (the 2006 figures are for Sponda's property portfolio before the
Kapiteeli acquisition):
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| By type of property | 30.9.07 | 30.6.07 | 31.3.07 | 31.12.06 |
--------------------------------------------------------------------------------
| Offices and retail, % | 90.0 | 89.7 | 89.3 | 88.8 |
--------------------------------------------------------------------------------
| Logistics, % | 91.0 | 89.5 | 89.0 | 88.6 |
--------------------------------------------------------------------------------
| Russia & Baltic States | 100.0 | 100.0 | 100.0 | 100.0 |
--------------------------------------------------------------------------------
| Total property portfolio, % | 90.3 | 89.8 | 89.3 | 88.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| By geographical area | 30.9.07 | 30.6.07 | 31.3.07 | 31.12.06 |
--------------------------------------------------------------------------------
| Helsinki Business District, | 90.2 | 88.3 | 86.7 | 89.7 |
| % | | | | |
--------------------------------------------------------------------------------
| Helsinki Metropolitan Area, | 88.6 | 89.3 | 89.1 | 87.5 |
| % | | | | |
--------------------------------------------------------------------------------
| HMA logistics, % | 89.5 | 88.2 | 87.7 | 87.1 |
--------------------------------------------------------------------------------
| Other areas, % | 96.6 | 96.7 | 98.0 | 93.4 |
--------------------------------------------------------------------------------
| Total property portfolio, % | 90.3 | 89.8 | 89.3 | 88.8 |
--------------------------------------------------------------------------------
Total cash flow derived from leasing agreements on 30 September 2007 was EUR 779
million (30 September 2006: EUR 440 million) and the average length of all the
agreements was 4.3 (4.2) years. The average length of leasing agreements for
office and retail properties was 4.6 years and for logistics premises it was 3.1
years. Sponda signed a total of 125 new agreements (70 000 m²) during July -
September 2007 and during this period 86 agreements (24 000 m²) expired.
Sponda's leasing contracts expire as follows:
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| Expiry | % of rental income |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 1 year | 10.7 |
--------------------------------------------------------------------------------
| 2 years | 13.5 |
--------------------------------------------------------------------------------
| 3 years | 12.2 |
--------------------------------------------------------------------------------
| 4 years | 17.0 |
--------------------------------------------------------------------------------
| 5 years | 5.0 |
--------------------------------------------------------------------------------
| 6 years | 5.2 |
--------------------------------------------------------------------------------
| More than 6 years | 22.1 |
--------------------------------------------------------------------------------
| Open ended | 14.3 |
--------------------------------------------------------------------------------
Property portfolio
On 30 September 2007 Sponda Group had a total of 196 investment properties with
an aggregate leasable area of about 1.3 million m². Of this 67 % are office and
retail premises and 33 % logistics premises.
During the January - September period the fair value of Sponda's investment
properties rose by EUR 92.4 million. Capital expenditure during the period
allocated to property maintenance and improvements in quality levels was EUR
15.6 million. On 30 September 2007 the entire property portfolio had a fair
value of EUR 2 386.2 (30 September 2006: EUR 1 372.5 million).
During the July - September period the fair value of Sponda's investment
properties rose by EUR 36.0 million which includes capital expenditure allocated
to property maintenance and improvements in quality levels of EUR 3.9 million.
Factors contributing to the rise in the fair value of the investment properties
were the valuation of the portfolio properties and the increase in rental
income. Sponda's property portfolio was valued during the third quarter by
Catella Property Oy.
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| Sponda's investment | Total | Office | Logis- | Proper- | Russia |
| properties | | and | tic | ty | & |
| | | retail | s | devel-o | Baltic |
| | | | | pment | |
--------------------------------------------------------------------------------
| Operating income | 142.4 | 117.0 | 22.8 | 1.3 | 1.3 |
--------------------------------------------------------------------------------
| Maintenance costs | -38.8 | -31.5 | -5.9 | -1.1 | -0.3 |
--------------------------------------------------------------------------------
| Net operating income | 103.6 | 85.5 | 16.9 | 0.2 | 1.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fair value of | 2 455.1 | 2 023.9 | 245.6 | 174.9 | 10.7 |
| investment properties | | | | | |
| at 1 Jan. 2007 | | | | | |
--------------------------------------------------------------------------------
| Acquisitions in 2007 | 23.7 | 9.7 | 9.4 | 0.3 | 4.3 |
--------------------------------------------------------------------------------
| Investments, property | 94.5 | 13.0 | 7.6 | 58.5 | 15.5 |
| development | | | | | |
--------------------------------------------------------------------------------
| Other transfers | -2.6 | -0.3 | 13.1 | -14.8 | -0.6 |
| between segments | | | | | |
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| Sales in 2007 | -276.9 | -263.6 | -1.8 | -11.5 | 0.0 |
--------------------------------------------------------------------------------
| Fair values | 92.4 | 72.0 | 23.7 | -3.3 | 0.0 |
| adjustment | | | | | |
--------------------------------------------------------------------------------
| Fair value of | 2 386.2 | 1 854.6 | 297.5 | 204.1 | 29.9 |
| investment properties | | | | | |
| at 30 Sept. 2007 | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in fair value | 3.8 % | 3.6 % | 9.6 % | | |
| % | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Annual net operating | 6.2 % | 5.9 % | 8.3 % | | 10.9 % |
| income/ | | | | | |
| fair value at | | | | | |
| 30 September 2007 *) | | | | | |
--------------------------------------------------------------------------------
| Yield requirement | | 5.0-8.0 % | 7.0-7.75 % | | |
| used in calculating | | | | | |
| fair value | | | | | |
--------------------------------------------------------------------------------
| Weighted average | 6.4 % | | | | |
| yield requirement for | | | | | |
| the total portfolio | | | | | |
--------------------------------------------------------------------------------
* Excluding property development
Investments and divestments
During the January - September 2007 period Sponda purchased investment
properties for altogether EUR 23.7 million, and of this it purchased property
for EUR 4.9 million during the third quarter. During January - September Sponda
sold investment property for EUR 276.9 million, with the third quarter
accounting for EUR 0.2 million of this.
Capital expenditure allocated to property maintenance and improvements in
quality levels in the third quarter amounted to EUR 3.9 million. Sponda invested
EUR 40.7 million in property development. This was spent on renovating the
City-Center complex in the centre of Helsinki, developing the logistics centre
at Vuosaari Harbour, and on the retail property in the Itäkeskus district of
Helsinki and the office property in the Ruoholahti district of Helsinki.
Office and retail properties
The economic occupancy rate for the Office and Retail Property unit continued to
improve, to 90.0 % (31 December 2006: 88.8 %). During the third quarter Sponda
signed two major leases: with Evli Bank Plc for the new City-Center building
(4 200 m²) and with the Cancer Society of Finland for the premises at Pieni
Roobertinkatu 9 (2 240 m²).
The property had a fair value on 30 September 2007 of EUR 1 854.6 million. The
change in the fair value since the beginning of 2007 was EUR 72.0 million. The
property portfolio had a leasable area of about 860 000 m², with office premises
accounting for an estimated 75 % of this and retail premises for 25 %. The
unit's total revenue, net operating income and operating profit were as follows:
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| Office and retail, | 7-9/2007 | 7-9/2006 | 1-9/2007 | 1-9/2006 | 1-12/2006 |
| Me | | | | | |
--------------------------------------------------------------------------------
| Total revenue | 36.1 | 19.2 | 117.0 | 56.8 | 84.7 |
--------------------------------------------------------------------------------
| Net operating | 26.8 | 14.8 | 85.5 | 42.8 | 63.1 |
| income | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 55.3 | 13.6 | 170.9 | 48.3 | 78.0 |
--------------------------------------------------------------------------------
During the third quarter of 2007 Sponda did not purchase any office or retail
premises, but sold property for EUR 0.2 million. Capital expenditure on property
maintenance totalled EUR 13.0 million by the end of September, with the third
quarter accounting for EUR 2.9 million of this.
Logistics properties
The economic occupancy rate for the Logistics Properties unit improved to 91.0 %
on 30 September 2007 (31 December 2006: 88.6 %). The property had a fair value
of EUR 297.5 million, and the change in the fair value since the beginning of
2007 was EUR 23.7 million. The property portfolio had a leasable area of about
400 000 m². The unit's total revenue, net operating income and operating profit
were as follows:
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| Logistics, Me | 7-9/2007 | 7-9/2006 | 1-9/2007 | 1-9/2006 | 1-12/2006 |
--------------------------------------------------------------------------------
| Total revenue | 7.9 | 7.0 | 22.8 | 22.1 | 28.6 |
--------------------------------------------------------------------------------
| Net operating | 6.1 | 5.5 | 16.9 | 17.5 | 22.2 |
| income | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 14.5 | 13.7 | 40.5 | 24.9 | 42.9 |
--------------------------------------------------------------------------------
During the third quarter Sponda purchased logistics property for EUR 4.9
million. No property was sold during the quarter.
Capital expenditure on property maintenance totalled EUR 2.6 million at the end
of September, and of this EUR 1.0 million was spent during the third quarter.
Property development
The fair value of Sponda's investment property development portfolio was EUR
204.1 million at the end of September 2007. During January - September EUR 58.5
million was spent on developing properties and new purchases, and EUR 40.7
million of this was spent in July - September.
Development work on the City-Center complex is progressing as planned. The
second phase of the project, which includes the Kaivokatu street-level premises
and station tunnel premises, has begun and should be completed in the spring of
2008. In September 2007 Sponda signed a lease with Evli Bank Plc for a 4 200 m²
office building to be built in the City-Center complex. Construction work will
start at the beginning of 2009. The renovation of the City-Center complex is
expected to be completed in 2011 and the total investment is estimated at some
EUR 110 million.
Construction of the logistics area and gatehouse building at Vuosaari Harbour
began in spring 2007 and the first leases have been signed for both sites. The
actual construction of the car park building and passenger terminal will start
at the beginning of 2008 and earthworks are currently underway on the site. The
project will have a total investment value of roughly EUR 140 million. The
harbour will start operations in November 2008. Sponda is responsible for
developing, leasing and managing all the buildings.
Construction has started of the retail property in the Itäkeskus district in
Helsinki. The total investment value for the building will be about EUR 56
million and it will have a leasable area of 21 500 m². The property has been
leased in its entirety to HOK Elanto and will be completed by November 2008.
Construction has begun of the office building at Porkkalankatu 22 in the
Ruoholahti district of Helsinki. The investment value of the project will be
about EUR 29 million and it will have a leasable area of 13 500 m². At the
moment just over 70 % of the building has been leased, and the estimated
completion date is autumn 2008. The main tenants will be Altia Corporation and
Diacor Terveyspalvelut Oy.
Sponda started construction of an office building at Lautatarhankatu 2 in the
Sörnäinen district of Helsinki. Some 51 % of the building has been leased and
its main tenant will be Tradeka Oy, which will move its head office into the new
premises. The project will have a total investment cost of about EUR 22 million
and the property will have a leasable area of 9 200 m. The estimated completion
date is towards the end of 2008.
Sponda started construction of a logistics property at Itäinen
Valkoisenlähteentie 18 in the Akseli district of Vantaa. The project will have a
total investment cost of about EUR 5 million and 50 % of the property has been
leased. The total leasable area will be 5 000 m² and the property should be
completed by the end of 2008.
Real estate funds
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 September 2007 the fund's
property investments had a fair value of EUR 103.9 million.
Sponda Real Estate Fund I Ky (Sponda's holding 46 %) invests in logistics sites
outside the Helsinki Metropolitan Area. At the end of the review period the
fund's property investments had a fair value of EUR 138.0 million, while the
fund has a target size of EUR 200 million. Sponda is responsible for managing
the funds and their properties, and receives management fees.
In addition to those mentioned above, Sponda is also responsible for managing
the properties in the property portfolio, with a value of about EUR 400 million,
sold in March 2007 to Whitehall Street Real Estate Limited and Niam Nordic
Investment Fund III.
Russia and Baltic States
Sponda is actively looking for properties for investment and development in the
Russian and Baltic markets. In September 2007 Sponda's property portfolio had a
value of EUR 30 million, including office and logistics properties and a 46
hectare piece of land in St Petersburg. Sponda also owns a 20 hectare site in
Moscow province.
Sponda purchased an office property that is under construction for USD 47.5
million from the centre of Moscow in October 2007. The premises will have a
total of 3,025 m² of leasable office space and parking space for 54 cars. Sponda
is engaged in initial negotiations with various potential tenants. The building
will be completed by the end of 2007.
In October Sponda purchased an office property for USD 11.5 million from St
Petersburg at the address Kaluzhskij pereulok 3. The property comprises a total
of 2730 m² of leasable office premises and parking for 27 cars. The property is
fully leased.
Cash flow and financing
Sponda's net cash flow from operations on 30 September 2007 totalled EUR 257.3
million (30 September 2006: EUR 35.2 million). Net cash flow from investing
activities was EUR 122.9 (-79.0) million and after financing activities was EUR
-398.4 (43.6) million.
Financial income and expenses at the end of the period totalled EUR -55.4
(-22.1) million. The 2007 figure includes a provision of EUR 0.5 million for
interest costs in connection with Sampo Bank's suit for payment. Sponda's equity
ratio on 30 September 2007 was 35 % (30 September 2006: 41 %) and gearing was
155 % (121 %). Interest-bearing debt amounted to EUR 1 427.7 (698.2) million,
the average maturity of Sponda's loans was 2.9 (3.2) years and the average
interest rate 4.5 % (4.2 %). Fixed-rate and interest-hedged loans accounted for
78 % of the loan portfolio. The average interest-bearing period of the whole
debt portfolio was 3.3 (2.7) years. The interest margin, which describes the
company's solvency, was 2.0 (2.6).
At the end of September, Sponda Group's debt portfolio comprised EUR 650 million
in syndicated loans, EUR 405.6 million in bonds, EUR 289.5 million in issued
commercial papers, and EUR 82.6 million in loans from financial institutions.
Sponda has EUR 300 million in unused credit limits. Sponda Group has mortgaged
loans worth of EUR 2.5 million.
Personnel and administration costs
During the January-September period Sponda Group had on average 219 employees
(56 in the corresponding period of 2006), of whom 135 (56) worked for the parent
company Sponda Plc and 84 for the subsidiary Ovenia Oy. On 30 September 2007
Sponda Group had 216 (58) employees, of whom 134 (58) were employed in the
parent company and 82 at Ovenia Oy. Sponda has personnel in Finland and Russia.
In January-September Sponda's sales and administration costs totalled EUR 19.3
million (30 September 2006: EUR 7.2 million), of which EUR 15.8 million were for
the parent company Sponda and EUR 3.5 million for the subsidiary Ovenia. The
increase was due mainly to the growth in the number of personnel after the
Kapiteeli acquisition.
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
long-term 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
On 27 August 2007 Sponda increased its holding in Ovenia Oy, which provides
property management services, from 51 per cent to 70 per cent. Sponda purchased
Ovenia shares from Varma Mutual Pension Insurance Company, Kaleva Mutual
Insurance Company and Sampo Life Insurance Company Limited.
Sponda Group comprises the parent company, the subsidiary Sponda Kiinteistöt Oy
(formerly Kapiteeli Oy) and Sponda Kiinteistöt Oy's 70 per cent owned
subsidiary Ovenia Oy, as well as the Group's mutually owned property companies,
which are either wholly or majority owned by Sponda Plc or Sponda Kiinteistöt
Oy. Sponda Group also includes Sponda Russia Ltd and Sponda Asset Management Oy.
The Sponda share
In July 2007 Sponda moved from the medium size group to the large company group
in the classification of the OMX Nordic Exchange, based on the company's market
capitalization.
The weighted average price of the Sponda share in the January-September 2007
period was EUR 11.15. The highest quotation on the Helsinki Stock Exchange was
EUR 13.29 and the lowest EUR 9.01. Turnover during January-September totalled
72.7 million shares or EUR 810.5 million. The closing price of the share on 28
September 2007 was EUR 9.75, and the market capitalization of the company's
share capital was EUR 1.1 billion.
The Annual General Meeting on 4 April 2007 authorized the Board of Directors to
purchase the company's own shares. The authorization was not exercised during
the review period.
Sponda issued the following flagging announcements in the July-September 2007
period:
13 August 2007: Cohen & Steers, Inc. announced that its holding of shares
represented 4.989 % of the total number of shares and votes in Sponda Plc.
14 August 2007: Cohen & Steers, Inc. announced that its holding of shares
represented 5.001 % of the total number of shares and votes in Sponda Plc.
20 August 2007: Stichting Pensioenfonds ABP announced that its holding of shares
represented 3.6977 % of the total number of shares and votes in Sponda Plc.
22 August 2007: Cohen & Steers, Inc. announced that its holding of shares
represented 5.113 % of the total number of shares and votes in Sponda Plc.
18 October 2007: Cohen & Steers, Inc. announced that its holding of shares
represented 4.959 % of the total number of shares and votes in Sponda Plc.
At the end of the review period on 30 September 2007 Sponda's ownership
structure was as follows:
--------------------------------------------------------------------------------
| | Number of | % of total |
| | shares | |
--------------------------------------------------------------------------------
| The Finnish State | 38 065 498 | 34.3 |
--------------------------------------------------------------------------------
| Other public entities | 2 018 190 | 1.8 |
--------------------------------------------------------------------------------
| Nominee registered | 61 451 126 | 55.3 |
--------------------------------------------------------------------------------
| Households | 6 346 932 | 5.7 |
--------------------------------------------------------------------------------
| Non-profit organizations, total | 1 582 229 | 1.4 |
--------------------------------------------------------------------------------
| Private corporations, total | 881 815 | 0.9 |
--------------------------------------------------------------------------------
| Financial and insurance institutions, total | 559 759 | 0.5 |
--------------------------------------------------------------------------------
| Foreign owners, total | 124 636 | 0.1 |
--------------------------------------------------------------------------------
| Total number of shares | 111 030 185 | 100.0 |
--------------------------------------------------------------------------------
Board of Directors and auditors
Sponda's Board of Directors has six members: Tuula Entelä, Timo Korvenpää, Harri
Pynnä, Lauri Ratia, Arja Talma and Jarmo Väisänen. Lauri Ratia is chairman of
the Board and Jarmo Väisänen is deputy chairman. All Board Members are
independent of the company, and five of the six are independent of major
shareholders in the company.
Sponda Plc's auditors are Mr Sixten Nyman, CPA auditor, and KPMG Oy Ab, CPA
audit firm, with Ms Raija-Leena Hankonen, CPA auditor, as principal auditor. Ms
Riitta Pyykkö, CPA auditor, is deputy auditor.
Committees of the Board of Directors
On 4 April 2007 the Board of Directors established two permanent committees to
assist the Board by preparing matters for which the Board is responsible. The
permanent committees are the Audit Committee and the Structure and Remuneration
Committee.
The Audit Committee comprises chairman Arja Talma and ordinary members Tuula
Entelä and Timo Korvenpää. The Structure and Remuneration Committee comprises
chairman Lauri Ratia and ordinary members Jarmo Väisänen and Harri Pynnä.
Management
Sponda Plc's president and Chief Executive Officer is Kari Inkinen. The
Executive Board comprises the president and CEO, the CFO, the SVP Legal Affairs
and Treasury, and the heads of the business units, in total eight persons.
Suit for payment
In a ruling issued on 11 January 2007, the Helsinki city court ordered Sponda
Plc to pay interest, penal interest and court costs totalling EUR 7.6 million to
Sampo Bank Plc based on a credit agreement. Sponda appealed the decision to the
Helsinki court of appeal on 9 February 2007. The amount of Sampo Bank's suit for
payment, EUR 7.6 million, was recognized as an expense under provisions in the
2006 financial statements. In the January - September period EUR 0.5 million was
recognized as an expense under provisions.
Subsequent events
Sponda Plc and Sponda Kiinteistöt Oy (formerly Kapiteeli Oyj) were chosen in
April 2006 as main contractors for the Ratina shopping centre in Tampere and for
development projects in adjacent areas. An appeal was made to the Market Court
against the decision of the City of Tampere in May 2006. In October 2007 the
Market Court decided not to proceed with the appeal. The decision of the Market
Court will come into legal force if no appeal is made against it by 12 November
2007. Sponda is planning a 48 000 m² shopping centre for the area, for which the
total capital expenditure is estimated at some EUR 200 million.
In October the city government of Vaasa chose Sponda Plc from three candidates
to be its partner in developing the shopping centre planned to replace the
disused bus station. The goal is for Sponda and the City of Vaasa to design and
plan the piece of land for the shopping centre together. After the planning
process, Sponda and the city will decide on the sale of the piece of land being
planned. It is hoped to obtain building rights of 40 000 m² for the land as well
as parking space for 1 000 cars. The shopping centre will be completed at the
earliest in 2010.
Sponda purchased an office property that is under construction for USD 47.5
million from the centre of Moscow in October 2007. The premises will have a
total of 3,025 m² of leasable office space and parking space for 54 cars. Sponda
is engaged in initial negotiations with various potential tenants. The building
will be completed by the end of 2007.
On 31 October Sponda signed a contract to purchase a logistics property from the
Lutheran Parish Union of Helsinki for approximately EUR 17 million. The
transaction is planned to be closed on 23 November 2007. The property, located
at Tulppatie 1 in the Roihupelto district of Helsinki, has altogether about
11,100 m2 of leasable warehouse, production and office premises. The entire
property is leased to a single tenant.
In October Sponda purchased an office property for USD 11.5 million from St
Petersburg at the address Kaluzhskij pereulok 3. The property comprises a total
of 2730 m² of leasable office premises and parking for 27 cars. The property is
fully leased.
The Uusimaa corporate tax office has decided to deviate from the 2006 tax
returns given by Sponda Kiinteistöt Oy (former Kapiteeli Ltd) and considers that
the company's taxable profit for the year is EUR 192 million. The reason for
this decision is that, since the company's personnel were transferred to Sponda
Plc, the company's business cannot be considered to have continued essentially
in the same way as described in the special dispensation granted by the Uusimaa
tax office.
Sponda Kiinteistöt Oy has decided to appeal against the decision, since the
company's business after the change of ownership on 14 December 2006 has, in its
opinion, remained essentially the same. The tax loss carry-forward for the years
1996-1999 is approximately EUR 558 million.
Prospects
During 2007 Sponda expects its earnings per share to improve significantly from
the previous year. Likewise the economic occupancy rate and the cash flow from
operations per share, including profits and losses on property sales, are
expected to improve during 2007. These views are based on favourable
developments in Finland's property market, positive change in the value of
properties, and profit on the disposal of property so far this year.
Risks and uncertainty factors in the near future
Recognized risks in the property investment sector include the risks associated
with the property market and the risks relating to property investments and
capital expenditure. If they materialize these could weaken Sponda's financial
result. Rising construction costs and delays in project schedules may increase
the costs of property development. In Russia there are also risks relating to
permit procedures that may have an impact on the schedules of property
development projects.
Financing involves refinancing risks and loan agreements have an interest rate
risk. Sponda reduces the refinancing risk by using credit agreements of varying
durations, employing a number of funding sources and maintaining the company's
reputation as a trustworthy debtor. Risks from floating rate financing are
reduced with interest hedging agreements. Expanding international operations
increase Sponda's foreign exchange risk.
Sponda's operational risks are risks resulting from inadequate or defective
internal processes or systems. They also include risks associated with the legal
operating environment. Operational risks relate for example to the functionality
of the company's information systems and to the permanence of its skilled
employees.
Schedule for financial information in 2008
Sponda will publish its financial statements bulletin for 2007 on Tuesday, 5
February 2008. The Annual General meeting will be held on 19 March 2008. Sponda
will publish its 2008 interim reports on 6 May 2008, 7 August 2008 and 30
October 2008.
1 November 2007
Sponda Plc
Board of Directors
Further information: Kari Inkinen, President and CEO, tel. +358 20-431 3311 or
+358 400-402 653 and
Robert Öhman, CFO, tel. +358 20-431 3320 or +358 40-540 0741.
Distribution:
Helsinki Exchanges
Media
www.sponda.fi
This interim report is unaudited. It has been prepared applying IAS 34 (Interim
Reports). The same accounting and measurement principles have been applied in
this interim report as in the previous annual financial statements bulletin.
Sponda Plc
Consolidated income statement (IFRS)
Me
--------------------------------------------------------------------------------
| | 7-9/07 | 7-9/06 | 1-9/07 | 1-9/06 | 1-12/06 |
--------------------------------------------------------------------------------
| Revenue | | | | | |
--------------------------------------------------------------------------------
| | Rental income and | 44.4 | 26.3 | 146.1 | 79.0 | 115.4 |
| | recoverables | | | | | |
--------------------------------------------------------------------------------
| | Interest income | - | - | 0.2 | - | - |
| | from finance | | | | | |
| | leasing agreements | | | | | |
--------------------------------------------------------------------------------
| | Service income, | 4.8 | 0.2 | 11.1 | 0.8 | 2.0 |
| | fund management | | | | | |
| | fees and share of | | | | | |
| | fund profit | | | | | |
--------------------------------------------------------------------------------
| | | 49.2 | 26.5 | 157.4 | 79.8 | 117.4 |
--------------------------------------------------------------------------------
| Expenses | | | | | |
--------------------------------------------------------------------------------
| | Maintenance | -12.2 | -6.1 | -41.7 | -18.7 | -29.4 |
| | expenses | | | | | |
--------------------------------------------------------------------------------
| | Service expenses | -0.8 | -0.1 | -2.0 | -0.2 | -0.4 |
| | and direct fund | | | | | |
| | expenses | | | | | |
--------------------------------------------------------------------------------
| | | -13.0 | -6.2 | -43.7 | -18.9 | -29.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net operating income | 36.2 | 20.3 | 113.7 | 60.9 | 87.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit/loss on sales | 0.1 | - | 1.2 | - | - |
| of investment | | | | | |
| properties | | | | | |
--------------------------------------------------------------------------------
| Valuation gains/losses | 36.0 | 8.9 | 92.4 | 19.1 | 26.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Proceeds from sale of | 0.2 | - | 209.4 | - | 11.6 |
| trading properties | | | | | |
--------------------------------------------------------------------------------
| Carrying amount of | - | - | -182.4 | - | -10.0 |
| trading properties | | | | | |
| sold | | | | | |
--------------------------------------------------------------------------------
| Profit/loss on sales | 0.2 | - | 27.0 | - | 1.6 |
| of trading properties | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sales and marketing | -0.4 | -0.2 | -1.3 | -0.8 | -1.1 |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Administrative | -3.5 | -2.2 | -18.0 | -6.4 | -10.8 |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Other operating income | 0.2 | - | 0.5 | 0.3 | 0.9 |
--------------------------------------------------------------------------------
| Other operating | -0.1 | - | -0.3 | - | -0.5 |
| expenses | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | 68.7 | 26.8 | 215.2 | 73.1 | 103.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income | - | -0.2 | 3.3 | 0.1 | 3.7 |
--------------------------------------------------------------------------------
| Financial expenses | -16.2 | -7.5 | -58.2 | -22.2 | -34.7 |
--------------------------------------------------------------------------------
| Provision for interest | -0.5 | - | -0.5 | - | -7.5 |
| expenses | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income and | -16.7 | -7.7 | -55.4 | -22.1 | -38.5 |
| expenses, net | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before taxes | 52.0 | 19.1 | 159.8 | 51.0 | 65.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income taxes for | -0.1 | -0.5 | -0.1 | -0.9 | -0.4 |
| current and previous | | | | | |
| fiscal years | | | | | |
--------------------------------------------------------------------------------
| Deferred taxes | -12.9 | -4.5 | -41.0 | -12.4 | -16.7 |
--------------------------------------------------------------------------------
| Income taxes, total | -13.0 | -5.0 | -41.1 | -13.3 | -17.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit for the period | 39.0 | 14.1 | 118.7 | 37.7 | 48.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | | | |
--------------------------------------------------------------------------------
| Equity holders of the | 38.9 | 14.1 | 118.5 | 37.7 | 48.4 |
| parent company | | | | | |
--------------------------------------------------------------------------------
| Minority interest | 0.1 | - | 0.2 | - | -0.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit for period | 39.0 | 14.1 | 118.7 | 37.7 | 48.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share | | | | | |
| based on profit | | | | | |
| attributable to equity | | | | | |
| holders of the parent | | | | | |
| company: | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share, | | | 1.11 | 0.48 | 0.61 |
| basic, € | | | | | |
--------------------------------------------------------------------------------
| Earnings per share, | | | 1.11 | 0.48 | 0.61 |
| diluted, € | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Average number of | | | | | |
| shares, million | | | | | |
--------------------------------------------------------------------------------
| Basic | | | 106.8 | 79.3 | 79.3 |
--------------------------------------------------------------------------------
| Diluted | | | 106.8 | 79.3 | 79.3 |
--------------------------------------------------------------------------------
Consolidated balance sheet (IFRS)
Me
--------------------------------------------------------------------------------
| | 30.9.2007 | 31.12.2006 | 30.9.2006 |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current assets | | | |
--------------------------------------------------------------------------------
| Investment properties | 2 386.2 | 2 455.1 | 1 372.5 |
--------------------------------------------------------------------------------
| Investments in real estate funds | 28.6 | 19.4 | 2.6 |
--------------------------------------------------------------------------------
| Property, plant and equipment | 14.8 | 19.5 | 12.4 |
--------------------------------------------------------------------------------
| Goodwill | 27.5 | 27.5 | - |
--------------------------------------------------------------------------------
| Other intangible assets | 4.7 | 5.2 | 0.4 |
--------------------------------------------------------------------------------
| Finance lease receivables | 2.7 | 2.7 | - |
--------------------------------------------------------------------------------
| Non-current receivables | 24.3 | 5.2 | 0.1 |
--------------------------------------------------------------------------------
| Deferred tax assts | 57.7 | 110.5 | 0.4 |
--------------------------------------------------------------------------------
| Total non-current assets | 2 546.5 | 2 645.1 | 1 388.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Trading properties | 48.4 | 231.1 | - |
--------------------------------------------------------------------------------
| Trade and other receivables | 26.5 | 39.6 | 5.7 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 5.4 | 23.6 | 0.6 |
--------------------------------------------------------------------------------
| Total current assets | 80.3 | 294.3 | 6.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 2 626.8 | 2 939.4 | 1 394.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SHAREHOLDERS' EQUITY AND | | | |
| LIABILITIES | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to equity | | | |
| holders of the parent company | | | |
--------------------------------------------------------------------------------
| Share capital | 111.0 | 79.3 | 79.3 |
--------------------------------------------------------------------------------
| Share premium reserve | 159.5 | 159.5 | 159.4 |
--------------------------------------------------------------------------------
| Translation differences | 0.4 | - | - |
--------------------------------------------------------------------------------
| Fair value reserve | 9.6 | 2.3 | -0.9 |
--------------------------------------------------------------------------------
| Revaluation reserve | 0.6 | 0.6 | 0.6 |
--------------------------------------------------------------------------------
| Invested non-restricted equity | 209.7 | - | - |
| reserve | | | |
--------------------------------------------------------------------------------
| Retained earnings | 423.2 | 349.3 | 338.6 |
--------------------------------------------------------------------------------
| | 914.0 | 591.0 | 577.0 |
--------------------------------------------------------------------------------
| Minority interest | 1.6 | 1.8 | - |
--------------------------------------------------------------------------------
| Total shareholders' equity | 915.6 | 592.8 | 577.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing loans and | 1 101.2 | 658.2 | 499.2 |
| borrowings | | | |
--------------------------------------------------------------------------------
| Provisions | 14.9 | 22.7 | 0.8 |
--------------------------------------------------------------------------------
| Other liabilities | - | - | 0.7 |
--------------------------------------------------------------------------------
| Deferred tax liabilities | 206.9 | 218.7 | 75.2 |
--------------------------------------------------------------------------------
| Total non-current liabilities | 1 323.0 | 899.6 | 575.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Current interest-bearing loans | 326.5 | 1 347.4 | 199.0 |
| and borrowings | | | |
--------------------------------------------------------------------------------
| Trade and other payables | 61.7 | 99.6 | 42.8 |
--------------------------------------------------------------------------------
| Total current liabilities | 388.2 | 1 447.0 | 241.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | 1 711.2 | 2 346.6 | 817.7 |
--------------------------------------------------------------------------------
| Total shareholders' equity and | 2 626.8 | 2 939.4 | 1 394.7 |
| liabilities | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest-bearing loans and | 1 427.7 | 2 005.6 | 698.2 |
| borrowings | | | |
--------------------------------------------------------------------------------
Consolidated statement of cash flows (IFRS)
Me
--------------------------------------------------------------------------------
| | | 1-9/2007 | 1-12/2006 | 1-9/2006 |
--------------------------------------------------------------------------------
| Cash flow from operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Profit for the period | | 118.7 | 48.3 | 37.7 |
--------------------------------------------------------------------------------
| Adjustments | | -3.8 | 29.6 | 16.0 |
--------------------------------------------------------------------------------
| Change in net working capital | 1) | 200.4 | 8.6 | 2.9 |
--------------------------------------------------------------------------------
| Interest received | | 4.0 | 0.8 | 0.1 |
--------------------------------------------------------------------------------
| Interest paid | | -60.6 | -34.3 | -19.9 |
--------------------------------------------------------------------------------
| Other financial items | | -1.9 | -6.7 | -0.7 |
--------------------------------------------------------------------------------
| Taxes received/paid | | 0.5 | -0.9 | -0.9 |
--------------------------------------------------------------------------------
| Net cash from operating | | 257.3 | 45.4 | 35.2 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from investing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Acquisition of Kapiteeli | | -15.1 | -929.1 | - |
--------------------------------------------------------------------------------
| Acquisition of investment | | -130.1 | -110.0 | -74.4 |
| properties | | | | |
--------------------------------------------------------------------------------
| Capital expenditure on real | | -9.2 | -19.4 | -2.6 |
| estate funds | | | | |
--------------------------------------------------------------------------------
| Acquisition of tangible and | | -1.1 | -0.6 | -2.2 |
| intangible assets | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of | | 277.8 | 37.8 | 0.2 |
| investment properties | | | | |
--------------------------------------------------------------------------------
| Loans granted | | - | -0.9 | - |
--------------------------------------------------------------------------------
| Repayments of loan | | 0.6 | 1.3 | - |
| receivables | | | | |
--------------------------------------------------------------------------------
| Net cash from investment | | 122.9 | -1 020.9 | -79.0 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from financing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Proceeds from the issue of | | 239.5 | 0.7 | 0.7 |
| shares | | | | |
--------------------------------------------------------------------------------
| Non-current loans, raised | | 710.5 | 300.0 | 300.0 |
--------------------------------------------------------------------------------
| Non-current loans, repayments | | -352.7 | -250.0 | -250.0 |
--------------------------------------------------------------------------------
| Current loans, | | -951.1 | 987.2 | 32.5 |
| raised/repayments | | | | |
--------------------------------------------------------------------------------
| Dividends paid | | -44.6 | -39.6 | -39.6 |
--------------------------------------------------------------------------------
| Net cash from financing | | -398.4 | 998.3 | 43.6 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in cash and cash | | -18.2 | 22.8 | -0.2 |
| equivalents | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents, | | 23.6 | 0.8 | 0.8 |
| beginning of period | | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents, | | 5.4 | 23.6 | 0.6 |
| end of period | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 1) Includes deductions for | | | | |
| trading | | | | |
--------------------------------------------------------------------------------
| properties | | 182.4 | 10.0 | - |
--------------------------------------------------------------------------------
Changes in Group shareholders' equity
Me
--------------------------------------------------------------------------------
| | | Share | Share | Trans- | Fair | Revaluatio |
| | | capital | premium | latio | value | n reserve |
| | | | reserve | n | reserve | |
| | | | | diff- | | |
| | | | | erence | | |
| | | | | s | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity at 31 Dec. 2005 | 79.2 | 158.8 | - | -4.2 | - |
--------------------------------------------------------------------------------
| Cash flow hedges: | | | | | |
--------------------------------------------------------------------------------
| | Amount taken to | | | | 4.2 | |
| | equity | | | | | |
--------------------------------------------------------------------------------
| | Amount recognized in | | | | 0.1 | |
| | income statement | | | | | |
--------------------------------------------------------------------------------
| | Instruments of | | | | 0.1 | |
| | reversed hedge | | | | | |
| | accounting | | | | | |
--------------------------------------------------------------------------------
| Increase | | | | | 0.8 |
--------------------------------------------------------------------------------
| Taxes on items | | | | -1.1 | -0.2 |
| recognized in equity or | | | | | |
| transferred from equity | | | | | |
--------------------------------------------------------------------------------
| Total income and | | | | 3.3 | 0.6 |
| expenses recognized | | | | | |
| directly in equity | | | | | |
--------------------------------------------------------------------------------
| Profit for period | | | | | |
--------------------------------------------------------------------------------
| Total income and | | | | 3.3 | 0.6 |
| expenses for the period | | | | | |
--------------------------------------------------------------------------------
| Dividends | | | | | |
--------------------------------------------------------------------------------
| Share issue | 0.1 | 0.6 | | | |
--------------------------------------------------------------------------------
| Equity at 30 September | 79.3 | 159.4 | - | -0.9 | 0.6 |
| 2006 | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | | Investe | Retaine | Total | Minorit | Total |
| | | d | d | | y | shareholde |
| | | non-res | earning | | interes | rs' equity |
| | | tricted | s | | t | |
| | | equity | | | | |
| | | reserve | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity at 31 Dec. 2005 | - | 340.5 | 574.3 | - | 574.3 |
--------------------------------------------------------------------------------
| Cash flow hedges: | | | | | |
--------------------------------------------------------------------------------
| | Amount taken to | | | 4.2 | | 4,2 |
| | equity | | | | | |
--------------------------------------------------------------------------------
| | Amount recognized in | | | 0.1 | | 0,1 |
| | income statement | | | | | |
--------------------------------------------------------------------------------
| | Instruments of | | | 0.1 | | 0,1 |
| | reversed hedge | | | | | |
| | accounting | | | | | |
--------------------------------------------------------------------------------
| Increase | | | 0.8 | | 0.8 |
--------------------------------------------------------------------------------
| Taxes on items | | | -1.3 | | -1.3 |
| recognized in equity or | | | | | |
| transferred from equity | | | | | |
--------------------------------------------------------------------------------
| Total income and expense | | | 3.9 | | 3.9 |
| recognized directly in | | | | | |
| equity | | | | | |
--------------------------------------------------------------------------------
| Profit for period | | 37.7 | 37.7 | | 37.7 |
--------------------------------------------------------------------------------
| Total income and expense | | 37.7 | 41.6 | | 41.6 |
| for the period | | | | | |
--------------------------------------------------------------------------------
| Dividends | | -39.6 | -39.6 | | -39.6 |
--------------------------------------------------------------------------------
| Share issue | | | 0.7 | | 0.7 |
--------------------------------------------------------------------------------
| Equity at 30 September | - | 338.6 | 577.0 | - | 577.0 |
| 2006 | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Changes in Group | | | | | |
| shareholders' equity | | | | | |
--------------------------------------------------------------------------------
| Me | | | | | |
--------------------------------------------------------------------------------
| | | Share | Share | Trans- | Fair | Revaluatio |
| | | capital | premium | latio | value | n reserve |
| | | | reserve | n | reserve | |
| | | | | diff- | | |
| | | | | erence | | |
| | | | | s | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity at 31 Dec. 2006 | 79.3 | 159.5 | - | 2.3 | 0.6 |
--------------------------------------------------------------------------------
| Cash flow hedges: | | | | | |
--------------------------------------------------------------------------------
| | Amount taken to | | | | 9.3 | |
| | equity | | | | | |
--------------------------------------------------------------------------------
| | Amount recognized in | | | | 0.3 | |
| | income statement | | | | | |
--------------------------------------------------------------------------------
| | Instruments of | | | | 0.3 | |
| | reversed hedge | | | | | |
| | accounting | | | | | |
--------------------------------------------------------------------------------
| Translation differences | | | 0.4 | | |
--------------------------------------------------------------------------------
| Taxes on items | | | | -2.6 | |
| recognized in equity or | | | | | |
| transferred from equity | | | | | |
--------------------------------------------------------------------------------
| Total income and expense | | | 0.4 | 7.3 | |
| recognized directly in | | | | | |
| equity | | | | | |
--------------------------------------------------------------------------------
| Profit for period | | | | | |
--------------------------------------------------------------------------------
| Total income and expense | | | 0.4 | 7.3 | |
| for the period | | | | | |
--------------------------------------------------------------------------------
| Decrease | | | | | |
--------------------------------------------------------------------------------
| Dividends | | | | | |
--------------------------------------------------------------------------------
| Share issue | 31.7 | | | | |
--------------------------------------------------------------------------------
| Equity 30 September 2007 | 111.0 | 159.5 | 0.4 | 9.6 | 0.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | | Investe | Retaine | Total | Minorit | Total |
| | | d | d | | y | shareholde |
| | | non-res | earning | | interes | rs' equity |
| | | tricted | s | | t | |
| | | equity | | | | |
| | | reserve | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity 31 Dec. 2006 | - | 349.3 | 591.0 | 1.8 | 592.8 |
--------------------------------------------------------------------------------
| Cash flow hedges: | | | | | |
--------------------------------------------------------------------------------
| | Amount taken to | | | 9.3 | | 9,3 |
| | equity | | | | | |
--------------------------------------------------------------------------------
| | Amount recognized in | | | 0.3 | | 0,3 |
| | income statement | | | | | |
--------------------------------------------------------------------------------
| | Instruments of | | | 0.3 | | 0,3 |
| | reversed hedge | | | | | |
| | accounting | | | | | |
--------------------------------------------------------------------------------
| Translation differences | | | 0.4 | | 0.4 |
--------------------------------------------------------------------------------
| Taxes on items | | | -2.6 | | -2.6 |
| recognized in equity or | | | | | |
| transferred from equity | | | | | |
--------------------------------------------------------------------------------
| Total income and expense | | | 7.7 | | 7.7 |
| recognized directly in | | | | | |
| equity | | | | | |
--------------------------------------------------------------------------------
| Profit for period | | 118.5 | 118.5 | 0.2 | 118.7 |
--------------------------------------------------------------------------------
| Total income and expense | | 118.5 | 126.2 | 0.2 | 126.4 |
| for the period | | | | | |
--------------------------------------------------------------------------------
| Decrease | | | - | -0.1 | -0.1 |
--------------------------------------------------------------------------------
| Dividends | | -44.6 | -44.6 | -0.3 | -44.9 |
--------------------------------------------------------------------------------
| Share issue | 209.7 | | 241.4 | | 241.4 |
--------------------------------------------------------------------------------
| Equity 30 September 2007 | 209.7 | 423.2 | 914.0 | 1.6 | 915.6 |
--------------------------------------------------------------------------------
Notes to the Group's interim report
Accounting principles
The Group adopted on 1 January 2007 the IFRS 7 standard: ‘Financial instruments:
disclosures in financial statements' and the amendment to the IAS 1 standard
concerning presentation of equity. The adoption of both standards will mainly
affect the information to be presented in the notes to the Group's financial
statements. In other respects the accounting principles for the financial
statements are the same as those used for the financial statements of 31
December 2006.
Income statement by business area M€
--------------------------------------------------------------------------------
| Income | Offic | Logis | Prop-e | Russia | Funds | Other | Group, |
| statement | e & | -tics | rty | /Balti | | | total |
| 1-9/0 | retai | | devel- | c | | | |
| 7 | l | | opment | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total revenue | 117.0 | 22.8 | 1.3 | 1.3 | 7.7 | 7.3 | 157.4 |
--------------------------------------------------------------------------------
| Maintenance | -31.5 | -5.9 | -1.1 | -0.3 | -2.9 | -2.0 | -43.6 |
| expenses and | | | | | | | |
| direct fund | | | | | | | |
| expenses | | | | | | | |
--------------------------------------------------------------------------------
| Net operating | 85.5 | 16.9 | 0.2 | 1.0 | 4.9 | 5.3 | 113.8 |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Profit/loss on | -0.7 | 1.8 | 0.0 | 0.0 | 0.0 | 0.0 | 1.1 |
| sale of | | | | | | | |
| investment | | | | | | | |
| properties | | | | | | | |
--------------------------------------------------------------------------------
| Profit/loss on | 20.7 | 0.0 | 6.7 | 0.0 | -0.5 | 0.0 | 27.0 |
| sale of trading | | | | | | | |
| properties | | | | | | | |
--------------------------------------------------------------------------------
| Valuation gains | 72.0 | 23.7 | -3.3 | 0.0 | 0.0 | 0.0 | 92.4 |
| and losses | | | | | | | |
--------------------------------------------------------------------------------
| Administration | -6.7 | -1.9 | -2.4 | -1.4 | -2.0 | -4.8 | -19.2 |
| and marketing | | | | | | | |
| expenses | | | | | | | |
--------------------------------------------------------------------------------
| Other income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.2 | 0.2 |
| and expenses | | | | | | | |
--------------------------------------------------------------------------------
| Operating | 170.9 | 40.5 | 1.3 | -0.4 | 2.3 | 0.8 | 215.2 |
| profit | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income | Offic | Logis | Prop-e | Russia | Funds | Other | Group, |
| statement | e & | -tics | rty | /Balti | | | total |
| 1-9/0 | retai | | devel- | c | | | |
| 6 | l | | opment | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total revenue | 56.8 | 22.1 | 0.1 | 0.0 | 0.8 | 0.0 | 79.8 |
--------------------------------------------------------------------------------
| Maintenance | -14.0 | -4.6 | -0.1 | 0.0 | -0.2 | 0.0 | -18.9 |
| expenses | | | | | | | |
--------------------------------------------------------------------------------
| Net operating | 42.8 | 17.5 | 0.0 | 0.0 | 0.6 | 0.0 | 60.9 |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Valuation gains | 10.1 | 9.0 | 0.0 | 0.0 | 0.0 | 0.0 | 19.1 |
| and losses | | | | | | | |
--------------------------------------------------------------------------------
| Administration | -4.6 | -1.6 | -0.8 | 0.0 | -1.0 | 0.8 | -7.2 |
| and marketing | | | | | | | |
| expenses | | | | | | | |
--------------------------------------------------------------------------------
| Other income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.3 | 0.3 |
| and expenses | | | | | | | |
--------------------------------------------------------------------------------
| Operating | 48.3 | 24.9 | -0.8 | 0.0 | -0.4 | 1.1 | 73.1 |
| profit | | | | | | | |
--------------------------------------------------------------------------------
Investment properties
--------------------------------------------------------------------------------
| | 30.9.2007 | 31.12.2006 | 30.9.2006 |
--------------------------------------------------------------------------------
| Fair value of investment | 2 455.1 | 1 259.7 | 1 259.7 |
| properties, start of period | | | |
--------------------------------------------------------------------------------
| Kapiteeli acquisition | - | 1 070.0 | - |
--------------------------------------------------------------------------------
| Purchase of investment properties | 23.7 | 94.3 | 47.7 |
--------------------------------------------------------------------------------
| Other capital expenditure on | 87.1 | 43.3 | 47.3 |
| investment properties | | | |
--------------------------------------------------------------------------------
| Disposal of investment properties | -276.9 | -37.7 | -0.2 |
--------------------------------------------------------------------------------
| Transfers to/from property, plant | 4.2 | -1.5 | -1.9 |
| and equipment | | | |
--------------------------------------------------------------------------------
| Transfers from trading properties | 0.3 | - | - |
--------------------------------------------------------------------------------
| Fair value adjustment for property | 0.3 | 0.8 | 0.8 |
| in own use | | | |
--------------------------------------------------------------------------------
| Valuation gains/losses | 92.4 | 26.2 | 19.1 |
--------------------------------------------------------------------------------
| Fair value of investment | 2 386.2 | 2 455.1 | 1 372.5 |
| properties, end of period | | | |
--------------------------------------------------------------------------------
Investment properties are properties held by the company for the purpose of
earning rental revenue or for capital appreciation. Sponda has chosen the fair
value method to measure its investment properties, recognizing changes in their
fair value in the income statement.
The fair value of Sponda's investment properties is confirmed using the
company's own calculations in which Sponda applies the yield method based on
cash flow analysis. The method is in compliance with the International Valuation
Standard (IVS). All the figures used in calculating the fair value of properties
are examined at least once a year by an external expert, to ensure that the
parameters and values used in the calculations are based on market observations.
Sponda's whole property portfolio was revalued during third quarter by Catella
Property Oy.
The Group's most significant investment commitments are in the following
projects:
Development work on the City-Center complex is continuing on schedule. The
refurbished underground basement facilities were completed in May 2007. The
second phase of the project, which includes the Kaivokatu street-level premises
and station tunnel premises, has begun and should be completed in the spring of
2008. The project is expected to be completed in 2011 and the total investment
is estimated at some EUR 110 million.
Construction of the logistics area and gatehouse building at Vuosaari Harbour
began in spring 2007. The project is progressing according to plan and will have
a total investment value of roughly EUR 140 million. The harbour will start
operations in November 2008.
Construction has started of the retail property in the Itäkeskus district in
Helsinki. The total investment value for the building will be about EUR 56
million and it will have a leasable area of 21 500 m². The property has been
leased to a single tenant and will be completed by November 2008.
Construction has begun of the office building at Porkkalankatu 22 in the
Ruoholahti district of Helsinki. The investment value of the project will be
about EUR 29 million and it will have a leasable area of 13 500 m². At present
just over 70 % of the building has been leased, and the estimated completion
date is autumn 2008
Sponda started construction of an office building at Lautatarhankatu 2 in the
Sörnäinen district of Helsinki. Some 51 % of the building has been leased. The
project will have a total investment cost of about EUR 22 million and the
property will have a leasable area of 9 200 m. The estimated completion date is
towards the end of 2008.
Property, plant and equipment
--------------------------------------------------------------------------------
| | 30.9.2007 | 31.12.2006 | 30.9.2006 |
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| Carrying amount, start of period | 19.5 | 8.8 | 8.8 |
--------------------------------------------------------------------------------
| Kapiteeli acquisition | - | 5.2 | - |
--------------------------------------------------------------------------------
| Additions | 1.8 | 4.5 | 2.0 |
--------------------------------------------------------------------------------
| Disposals | -1.7 | - | - |
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| Reclassifications to/from | | | |
--------------------------------------------------------------------------------
| investment properties | -4.2 | 1.5 | 1.9 |
--------------------------------------------------------------------------------
| Depreciation for the period | -0.6 | -0.5 | -0.3 |
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| Carrying amount, end of period | 14.8 | 19.5 | 12.4 |
--------------------------------------------------------------------------------
Trading properties
--------------------------------------------------------------------------------
| | 30.9.2007 | 31.12.2006 | 30.9.2006 |
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| Carrying amount, start of period | 231.1 | - | - |
--------------------------------------------------------------------------------
| Kapiteeli acquisition | - | 241.8 | |
--------------------------------------------------------------------------------
| Disposals and other changes | -182.7 | -10.7 | |
--------------------------------------------------------------------------------
| Carrying amount, end of period | 48.4 | 231.1 | - |
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Sampo Bank's suit for payment
In its ruling, the Helsinki city court ordered Sponda Plc to pay interest, penal
interest and court costs totalling EUR 7.6 million to Sampo Bank Plc based on a
credit agreement. Sponda appealed the decision to the Helsinki court of appeal
on 9 February 2007. The amount of Sampo Bank's suit for payment, EUR 7.6
million, was recognized as an expense under provisions in the 2006 financial
statements. In the January - September period EUR 0.5 million was recognized as
an expense under provisions.
Contingent liabilities
Collateral and commitments given by Group
M€
--------------------------------------------------------------------------------
| | 30.9.2007 | 30.9.2006 | 31.12.2006 |
--------------------------------------------------------------------------------
| Loans from financial institutions, | 2.5 | 0.1 | 15.8 |
| covered by collateral | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Mortgages | 3.0 | 0.1 | 0.2 |
--------------------------------------------------------------------------------
| Book value of pledged shares | 1.9 | - | 149.7 |
--------------------------------------------------------------------------------
| Guarantees | 24.9 | - | 17.1 |
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| Collateral, total | 29.7 | 0.1 | 167.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Lease and other liabilities | 30.9.2007 | 30.9.2006 | 31.12.2006 |
--------------------------------------------------------------------------------
| M€ | | | |
--------------------------------------------------------------------------------
| Lease liabilities | 20.0 | 21.1 | 22.9 |
--------------------------------------------------------------------------------
| Other liabilities | 0.1 | - | 0.1 |
--------------------------------------------------------------------------------
| Mortgages | 2.3 | 2.2 | 2.3 |
--------------------------------------------------------------------------------
| Guarantees | 0.1 | - | 0.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest derivatives | 30.9.2007 | 30.9.2006 | 31.12.2006 |
--------------------------------------------------------------------------------
| M€ | | | |
--------------------------------------------------------------------------------
| Swap contracts, notional value | 605.0 | 306.8 | 541.8 |
--------------------------------------------------------------------------------
| Swap contracts, fair value | 9.7 | -0.6 | 2.3 |
--------------------------------------------------------------------------------
| Cap options purchased, notional | 557.0 | - | 737.0 |
| value | | | |
--------------------------------------------------------------------------------
| Cap options purchased, fair value | 14.3 | - | 10.0 |
--------------------------------------------------------------------------------
| Forward rate agreements, notional | 50.0 | - | - |
| value | | | |
--------------------------------------------------------------------------------
| Forward rate agreements, fair value | 0.0 | - | - |
--------------------------------------------------------------------------------
Key indicators
--------------------------------------------------------------------------------
| | 7-9/07 | 7-9/06 | 1-9/07 | 1-9/06 | 1-12/06 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings/share, e | 0.35 | 0.18 | 1.11 | 0.48 | 0.61 |
--------------------------------------------------------------------------------
| Equity ratio, % | | | 35 | 41 | 20 |
--------------------------------------------------------------------------------
| Gearing, % | | | 155 | 121 | 334 |
--------------------------------------------------------------------------------
| Net assets per share, e | | | 8.23 | 7.28 | 7.45 |
--------------------------------------------------------------------------------
| Cash flow from | 0.15 | 0.12 | 0.59 | 0.40 | 0.56 |
| operations/share, e | | | | | |
--------------------------------------------------------------------------------
Calculation of financial ratios
--------------------------------------------------------------------------------
| Earnings/share, € = | Share of profit for the period |
| | attributable to equity holders of the |
| | parent company |
--------------------------------------------------------------------------------
| | Adjusted average number of shares during |
| | the period |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity ratio, % = 100 x | Shareholders' equity | |
--------------------------------------------------------------------------------
| | Balance sheet total - advances received |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gearing, % = 100 x | Interest-bearing liabilities - cash and |
| | cash equivalents |
--------------------------------------------------------------------------------
| | Shareholders' equity | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity per share,e = | Equity attributable to equity holders of |
| | parent company on 30 September |
--------------------------------------------------------------------------------
| | Adjusted number of shares on 30 September |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from | Operating profit | | | |
| operations/share, e 1) = | | | | |
--------------------------------------------------------------------------------
| | -/+ Valuation gains and losses |
--------------------------------------------------------------------------------
| | +/- Changes in provisions |
| | +/- Defined benefit pension expenses |
--------------------------------------------------------------------------------
| | - Financial income and expenses affecting cash |
| | flow |
--------------------------------------------------------------------------------
| | - Taxes affecting cash flow | | |
--------------------------------------------------------------------------------
| | Average adjusted number of shares during the |
| | period |
--------------------------------------------------------------------------------
| EPRA equity per share, e = | Equity attributable to equity holders of |
| | parent company on 30 September |
| | + Deferred tax relating to the fair valuation |
| | of property and to property depreciation |
| | allowances |
| | - Goodwill relating to deferred tax liability |
| | Adjusted number of shares on 30 September |
--------------------------------------------------------------------------------
1) Profit on the sale of non-current assets has been deducted and losses from
their sale have been added to the operating profit for the years 2004-2006.
Related party transactions
The following transactions took place with related parties:
Rental income from state institutions and companies totalled EUR 17.9 million in
the January-September 2007 period (1-12/2006: EUR 13.6 million).
Management employee benefits
--------------------------------------------------------------------------------
| | 1-9/2007 | 1-9/2006 | 1-12/2006 |
--------------------------------------------------------------------------------
| Salaries and bonuses | 1.5 | 0.8 | 1.0 |
--------------------------------------------------------------------------------
| Incentive bonuses | 0.2 | 0.3 | 0.2 |
--------------------------------------------------------------------------------
| Share-based payments | 1.1 | - | 1.1 |
--------------------------------------------------------------------------------
| Total | 2.8 | 1.1 | 2.3 |
--------------------------------------------------------------------------------
There were no outstanding loans receivable from key management on 30 September
2007 or 31 December 2006.
Members of the Board of Directors held 2 170 shares and members of the Executive
Board 31 368 shares on 30 September 2007 (31 December 2006: 48 009 and 7 682
shares).
The Finnish State held 34.3 % of Sponda's shares on 30 September 2007 (31 Dec.
2006: 34.3 %). Sponda sold three land areas for about EUR 65 million in
accordance with a purchase option agreed with the Finnish State in February
2007.
Major property transaction
In a transaction signed on 30 March 2007, Sponda sold shares in real estate
companies, business properties and land sites that were outside its strategic
focus to Whitehall Street Real Estate Limited and Niam Nordic Investment Fund
III for EUR 401.1 million. The sale comprised in total 564 real estate items, of
which 43 were investment properties. Sponda recorded a profit on the sale of
some EUR 18 million, which was reduced in a review of the selling price in the
second quarter by EUR 1.3 million.
Events after the close of the period
Sponda Plc and Sponda Kiinteistöt Oy (formerly Kapiteeli Oyj) were chosen in
April 2006 as main contractors for the Ratina shopping centre in Tampere and for
development projects in adjacent areas. An appeal was made to the Market Court
against the decision in May 2006. In October 2007 the Market Court decided not
to proceed with the appeal made against the decision of the City of Tampere.
There is a right to appeal against the decision of the Market Court. Sponda is
planning a 48 000 m² shopping centre on the site, for which the total capital
expenditure is estimated at some EUR 200 million.
In October the city government of Vaasa chose Sponda Plc from three candidates
to be its partner in developing the shopping centre planned to replace the
disused bus station. The goal is for Sponda and the City of Vaasa to design and
plan the piece of land for the shopping centre together. After the planning
process, Sponda and the city will decide on the sale of the piece of land being
planned. It is hoped to obtain building rights of 40 000 m² for the land as well
as parking space for 1 000 cars. The shopping centre will be completed at the
earliest in 2010.
Sponda purchased an office property that is under construction for USD 47.5
million from the centre of Moscow in October 2007. The premises will have a
total of 3,025 m² of leasable office space and parking space for 54 cars. Sponda
is engaged in initial negotiations with various potential tenants. The building
will be completed by the end of 2007.
In October Sponda purchased an office property for USD 11.5 million from St
Petersburg at the address Kaluzhskij pereulok 3. The property comprises a total
of 2730 m² of leasable office premises and parking for 27 cars. The property is
fully leased.
The Uusimaa corporate tax office has decided to deviate from the 2006 tax
returns given by Sponda Kiinteistöt Oy (former Kapiteeli Ltd) and considers that
the company's taxable profit for the year is EUR 192 million. The reason for
this decision is that, since the company's personnel were transferred to Sponda
Plc, the company's business cannot be considered to have continued essentially
in the same way as described in the special dispensation granted by the Uusimaa
tax office.
Sponda Kiinteistöt Oy has decided to appeal against the decision, since the
company's business after the change of ownership on 14 December 2006 has, in its
opinion, remained essentially the same. The tax loss carry-forward for the years
1996-1999 is approximately EUR 558 million.
