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Swedish property company Kungsleden presents the Financial Statement for 2011.
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Welcome to Kungsleden
Facilitating opportunities
Fourth quarter 2011
Chief ExecutiveThomas Erséus
Deputy Chief Executive Johan Risberg
Owning and managing properties with satisfied customers
Always open to new opportunities
– regardless of property type or geography
High and stable returns for the long term with
risk diversification as a key ingredient
A quality portfolio with good geographical risk spread
636 properties, portfolio total over SEK 26 bn
Commercial
properties:
Industrial,
warehouse,
retail, office
Public properties:
retirement homes,
care, schools,
preschools and
judicial system
Modules for
schools, pre-
schools, offices and
portable units
Kungsleden,
SEK 14,143 m.
50% of Hemsö
= SEK 10,429 m.
Nordic Modular
Group, SEK 1,550 m.
Profit better than estimate and a stronger organisation
■ Profit for calculating dividends increased by SEK 173 m year on
year to SEK 703 m
■ Gross profit increased by 21% to SEK 1,877 m
■ Profit from property management increased by 29% to SEK 690 m
■ 60 properties purchased for SEK 4 798 m at a property yield of
10.2%
■ 20 properties sold for SEK 1,224 m at a property yield of 5%
■ Average property yield (earnings capacity) from 6.4 to 7.2%
■ Property values +SEK 690 m, financial instruments - SEK 609 m
■ Best workplace of property companies
Fourth quarter the best historically
■ Gross profits increased by 28%
■ Profit from property management of SEK 192 m the best historical
quarterly figure
■ Ten-year Green Lease signed with Westinghouse in Västerås, total
rental value approx. SEK 160 m
■ 11 properties purchased for SEK 305 m at a property yield of 7.4%
■ 16 properties sold despite a difficult market for SEK 1,044 m at a
property yield of 5.1%
After the fourth quarter
■ Syndicated loan rearranged in January 2012, which means that half
of Kungsleden’s maturities for 2012 are now refinanced
A good start to the year
Increased profit for calculating dividends and a higher dividend
2011 2010
SEK m Jan-Dec Jan-Dec
Gross profit 1,877 1,545
Sales and administration costs -319* -260
Net financial position -868 -749
Profit from property management 690 536
Realised items
Trading net on sale 56 33
Realised value changes, properties 66 21
Deduction for deferred tax on sale -8 -
Realised value changes, financial instruments -66 -8
Realised items 48 46
Taxes payable -35 -52
Profit for calculating dividends 703 530
* Of which Hemsö SEK 75 SEK m and Nordic Modular SEK 61 m.
Highlights of 2011
• Purchase from NRP better than
expected
• Hemsö has grown
• Nordic Modular returning good
profitability
• Focus on vacancies
Purchase from NRP—better than expected
Office and industrial properties
36 properties for SEK 3.6 bn
10% property yield
ABB in Västerås makes up
39% of areas
Stable returns and stable
tenants
Vacancy level of 5%
Yearly impact on profit for
calculating dividends of
approx. SEK 200 m
Hemsö has grown by SEK 1 billion
■ Hemsö is an independent
organisation
■ 312 properties in 86
municipalities
■ Larger property portfolio, to
approx. SEK 21 bn
■ Purchased at a yield of 6.9%
Nordic Modular is a profitable investment
■ Marked increase in order
bookings in the first half-year
■ Rental revenues and gross
profit increased year on year
■ Leased modules made up
12% of consolidated gross
profit and only 6% of property
value
■ Average return on equity well
over 20% since acquisition in
2007
Focusing on large vacancies has paid off
■ Three different lettings
totalling 10,000 sq.m. in
Arlöv, Malmö
■ 15,000 sq.m. let in Slagsta
Strand, south of Stockholm
■ Sale or five properties with
leasable area of
50,000 sq.m. in Slagsta
Strand
Increased occupancy and green partnerships
■ New agreements with annual rental value of SEK 118 m
■ Economic occupancy levels of 91.6 (90.3)%
■ Average remaining lease term 6.4 years, commercial 5.1 years,
public 7.4 years
■ Partnering with tenants to mitigate environmental impact through
reduced energy consumption
■ Westinghouse signs 10-year Green Lease
■ Two Green Building-accredited properties
Building awareness externally and pride internally
Very high job satisfaction offers stimulation
Source: Ennova
Portfolio growth of SEK 16 billion since 2002
More offices and less retail in the portfolio
Geographical spread limits risk
2011 in figures
Multiple profit streams
2011, SEK m
Kungsleden
excl. Hemsö and
Nordic Modular Hemsö, 50% Nordic Modular
Total
Kungsleden
Rental revenues 1,515 835 244 2,594
Sales revenue, modules 0 288 288
Net sales 1,515 835 532 2,882
Property costs -463 -235 -49 -747
Production costs, modules 0 -258 -258
Gross profit 1,052 600 225 1,877
Trading net 56 0 0 56
Sales and administration costs -183 -75 -61 -319
Net financial position -507 -309 -52 -868
Unrealised value changes -154 331 -96 81
Profit before tax 264 547 17 828
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• The increase is primarily
sourced from a larger
property portfolio and
good property
management
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Sharp increase in
order bookings in the
first half-year with
deliveries in arrears
through 2011
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Net sales increased
by 25%
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Gross profit increased
by 21% due to new
acquisitions
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• If sales proceeds are
compared to acquisition cost,
the effect of sales on profit for
calculating dividends is
obtained, which amounts to
SEK 114 m.
• SEK 66 m of value changes
and deductions for deferred
tax of SEK -8 m are additional
to the trading net of SEK 56
m.
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Of this total, SEK 75
SEK m is from
Hemsö, SEK 61 m
from Nordic Modular
and SEK 183 m from
commercial
properties, business
development and
central administration
• The increase is
mainly explained by
Hemsö being an
independent
organisation and a
larger property
portfolio.
• A non-recurring item
of SEK 5 m is
sourced from the
relocation and
demerger of Hemsö
and Kungsleden
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• The net financial
position changed
negatively mainly
because of a higher
loan volume and
newly arranged bond
loan with a higher
interest margin than
bank borrowings
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Value changes on
properties amounted
to SEK 690 m,
corresponding to 3%
of book value
• Mainly relating to
Hemsö and
properties in the NR
portfolio
• Value changes on
financial instruments
amount to SEK -609
m
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Tax is slightly less
than 26.3% of profit
before tax because
property sales were
conducted via
companies
Income Statement
SEK m
2011
Jan-Dec
2010
Jan-Dec
Rental revenues 2,594 2,120
Sales revenues, modular buildings 288 184
Net sales 2,882 2,304
Gross profit 1,877 1,545
Trading net 56 33
Sales and administration costs –319 -260
Net financial position –868 -749
Unrealised value changes 81 617
Profit before tax 828 1,186
Tax –190 –345
Profit after tax for the period 638 841
• Lower number due to
unrealised value
changes on financial
instruments, which
were negative due to
sharply falling market
interest rates
Total assets increase by nearly SEK 4 bn
SEK m 2011 2010
Assets 31 Dec 31 Dec
Goodwill 201 201
Properties 26,122 21,501
Receivables, etc. 1,146 2,045
Cash and cash equivalents 816 747
Total assets 28,286 24,494
Equity and liabilities
Equity 7,719 7,357
Interest-bearing liabilities 17,315 13,949
Non-interest-bearing liabilities 3,252 3,188
Total equity and liabilities 28,257 24,494
Transfer to new accounting method
■ The way Hemsö is consolidated is changing from 1 January 2012
from the proportional method to the equity method
■ Half of Hemsö’s profit/loss is being reported on a line in the Income
Statement as profit/loss from participations in joint ventures
■ Half of the value of Hemsö’s equity is reported as an asset on a
separate line in the Statement of Financial Position
■ This change does not affect equity, net profit or profit for calculating
dividends
■ Property values and loans become lower, which reduces total assets
and increases the equity/assets ratio
Profit/loss, proportional and equity method, pro forma
SEK m
Proportional
method
Equity
method
Rental revenues 2,594 1,759
Sales revenues, modular buildings 288 288
Net sales 2,882 2,047
Gross profit 1,877 1,277
Trading net 56 56
Sales and administration costs -319 -244
Net financial position -868 -131
Unrealised value changes 81 -250
Profit before tax 828 708
Tax -190 -70
Profit after tax for the year 638 638
Statement of Financial Position, proportional and
equity methods, pro forma
SEK m
Proportional
method
Equity
method
ASSETS
Goodwill 201 201
Properties 26,122 15,693
Participations in joint ventures - 1,085
Receivables from joint ventures - 1,500
Receivables, etc. 1,147 988
Cash and cash equivalents 816 684
TOTAL ASSETS 28,286 20,151
EQUITY AND LIABILITIES
Equity 7,719 7,719
Interest-bearing liabilities 17,315 10,654
Non interest-bearing liabilities 3,252 1,778
TOTAL EQUITY AND LIABILITIES 28,286 20,151
Restructuring of derivative portfolio provides lower
average interest rate
As of 31 December 2011
Loan, SEK
m
Interest
derivatives,
SEK m
Ave.
interest,
%
Ave. interest,
loans and
derivatives, years
Average fixed
interest term,
years
2012 17,326 200 4.3
2013 1,100 3.7
2014 2,400 3.8
2015 2,700 4.0
2016 950 3.3
2017 700 3.7
2018 3,850 4.1
2019 1,400 3.1
2020 1,200 3.4
2021 800 3.3
Total derivatives 17,326 15,300 4.8 4.7
Market value of loans and
derivatives 1,255
Total 18,581
Approx. half of maturities in 2012 are refinanced
As of 31 December 2011
Utilised
credits,
SEK m
Un-utilised
credits, SEK
m
Total credits,
SEK m
2012 8,510 3,110 11,620
2013 2,725 50 2,775
2014 2,573 - 2,573
2015 999 - 999
2016 2,044 - 2,044
2017 - - -
2018 303 - 303
2019 172 - 172
Summa 17,326 3,160 20,486
Average conversion term, years 1.8 1.5
Equity/assets ratio
31 Dec 11
27%
31 Dec 10
30%
30 Jun 11
27%
Equity method
38%
LTV ratio 66% 65% 68% 67%
Property management is the foundation of earnings
Big differences in results for financial targets in
2007-11 Interest cover RoE
2007 2.7 25.6
2008 1.6 -11.9
2009 1.6 3.5
2010 1.8 11.7
2011 1.9 8.1
Average 1.9 7.4
The share to mid-February 2012
Total yield until mid-February 2012
10 largest shareholders represent 25% of votes & capital
■ Nordea fonder 4.8
■ Pensioenfonds PGGM (NL) 3.4
■ Länsförsäkringar fonder 2.9
■ SHB fonder 2.6
■ Norska staten 2.4
■ Olle Florén and companies 2.3
■ Danske Invest fonder 2.3
■ AP4 1.7
■ AP2 1.3
■ Swedbank Robur Fonder 1.1
24.8
Source: SIS Ägarservice, 31 Dec 2011
Stable portfolio but hesitant market conditions
■ Kungsleden’s lettings market
– Stable lettings market but businesses generally more cautious
– Limited vacancies
■ Financial market
– Market driven by shorter credits
– Higher funding costs
■ Transaction market
– Activity down in the fourth quarter
– Property market remains liquid and transparent
Property management and portfolio enhancement in focus
in 2012 ■ Fairly strong Swedish economy
■ Quality portfolio with good geographical risk-spread ensures stable
cash flow
■ As always, focus on customer care and portfolio enhancement
■ Extending the base of alternative types of funding
■ Continue to look for good transaction opportunities
■ Work to reduce vacancies in a small number of large properties
■ High employee commitment offers good prospects for positive
profits from property management and business development
■ The Board’s estimate of profit for calculating dividends for 2012 is
SEK 600 m
Questions?