Interim report January - September 2011

RESULTS IN BRIEF

Interim period (January – September)

  • Net sales increased by 24 per cent to SEK 2,114 (1,705) m, and gross profit increased by 19 per cent to SEK 1,386 (1,160) m after a larger property portfolio.
  • Profit before tax was SEK 455 (405) m. Profit after tax was SEK 335 (317) m, equivalent to SEK 2.50 (2.30) per share. The profit increase is mainly due to a larger property portfolio.
  • Cash flow from operating activities amounted to SEK 515 (351) m
  • Profit for calculating dividends for the interim period amounted to SEK 462 (379) m, equivalent to SEK 3.40 (2.80) per share.
  • As of 30 September 2011, the property portfolio consisted of 639 (592) properties with a book value of SEK 26,455 (21,501) m.
  • The estimated profit for calculating dividends for the full year 2011 is unchanged at SEK 650 m, or SEK 4.80 per share.

Third quarter (July – September)

  • Net sales increased by 36 per cent to SEK 766 (563) m, and gross profit increased by 34 per cent to SEK 548 (408) m, after a larger property portfolio.
  • The loss before tax was SEK –234 (237) m. Loss after tax was SEK –173 (180) m, equivalent to SEK –1.30 (1.30) per share. The lower figure is due to negative value changes on financial instruments.
  • Cash flow from operating activities amounted to SEK 254 (114) m.
  • Profit for calculating dividends for the quarter was SEK 239 (160) m, equivalent to SEK 1.70 (1.20) per share.

SIGNIFICANT EVENTS

Interim period (January – September)

  • 49 (12) properties purchased for SEK 4,493 (839) m. 4 (41) properties were also sold for SEK 179 (1,028) m, with a profit of SEK 34 (12) m. These sales affected profit for calculating dividends by SEK 45 (14) m.
  • The largest transaction was the purchase of 36 properties from NRP for SEK 3.6 billion.
  • Kungsleden rated the best workplace of the property companies in the Great Place to Work survey

Third quarter (July – September)

  • 5 (2) properties were purchased for SEK 306 (40) m. 1 (2) properties were also sold for SEK 133 (123) m, with a profit of SEK 11 (–2) m. These sales affected profit for calculating dividends by SEK 17 (13) m.
  • New letting of 15,000 sq.m. in Slagsta, south of Stockholm.

Results for the period Kungsleden is reporting a gross profit of SEK 548 m for the third quarter, the company’s best quarterly figure ever. The primary explanation is growth of our property portfolio. By 30 September, we had purchased 49 properties for nearly SEK 4.5 billion at an estimated property yield of 9.5 per cent. However, negative value changes on our financial instruments reduced profit after tax, but have no cash flow effect.

Administration costs decreased on the previous quarter, which had fairly high non-recurring costs due to the organisational division of Hemsö and Kungsleden. The largest cost item is our funding costs, which have increased mainly as a result of a higher loan volume after executed acquisitions.

Lettings market Despite debt concerns in the surrounding world, conditions are favourable in Sweden, with a fairly strong domestic economy. Based on experience of previous recessions, we know that with its segment diversification into different property types and tenant structures with commercial and public tenants, Kungsleden has good resistance even if the economy were to deteriorate. Even if we do not see any risks at present, we are monitoring progress closely.

Because we’re in a late-cyclical sector, we started to see vacancies falling somewhat in the quarter. Our work on the few properties where our vacancies are concentrated paid off well. For example, we signed a three-year lease with Hemmamässan on 15,000 sq.m. in Slagsta Strand, south of Stockholm.

Transaction market Transaction volumes on the Swedish property market amounted to SEK 22 billion in the third quarter, a 16 per cent increase year on year according to real estate services firm JLL. After the end of the quarter, the executive auction of Kefren’s property captured a lot of attention. This high interest bears testimony to a liquid market despite debt concerns, with breadth and depth on the buy side, a wealth of local players and good prices. It also demonstrates that the property asset class is an attractive investment alternative in a low interest environment.

Generally, we’re seeing sustained increased interest in public properties, which is obviously positive, with prices rising somewhat in the year as a result. Kungsleden will remain active in the transaction market, even if turmoil on the financial markets affects the deals we do.

Rising activity in our modular business Our modular business primarily consists of modular lettings and production. Rental revenues are unchanged in the period, but new lettings were greater than terminated leases, and we expect them to remain so for the rest of the year. Revenues from module sales were over SEK 70 m in the quarter, against less than SEK 48 m last year. Interest and enquiries have increased over the past year. With the current activity levels, we’ll be moving into 2012 at a higher letting level than in 2011, which will strengthen Nordic Modular’s profits, all other things being equal.

Outlook The harsh credit market climate is persisting, especially for new lending. New regulation and turmoil on the financial markets is creating uncertainty among banks in terms of capital adequacy requirements and funding costs, which affects borrowers negatively. Just as previously, we will continue to examine alternative funding sources as a complement to bank borrowings.

Our profit for calculating dividends amounted to SEK 239 m for the third quarter and SEK 462 m for the period January to September. We are reiterating our estimate of profit for calculating dividends for 2011 of SEK 650 m.”

Thomas Erséus
Chief Executive

Regulatory

For more information, please contact:

Thomas Erséus, CEO Kungsleden | phone +46 (0)8 503 052 04 | mobile +46 (0)70 378 20 24
Johan Risberg, Deputy CEO Kungsleden | phone +46 (0)8 503 052 06 | mobile +46 (0)70 690 65 65

www.kungsleden.se


Detta pressmeddelande finns tillgängligt på svenska på www.kungsleden.se/pressmeddelanden 

Kungsleden AB (publ) discloses the information in this press release according to the Swedish Securities Markets Act and/or the Swedish Financial Trading Act. The information was provided for public release on 14 October 2011 at 08:00 a.m.

Kungsleden’s strategy is to ensure sustainable high and stable returns proceeding from its existing holding, and through acquisitions and divestments. As of 30 September 2011, the property portfolio comprised 639 properties with a book value of SEK 26.5 bn. The portfolio was located in a total of 142 municipalities, mainly in southern and central Sweden. Kungsleden has been quoted on the Nasdaq OMX Stockholm since 1999.