Interim Report January – September 2010
Increased profits for the quarter but reduced estimate
- Net sales fell by 15 per cent to SEK 1,705 (2,015) m, and gross profit fell by 17 per cent to SEK 1,160 (1,398) m due to the previous year’s transaction with AP3 (the Swedish Third Pension Insurance Fund) and increased costs relating to the severe winter.
- Profit before tax was SEK 405 (309) m. Profit after tax was SEK 317 (339) m, equivalent to SEK 2.30 (2.50) per share.
- As of 30 September 2010, the property portfolio comprised 559 (585) properties with a book value of SEK 21,800 (21,861) m.
- 12 (3) properties were acquired for SEK 839 (169) m. 41 (262) properties were also divested for SEK 1,028 (7,538) m, generating a profit of SEK 12 (–126) m. These divestments affected profit for calculating dividends by SEK 14 (878) m.
- Profit for calculating dividends for the interim period was SEK 379 (1,016) m, equivalent to SEK 2.80 (7.40) per share.
- The new estimate of profit for calculating dividends for the full year 2010 is SEK 500 (600) m, equivalent to SEK 3.70 (4.40) per share. This reduction is due to the severe winter and fewer divestments than in the previous estimate.
Third quarter (July – September)
- Net sales fell by 2 per cent to SEK 563 (576) m as a result of net property divestments.
- Profit before tax was SEK 237 (145) m. Net profit after tax was SEK 180 (103) m, or SEK 1.30 (0.80) per share.
“The Swedish economy has performed well in absolute and relative terms against Europe and the rest of the world. This is a factor, which not least, is benefiting the Swedish property sector. Expectations of reduced unemployment and continued growth mean that demand for office and other commercial premises is expected to rise.
Profit for the period was predominantly stable, adjusted for the Hemsö deal with AP3 (the Swedish Third Pension Insurance Fund), which affected the previous year’s comparative figures. Indexation has affected our results, as have increased vacancies in six commercial properties. Measures are ongoing, and because most of these premises are in attractive locations, there is good potential to increase occupancy. Meanwhile, we have divested fully let properties, affecting average vacancy levels somewhat. Rental revenues reduced by 2 per cent in like-for-like terms. We have a positive view of the lettings market, and in our work in the year, have arranged new lettings equivalent to an annual rental value of SEK 53 m.
The past few months has seen surging interest in property investments, with the fact that properties with tenants on long agreements are an attractive investment being part of the background. Bad debt in the Swedish property sector has been low, while properties are an inflation-proof investment. This is contributing to a strong transaction market, with for example, pension assets active in several major property deals through the autumn. Kungsleden made property acquisitions totalling SEK 839 (169) m in the period.
There is also substantial interest in public properties. A significant share of the asset reallocation we have witnessed has been to public properties. We have also noted several new start-up companies that focus on public properties, which in the longer term, will probably be a value driver.
Our retirement homes business in Germany remains stable, as is the operation of our 50:50 joint venture with AP3, Hemsö. Our modular business, Nordic Modular, is noting increased interest with plentiful enquiries to its lettings business and some increase in its modular production order book.
Credit market conditions are continuing to ease gradually. We conducted another bond issue after the end of the period, this time of SEK 600 m. Bond loans are a natural component of our funding, and we intend to be a recurrent issuer on the market.
Establishing Hemsö as an independent company remains on track, and as of 1 October, this company completed the acquisition of a portfolio from Vasallen for SEK 1,150 m with a rental value of approximately SEK 125 m.
In the year, Kungsleden has primarily focused on transactions limiting the downside in its property portfolio, which meant fewer positive realised value changes than expected. Because there is reason to believe that property prices will gradually rise, Kungsleden has chosen not to sell so many properties at present to generate profits against acquisition cost. For this reason, Kungsleden is restating its estimate of profit for calculating dividends for 2010 to SEK 500 m, SEK 100 m lower than the previous estimate of SEK 600 m.”
For more information, please contact:
Thomas Erséus, CEO Kungsleden | phone +46 8 503 052 04 | mobile +46 70 378 20 24
Johan Risberg, Deputy CEO Kungsleden | phone +46 8 503 052 06 | mobile +46 70 690 65 65
Detta pressmeddelande finns tillgängligt på svenska på www.kungsleden.se
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 2010, the property portfolio comprised 559 properties with a book value of SEK 21.8 bn. The holding was located in a total of 130 municipalities, although concentrated on the Swedish provinces of Götaland and Svealand, and the Öresund region. Kungsleden has been quoted on the Nasdaq OMX Stockholm since 1999.