Profit as expected in a stable property market
• Net sales fell by 26 per cent to SEK 571 (771) m, and gross profit by 29 per cent to SEK 355 (501) m due to the previous year’s transaction with AP3 and increased costs relating to the severe winter.
• Profit before tax was SEK 36 (–79) m. Profit after tax was SEK 58 (–67) m, equivalent to SEK 0.40 (–0.50) per share.
• As of 31 March 2010, the property portfolio comprised 556 (585) properties with a book value of SEK 21,239 (21,861) m.
• No properties were acquired. 30 (6) properties were divested for SEK 602 (222) m, generating a profit of SEK 3 (11) m. These divestments affected profit for calculating dividends by SEK 28 (61) m.
• Profit for calculating dividends for the interim period was SEK 126 (223) m, equivalent to SEK 0.90 (1.60) per share.
• The forecast for the full year 2010 profit for calculating dividends remains at SEK 600 m, or SEK 4.40 per share.
“Our profits for the first quarter were consistent with our expectations and our estimate of profit for calculating dividends. The year-on-year profit change is mainly due to the Hemsö transaction with the Swedish Third Pension Insurance Fund (AP3 ), and increased costs, mainly for heating and property care, of approximately SEK 25 m, due to the severe winter.
Trading net for the quarter was SEK 3 m, after actions including the completion of our transaction with Corem Property Group. We also had a positive tax effect of just over SEK 30 m, after divesting properties without deducting for deferred tax. Administration costs continued to reduce in the quarter. The reduced net financial position was mainly a consequence of lower loan volumes after the sale to AP3. The book value of our portfolio was adjusted upwards by SEK 12 m in the quarter.
Vacancies rose slightly early in the year. Kungsleden has a somewhat late-cyclical operation, and in 2010, we do expect some increase in vacancies. Nordic Modular’s sales were lower than the previous year, while its gross profit was positive. After the adaptations to production completed in 2008–2009, production costs were down by over 40 per cent. The clear trend improvement on the transaction market sustained. According to Jones Lang Lasalle, transaction volumes were over SEK 18 bn in the first quarter. Kungsleden divested a total of about 30 properties for just over SEK 600 m. We are now observing that there are opportunities to do good deals once again. Notably, the market for public properties is attracting new players. It has become easier to secure short-term credit, which is contributing to a more upbeat market outlook, while however, long-term funding is still harder to arrange. It is important for Kungsleden to maintain optimal funding as far as possible, for the long and short term.
At the end of the first quarter, the Swedish Tax Agency initiated additional proceedings regarding property divestments conducted, although no regulatory decision has been reached. Back in 2009, we provisioned SEK 325 m relating to these tax proceedings. Our judgment is that the total liquidity effect of these tax proceedings will not exceed SEK 300 m assuming a potential negative outcome. Our view remains that we have complied with applicable laws and regulations.
Kungsleden was also recognised as one of Sweden’s best workplaces in the Great Place to Work survey, involving 80 companies. Kungsleden secured a top four place of the medium-sized companies, and was the best of the property companies. These results are very pleasing, because in recent years, Kungsleden has worked consciously to strengthen its internal corporate culture.
We will continue to work on arranging cost-efficient long-term funding, so we can exploit the attractive deal opportunities that we expect to arise. With stable counterparties, long contracts and continued goal-oriented work addressing our customers, we will be able to deal with expected modest increases in vacancies from low levels.”
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 1 March 2010 at 11.30 a.m.
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 31 March 2010, the property portfolio comprised 556 properties with a book value of SEK 21.2 bn. The holding was located in a total of 129 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.