Kungsleden AB (publ) Interim Report
1 January—30 June 2001
• Profit before tax for the period amounted to SEK 191 (169) m, corresponding to
earnings per share of SEK 10.1 (9.1).
• Kungsleden’s operating surplus increased by 52 per cent to SEK 305 (200) m.
• Operating profit increased by 67 per cent to SEK 321 (193) m.
• In the period, 49 properties were divested, generating SEK 447 m and profits of
SEK 30 (5) m; 44 properties, with a value of SEK 1,937 m, were acquired. During the
period, our group of properties has grown by more then 20 per cent.
• Kungsleden is revising its forecast of profit after tax to SEK 330 m, equivalent to
SEK 17,4 per share. The previous forecast was SEK 300 m.
Kungsleden’s business concept, vision and operations
Kungsleden’s business concept is to own and manage properties that generate high and stable long-term property yield.
Kungsleden’s vision is to utilize and develop its competencies in structuring heterogeneous property holdings.
Kungsleden’s dual operational focus is property management and trading. The corporation views the yield properties generate as its crucial performance measure, considering this more important than property type or geographical location. Kungsleden is a transaction-intensive corporation, with our property holding in frequent change as a consequence of acquisitions and disposals.
Profits
Kungsleden posted profit before tax of SEK 191 (169) m for the period January–June 2001.
Additionally, last year’s profits included non-recurring gains of SEK 75 m from the sale of interest rate swaps. Earnings per share were SEK 10.1 (9.1).
The operating surplus for the period January–June 2001 amounted to SEK 305 (200) m, of which SEK 161 (100) m arose in the reporting period. The operating surplus increase that appeared in the first quarter continued during the second, due mainly to the growth and restructuring of Kungsleden’s property holding over the past year.
Capital gains from property disposals amounted to SEK 30 (5) m, with SEK 28 (4) m arising in the reporting period, with the biggest individual gains from the sale of development rights at Kungens Kurva, Huddinge, south of Stockholm.
Cash flow for the period was SEK 140 (137) m, equivalent to SEK 7.4 (7.4) per share.
Net financial items and borrowing
Kungsleden’s net financial items was SEK –130 (–23) m, with interest subsidies of SEK 0 m. Interest cover was 2.5 (8.2). Last year, Kungsleden’s net financial items included SEK 75 m in capital gains from divested interest rate swaps.
Payment for properties from JM, with Kungsleden taking possession on 8 March, was transferred on 30 June 2001. New property acquisitions from JM, effective 7 June 2001, will be paid on 7 December 2001.
Kungsleden’s interest-bearing liabilities amounted to SEK 5,240 (3,755) m as of 30 June, including a bond issue totaling SEK 500 m. The average interest rate of the funding portfolio is 6.01 (5.66) per cent. The average fixing period was 2.7 (3.2) years. Kungsleden does not own any properties in foreign countries and has no foreign currency borrowing.
Fixing periods, including bonds as of 30 June 2001
Loan, SEK m Average interest, %
Floating interest 3,370 5.49
2003 120 8.47
2005 150 9.78
2006 350 6.06
2008 250 6.05
2009 100 6.12
2010 800 7.07
2011 100 6.26
Total 5,240 6.01
Tax
Tax paid for the period was SEK 0 m. Deferred tax was SEK 53 m, the consequence of RR’s (the Swedish Financial Accounting Standards Council) new recommendations for accounting income taxes. More information is available in the section ‘Accounting principles’.
Property taxes amounted to SEK 21 (15) m and are included in the operating surplus.
Acquisitions and disposals
Kungsleden acquired 44 properties with floor-space of 262,000 m2 for a total purchase price of SEK 1,937 m in the period. These acquisitions were effected at a calculated pro forma property yield of 7.6 per cent.
Kungsleden made the following major acquisitions:
• Two property portfolios were acquired from JM, with Kungsleden taking possession on
8 March 2001 and 7 June 2001. The total purchase price was SEK 1,523 m. The majority
of these acquisitions were office premises located in Greater Stockholm.
• Three office and residential properties in Central Helsingborg from Skanska, with a
purchase price of SEK 180 m, and Kungsleden taking possession on 16 May 2001.
• Two office premises in Gothenburg, acquired from SKF, with a purchase price of
SEK 106 m and floor-space of 29,000 m2, primarily office premises.
Kungsleden divested 49 properties with floor-space of 71,000 m2, with a total value of
SEK 447 m, and generating profits of SEK 30 m, in the same period. In terms of sales prices, divested properties generated a pro forma property yield of 5.7 per cent.
Some property disposals were an element of Kungsleden’s restructuring—47 properties
in 24 municipalities for a total purchase price of SEK 229 m, and some because of low yields —two centrally located premises in Helsingborg, for SEK 218 m.
Property holding
As of 30 June 2001, Kungsleden’s holding comprises 455 properties with floor-space of 1,724,000 m2 and a book value of SEK 8,068 m, located in 138 municipalities. Of total property values, 90 per cent is located in 50 municipalities, with the three major city regions—Greater Stockholm, Greater Gothenburg and the Öresund region—representing 56 per cent of property values.
Kungsleden’s orientation towards trading and restructuring implies that its property holding is classified as current assets, with one implication being that profits are not depreciated according to plan, but instead, each property is valued individually proceeding from the expected sales price, in accordance with the LOCOM principle (lower of cost and market). Value adjustment is effected at the end of each calendar year.
Earnings capacity
Kungsleden focuses on the creation of stable, high yields, implying that the corporation’s property holding is in continual transformation through acquisitions and disposals. In order to illustrate the earnings capacity of the holding, pro forma accounting of the holding was included in the Annual Report for 2000. A further statement, according to the same principles for the holding as of 30 June 2001, is included below. Acquisitions and disposals effected since 1 January 2001 resulted in an unchanged property yield of 8.3 per cent.
The property holding in summary, as of 30 June 2001
South West East Central North Total
Number 137 127 95 77 19 455
Lettable floor-space, 000 m2 476.9 468.2 509.7 225.8 43.9 1,724.5
Book value, SEK m 1,885.7 2,107.2 2,920.2 937.0 218.1 8,068.2
Rental value, SEK m 271.8 316.0 409.7 148.6 36.4 1,182.5
Rental revenues, SEK m 251.4 287.5 366.8 128.9 35.2 1,069.8
Operating surplus, SEK m 154.3 191.5 238.6 62.1 19.7 666.2
Economic occupancy, % 93.3 92.1 90.2 89.1 96.7 91.4
Property yield, % 8.2 9.1 8.2 6.6 9.0 8.3
Warehousing/ Resi-
Offices Retail industrial dential Hotel Land Total
Number 223 42 93 34 7 56 455
Lettable floor-space, 000 m2 871.8 143.6 616.7 67.3 25.1 – 1,724.5
Book value, SEK m 5,538.1 767.4 1,373.4 277.4 89.2 22.7 8,068.2
Rental value, SEK m 766.5 119.2 229.1 51.8 15.9 – 1,182.5
Rental revenues, SEK m 700.0 107.9 204.1 44.7 13.1 – 1,069.8
Operating surplus, SEK m 446.0 62.4 129.7 20.7 8.3 –0.9 666.2
Economic occupancy, % 91.7 92.4 90.9 88.7 89.5 – 91.4
Property yield, % 8.1 8.1 9.4 7.5 9.3 – 8.3
Financial structure
The closing balance of shareholders’ equity was SEK 2,060 (1,957) m, or SEK 108.7 (105.4) per share, equivalent to an equity ratio of 24.1 (29.6) per cent. Share capital corresponds to SEK 47 m of total shareholders’ equity. The share capital is divided between 18,958,620 shares, each with a nominal value of SEK 2.5.
Investments
Investments in existing properties were SEK 51 (32) m.
Human resources
The average number of employees in the period was 79 (78).
Parent company
Parent company profits after financial items amounted to SEK 0 (–10) m. Liquid funds were SEK 0 (1) m as of 30 June 2001.
Accounting principles
This Interim Report has been produced consistent with the recommendations of RR (the Swedish Financial Accounting Standards Council).
The accounting principles and calculations used in this Interim Report are identical to those used in the latest Annual Report, with the following exception:
From 2001 onwards, Kungsleden’s accounting has been adapted to conform to RR’s (the Swedish Financial Accounting Standards Council) recommendation regarding deferred tax (RR9). The relevant comparative figures in the Income Statement and Balance Sheet have been adjusted accordingly.
RR’s standard no 9; 'Accounting for deferred taxes' has exerted the following influence on Kungsleden accounts: Initially, Kungsleden accountsfor the net of the temporary differences in properties and accumulated tax losses, both valued at a nominal 28 per cent tax rate. The resulting net was positive, with a value of SEK 277.1 m. This amount has been accounted for as an adjustment to opening balances by posting a deferred tax receivable against an increase to non-restricted consolidated equity brought forward.
In the interim period, Kungsleden has posted profits subject to deferred taxes of SEK 53 m, an amount accounted for as a reduction of the deferred tax asset.
Outlook
The companys brisk progress during the first half-year has caused the board to revise its
forecast for profit after tax paid to SEK 330 m, equivalent to SEK 17,4 per share. The previous
forecast was SEK 300 m. For the remainder of the year, Kungsleden will remain active on its
transaction side, with the intention of enhancing the structure of the corporation’s holding, and
further consolidating Kungsleden’s earnings capacity.
Stockholm, 16 August 2001
Jens Engwall
Chief Executive
Kungsleden AB (publ)
Forthcoming financial reports
• Interim Report, January–September, 24 October 2001.
• Financial Statement, February 2002.
• The Annual Report for the financial year 2001, March 2002.
Audit review, Kungsleden AB
I have reviewed this Interim Report in accordance with the recommendation issued by FAR (the Swedish Institute of Authorized Public Accountants). This summary review is significantly more limited than a full audit. Nothing has arisen to suggest that this Interim Report does not satisfy the stipulations of prevailing Swedish stock exchange and annual accounts legislation.
Stockholm, 16 August 2001
Thomas Thiel
Authorized Public Accountant
For further information, please contact:
Jens Engwall
Chief Executive
Tel: +46 (0)8 50305204, mobile: +46 (0)706906550
Johan Risberg
Deputy Chief Executive, Chief Financial Officer
Tel: +46 (0)850305206, mobile: +46 (0)70 6906565
Income statement
Interim period Reporting period Previous year
SEK m jan–jun 2001 jan–jun 2000 apr–jun 2001 apr–jun 2000 2000
Property management
Rental revenues 497.6 366.1 258.2 182.0 784.7
Operating and maintenance costs –140.1 –122.7 –71.9 –61.5 –236.0
Property tax –21.2 –15.3 –11.0 –7.5 –31.0
Ground rent –5.5 –3.7 –3.2 –1.6 –8.0
Property administration –26.1 –24.3 –11.1 –11.6 –48.8
Operating surplus,
property management 304.7 200.1 161.0 99.8 460.9
Property trading
Sales revenue, properties 447.1 117.7 203.8 62.1 390.0
Sales administration –11.0 –3.1 –10.2 –1.4 –7.3
Book value –405.8 –109.9 –165.5 –56.9 –320.4
Profit from property trading 30.3 4.7 28.1 3.8 62.3
Gross profit 335.0 204.8 189.1 103.6 523.2
Central administrative costs –13.6 –12.0 –7.1 –7.0 –20.9
Value adjustments, property 0.0 0.0 0.0 0.0 –46.9
Operating profit 321.4 192.8 182.0 96.6 455.4
Profit from financial items
Interest income, etc. 3.8 74.9 2.5 74.0 83.1
Interest subsidies 0.2 1.1 0.1 0.2 1.8
Interest costs, etc. –134.2 –99.4 –67.8 –51.1 –223.9
Profit before tax 191.2 169.4 116.8 119.7 316.4
Tax
Current tax 0.0 0.0 0.0 0.0 –7.1
Deferred tax –52.8 –47.4 –32.0 –33.5 –81.5
Net profit 138.4 122.0 84.8 86.2 227.8
Average no. of shares 18,958,620 18,558,620 18,958,620 18,558,620 18,591,953
Profit before tax per share, SEK 10.1 9.1 6.2 6.4 17.0
Profit after tax per share, SEK 7.3 6.6 4.5 4.6 12.3
Balance sheet
SEK m 30 june 2001 30 june 2000 31 dec 2000
Assets
Fixed assets 127.4 229.3 176.1
Current property assets 8,068.2 6,049.9 6,486.7
Other current assets 128.9 146.5 154.6
Cash and bank balances 213.5 177.7 140.2
Total assets 8,538.0 6,603.4 6,957.6
Liabilities and shareholders’ equity
Shareholders’ equity1 2,060.0 1,956.5 2,092.3
Provisions 3.6 7.8 5.0
Interest-bearing liabilities 5,240.0 3,755.0 4,115.0
Non-interest-bearing liabilities 1,234.4 884.1 745.3
Total liabilities and shareholders’ equity 8,538.0 6,603.4 6,957.6
1 See ‘Change in shareholders’ equity’ below
Change in shareholders’ equity
Opening balance 2,092.3 1,705.8 1,705.8
Effect of new accounting principle 277.1 277.1
New opening balance, subsequent to adjustment 2,092.3 1,982,9 1,982,9
New share issue 30.0
Dividends –170.7 –148.4 –148.4
Net profit 138.4 122.0 227.8
Closing balance 2,060.0 1,956.5 2,092.3
Key figures
30 june 2001 30 june 2000 31 dec 2000
Financial key figures Economic occupancy, % (pro forma) 91.4 92.3 91.0
Profit margin, % 61.2 54.7 58.7
Interest cover, multiple 2.5 8.2 3.3
Property yield, % (pro forma) 8.3 8.4 8.3
Return on equity, % – – 16.3
Return on total capital, % – – 8.7
Debt/equity ratio, times 2.5 1.9 2.0
Mortgage ratio, property, % 64.9 62.1 63.4
Equity ratio, % 24.1 29.6 30.1
Data per share
No. of outstanding shares 18,958,620 18,558,620 18,958,620
Average no. of shares 18,958,620 18,558,620 18,591,953
Operating surplus per share, SEK 16.1 10.8 24.3
Profit before tax per share, SEK 10.1 9.1 16.7
Profit before tax per average share, SEK 10.1 9.1 17.0
Profit after tax per share, SEK 7.3 6.6 12.0
Profit after tax per average share, SEK 7.3 6.6 12.3
Property book value per share, SEK 425.6 326.0 342.2
Shareholders’ equity per share, SEK 108.7 105.4 110.4
Cash flow statement
SEK m jan–june 2001 jan–june 2000 jan–dec 2000
Ongoing operations
Profit after financial items 191.0 169.4 316.4
Adjustments for items not included in cash flow, etc. –0.8 8.1 50.7
190.2 177.5 367.1
Tax paid 0.0 0.0 –7.1
Cash flow before change in working capital 190.2 177.5 360.0
Change in working capital 510.4 617.4 473.2
Cash flow from ongoing operations 700.6 794.9 833.2
Investment activity
Net investments, properties –1,581.5 –777.7 –1,261.4
Net investments, other –0.8 –0.1 –0.5
Change in financial assets 0.7 2.8 20.9
Cash flow from investment activity –1,581.6 –775.0 –1,241.0
Financing activity
New share issue 0.0 0.0 30.0