Press Release
23 April 2003
Kungsleden’s first quarter: Operating surplus SEK 200 m
· Kungsleden’s profit after tax was SEK 81 m, or SEK 4.30 per share.
· The operating surplus increased by 5 per cent to SEK 200 m.
· Kungsleden divested 14 properties in the interim period for SEK 180 m, generating a profit of SEK 26 m, while acquiring 4 properties for SEK 202 m.
· Kungsleden is retaining its forecast of profit before tax of SEK 450 m.
Jens Engwall, Kungsleden’s Chief Executive, had the following comment: “We improved the operating surplus despite a tough market and severe winter, with high operating costs. By effecting acquisitions and disposals, we’ve lifted our holding’s earnings capacity—what the holding we owned on 31 March 2003 would have generated if we’d held it for the last 12 months—to SEK 879 m. But what’s even more important is that simultaneously, we’ve enhanced our risk-adjusted returns.”
Report period January–March / Interim periodJanuary–March / 12 months
April–March
SEK m / 2003 / 2002 / 2003 / 2002 / 2003 / 2002
Operating surplus / 200.3 / 189.5 / 200.3 / 189.5 / 829.3 / 684.2
Profit, property trading / 25.7 / 36.0 / 25.7 / 36.0 / 126.0 / 134.0
Net financial position / -107.9 / -87.9* / -107.9 / -87.9* / -442.9 / -299.4
Profit after tax / 80.6 / 93.0 / 80.6 / 93.0 / 309.3 / 305.2
EPS, SEK / 4.30 / 4.90 / 4.30 / 4.90 / 16.30 / 16.10
Cash flow from op’ns per share, SEK / 10.40 / 5.60 / 10.40 / 5.60 / 28.90 / 28.30
RoE, % / 13.6 / 16.8 / 13.6 / 16.8 / 13.2 / 13.8
* Gained a positive SEK 14 m influence because of freedom from interest.
For more information, please contact:
Jens Engwall, Kungsleden’s Chief Executive, tel: +46 (0)8 503 05204, mobile +46 (0)70 690 6550
Johan Risberg, Kungsleden’s COO, tel: +46 (0)8 503 05206, mobile +46 (0)70 690 6565
Detta pressmeddelande och bokslutskommunikén finns tillgängliga 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 disposals. Kungsleden’s property holding comprises 420 properties with a book value of approximately SEK 10.3 bn. The holding is located in a total of 119 municipalities, although concentrated on the Swedish provinces of Götaland and Svealand. Kungsleden has been quoted on the OM Stockholm Exchange O-list
since 14 April 1999.
Kungsleden AB
Interim Report
January 1–March 31 2003
· Kungsleden’s profit after tax was SEK 81 m, or SEK 4.30 per share.
· The operating surplus increased by 5 per cent to SEK 200 m.
· Kungsleden divested 14 properties in the interim period for SEK 180 m, generating a profit of SEK 26 m, while acquiring 4 properties for SEK 202 m.
· Kungsleden is retaining its forecast of profit before tax of SEK 450 m.
Kungsleden’s business concept, vision and strategy
Kungsleden owns and manages properties, generating high and stable long-term returns.
Kungsleden’s vision is that by means of skilled entrepreneurship and a high level of expertise, Kungsleden will become Sweden’s most profitable and successful property company.
We intend to achieve our objectives by:
• Enhancing our skilled and businesslike organisation;
• Pursuing customer satisfaction through the active management and enhancement of our property holding;
• Proceeding from our existing holding, and through acquisitions and disposals, assuring high long-term returns.
Kungsleden’s objective is the constant improvement of its portfolio’s risk-adjusted returns. The corporation strives to constantly maintain high and stable cash flow from operations. Moreover, Kungsleden minimises operating risk by diversification in terms of property type, geographical market, tenants and by spreading rental contract maturities over time. Kungsleden avoids development projects, because typically, they imply significant cash flow uncertainty. Kungsleden’s experience is that property trading can be successful regardless of general economic conditions, and uses this activity to enhance its portfolio’s risk-adjusted returns.
PROFIT
Earnings capacity
Our property holding is subject to continuous change of such an extent that at any given moment, the Income Statement does not reflect earnings capacity most accurately. Instead, earnings capacity illustrates how our Income Statement would have appeared if those properties owned on 31 March 2003 had actually been held for the preceding 12 months. The intention is to demonstrate the impact of changes to our property holding, and to offer the most accurate indication of the current situation and earnings capacity.
Earnings capacity
SEK/000 SEK/000
SEK m 31 Mar. ’03 sq. m. 31 Dec. ’02 sq. m.
Rental revenues 1,352 739 1,340 729
Operation & maintenance costs –356 –195 –351 –191
Property tax –44 –24 –44 –24
Ground rent –12 –7 –13 –7
Property administration –61 –33 –61 –33
Operating surplus 879 480 871 474
Book value 10,251 10,130
Property yield, % 8.6 8.6
Economic occupancy, % 93.5 93.6
Profit margin, % 65.0 65.0
Floor-space, 000 sq. m. 1,830 1,838
Property trading in the period benefited Kungsleden’s earnings capacity. The corporation made acquisitions at a property yield of 8.5 per cent in terms of book value, and disposals at 6.5 per cent. Those properties disposed of had risk-adjusted returns below the portfolio average, while the acquired properties’ had risk-adjusted returns that were higher than the portfolio average.
However, property management exerted an adverse impact on earnings capacity, because the first quarter was weaker than the comparable period of the previous year. The explanation is a relatively severe winter implying unusually high cost increases on heating, electricity and property care. To some extent, these effects are timing-related because a proportion of the cost hikes are passed on to tenants in future statements. Vacancies, discounting and rental losses remained reasonable, while no negative tendency was discernible.
Because of the timing effect, the aggregate impact on earnings capacity was faintly negative. However, underlying earnings capacity has continued to advance.
Kungsleden’s results
Kungsleden’s results deteriorated slightly year on year. Despite the profit margin declining from 58.8 to 57.3 per cent, the operating surplus grew by SEK 10 m because of a larger property holding. Profits from property trading were down SEK 10 m. Financial costs increased by SEK 20 m, mainly due to freedom from interest received in the previous year. The tax cost was down SEK 7 m because of lower profit before tax and a slightly lower tax rate.
Net financial position
2003 2002
SEK m Jan–Mar Jan–Mar
Accounted net financial position –107.9 –87.9
Freedom from the interest coincident
with property acquisitions 0.0 –14.0
Interest subsidies –0.1 –1.6
Adjusted net financial position –108.0 –103.5
Progress of the adjusted net financial position is due to a larger average property holding implying higher borrowings. Between year-end 2002 and 31 March, the snap-shot interest declined from 6.06 to 5.82 per cent. The interest fixing period increased from 3.14 to 3.18 years.
Property holding and earnings capacity
As of 31 March 2003, the holding comprised 420 properties with floor-space of 1,830 sq.m. and a book value of SEK 10,251 m. These properties were located in 119 municipalities. Of property book values, 64 per cent was located in the major urban regions of Greater Stockholm, Greater Gothenburg and Öresund. In the period, Kungsleden acquired properties with a value of SEK 202 m, while making SEK 68 m of investments in existing properties. Properties with a book value of SEK 149 m were divested.
Property trading
In the interim period, Kungsleden acquired 4 properties with floor-space of 23,000 sq.m. for SEK 202 m. These transactions were effected at an estimated property yield of 8.5 per cent. In the same period, 14 properties were divested for a total of SEK 180 m, and profits of SEK 26 m. These properties were divested at a property yield measured against sales value of 5.4 per cent, and at SEK 2 above internal and 23 m below external valuations respectively (effected as of 31 December 2003). The sales value per property for nine of the units was less than SEK 10 m.
Profit effect of divested properties
Sales, SEK m Profit, SEK m No.
Positive 177.7 31.3 10
Zero 0.0 0.0 0
Negative 2.2 –0.6 4
Sales administration –5.0
Total 179.9 25.7 14
Kungsleden disposed of two properties of the retail type, seven offices, two industrial/warehouse and three were of other types. These properties were prioritised for sale, and not considered to satisfy Kungsleden’s portfolio criteria.
Kungsleden acquired three industrial/warehouse properties from Platzer and one retirement home property from JM. The industrial/warehouse units, are modern, fully occupied and are located in Mölndal, near Gothenburg. They have been acquired at an estimated property yield of 9.2 per cent. The retirement home property, which has been converted and extended, is also fully occupied with a 20-year rental contract with the Municipality of Järfälla, outside of Stockholm, and was acquired at an estimated property yield of 7.1 per cent.
Property values
No significant changes to property values have occurred since the previous year-end.
Funding
The funding portfolio totalled SEK 7,371 m. The interest maturity structure has been achieved by a combination of multi-year loans with floating interest, and interest swaps, where we receive floating interest and pay at fixed rate. We consider this funding solution to be the most efficient because it enables amortisation after property disposals without incurring interest penalties. It is also possible to increase or decrease interest fixing periods when considered optimal.
Interest fixing periods as of 31 March 2003
Maturity Nom. amt., SEK m Prop., % Ave. int., %
2003 3,146 42.7 5.27
2004 200 2.7 5.26
2005 550 7.5 6.44
2006 450 6.1 5.96
2007 475 6.4 6.56
2008 627 8.5 5.80
2009 348 4.7 5.17
2010 1,275 17.3 6.70
2011 300 4.1 6.57
Total 7,371 100.0 5.82
Shareholders’ equity
The closing balance of shareholders’ equity was SEK 2,391 m, or SEK 126 per share, equivalent to an equity ratio of 22.4 per cent.
The share and shareholders
The closing price on 31 March 2003 was SEK 138.50. Compared to the closing price at year-end 2002 of SEK 145, Kungsleden’s share price declined by 4 per cent. The record date for dividends was 15 April, when the share was quoted at SEK 133.50. Accordingly, in the period 1 January to 15 April 2003, total returns per share were 0 per cent.
As of 31 March 2003, Kungsleden had approximately 13,700 shareholders, up 2 per cent since 31 December 2002.
Shareholder
No. of shares % of vote and capital
Olle Florén with companies 457,500 2.4
Crafoord Foundation 442,000 2.3
Management and Board 338,800 1.8
Swedish Red Cross 300,000 1.6
Agria 260,000 1.4
Baltic Foundation 260,000 1.4
SHB/SPP fonder 231,380 1.2
Robur Swedish small-caps fund 201,800 1.0
Odey Funds (GB) 142,500 0.8
3rd Nat. Pens. Ins. Fund 135,900 0.7
Total, 10 largest shareholders 2,769,880 14.6
Foreign shareholders, other 2,244,450 11.8
Other shareholders 13,944,290 73.6
Total 18,958,620 100.0
Human resources
The average number of employees was 75.
Parent company
The parent company’s deficit was SEK –8 m; as of 31 March 2003, liquid assets were SEK 238 m.
Accounting principles
Kungsleden’s accounting principles are unchanged since the previous year. Kungsleden observes RR’s (the Swedish Financial Accounting Standards Council) recommendations and Task Force statements.
Forecast 2003
The Board of Directors expects profit before tax of at least SEK 450 m for 2003.
Significant events after the end of the period
Up to and including 15 April 2003, Kungsleden had disposed of 3 properties for SEK 89 m, generating profits of SEK 10 m.
Jens Engwall
Chief Executive
Stockholm, Sweden 23 April 2003
Forthcoming reports
Interim Report, January–June, 15 August
Interim Report, January–September, 24 October
For more information, please contact:
Jens Engwall, Chief Executive,
tel: +46 (0)8 503 05204, mobile: +46 (0)70 690 6550
Johan Risberg, COO, CFO,
tel: +46 (0)8 503 05206, mobile: +46 (0)70 690 6565
Income Statement
Reporting period Interim period 12 months
2003 2002 2003 2002 2002/2003 2001/2002
SEK m Jan—March Jan—March Jan—March Jan—March April—March April—March
Property management
Rental revenues 349.3 322.5 349.3 322.5 1,317.4 1,121.8
Operating and maintenance costs –115.9 –99.3 –115.9 –99.3 –365.1 –324.6
Property tax –12.2 –11.1 –12.2 –11.1 –49.7 –45.6
Ground rent –3.2 –4.1 –3.2 –4.1 –12.2 –12.1
Property administration –17.7 –18.5 –17.7 –18.5 –61.1 –55.3
Operating surplus, property management 200.3 189.5 200.3 189.5 829.3 684.2
Property trading
Sales proceeds, property 179.9 240.5 179.9 240.5 819.0 1,054.3
Sales administration including costs –5.0 –2.7 –5.0 –2.7 –18.7 –18.2
Book value of divested properties –149.2 –201.8 –149.2 –201.8 –674.3 –902.1
Profit, property trading 25.7 36.0 25.7 36.0 126.0 134.0
Gross profit 226.0 225.5 226.0 225.5 955.3 818.2
Central administration costs –8.7 –8.4 –8.7 –8.4 –31.8 –32.4
Value adjustments 0.0 0.0 0.0 0 –48.5 –51.3
Operating profit 217.3 217.1 217.3 217.1 875.0 734.5
Profit from financial items
Interest income, etc 0.8 1.3 0.8 1.3 3.9 18.5
Interest subsidies 0.1 1.6 0.1 1.6 –1.5 2.7
Interest costs, etc –108.8 –90.8 –108.8 –90.8 –445.3 –320.6
Profit before tax 109.4 129.2 109.4 129.2 432.1 435.1
Tax
Current tax 0.0 0.0 0.0 0.0 –0.2 –2.0
Deffered tax –28.8 –36.2 –28.8 –36.2 –122.6 –127.9
Net profit 80.6 93.0 80.6 93.0 309.3 305.2
Average number of shares 18,958,620 18,958,620 18,958,620 18,958,620 18,958,620 18,958,620
Profit before tax per average number of shares, SEK 5.80 6.80 5.80 6.80 22.80 22.90
Profit after tax per average number of shares, SEK 4.30 4.90 4.30 4.90 16.30 16.10
Balance sheet
SEK m 31 March 2003 31 March 2002 31 Dec 2002 31 Dec 2001
Assets
Fixed assets 18.9 23.7 14.8 56.1
Current property assets 10,251.6 9,303.4 10,129.9 9,476.9
Other current assets 126.8 431.4 140.1 260.2
Cash and bank balances 263.0 139.6 127.6 153.7
Total assets 10,660.3 9,898.1 10,412.4 9,946.9
Liabilities and shareholder’s equity
Shareholder’s equity 1 2,390.8 2,280.6 2,310.2 2,187.6
Provisions 164.7 1.5 136.0 2.2
Interest-bearing liabilities 7,370.7 6,136.9 7,435.2 5,966.2
Non-interest bearing liabilities 734.0 1,479.1 531.0 1,790.9
Total liabilities and shareholder’s equity 10,660.2 9,898.1 10,412.4 9,946.9