Sponda Plc's interim report January - March 2004: SPONDA'S RESULT FROM LEASING OPERATIONS REMAINED UNCHANGED

Sponda's net income in the first three months of 2004 totalled EUR 5.5 (31.March 2003: 6.9) million. Total revenue, which was derived from rental income, amounted to EUR 25.3 (25.3) million. The operating profit was EUR 14.7 (14.6) million. Earnings per share were EUR 0.07 (0.09). Financial income and expenses, net, came to EUR -6.9 (-5.4) million.

 

Net operating income was EUR 18.6 (18.6) million. The gross margin after depreciation on real estate totalled EUR 14.9 (15.0) million. The book value of the Group's property portfolio was EUR 1.1 billion. Shareholders' equity per share was EUR 6.40 (31 Dec. 2003: EUR 6.33).

 

Interest-bearing debt amounted to EUR 574.6 million (31 Dec. 2003: EUR 582.8 million) and the equity ratio was 45.8 % (31 Dec. 2003: 45.4 %). The average maturity of Sponda's loans was 2.4 years, the average interest rate was 4.5 % and the average interest-bearing period was 2.8 years.

 

The number of interest hedging instruments covering the loan capital was increased during the period with the signing of five-year interest rate swap contracts on loans totalling EUR 35 million.

 

The vacancy rate for business premises throughout the Helsinki metropolitan area was 7.4 % at the beginning of 2004. Retail premises remained in short supply with a vacancy rate of 1.2 %. The overall availability of logistics properties increased slightly and the vacancy rate in this sector was 2.0 %.

The property leasing market in 2004 is expected to remain at the same level as in 2003 or to weaken slightly.

 

Net operating income from Sponda's properties totalled EUR 18.6 (18.6) million, of which 71 % was derived from offices, 4 % from retail premises, and 25 % from logistics properties.

 

Geographically, net operating was derived as follows: 53 % from Helsinki Business District, 20 % from Helsinki Metropolitan Area (HMA),  17 % from Logistics Properties in HMA, and 10 % from elsewhere in Finland.

 

The economic occupancy rate of Sponda's entire property portfolio at the end of March was 88.6 % (31 Dec. 2003: 88.6 %). 

 

The economic occupancy rate was broken down as follows: offices 87.8 % (31 Dec. 2003: 87.9 %), retail premises 93.4 % (31 Dec. 2003: 93.4 %) and logistics properties 90.1 % (31 Dec. 2003: 89.7 %).

 

The economic occupancy rates in Sponda's business areas were: Helsinki Business District 90.1 %, Helsinki Metropolitan Area 83.9 %, Logistics Properties in HMA 87.3 %, and Rest of Finland 94.1 %.

 

Property sales and acquisitions

Sponda sold its shares in Kauppakatu 14 in Tampere for EUR 1.6 million, recording a profit of EUR 1 million on the deal.

 

Sponda did not purchase any properties during the first three months of the year.

 

Sponda's strategy is to develop properties and the working environments they provide. Sponda focuses on large real estate entities such as City-Center, Havis Business Center and Honkatalo.

 

City-Center is Sponda's most important current development site. Negotiations with the City of Helsinki on the scope of the project and its façade are still in progress. The National Board of Antiquities recommends that the original drive-in ramps and the characteristic 'concrete sausage' structure encircling the building be retained throughout the renewal. The project's various parties are still seeking a mutually satisfactory solution and the City Council is expected to approve the final rezoning plan next autumn.

 

City-Center's office floors 4-6, totalling 6 800 m2, are being renovated during 2004 for a cost of EUR 3.5 million. Lost rental income from these premises during 2004 will total EUR 1.5 million.

 

Havis Business Center, located between Unioninkatu and Fabianinkatu streets in downtown Helsinki's Kaartinkaupunki district, is being converted for small and medium-sized companies. The conversion work has been started and space totalling approx. 5,500 m2 previously occupied by a bank, will be turned into premises suitable for restaurants and conference rooms. The project will be completed next autumn.

 

The Sponda Group had 51 (52) employees on average between 1 January and 31 March 2004, which included 46 (51) in the parent company. At the close of the period personnel totalled 52 (52), which included 47 (51) in the parent company.

 

Sponda Group comprises the parent company, Sponda Plc, and its wholly owned subsidiaries, all of which are mutual property companies.

 

The price of the Sponda share rose during the review period and on 31 March 2004 stood at EUR 7.05. The average price between January and March was EUR 6.68, the lowest price being EUR 6.20 and the highest price being EUR 7.07.  The market capitalization of the company's share capital at the close of the period was EUR 555 million.

 

Sponda Plc's Annual General Meeting adopted the parent company's and consolidated income statements and balance sheets for the financial year ending 31 December 2003 and discharged the company's officers from liability for the year. The AGM approved the Board's proposal to pay a dividend of 0.30 euros per share on the financial year 2003.

 

The AGM authorized the Board of Directors for one year from the AGM to purchase at most 3,900,000 of the company's own shares using distributable funds provided that after the purchase the aggregate nominal value of the shares owned by the company and its subsidiary companies, or the voting rights carried by these shares, may not exceed five (5) percent of the company's total share capital or the voting rights carried by all the shares.

 

The AGM authorized the Board of Directors for one year from the AGM to surrender the company's shares purchased by the company. The Board may surrender at most the same number of shares corresponding to the number to be purchased as outlined above, i.e. at most 5 % of the total number of shares and voting rights.

 

The AGM approved the proposal of the Finnish State to appoint a shareholders' Nomination Committee. The Nomination Committee is responsible for proposing candidate members for the Board of Directors and their remuneration at the following Annual General Meeting.

 

Representatives of the three (3) largest shareholders will be elected to the Nomination Committee along with the Chairman of the Board as an expert member. The right to appoint the Committee members representing the shareholders belongs to those shareholders whose holding of the voting rights carried by all the company's shares is largest on 1 December preceding the Annual General Meeting.

 

The AGM confirmed the number of members of the Board of Directors to be six and the following were re-elected to serve on the Board until the close of the subsequent annual general meeting: Maija-Liisa Friman, Jarmo Laiho, Harri Pynnä, Anssi Soila and Jarmo Väisänen. Kaj-Gustaf Bergh was elected as a new member.  Convening after the AGM, the new Board of Directors elected Anssi Soila chairman of the Board and Jarmo Väisänen deputy chairman of the Board.

 

The AGM confirmed the fees to be paid to the Board of Directors as follows: a monthly fee of EUR 2,500 to the chairman, a monthly fee of EUR 1,500 to the deputy chairman, and a monthly fee of EUR 1,250 to the other members. The members will be paid an additional EUR 300 for each meeting attended.

 

Sixten Nyman APA and the firm of authorized public accountants KPMG Wideri Oy Ab were appointed the company's auditors, and Fredrik Westerlund APA the deputy auditor, until the close of the subsequent annual general meeting.

 

Sponda has sold the Kiinteistö Oy Hauki office complex (the Bensow Building) in the Hauki block at Eteläesplanadi 22 in Helsinki city centre to Tapiola Mutual Pension Insurance Company for EUR 33 million. Sponda has entered a profit of EUR 12 million on the sale.

 

Prospects for 2004

Sponda's overall result is forecast to remain at the 2003 level.

31 March 2004

 

Sponda Plc

Board of Directors