Gross profit up 47 per cent and this year’s refinancing secured

Interim report January - March 2012
RESULTS IN BRIEF
The interim period (January–March)

  · Net sales increased
by 36 per cent to SEK 556 (407) m while gross profit increased by 47 per cent to
SEK 335 (228) m with a larger property portfolio and milder winter.
  · Profit
before tax amounted to SEK 458 (492) m. Profit after tax was SEK 113 (406) m, or
SEK 0.80 (3.00) per share. The profit decrease is mainly due to provisioning for
tax costs and lower profits from Hemsö, which reported lower unrealised value
changes on properties.
  · Cash flow from operating activities was SEK 120 (37)
m.
  · Profit for calculating dividends for the period was SEK 121 (78) m,
equivalent to SEK 0.90 (0.60) per share. 
  · As of 31 March 2012, the property
portfolio consisted of 317 (324) properties with a book value of SEK 15,533
(15,693) m.
  · In April, the estimated profit for calculating dividends for
the full year 2012 was downgraded to SEK 550 m, from SEK 600 m previously after
negative outcomes on two tax rulings were received. This estimate corresponds to
SEK 4.00 (4.40) per share.

SIGNIFICANT EVENTS
The interim period
(January–March)

  · From 1 January 2012, the portfolio in Hemsö Fastighets AB
is recognised according to the equity method. Compared to the proportional
method, the results of operations and financial position from the holding in
Hemsö are reported on an individual line instead of, in principle, affecting all
other items, more information at www.kungsleden.se/consolidation-of-hemso.
  ·
Kungsleden sold 7 (2) properties for SEK 230 (5) m, generating a profit of SEK
20 (3) m. These sales affected profit for calculating dividends by SEK 39 (3) m.
No properties were purchased, compared to 37 properties, for SEK 3,748 m in the
corresponding period of 2011.
  · Kungsleden’s syndicated loan was rearranged
with a new SEK 4,500 m facility in January.
  · Kungsleden came second in the
Great Place to Work Survey 2012 out of medium-sized organizations in
Sweden.

After the end of the period

  · Two tax rulings from the
Administrative Court of Appeal, with a negative outcome for Kungsleden, were
received in April. As a result, profit for calculating dividends was charged
with SEK 80 m and the Income Statement with a tax cost of SEK 260 m.
  ·
Basically all the remaining refinancing requirement for 2012 was secured in
April. Loans of SEK 1.6 billion were extended, of which SEK 1.0 billion to 2015
and SEK 0.6 billion to 2013. Definitive tenders were also secured for loans of
SEK 1.3 billion.

[image]“Results for the quarter Net sales increased by 36
per cent to SEK 556 m, while gross profit increased by 47 per cent to SEK 335 m,
compared to the first quarter of the previous year. After the transfer to
reporting Hemsö in accordance with the equity method, net sales and gross profit
include Kungsleden’s wholly owned properties only. Instead, Hemsö’s profit or
loss is reported on its own line in the Income Statement, at half of Hemsö’s
profit after tax. Hemsö’s profits decreased by 44 per cent to SEK 84 m, mainly a
result of lower unrealised value changes on properties.

Sales and
administration costs were up by just over SEK 11 m, mainly as a consequence of a
larger property portfolio. A larger portfolio means more borrowings, which were
charged to net financial items. But increased costs were more than compensated
by gross profit increasing by SEK 107 m, with most of the increase provided by
the properties purchased from NR Nordic & Russia Properties. Property sales
produced a profit of SEK 20 m net.

I’m very satisfied with our results and
the stability of our underlying operations. A mild winter early in the year
helped the earnings capacity of our portfolio to increase by 8.0 per cent, from
7.9 per cent at year-end. The operating surplus margin increased from 66.7 per
cent to 67.2 per cent. Profit for calculating dividends was SEK 121 m, compared
to SEK 78 m last year despite unexpected tax costs, with a SEK –80 m liquidity
effect, after rulings by the Administrative Court of Appeal in
Stockholm.

Retroactive tax The rulings are for two companies in the group,
which in 2004 claimed deductions for losses on liquidation when liquidating
limited partnerships. These losses arose as part of internal restructuring, and
accordingly, the Administrative Court of Appeal did not regard them as actual
from a group perspective. Rulings in various administrative courts of appeal on
the same legal issue—to which Kungsleden was not party—have differed in the past
year. Our view is that we have consistently followed the rules on each occasion,
and against this background, we intend to have this matter considered at the
highest level. It is regrettable and very frustrating to be unable to offer
clearer information after eight years.

Nordic Modular and Hemsö Nordic
Modular made a good start to the year. Sales of modules increased by 18 per
cent, with an upturn also apparent in lettings. Hemsö’s operating net also made
positive progress. I can conclude that the interest in public properties remains
high, and at present, we see no risk of increased required returns in this
segment.

For Kungsleden’s part, the lettings market featured higher activity
with more terminations, but also more new contract signings. In like-for-like
portfolio terms, net lettings were virtually unchanged, but were higher in
absolute terms, for reasons including us now holding a larger portfolio. When
companies see a need to adapt their premises, they start earlier now than pre
-financial crisis. Our mission is to maintain unchanged, and preferably reduced,
vacancies.

Funding In the period until the start of the second quarter, we
had rearranged and secured definitive tenders on basically all our refinancing
requirement for 2012. This means that we have new credit and loan facilities
totalling SEK 7.4 billion. Average interest after arranged refinancing is
estimated at 6.7 per cent. The previous facilities were entered a few years ago
when loan terms were more advantageous. The interest margins received are
consistent with what the rest of the market is paying. We will continue to work
to limit our funding costs and diversify our loan portfolio through alternative
funding sources, such as unsecured bonds.

Outlook Our business is progressing
very stably, and our average property yield increased to 8.0 per cent in the
quarter. We also did some positive transactions, but the tax rulings for the
2004 tax year arrived in April. Overall this meant the downgrade of the Board of
Directors’ estimate for profit for calculating dividends, which was reported
earlier in April, was limited to SEK 50 m. The estimate for the full year is SEK
550 m, against SEK 600 m previously.

Our equity ratio was 38 per cent, we
have strong and stable cash flow and, long lease contracts with strong
counterparties, several property segments and geographical diversity that limit
risks, and a loan to value ratio consistent with current standards, strong
liquidity and arranged refinancing. Accordingly, my judgement is that a
potential market slowdown would have a limited impact for Kungsleden’s
part.”

Thomas Erséus
Chief Executive
For more information, please contact:

Thomas Erséus, CEO Kungsleden | phone
+46 (0)8 503 052 04 | mobile +46 (0)70 378 20 24
Johan Risberg, Deputy CEO
Kungsleden | phone +46 (0)8 503 052 06 | mobile +46 (0)70 690 65
65

www.kungsleden.se
Detta pressmeddelande finns tillgängligt på svenska på
www.kungsleden.se/pressmeddelanden 

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 26 April 2012 at 8:00 a.m.

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 2012, the property
portfolio comprised 317 properties with a book value of SEK 15.5 bn. The
portfolio was located in a total of 100 municipalities, mainly in southern and
central Sweden. Kungsleden has been quoted on the Nasdaq OMX Stockholm since
1999.