Sponda Group recorded net income totalling EUR 30.7 (78.8) million in 2003. Total revenue, which was derived from rental income, amounted to EUR 100.4 (100.7) million. Net operating income was EUR 76.1 (74.9) million. The operating profit was EUR 62.7 (125.3) million. The previous year's operating profit included a profit of EUR 67 million on the sale of the Itäkeskus Shopping Mall. Earnings per share (EPS) were EUR 0.39 (0.97). The Board proposes a dividend of EUR 0.30 (0.90) per share.
The book value of Sponda's property portfolio on the balance sheet date was EUR 1,065.1 (1,028.8) million and the balance sheet totalled 1,094.0 (1,038.9) million. The market value of the property portfolio was EUR 1.24 (1.18) billion. Net assets per share amounted to EUR 8.35 (8.73). Shareholders' equity per share was EUR 6.33 (6.81).
Financing
Financial income and expenses came to EUR -23.1 (-17.1) million. Sponda's equity ratio at the close of the period was 45.4 (52.9) %. Interest-bearing debt amounted to EUR 582.8 (456.7) million and net interest expenses were EUR 22.8 (21.9) million. The average maturity of Sponda's loans was 2.6 (3.3) years, the average interest rate was 4.4 (4.8) %, and the average interest-bearing period was 2.7 (2.0) years. Secured loans represented 12.9 % of the balance sheet total.
In November 2003 Sponda issued EUR 100 million in notes to Finnish institutional investors to cover future investments and develop the company's capital structure. The bond was divided into EUR 40 million in fixed-interest notes and EUR 60 million in floating-rate notes.
Business conditions
The effects of a forecast recovery of the Finnish economy will be felt in the real estate sector after a time lag of roughly one year, so the need for new premises will not become evident until 2005. At the end of September 2003 the vacancy rate in the Helsinki Metropolitan Area was most pronounced in office premises, almost 7 %. Rent levels for office premises in Helsinki Business District and for retail and logistics premises in Helsinki Metropolitan Area have remained stable. Foreigners have taken an increasingly lively interest in Finland and liquidity in real estate market has improved.
Leasing activities
Net operating income from Sponda's properties totalled EUR 76.1 (74.9) million, of which 51 % was derived from Helsinki Business District, 22 % from Helsinki Metropolitan Area, 17 % from Logistics Properties and 10 % from the rest of Finland.
The economic occupancy rate of Sponda's entire property portfolio at the end of the year was 88.6 % (90.3 %).
The economic occupancy rate by area was as follows: 89.3 (91.9) % from Helsinki Business District, 86.0 (83.6) % from Helsinki Metropolitan Area, 86.7 (92.1)% from Metropolitan Logistics Properties, and 94.4 (94.7) % from the rest of Finland.
The economic occupancy rate by property type was 87.9 % for Sponda's office premises, 93.6 % for the company's retail premises, and 89.7 % for its logistics premises. The value of Sponda's portfolio of leasing contracts on 31 December 2003 was EUR 406 (390) million and the average length of the contracts was 3.7 (3.9) years.
Property portfolio
The market value of Sponda's property portfolio on 31 December 2003 was EUR 1.24 (1.18) billion. The comparable change in the portfolio value was approximately EUR -1 million, or -0.1 %. The increase was the result of investments.
Sponda owns altogether 88 properties: 23 of these are located in the Helsinki Business District and 23 in the Helsinki Metropolitan Area, while 21 fall under Logistics Properties. The remaining 21 properties are located elsewhere in Finland. The aggregate leasable area of these properties is 800,000 m2, comprising 397,000 m2 of office space (50 % of total leasable area), 23,000 m2 (3 %) of retail premises, and 380,000 m2 (47 %) of logistics properties.
Maintenance and repairs
Sponda's investments in maintenance and upgrading of its real estate totalled EUR 14.2 (12.8) million in 2003.
The Unioninkatu 18 property in Helsinki Business District is currently being renovated for completion in 2004. The foyer of the Upseerin Avec building in Espoo was renewed and a staff canteen, conference rooms and a fitness centre were added to the building. Renovation of the façade of the Honkatalo office building in Vantaa, and replacement of the building's windows, will be completed in 2004. Renovation of the façade of the Honkatalo logistics properties was started in autumn 2003.
Property acquisitions and sales
Sponda Plc purchased the Kiinteistö Oy Aleksi-Hermes (Hermes) retail and office property on the corner of Aleksanterinkatu and Keskuskatu streets in Helsinki city centre from OKOBANK Osuuspankkien Keskuspankki Oyj for EUR 53 million. The building has a total leasable area of approximately 8,400 m2. Hermes is situated in the same block as the City-Center complex also owned by Sponda.
Sponda also purchased an office building at Sentnerinkuja 3, North Haaga, from OKOBANK's affiliate OP-Kiinteistöt Oy for EUR 3.2 million. This building has a total leasable area of roughly 4,500 m2.
Sponda Plc sold the Lönnrotinkatu 29 property (Vanha Poli) for EUR 6.4 million to La Tour Securities Oy, part of the Palace group.
In April Sponda sold a 4,000 m2 office property in Tampere for EUR 8 million.
Sponda also sold part-holdings in other properties during the year totalling EUR 2.4 million. Sponda recorded a profit on these sales of altogether EUR 6.0 million.
Property improvements
Sponda focuses on the development of large property complexes. Sponda's most important development projects at the moment are City-Center, Upseerin Avec and Havis Business Center.
The inauguration of 1,500 m2 of new retail premises in the tunnel level of the City-Center during 2003 marked the completion of the first phase of this project. On its completion in 2008, the entire complex will offer business premises totalling almost 53,000 m2 compared to roughly 34,000 m2 before the project was started. The total estimated cost of the project is EUR 100 million.
The renovation of Upseerin Avec in Espoo was completed in the autumn and its tenants represent a wide range of businesses. The size of its premises varies from a few hundred to several thousand square metres.
The Havis Business Center in the Kaartinkaupunki district of central Helsinki will be converted into an office complex suitable for different tenants. Sampo Bank will continue as a tenant in smaller premises of this property, which is also the head office for Mandatum Bank and Sponda itself. A provisional agreement has been signed with Palace Restaurants under which a new 3,000 m2 restaurant complex will be opened on Unioninkatu.
Group structure
Sponda Group comprises the parent company, Sponda Plc, and its wholly owned subsidiaries, all of which are mutual property companies.
Organization and personnel
The Sponda Group had 52 (50) employees on average between 1 January and 31 December 2003, which included 51 (49) in the parent company. At the close of the period personnel totalled 52 (52), which included 50 (51) in the parent company.
Wages and salaries paid by the parent company amounted to EUR 2,522,952.09. Remuneration paid to the Board of Directors and the CEO totalled EUR 285,860.16. The Sponda Group paid EUR 2,612,954.28 in wages and salaries during the review period. Of this, remuneration to the Board of Directors and the Presidents totalled EUR 285,860.16 and wages and salaries to other employees amounted to EUR 2,327,094.12.
IAS and IFRS reporting in 2005
Sponda Plc will adopt the IFRS standards in company's interim and annual reports in 2005. The company began preparations for their adoption during 2003 and the standards will be adopted during 2004 to obtain comparable data for the following year. The necessary changes to the company's accounting systems have been defined and will be made during 2004.
The largest change to Sponda Plc's financial reporting relates to the valuation of property investments under IAS 40. In its IFRS reporting, Sponda Plc will enter its properties in the balance sheet at their market value and to enter any changes to this value during the reporting period in the income statement. Other changes to Sponda's current accounting principles arise from the IAS rules on recording deferred tax assets and liabilities, the valuation of financial instruments, and employment benefits.
Board of Directors
The members of the Board of Directors are Heikki Bergholm, Maija-Liisa Friman, Jarmo Laiho, Harri Pynnä, Anssi Soila and Jarmo Väisänen. The chairman of the Board is Anssi Soila and the deputy chairman is Jarmo Väisänen.
Auditors
The Annual General Meeting on 8 April 2003 appointed Sixten Nyman APA and KPMG Wideri Oy Ab as the company's auditors, and Ari Viitala APA as the deputy auditor.
Share performance
Sponda's share performed better in 2003 than the HEX all-share index and also Sponda's own industrial index (Investment). The closing price on 31 December 2003 was EUR 6.61 (5.45). The lowest price during the year was EUR 4.20 and the highest price was EUR 6.80. The company's market capitalization at the end of the year was EUR 519 (437) million.
Purchase of own shares
The Annual General Meeting on 8 April 2003 authorized the Board of Directors for one year from the AGM to purchase the company's own shares using distributable funds. On 31 December 2003 this authorization was still unexercised.
Increase in share capital
Conversions of Sponda Plc's A series convertible bond 2000 totalled 294,000 new shares. An increase of EUR 294,000 has been recorded in the Trade Register. Following this increase Sponda's share capital amounts to EUR 78,449,275 and the total number of shares is 78,449,275.
Prospects
In 2004 the leasing market, and Sponda's result of leasing operations, are expected to remain at 2003 levels.
Annual General Meeting and dividend
Sponda Plc's Board of Directors has decided that the Annual General Meeting will be held on 7 April 2004, commencing at 2.00 pm. The Board will propose a dividend of EUR 0.30 per share on the financial year 2003. The Board will propose payment of the dividend on 21 April 2004.
4 February 2004
Sponda Plc
Board of Directors
Further information: Mr Kari Kolu, President and CEO, Sponda Plc, tel. +358-9-6805 8202
Ms Sari Aitokallio, CFO, Sponda Plc, tel. +358-9-6805 8206
ENCLOSURES
Consolidated Income Statement 1 January - 31 December 2003
Consolidated Balance Sheet 31 December 2003
Cash Flow Statement
Contingent Liabilities
Key Indicators
The full report including tables can be downloaded from the enclosed link:
