Operating profit increased 58 % to MFIM 108.9. Pretax profit rose 26 % to MFIM 33.3. Demand remained strong for business premises in the Helsinki Metropolitan Area and especially in the city centre, and rent levels continued to rise.
Result
Sponda Plc recorded an operating profit of FIM 297.5 (188.6) million between January and September. The profit after appropriations, extraordinary items, provisions and taxes was FIM 162.1 (128.8) million. The profit before taxes and minority interest was FIM 131.9 (122.1) million. Earnings per share were FIM 1.81, compared to FIM 1.68 last year, and they represent growth of FIM 0.13, or 7.7 %, on the same period last year. Sponda's net sales for the 1-9/2000 period totalled FIM 469.0 (310.5) million, up 51.0 % on the same period last year. Castrum contributed FIM 77.4 million (6 months) of this increase and Sponda FIM 81.1 million.
Financing
Interest-bearing net debt totalled FIM 3 945.5 (4 014.8 on 30 June 2000) million and the equity ratio was 43.1 % (42.6 % on 30 June 2000). The average maturity of Sponda's credit lines was 4.0 years, the average interest rate was 5.5 % and the average interest period was 3.0 years. Sponda plays an active role in the capital markets employing a variety of different financing instruments. The value of traditional secured bank loans in the balance sheet will fall to below 15 % during the fourth quarter of 2000.
Sponda's property portfolio has a book value of FIM 6 966.4 million. The balance sheet on 30 September 2000 totalled FIM 7 268.3 (MFIM 7 261.4 on 30 June 2000). Shareholders' equity per share was FIM 35.62 or EUR 5,99 (FIM 34.94 or EUR 5,87 on 30 June 2000).
Tenant improvements
The office premises belonging to the property at Kaivokatu 12, the Seurahuone building, were leased to Conventum Oyj, which will move in in May 2001. The building's other tenants are the Hotel Seurahuone and Merita Bank. Modernisation of the offices has started, a project expected to cost approximately FIM 15 million. The technical facilities in the building will be updated and the necessary renovation work will adhere as far as possible to the original architectural style of the building. In 1999 Sponda completed a separate study of the property's building history with architects Kari Hyvärinen Oy.
In a project estimated to cost approximately FIM 6 million, tenant improvement at Ratapihantie 11 in Pasila, north Helsinki, is still in progress and will be completed by the end of the year. This project involves modernising about 1 500 m2 of office space for the building's tenants, Nortel Networks Oy and Finn Computer Software Oy. The renovation of the Mäkkylä office building in Espoo, comprising about 3 900 m2, is initially estimated to cost FIM 10 million. This building's tenants, Arrow Finland Oy and TietoEnator Applications Oy, will be able to take up residence in March 2001. The 1 100 m2 renovation at Lönnrotinkatu 28 in the centre of Helsinki was completed and the building's basement and groundfloor were converted into a multimedia studio for handling digital photo material.
Business conditions
The Finnish economy's upward trend strengthened further during the year, according to the Research Institute of the Finnish Economy (Etla). GDP is expected to increase 6 % and growth in private consumption will rise to 3.9 %. The average rate of unemployment has declined. The ECB has gradually raised its interest rates during the year to 4.75 % in October. Inflation increased to 4.2 % in September. Most of Sponda's leasing contracts are index-linked, which means that higher inflation will increase net sales.
Catella Real Estate Consulting Ltd's autumn market survey indicates that rental levels of business premises in the Helsinki Metropolitan Area have continued to rise and that the rate of increase in the city centre has accelerated. Vacant premises are in extremely short supply and the vacancy rate fell further to 1.4 %.
Leasing between January and September
Sponda is divided into four business areas: Helsinki Business District (HBD), Helsinki Metropolitan Area, Itäkeskus, and the logistics properties of Sponda's subsidiary Castrum Oyj.
Net operating income from Sponda's properties totalled FIM 355.3 (232.4) million, of which 42.5 % was derived from Helsinki CBD, 14.5 % from Helsinki Metropolitan Area, 22.5 % from the Itäkeskus Shopping Mall, 17.5 % from Castrum and 3.0 % from the rest of Finland. The economic occupancy rate of Sponda's entire property portfolio at the end of September was 97.6 % (96.7 %).
The economic occupancy rate of Sponda's properties in Helsinki CBD was 96.3 % and net operating income totalled FIM 151.1 million on 30 September 2000 (FIM 102.0 million on 30 September 1999). The same figures for Sponda's other business areas were as follows: Helsinki Metropolitan Area 98.6 % and FIM 51.6 (39.4) million; the Itäkeskus Shopping Mall 99.5 % and FIM 80.1 (77.6) million; the Castrum properties 97.4 % and between 1 April 2000 and 30 September 2000 FIM 62.0 million; and Sponda's properties in the rest of Finland 97.3 % and FIM 10.5 (13.4) million.
Castrum properties become new business area
Castrum Oyj became a majority-owned (66 %) subsidiary of Sponda Plc and it has been consolidated in the Sponda Group's accounts since 1 April 2000. Castrum's equity ratio is 46.3 %. Roughly 70 % of Castrum's properties are located in the Helsinki Metropolitan Area, and these contribute almost two-thirds of the company's net income. Castrum's property portfolio comprises 57 properties, mainly logistical premises, with a total area of 430 000 m2. Castrum's policy is to focus on large logistical units and divest its smaller properties.
Property acquisitions and sales
On 2 October, after the close of the reporting period, Sponda exchanged its entire holding in Kiinteistö Oy Ulappatori for shares in Puotiharjun Puhos Oy (2 200 m2) and Tunneli Oy (1 300 m2) on Kaivokatu, both in Helsinki, with Oyj Citycon, a real estate investment company.
On 3 October 2000 Sponda Plc acquired 2 695 m2 (33 % minority holding) in Kiinteistö Oy Helsingin Itäkatu 11 for FIM 16.5 million. This gave Sponda total ownership of the office and retail building (total area about 8 200 m2) adjacent to the Itäkeskus Shopping Mall's metro entrance.
Itäkeskus Shopping Mall expansion makes progress
The Itäkeskus Shopping Mall expansion has reached roof level and the new premises will be inaugurated in late autumn 2001. The glass-roofed main avenue will reach a length of almost half a kilometre and, with its branching pedestrian precincts, will form an enclosed "winter city" covering more than 10 hectares. The boulevard will end at a piazza, which will offer a centre for rest and refreshment in the tradition of the small towns in continental Europe. The piazza will be encircled by a ring of retail businesses on two floors, all of which will be visible from the piazza.
Sales by the retail outlets in the Itäkeskus Shopping Mall between January and September 2000 totalled FIM 1 103 million, 3 % up on the same period last year (FIM 1 071 million).
Personnel
The Sponda Group had 46 (32) employees on average between January and September 2000, which included 31 (25) employed by the parent company Sponda Plc. Personnel numbered 52 (34) on 30 September, including 34 (27) in the parent company. These figures include Castrum's employees.
Mr Jari Kähkönen was appointed President of Castrum on 1 October 2000. He also continues as Castrum's acting CFO. Castrum's real estate management functions were realigned to conform with those of the parent company, Sponda. Ms Lea Jokinen was named Director, Properties with responsibility for logistical premises.
Group structure
Sponda Group comprises the parent company and its subsidiaries, most of which are wholly owned. With the exception of Tamsoil Oy and Castrum Oyj, these are mutual property companies. The principal subsidiaries are Castrum Oyj (66 %), Kauppakeskus Itäkeskus Oy and Tamsoil Oy.
Share performance
The price of the Sponda share remained broadly unchanged from the second quarter and the closing price on 30 September 2000 was EUR 4.02 (FIM 23.90). The average price during the reporting period (1-9 2000) was EUR 3.89, the lowest price was EUR 3.65 and the highest price was EUR 4.30. Sponda's market capitalization at the close of the period was EUR 317 million (FIM 1 884.8 million).
In accordance with the Board of Directors' decision on 3 May 2000, Sponda had purchased altogether 902 000 of the company's shares by 30 September 2000 for a total of EUR 3 662 118 (FIM 21 773 966). The average price was EUR 4.06 (FIM 24.14), the highest price was EUR 4.24 and the lowest was EUR 3.68. The aggregate nominal value of these shares was EUR 758 528 (FIM 4 510 000) and they represented 1.14 % of the total voting power.
Decisions by Sponda Plc's Annual General Meeting
The decisions taken by Sponda Plc's Annual General Meeting on 27 March 2000 are described in the company's January-April and January-June interim reports.
Prospects
The property leasing markets have strengthened further and the result of leasing operations is forecast to be better than last year. The increasing use of long-term financing instruments has raised financing expenses. The profit before taxes and sales profits is expected to improve on 1999. The result will be burdened by higher taxes than in previous years. The consolidation of Castrum will improve earnings per share.
The full report including tables is available to download from the enclosed link.
