STOCKHOLM, Sweden, Aug. 15, 2002 (PRIMEZONE) -- Kungsleden:
- Profit before tax increased by 37 per cent to SEK 261 (191) m, equivalent to profit before tax per share of SEK 13.7 (10.1). - Kungsleden's operating surplus rose 31 per cent to SEK 401 (305) m. - In the interim period, 33 properties were divested for SEK 467 m, generating a profit of SEK 64 (30) m; nine properties were acquired for SEK 344 m. - Kungsleden is retaining its forecast of profit before tax of SEK 450 m for the operational year 2002.
Commenting, Kungsleden's Chief Executive Jens Engwall, said: "Our first- half-year profits are consistent with our expectations. Now, our business concept of high and stable property yields is being put to its first serious test in a harsh business climate. Until the present, we've succeeded very well - sustaining extensive property trading with healthy profits while also maintaining stable property yields."
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
Kungsleden's business concept is to own and manage properties with a high and stable long-term property yield. Kungsleden is an active participant in the change processes on the Swedish property market, by utilizing and enhancing its competencies in structuring heterogeneous property holdings. This implies Kungsleden's property holding frequently changing through acquisitions and disposals. Kungsleden's property portfolio comprises 431 properties with a book value of nearly SEK 9,5 bn. The holding is located in a total of 123 municipalities, and is concentrated on the Swedish provinces of Goetaland and Svealand. Kungsleden has been quoted on the Stockholmsboersen (Stockholm Stock Exchange) O-list since 14 April 1999.
Standing firm in the storm
The conditions for lucrative property business were less than optimal in the first six months of the year.
But despite this, Kungsleden enjoys a solid position, generating first half-year profits of SEK 261 m in 2002, which can be viewed against SEK 191 m for the corresponding period of the previous year. This implies that we achieved 37 per cent profit gains in a period when the economic climate left much to be desired.
We are also now putting our business concept of high and stable property yields to its first serious test in a harsh business climate, and so far, we've fared very well-maintaining extensive property trading with healthy earnings; our property yield is at a favourable 8.7 per cent while vacancies are only 6.5 per cent. We've achieved this simultaneously with the share of retirement homes-which we regard as a very low risk segment-increasing to 14 per cent of total consolidated book values.
We also managed to grind out progress on the property management side, achieving results-our operating surplus is up 31 per cent year on year. Moreover, it's worth noting that we consider the quality of our holding to have improved in the period. In terms of acquisitions and disposals, market conditions were far from optimal, but we acquired nine properties for a total of SEK 344 m, and divested a total of 33 for a total price of SEK 467 m nevertheless. In aggregate terms, our property trading generated a SEK 64 m surplus.
Of course, though, we are continuing to work towards enabling new business. Research and negotiations are an everyday activity for Kungsleden, and we still see major opportunities for acquisitions and disposals. In the present market conditions, we have the capacity to make up to one billion Swedish kronor of property acquisitions this autumn.
We are also accounting our retirement homes business area separately for the first occasion, because it is now starting to become a significant part of our business. If the opportunity arises, we will effect further acquisitions here during the autumn, and our objective is to be the market leader in terms of size and know-how in this segment. In the first half-year, this business area generated a property yield of 8.3 per cent, which can be set in a context of these properties being rented on long-term contracts with municipal counterparties, while retirement homes is a property market segment in very firm growth.
The reporting period was also a success in non-financial terms. I'd like to highlight the organisational resources Kungsleden has accumulated, with its combination of a broad skills base, high commitment and a close-knit spirit. Only when a property company can combine its balance sheet and property portfolio with entrepreneurship and an unswerving will to succeed, can it start to generate really quality returns.
The first half-year demonstrated the advantage of our strategy, with its combination of high property yields and active trading, so even if the right prospects for extensive transactions aren't in place, we can still turn a healthy profit.
We also take an upbeat view of the future-with businesses and public service bodies generating a sizeable share of the rental revenues in our tenant base. Additionally, our holding is in locations enjoying the right prospects for growth. Our pro forma accounting reveals that looking ahead, our holding will generate a very solid operating surplus, and we're looking forward to being able to complement these revenues with one or more major transactions through the autumn.
The above summarises my main heading-that we are standing firm in the storm, and if I might be so bold, I'd like to state that we actually thrive on a little stormy weather, which brings out the best in us.
We reiterate our forecast of profit before tax of SEK 450 m or SEK 24 per share; with our dividend policy, this means a dividend of SEK 12 for the current year.
Jens Engwall Chief Executive Stockholm, Sweden, August 2002
INTERIM REPORT, 1 JANUARY-30 JUNE 2002
- Profit before tax amounted to SEK 261 (191) m, equivalent
to SEK 13.7 (10.1) per share.
- Kungsleden's operating surplus increased by 31 per cent
to SEK 401 (305) m.
- During the interim period, 33 properties were divested for
SEK 467 m, generating a profit of SEK 64 (30) m; nine
properties were acquired for SEK 344 m.
Kungsleden's business concept
Kungsleden owns and manages properties, generating high and stable long- term returns.
Kungsleden's vision
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.
Kungsleden's strategy
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.
Profits
For the first half-year, profit before tax stood at SEK 261 (191) m, equivalent to SEK 13.7 (10.1) per share.
Our operating surplus amounted to SEK 401 (305) m; this 31 per cent increase is primarily due to the property holding's expanding volume in turn the result of major acquisitions effected in 2001.
The calculated earnings capacity of our property holding as of 30 June 2002 indicated that the snap-shot property yield was 8.7 per cent. The profit margin was SEK 61.6 (61.2) per cent.
Primarily, the relative sluggishness of economic activity resulted in low interest costs in the period. The cyclical components of the operating surplus-such as rental levels, vacancies and rental losses-are sustaining their positive progress. Kungsleden's diversification, with its spread into various property categories and locations, alleviates the impact of universal and specific events. Our rental contracts are well diversified over time. In 2002, SEK 119 m of commercial rental contracts will be renegotiated, equivalent to 10 per cent of the commercial contract base. Our property trading resulted in 33 (49) properties being divested for SEK 467 (447) m, generating a profit SEK 64 (30) m. The net financial position was SEK -188 (-130) m; interest cover was a multiple of 2.4 (2.5).
Our accounted tax cost was SEK 74 (53) m, or 28 (28) per cent. This item comprises deferred tax.
Cash flow from operations was 266 (296) m, or SEK 14.0 (15.6) per share.
Property holding and earnings capacity
As of 30 June 2002, the holding encompassed 431 properties with floor-space of 1,837,000 sq. m. and a book value of SEK 9,479 m. Theseproperties are located in 123 municipalities. Properties in the majorconurbations of Greater Stockholm, Greater Gothenburg and the Oresundregion accounted for 60 (56) per cent of property book values. Propertywith a value of SEK 344 (1,937) m was acquired in the interim period;investments in existing properties stood at SEK 54 (50) m. Propertieswith a book value of SEK 395 (406) m were divested.
Progress in the retirement homes business area-now accounting its firsthalf-year interim period-fully reflected expectations upon acquisition.The snap-shot property yield as of 30 June stood at 8.3 per cent, whilebook value subsequent to acquisitions in the period was SEK 1,290 m.
Kungsleden is focused on generating high and stable returns, and as aconsequence of property trading and enhanced management efficiency, theproperty holding's risk-adjusted returns are in continuous improvement.
We present the calculated snap-shot property yield in the section'property holding and earnings capacity.' Our calculation is based onthe following assumptions:
- Properties divested up to and including the balance sheet date
are excluded;
- Properties acquired by the balance sheet date are included as
if owned for 12 months.
Our calculation principles have been amended so the actuals of constituent properties for the most recent 12 months form the foundation for earnings capacity in each report. We use a combination of actuals and acquisition calculations for those properties owned for a shorter period, whereas previously, the actuals for constituent properties were only updated after the completion of full financial years. This revision implies that changing portfolio composition and rising management efficiency feed through more consistently and faster, while additionally, the calculated earnings capacity becomes more representative.
The start-up of the retirement homes business area has rendered our previous property classification redundant, and therefore, the figures in the section 'property holding and earnings capacity' have been revised by separating retirement homes from the residential category. Other residential properties, and our smaller hotel and land categories, have been combined in 'Other'.
Property trading
In the interim period, nine (44) properties with floor-space of 86,000 (262,000) sq. m. were acquired for SEK 344 (1,937) m. These transactions were consummated at an estimated property yield of 11.0 (7.6) per cent.
We divested 33 (49) properties for a total of SEK 467 (447) m in the period, generating a profit of SEK 64 (30) m: these properties were divested at an estimated property yield of 7.5 (5.7) per cent, with the transactions effected at SEK 7 m and 27 m above external and internal valuations (effected as of 31 December 2001) respectively.
The sales price of 25 of these properties being less than SEK 10 m. The following table illustrates the distribution between profitable and loss- making property disposals:
Shareholders' equity
The closing balance of shareholders' equity was SEK 2,175 (2,060) m or SEK 114.7 (108.7) per share, equivalent to an equity ratio of 22.0 (24.1) per cent.
The share and ownership structure
Our share price has maintained positive progress in 2002. On 31 December 2001, our share price was SEK 117; and on 28 June 2002, SEK 129.50.
Dividends paid were SEK 10.50 per share, and consequently, total returns in the period were 19.7 per cent. Kungsleden had approximately 12,300 shareholders as of 28 June 2002, a 21 per cent increase since year-end 2001.
Human resources
The average number of employees was 79 (77) in the period.
Parent company
Parent company profit after financial items was SEK -9 (-10) m; as of 30 June 2002, liquid funds stood at SEK 0 (0) m.
Accounting principles
Kungleden's accounting principles are unchanged since the previous year. The company observes RR's (the Swedish Financial Accounting Standards Council) recommendations and statements by the Council's task force.
Forecast 2002
Kungsleden is reiterating its forecast of profit before tax of SEK 450 m for 2002, equivalent to SEK 23.7 per share.
Stockholm, Sweden, 15 August 2002
Jens Engwall Chief Executive Kungsleden AB (publ)
Forthcoming reports
- Interim Report, January-September, 23 October - Financial Statement, February 2003 - Annual Report for the financial year 2002, March 2003.
Audit Report, Kungsleden AB
I have subjected this Interim Report to a summary view consistent with the recommendation issued by FAR (the Institute for the Accounting Profession in Sweden). A summary review is significantly more limited than a full audit. Nothing has arisen to suggest that this Interim Report does not satisfy the stipulations of Swedish stock exchange or annual accounts legislation.
Stockholm, Sweden, 15 August 2002
Thomas Thiel
Authorised Public Accountant
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
This information was brought to you by Waymaker http://www.waymaker.net
The following files are available for download:
www.waymaker.net/bitonline/2002/08/15/20020815BIT00630/wkr0001.doc The full report www.waymaker.net/bitonline/2002/08/15/20020815BIT00630/wkr0002.pdf The full report