Annual Report • Feb 7, 2020
Annual Report
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AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment.
Profit from property management for 2020, meaning profit before revaluations and tax, based on the current property portfolio and announced acquisitions and divestments and current exchange rates, is expected to amount to SEK 2,250 M. Sagax announced in a press release on 24 January 2020 that the company has entered into a conditional agreement to acquire 37 properties in Spain for an amount corresponding to SEK 1,560 M. The terms and conditions for the acquisition have not yet been fulfilled and accordingly the investment is not included in the forecast above.
| Selected key performance indicators | ||||||
|---|---|---|---|---|---|---|
| 2019 Jan-Dec |
2018 Jan-Dec |
2017 Jan-Dec |
2016 Jan-Dec |
2015 Jan-Dec |
2014 Jan-Dec |
|
| Profit from property management per Class A and B share after dilution, SEK1) Change compared with preceding year, % |
5.51 28 |
4.31 16 |
3.70 24 |
2.98 22 |
2.45 31 |
1.87 37 |
| Earnings per Class A and B share after dilution, SEK1) | 12.13 | 9.24 | 8.85 | 7.25 | 4.93 | 2.03 |
| Dividend per Class A and B share, SEK (2019 proposed)1) | 1.30 | 1.00 | 0.90 | 0.72 | 0.58 | 0.40 |
| Net debt/EBITDA, multiple | 6.6 | 7.4 | 8.1 | 8.7 | 9.3 | 8.8 |
| Interest coverage ratio, multiple | 4.9 | 4.2 | 3.7 | 3.4 | 2.9 | 2.6 |
| Debt ratio, % | 44 | 47 | 50 | 54 | 59 | 59 |
| Properties' market value, SEK M | 32,625 | 29,024 | 23,771 | 20,628 | 16,189 | 13,428 |
| Property yield, % | 6.4 | 6.8 | 6.9 | 7.1 | 7.4 | 7.6 |
1) Comparative figures have been adjusted for the bonus issue of Class A and B shares in 2019, by multiplying the number of shares by 2. The terms of the bonus issue were 1 Class A and 1 Class B share for each Class A and Class B share. The record date for the bonus issue was 3 June 2019.
In the fourth quarter, Sagax acquired a property outside Eindhoven. The property encompasses 9,500 square metres of lettable area and is fully let.
AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment.
The overriding objective is the long-term generation of the maximum possible risk-adjusted return to the company's owners. To achieve this objective, Sagax has set the following business targets:
The table and charts below illustrate the outcome for the past five years in relation to the financial targets.
Sagax invests primarily in warehouse and industrial properties. Properties designed as warehouses and for light industries are
attractive investment opportunities, since they generate a high yield combined with a low rate of new production and stable occupancy rates. Sagax invests in add-on acquisitions and in existing properties. Property acquisitions and investments in the existing portfolio aim to increase cash flow and diversify rental revenue, thereby reducing the company's operational and financial risks. The chart on page 3 illustrates the trend in the properties' market value and lettable area.
Sagax's financial structure is designed with a clear focus on operating cash flow and interest coverage ratio. This is expected to create both excellent prerequisites for expansion and an attractive return on equity. The charts on page 3 show Sagax's profit from property management and cash flow from operating activities. As illustrated, cash flow corresponds closely to profit from property management. The deviation is due mainly to joint ventures for which dividends rather than profit from property management are recognised as cash flow from operating activities.
The company has four classes of shares: Class A, B and D common shares, and preference shares. The aim of the Class D shares, like the preference shares, is to attract investor categories that value steady ongoing dividends.
| Outcome rolling 12 months |
Five-year average |
|
|---|---|---|
| Return on equity, measured over a five-year period, should not fall below 15% per year |
24% | 29% |
| Profit from property management per Class A and B share should increase by a minimum of 15% per year |
28% | 25% |
Sagax pursues efficiency and sustainability in its management strategy. The management strategy includes clearly prioritising customers with high credit ratings and obtaining long leases. The company's policy is to abstain from maximising rent levels at all points of time in favour of signing leases of a longer duration with solvent tenants. This is regarded as being advantageous since it reduces the risk of vacancies, while leading to lower costs for letting premises and adapting premises to tenant needs.
Sagax endeavours to attract reputable and creditworthy tenants. The company mainly enters into triple net leases and is thus only affected to a limited extent by changes in consumption or changed rates for such utilities as heating, electricity, property tax, water and sewage.
Sagax invests primarily in regions experiencing stable population growth and that have diversified business activities. Sagax's largest markets are Stockholm and Helsinki, which are regarded as offering favourable conditions for long-term growth. The risk of a decline in the occupancy rate and rent levels due to a weaker rental market is regarded as relatively low due to the stable demographic growth and the diversified business operations in these markets.
The focus of Sagax's sustainability activities comprises avoiding short-term gains arising at the expense of negative longer-term consequences, such as in the form of externalities. The company's investing activities, management and funding are conducted to achieve the best possible long-term – meaning sustainable – outcome. The company's property management takes place exclusively in markets that have well-developed legal frameworks.
The negative externalities of management primarily comprise the environmental impact from heating premises. As in previous years, it is intended that the carbon footprint of the Sagax organisation, calculated at 252 tonnes of carbon dioxide for 2018, will be compensated.
A central theme of Sagax's sustainability activities is compliance with laws, regulations and conventions. Sagax conducts operations or has investments in Sweden, Finland, Denmark, Germany, the Netherlands, France and Spain. Accordingly, the Group is subject to both Swedish and foreign laws and regulations. Read more in Sagax's 2018 Sustainability Report.
The profit/loss and cash flow items below refer to the January to December 2019 period. The comparative items refer to the year-earlier period. Amounts for the balance-sheet items and comparative figures refer to the position at the end of the current period and end of the year-earlier period.
Profit from property management rose 25% to 2,001 M (1,603), of which joint ventures and associated companies accounted for SEK 441 M (312). The increase in profit from property management was attributable to property acquisitions and higher profit from property management in joint ventures and associated companies. Profit from property management per Class A and B share after dilution rose 28% to SEK 5.51 (4.31).
Changes in the value of properties increased profit by SEK 1,956 M (1,878), of which the revaluation of joint ventures accounted for SEK 695 M (635).
The revaluation of financial instruments had an impact of SEK 884 M (289) on profit. The revaluation of listed shares
resulted in an unrealised change in value of SEK 594 M (109). The revaluation of financial instruments attributable to joint ventures amounted to SEK 305 M (76) pursuant to IFRS 9, while fixed-income derivatives accounted for SEK –15 M (103).
Profit after tax for the period was SEK 4,111 M (3,166).
Rental revenue rose 15% to SEK 2,581 M (2,247). Revenue was primarily positively affected by property acquisitions.
Other revenue of SEK 27 M (30) primarily comprised compensation from tenants who prematurely vacated premises, damages due to inadequate maintenance and insurance compensation.
During the period, rental revenue in comparable portfolios increased 3.3% excluding currency effects. The largest increase was found in the market segments of Stockholm (5.9%) and the Netherlands (4.4%), mainly due to lower vacancies. Other market segments reported minor revenue increases (an average of 1.6%) in the existing portfolio.
90 95
Economic leasing rate
%
100
The economic occupancy rate amounted to 95% (95). During the period, the vacancy value rose SEK 93 M (89) due to tenants vacating premises and declined SEK 98 M (86) due to new lettings. Discounts provided on a fixed-term basis amounted to SEK 22 M (19) on an annual basis at the end of the period. A change of market rent for vacant premises in Finland reduced the vacancy value by SEK 14 M and is an adjustment to the Group-wide calculation criteria.
In total, the closing vacancy value increased SEK 3 M (10) during the period to SEK 135 M (132).
Notice of termination had been served for leases with a rental value of SEK 85 M (49) at the end of the period, of which notice of vacating the premises accounted for SEK 81 M (44) and notice of renegotiation of the premises for SEK 4 M (5). Of the leases for which notice had been received, vacancies corresponding to SEK 29 M will occur in 2020. The rate of vacating premises is described in the table below. Leases that have not yet been occupied reduced the adjusted vacancy value by SEK 14 M (29).
Operating and maintenance costs rose to a total of SEK 306 M (256). Expenses for property tax increased to SEK 121 M (93). Site leasehold fees of SEK 24 M are recognised as a financial expense from 1 January 2019 in accordance with IFRS 16. Refer also to the heading Net financial items below. In the preceding year, site leasehold fees were recognised as property expenses and amounted to SEK 22 M.Other property expenses increased to SEK 47 M (37). All expense increases were primarily due to property acquisitions.
Costs for the Group's central administration amounted to SEK 122 M (132), corresponding to 4.7% (5.9) of the Group's rental revenue.
| Amounts in SEK M | 2019 Jan-Dec |
2018 Jan-Dec |
|---|---|---|
| Opening vacancy for each year | 132 | 122 |
| Vacancies | 93 | 89 |
| New lettings | –98 | –86 |
| Change in discounts provided | 4 | 2 |
| Vacancy value, acquired properties | 23 | 6 |
| Vacancy value, sold properties | –7 | –5 |
| Adjustment of vacancy value | –14 | – |
| Change in exchange rates | 1 | 4 |
| Closing vacancy value | 135 | 132 |
| Terminated for renegotiation | 4 | 5 |
| Terminated lease, not vacated | 81 | 44 |
| Letting, not occupied | –14 | –29 |
| Adjusted closing vacancy value | 205 | 152 |
| Year of vacancy | No. of leases | Rental value, SEK M |
|---|---|---|
| 2020 | 56 | 29 |
| 2021 | 10 | 38 |
| 2022 | 4 | 13 |
| 2024 | 1 | 1 |
| >2024 | 1 | 1 |
| Total | 72 | 81 |
| Area | Rental value, SEK M |
Vacancy value, SEK M1) |
Economic vacancy rate1) |
Lettable area, sqm |
Vacant area, sqm |
Vacancy rate by area |
|---|---|---|---|---|---|---|
| Stockholm | 685 | 43 | 6% | 629,000 | 37,000 | 6% |
| Helsinki | 613 | 42 | 7% | 580,000 | 50,000 | 9% |
| Finland, university cities | 321 | 10 | 3% | 345,000 | 13,000 | 4% |
| Paris | 282 | 14 | 5% | 275,000 | 13,000 | 5% |
| Netherlands | 264 | 10 | 4% | 321,000 | 6,000 | 2% |
| Rest of Sweden | 146 | – | – | 261,000 | – | – |
| Rest of Finland | 223 | 3 | 1% | 328,000 | 10,000 | 2% |
| Rest of Europe | 201 | 12 | 6% | 284,000 | 26,000 | 9% |
| Total | 2,735 | 135 | 5% | 3,022,000 | 153,000 | 5% |
1) The vacancy value and vacancy rate take into account both vacancies and discounts provided.
At the end of the period, the Group had 69 (59) employees. Functions such as property care-taking and on-call operations are outsourced. The company has offices in Stockholm, Helsinki, Rotterdam, Paris and Barcelona.
| Country | Total |
|---|---|
| Sweden | 33 |
| Finland | 20 |
| France | 7 |
| Netherlands | 6 |
| Spain | 3 |
| Total | 69 |
Profit for the period from joint ventures and associated companies amounted to SEK 917 M (830), of which profit from property management accounted for SEK 441 M (312), changes in the value of fixed-income derivatives for SEK –5 M (42) and changes in the value of properties for SEK 695 M (635). Profit was charged with of SEK 214 M (160) in tax. Refer also to page 11 for more information.
Interest-bearing liabilities increased to SEK 17,519 M (15,763) due to financing of property acquisitions.
Financial expenses declined to SEK 470 M (481) due to a lower average interest rate, despite higher interest-bearing liabilities, nonrecurring expenses for premature redemption of bonds of SEK 30 M as well as site leasehold fees of SEK 24 M charged to net financial items from 2019 according to IFRS 16. The company's average interest rate on 31 December 2019 was 1.9% (2.2). For more information about funding at Sagax, see page 12.
Financial income of SEK 20 M (35) primarily pertained to dividends received from listed shares.
The value growth for the properties amounted to SEK 1,261 M (1,243), of which unrealised changes in value amounted to SEK 1,301 M (1,265) excluding currency effects. The change in the market value of the property portfolio is also described on page 10.
New lettings and renegotiations of leases increased the market value of the properties by SEK 674 M (677). Vacancies and renegotiations reduced the value by SEK 337 M (216). The general change in market value for the company's properties amounted to SEK 965 M (804).
| Amounts in SEK M | Jan–Dec 2019 |
|---|---|
| New lettings/Renegotiations | 674 |
| Vacancies/Renegotiations | –337 |
| General change in market value | 965 |
| Total | 1,301 |
Realised changes in the value of properties amounted to SEK –40 M (–22) for the period.
The change in the value of financial instruments amounted to SEK 884 M (289), of which SEK –5 M (42) referred to joint ventures.
The change in value attributable to fixed-income derivatives amounted to SEK –15 M (103), of which –5 M (42) referred to joint ventures.
Revaluation of listed shares resulted in an unrealised change in value of SEK 594 M (97). No shares were sold during the period.
The revaluation of financial instruments attributable to joint ventures amounted to SEK 305 M (76) in accordance with IFRS 9.
Sagax recognised a current tax expense of SEK 100 M (10). The deferred tax expense amounted to SEK 416 M (435). The Group's deferred tax liabilities at the end of the period amounted to SEK 2,018 M (1,599).
Cash flow from operating activities before changes in working capital amounted to SEK 1,795 M (1,490). Changes in working capital had a positive impact of SEK 16 M (100) on cash flow. Investing activities had an impact of SEK –3,051 M (–3,771) on cash flow, while cash flow from financing activities contributed SEK 1,252 M (2,195) to Sagax. In total, cash and cash equivalents rose SEK 13 M (13) during the period. See page 16 for the statement of cash flows.
The Parent Company, AB Sagax, is responsible for stock market issues, such as financial reporting and stock market information. Services between Group companies are charged on commercial terms and conditions and in accordance with market-based pricing. Intra-Group services comprise management services and internal interest charging. The Parent Company's management fees from Group companies amounted to SEK 55 M (46). The Parent Company's income statement and balance sheet are shown on page 20.
Profit from property management for 2020, meaning profit before revaluations and tax, based on the current property portfolio and announced acquisitions and divestments and current exchange rates, is expected to amount to SEK 2,250 M. Sagax announced in a press release on 24 January 2020 that the company has entered into a conditional agreement to acquire 37 properties in Spain for an amount corresponding to SEK 1,560 M. The terms and conditions for the acquisition have not yet been fulfilled and accordingly the investment is not included in the forecast above.
Current earnings capacity is reported in conjunction with interim reports and year-end reports.
The table below shows earnings capacity on a 12-month basis at 1 January 2020. It is important to note that this capacity cannot be compared with a forecast for the forthcoming 12 months because it does not contain assessments about, for example, future vacancies, the interest rate scenario, currency effects, rent trends or changes in value.
| Amounts in SEK M | 1 Jan 2020 | 1 Jan 2019 |
|---|---|---|
| Rental value | 2,735 | 2,510 |
| Vacancy | –135 | –132 |
| Rental revenue | 2,600 | 2,378 |
| Property expenses | –466 | –395 |
| Net operating income | 2,134 | 1,983 |
| Central administration | –122 | –132 |
| Joint ventures and associated | 539 | 372 |
| companies | ||
| Net financial items | –352 | –387 |
| Lease expenses | –22 | –20 |
| Profit from property | ||
| management | 2,178 | 1,816 |
| Tax | –414 | –400 |
| Profit after tax | 1,764 | 1,416 |
| – of which, holders of preference shares | 34 | 34 |
| – of which, holders of Class D shares | 216 | 204 |
| – of which, holders of Class A and B shares |
1,515 | 1,178 |
The rental value is based on contractual rental revenue on an annual basis, with supplements for estimated market rents for vacant premises. Property expenses are based on actual outcomes over the past 12 months adjusted for the holding period, less expenses for site leasehold fees. Central administration costs are based on actual outcomes over the past 12 months. Net financial items are calculated based on interest-bearing liabilities and assets on the balance sheet date. Expenses for interest-bearing liabilities are based on the Group's estimated average interest rate, plus financing costs allocated over time and costs attributable to credit facilities that were unutilised on the balance sheet date. Lease expenses essentially pertain to site leasehold fees that are based on actual outcomes over the past 12 months adjusted for the holding period. Dividends attributable to the company's holdings of listed shares were not taken into account in the earnings capacity. Tax is calculated at the standard tax rate of 19% (22).
Shares in profit in joint ventures and associated companies are calculated in accordance with the same assumptions as for Sagax, taking into account the size of the participations.
Difference between yield of Sagax's properties and Sagax's average interest rate % 0 1 2 3 4 5 6 7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Difference between yield and lending rate
Year-end Report 2019 7 This document is an in-house translation of the Swedish Interim report. In the event of discrepancies, the Swedish original will supersede the translation.
At 31 December 2019, the property portfolio comprised 553 (512) properties with a lettable area of 3,022,000 square metres (2,850,000). At the end of the period, the total rental value and contractual annual rent amounted to SEK 2,735 M (2,510) and SEK 2,600 M (2,378), respectively. This corresponds to an economic occupancy rate of 95% (95).
During the period, Sagax invested SEK 3,544 M (3,482), of which property acquisitions accounted for SEK 2,836 M (3,026).
A total of 84 properties were acquired with a total lettable area of 357,000 square metres. The largest investment was Pieter Zeemansweg 17 in Dordrecht with a lettable area of 23,300 square metres.
A total of SEK 707 M (456) was invested in the existing property portfolio. SEK 140 M of the investments for the period were made against rent supplements, SEK 71 M was invested in conjunction with new lettings, SEK 357 M in conjunction with new production and SEK 129 M pertained to property maintenance.
The Group has agreed to acquire a property in Sweden, one property in Finland, 16 properties in Spain and 22 properties
in France for which possession will be taken in the first quarter of 2020. The total investment will amount to SEK 936 M. Refer also to events after the end of the period on page 27.
In addition, Sagax invested SEK 480 M in the french property company Groupe BMG through a convertible loan. BMG owns and manages 261 properties with a market value of SEK 7.8 billion. The term of the loan is five years and the interest rate is 7.2%. Sagax has a right but not an obligation to convert the loan to shares at the earliest after three years. Refer to press release no. 39, 2019
During the period, 44 properties with a total lettable area of 150,000 square metres were divested for a total of SEK 1,453 M, of which six to Sagax's joint venture Söderport for a total of SEK 668 M. Agreements were signed for the sale of one property in Sweden and two properties in Finland for a total of SEK 292 M which will be vacated after the end of the period.
The yield for the period in relation to market value amounted to 6.4% (6.8).
| Market value Rental value |
Economic | annual rent | Contractual | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Segment | No. of properties |
Lettable area, sqm |
Vacant area, sqm |
SEK M | SEK per sqm |
SEK M | Share | occupancy rate |
SEK M | Share |
| Stockholm | 76 | 629,000 | 37,000 | 9,840 | 15,600 | 685 | 25% | 94% | 641 | 24% |
| Helsinki | 71 | 580,000 | 50,000 | 6,708 | 11,600 | 613 | 22% | 93% | 571 | 23% |
| Finland, university cities | 67 | 345,000 | 13,000 | 3,148 | 9,100 | 321 | 12% | 97% | 311 | 12% |
| Paris | 60 | 275,000 | 13,000 | 2,919 | 10,600 | 282 | 10% | 95% | 269 | 10% |
| Netherlands | 55 | 321,000 | 6,000 | 2,982 | 9,300 | 264 | 10% | 96% | 254 | 10% |
| Rest of Sweden | 30 | 261,000 | – | 1,828 | 7,000 | 146 | 5% | 100% | 146 | 6% |
| Rest of Finland | 137 | 328,000 | 10,000 | 2,634 | 8,000 | 223 | 8% | 99% | 220 | 8% |
| Rest of Europe | 57 | 284,000 | 26,000 | 2,565 | 9,000 | 201 | 7% | 94% | 189 | 7% |
| Total | 553 | 3,022,000 | 153,000 | 32,625 | 10,800 | 2,735 | 100% | 95% | 2,600 | 100% |
| Amounts in SEK M | Property acquisitions |
Existing portfolio |
Total | Share of total investments |
Divestments | Net invest ments |
|---|---|---|---|---|---|---|
| Stockholm | 27 | 302 | 328 | 9% | –672 | –343 |
| Helsinki | 53 | 206 | 260 | 7% | –43 | 217 |
| Finland, university cities | 309 | 23 | 332 | 9% | –4 | 327 |
| Paris | 674 | 125 | 799 | 23% | –117 | 682 |
| Netherlands | 859 | 16 | 874 | 25% | – | 874 |
| Rest of Sweden | – | 2 | 2 | 0% | –583 | –581 |
| Rest of Finland | 43 | 31 | 74 | 2% | –25 | 49 |
| Rest of Europe | 871 | 3 | 874 | 25% | –10 | 865 |
| Total | 2,836 | 707 | 3,544 | 100% | –1,453 | 2,090 |
Sagax has a diverse lease structure, which better allows the company to maintain an even occupancy rate. To reduce the risk of lower rental revenue, Sagax endeavours to create longterm relationships with the company's existing tenants and to achieve favourable diversification in terms of the length and size of its leases.
Sagax's contractual annual rent at the end of the period was distributed between 1,724 leases (1,545), with about 1,200 tenants (1,000). The table below presents the size of Sagax's leases in relation to the Group's contractual annual rent at the end of the period. The table shows that 1,715 leases (1,536) each had a rental value of less than 1% of the Group's contractual annual rent. The total rental value for these leases accounted for 83% (82) of Sagax's contractual annual rent. In addition, Sagax is party to six leases (six) with a rental value corresponding to 1–2% of the Group's contractual annual rent. Combined, these leases total 9% (9) of Sagax's contractual annual rent. Only three (three) of Sagax's leases had an
Distribution of leases
| Share of | Contractual annual rent |
Average contractual |
Lease | |||
|---|---|---|---|---|---|---|
| contractual annual rent |
SEK M | Share | No. of leases |
annual rent, SEK M |
term, years |
|
| >2% | 201 | 8% | 3 | 67 | 12 | |
| 1–2 % | 236 | 9% | 6 | 39 | 6 | |
| <1% | 2,164 | 83% | 1,715 | 1 | 5 | |
| Total | 2,600 | 100% | 1,724 | 2 | 6 |
| Contractual annual rent | ||||
|---|---|---|---|---|
| Year of expiry | Area, sqm | SEK M | Share | |
| 2020 | 308,000 | 318 | 12% | |
| 2021 | 402,000 | 328 | 12% | |
| 2022 | 358,000 | 361 | 14% | |
| 2023 | 277,000 | 259 | 10% | |
| 2024 | 258,000 | 251 | 10% | |
| >2024 | 1,266,000 | 1,084 | 42% | |
| Total | 2,869,000 | 2,600 | 100% |
Sagax's tenants operate in a variety of industries. 18% (19) of the contractual rental revenue comes from tenants in the manufacturing industry, 13% (12) from companies with food-related operations and 12% (12) in the automotive industry, including sales, service and manufacturing. Diverse tenant industries is considered to lower the risk of vacancies and rent losses. The main industries are presented in the pie chart below.
According to Sagax's management strategy, the company strives to secure long-term leases and an even distribution of contract maturities over the years. This is deemed to reduce the risk of significant variations in the Group's occupancy rate. Leases representing 52% of the contractual annual rent expire in or after 2024. 10–14% of contractual annual rent expires every year between 2020 and 2023.
Annual value
Sagax prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The company has chosen to recognise its properties at fair value in accordance with the Fair Value Method.
At 31 December 2019, the total market value of Sagax's 553 properties (512) was SEK 32,625 M (29,024). The depreciation of the SEK against the EUR during the period led to property values abroad increasing SEK 209 M (551).
The recognised unrealised change in value amounted to SEK 1,301 M (1,265) for the period. Refer also to the table "Unrealised changes in value" on page 6.
The valuations were carried out in accordance with generally accepted international valuation methods. As of 31 December 2019, 97% valuation objects were valued separately by authorised property appraisers from independent valuation companies.
The principle method of appraisal used was cash flow calculations in which the present value of net operating income, investments and residual values was calculated. The calculation period was adjusted to the remaining term of existing leases and varies between five and 20 years. As a rule, the calculation period is ten years. All properties, except for two small
properties in Denmark, have been inspected over the past three-year period. These inspections include public areas and a selection of premises with specific emphasis on major tenants and vacant premises. The purpose of the inspections is to assess the properties' overall standard, maintenance requirements, market position and the attractiveness of the premises.
The cost of capital for the present value calculation of cash flows (4.9–16.0%), the cost of capital for the present value calculation of residual values (4.9–16.0%) and the yield requirement for the residual value calculations (4.5–14.0%) are based on analyses of transactions carried out and on individual assessments of the risk level and market position of each property.
The weighted cost of capital for the present value calculation of cash flows and residual values for the property portfolio was 7.8% (7.9) and 8.1% (8.4), respectively. The weighted yield requirement was 6.6% (7.1) at 31 December 2019. By comparison, the yield reported by Sagax for the period was 6.4% (6.8). A comparison of the yield reported over time and the yield requirement used in valuations is provided below.
A sensitivity analysis for changes in assumptions in property valuations is presented on page 25.
| SEK M | Number | |
|---|---|---|
| Property portfolio, 31 December 2018 | 29,024 | 512 |
| Acquisition of properties | 2,836 | 84 |
| Investments in the current portfolio | 707 | |
| Property sales | –1,453 | –44 |
| Subdivisions, property | – | 1 |
| Translation effect, currencies | 209 | |
| Unrealised changes in value | 1,301 | |
| Property portfolio, 31 December 2019 | 32,625 | 553 |
Sagax's joint ventures and associated companies contributed a total of SEK 441 M (312) to profit from property management during the period. Sagax's share of changes in the value of properties amounted to SEK 695 M (635) and the share of changes in the value of fixed-income derivatives was SEK –5 M (42) for the period. The total value of the commitment related to ownership of joint ventures and associated companies amounted to SEK 5,693 M (3,286).
Sagax owns 50% of Söderport Holding AB, with the remaining share owned by the Nyfosa Group. Via Hemsö Intressenter AB, Sagax indirectly owns 15% of Hemsö Fastighets AB, with the remaining share owned by the Third Swedish National Pension Fund. In addition, Sagax owns 25% of Emilshus Fastigheter AB, and 20% of the votes and 14% of the capital inNP3 Fastigheter AB.
Söderport's operations consist of owning, managing and developing properties in Sweden. On behalf of Söderport, Sagax handles the financial administration and most of the property management of the Söderport Group. Nyfosa is responsible for property management at certain locations.
A corresponding 68% of Söderport's rental value of SEK 835 M was located in Stockholm on 31 December 2019. Söderport's economic vacancies amounted to SEK 33 M (26) at the end of the period, corresponding to a vacancy rate of 4% (4). Of the economic vacancies, SEK 9 M (6) comprised fixed-term rent discounts provided for new lettings. At the end of the period, Stockholm accounted for 94% of the economic vacancies.
During the period, 18 properties were acquired in Stockholm and one in Gothenburg for a total SEK 1,520 M, of which nine from Nyfosa and six from Sagax. The acquired properties have a total lettable area of 85,000 square metres and the rental value amounts to SEK 106 M.
Söderport divested ten properties with a total lettable area of 64,600 square metres to Nyfosa during period and six
properties with a total lettable area of 145,000 square metres in Torslanda to Torslanda Property Investment AB (TPI). The rental value is SEK 170 M. TPI paid SEK 965 M of the purchase consideration in the form of newly issued TPI shares. Based on the issue, Söderport's participating interest in TPI increased from 28.6% to 78.4% and TPI is included as a subsidiary in Söderport's consolidated financial statements.
Hemsö Fastighets AB conducts operations in Sweden, Germany and Finland. Operations consist of owning, managing and developing public properties. The property portfolio comprised 370 properties with a total property value of SEK 55 billion at 31 December 2019. 94% of rental revenue derives from tax-financed operations. More information on Hemsö Fastighets AB is available on the company's website, hemso.se.
NP3 Fastigheter AB is a property company focusing on commercial investment properties with high yields mainly in northern Sweden. The company's property portfolio encompassed 344 properties with a total property value of SEK 10.7 billion and a rental value of SEK 1,082 M at 30 September 2019. NP3 Fastigheter AB is listed on Nasdaq Stockholm, Mid Cap. More information on NP3 Fastigheter AB is available on the company's website, np3fastigheter.se.
Emilshus acquires, develops and manages commercial properties in Småland. The property portfolio is situated in growth regions, with a keen focus on local presence and close partnership with tenants. The property portfolio encompassed 43 properties at 31 December 2019. More information on Emilshus Fastigheter AB is available on the company's website, emilshus.com.
| Söderport | Hemsö | ||||
|---|---|---|---|---|---|
| 2019 Jan – Dec | 2018 Jan – Dec | 2019 Jan – Dec | 2018 Jan – Dec | ||
| Sagax's participating interest, % | 50 | 50 | 15 | 15 | |
| Rental value, SEK M | 835 | 674 | 3,195 | 2,808 | |
| Rental revenue, SEK M | 708 | 585 | 3,027 | 2,607 | |
| Profit from property management, SEK M | 384 | 285 | 1,760 | 1,439 | |
| Profit for the period, SEK M Sagax's share of profit from property |
929 | 854 | 3,111 | 3,092 | |
| management, SEK M | 192 | 142 | 218 | 170 | |
| 2019 31 Dec | 2018 31 Dec | 2019 31 Dec | 2018 31 Dec | ||
| No. of properties | 80 | 70 | 370 | 365 | |
| Carrying amount of properties, SEK M | 10,853 | 7,683 | 55,027 | 46,236 | |
| Lettable area, sqm | 761,000 | 686,000 | 1,884,000 | 1,732,000 | |
| Lease term, years | 4.6 | 5.0 | 9.9 | 9.7 | |
| Economic vacancy rate, % | 4 | 4 | 2 | 2 | |
| Interest-bearing liabilities, SEK M | 5,828 | 3,907 | 35,542 | 29,729 | |
| Loan maturity, years | 4.5 | 1.5 | 7.4 | 7.9 | |
| Fixed interest, years | 3.1 | 3.2 | 6.4 | 5.9 | |
| Market value of fixed-income derivatives, SEK M | –208 | –222 | –211 | –281 | |
| Carrying amount of Sagax's participation, SEK M | 1,804 | 1,513 | 1,821 | 1,324 |
Year-end Report 2019 11 This document is an in-house translation of the Swedish Interim report. In the event of discrepancies, the Swedish original will supersede the translation.
Consolidated equity amounted to SEK 19,257 M (15,416) at 31 December 2019. Changes in equity during the period were attributable to comprehensive income for the period of SEK 4,201 M, a new issue of common shares totalling SEK 206 M and a share dividend of SEK 566 M.
Sagax's interest-bearing liabilities at the end of the period amounted to SEK 17,519 M (15,763). An amount corresponding to SEK 13,557 M (10,355) of liabilities was recognised in EUR.
Net debt amounted to SEK 15,232 M (14,812). Gross interest-bearing debt to banks totalled SEK 4,257 M (5,540). The remaining gross interest-bearing debt comprised listed bond loans of SEK 12,070 M (8,718) and commercial paper of SEK 1,192 M (1,505). The main covenants for bond loans are presented on page 13.
At 31 December 2019, secured liabilities comprised 14% (21) of the total assets. Unsecured liabilities corresponded to 30% (26) of the total assets on the same date.
The chart below shows how the debt ratio has decreased successively over time at the same time as financial expenses have declined in relation to the Group's profit before financial items. The debt ratio at the end of the year amounted to 44% (47) and the interest coverage ratio to 492% (433). Interest-bearing net debt for the past 12 months has averaged 6.6 (7.4) times EBITDA; see chart below.
A total of SEK 7,366 M (8,538) in loans was raised, of which SEK 5,031 M in the form of bond loans under the framework of Sagax's EMTN programme. Repayments during the period totalled SEK 5,734 M (6,707). Exchange-rate fluctuations increased interest-bearing liabilities by SEK 124 M (241).
Allocated borrowing costs of SEK 82 M (80) reduced interest-bearing liabilities in the balance sheet. Interest-bearing liabilities of SEK 17,437 M (15,683) were recognised. The average remaining fixed-interest and loan maturity terms were 3.5 years (3.0) and 3.8 years (3.6), respectively, at year end. The average interest rate on the company's interest-bearing liabilities was 1.9% (2.2), including the effect of derivatives. The average interest rate decreased as a consequence of new borrowing at lower interest rates, repayment of loans with
| Fixed interest | Loan maturity | Interest-rate swaps | |||||
|---|---|---|---|---|---|---|---|
| Year of expiry | SEK M | Interest rate | Share | SEK M | Share | SEK M | Interest rate |
| 2020 | 1,932 | 1.6% | 11% | 123 | 1% | – | – |
| 2021 | 1,299 | 1.6% | 7% | 1,796 | 10% | – | – |
| 2022 | 1,271 | 1.9% | 7% | 1,250 | 7% | 471 | 0.7% |
| 2023 | 2,488 | 1.8% | 14% | 4,879 | 28% | 710 | 0.9% |
| 2024 | 224 | 1.6% | 1% | 5,217 | 30% | – | |
| >2024 | 10,305 | 2.1% | 59% | 4,254 | 24% | 829 | 2.2% |
| Total/average | 17,519 | 1.9% | 100% | 17,519 | 100% | 2,009 | 1.4% |
| Amounts in SEK M | 31 Dec 2019 | 31 Dec 2018 |
|---|---|---|
| Interest-bearing liabilities | 17,519 | 15,763 |
| Interest-bearing assets | –511 | –6 |
| Cash and cash equivalents | –86 | –73 |
| Listed shares | –1,690 | –872 |
| Net debt | 15,232 | 14,812 |
higher interest rates and early redemption of interest-rate swaps. Sagax prematurely redeemed four bond loans during the period.
Sagax has SEK 9,720 M (5,138) in loans at fixed interest rates. The company has interest-rate caps and interest-rate swaps with a total nominal value of SEK 6,261 M (6,198), of which interest-rate swaps with an average interest rate of 1.4% (1.5) accounted for SEK 2,009 M (2,471).
Sagax's working capital, excluding prepaid rental revenue and including listed shares, amounted to SEK 140 M (–1,059) at 31 December 2019. At the same date, unutilised credit facilities amounted to SEK 3,652 M (3,392). No additional collateral needs to be pledged to utilise these credit facilities.
| Maturity | SEK M | Current interest | Interest terms | Maturity date | ISIN code | |
|---|---|---|---|---|---|---|
| 2017-2021 | 600 | 2.40% | Stibor 3M+2.25% | 1 Feb 2021 | SE0010636274 | |
| 2017-2022 | 1,250 | 2.30% | Stibor 3M+2.15% | 15 Feb 2022 | SE0010324228 | |
| 2019-2023 | 500 | 1.05% | Stibor 3M+0.90% | 16 Jun 2023 | XS2093119175 | |
| 2019-20231) | 250 | 1.13% 1.13% |
16 Jun 2023 | XS2093119845 | ||
| Total/average | 2,600 | 1.97% | ||||
| Maturity | EUR M | Current interest | Interest terms | Maturity date | ISIN code | |
| 2018-20241) | 500 | 2.00% 2.00% |
17 Jan 2024 | XS1877540465 | ||
| 2019-20251) | 300 | 2.25% 2.25% |
13 Mar 2025 | XS1962543820 | ||
| 2019-20251) | 1082) | 0.87% 2.25%3) |
13 Mar 2025 | XS1962543820 | ||
| Total/average | 908 | 1.95% | ||||
| 1) Fixed-rate loans 2) The nominal value is EUR 100 M. 3) Coupon rate. |
||||||
| Derivative contracts, 31 December 2019 | ||||||
| Amounts in SEK M | Nominal amount |
Years to ma turity |
Market value 31 Dec 2019 |
Market value 31 Dec 2018 |
Change for the period |
|
| Nominal interest-rate swaps | 2,009 | 4.2 | –119 | –122 | 3 | |
| Interest-rate caps | 4,251 | 2.4 | 0 | 4 | –4 |
| Financial covenant in EMTN programme |
2019 31 Dec |
2018 31 Dec |
|
|---|---|---|---|
| Rating according to Moody's Investor Services | Baa3, Stable outlook | Baa3, Stable outlook | |
| Net debt/Total assets | <65% | 38% | 44% |
| Interest coverage ratio | >1.8x | 5.3x | 4.3x |
| Secured liabilities/total assets | <45% | 14% | 21% |
Total 6,261 3.0 –119 –117 1
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| Amounts in SEK M | Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec |
| Rental revenue | 2,581 | 2,247 | 663 | 591 |
| Other revenue Operating expenses |
27 –222 |
30 –197 |
1 –57 |
3 –56 |
| Maintenance costs | –84 | –59 | –25 | –13 |
| Site leasehold fees | – | –22 | – | –6 |
| Property tax | –121 | –93 | –32 | –23 |
| Other property expenses | –47 | –37 | –14 | –11 |
| Net operating income | 2,133 | 1,869 | 536 | 487 |
| Central administration | –122 | –132 | –44 | –54 |
| Profit from joint ventures and associated companies | 917 | 830 | 463 | 273 |
| – of which, profit from property management | 441 | 312 | 126 | 79 |
| – of which, changes in value | 690 | 677 | 441 | 260 |
| – of which, tax | –214 | –160 | –105 | –66 |
| Financial income | 20 | 35 | 2 | 3 |
| Financial expenses | –446 | –481 | –96 | – |
| Financial expense, interest component of leases | –24 | – | –6 | – |
| Profit including changes in value of joint ventures and associated companies |
2,478 | 2,121 | 854 | 597 |
| – of which, profit from property management | 2,001 | 1,603 | 518 | 403 |
| Changes in value: | ||||
| Properties, realised | –40 | –22 | –22 | –3 |
| Properties, unrealised | 1,301 | 1,265 | 775 | 219 |
| Financial instruments, realised | – | 36 | – | 5 |
| Financial instruments, unrealised | 889 | 211 | 146 | 10 |
| Profit before tax | 4,627 | 3,611 | 1,753 | 828 |
| Deferred tax | –416 | –435 | –298 | –116 |
| Current tax | –100 | –10 | 74 | 55 |
| Profit for the period | 4,111 | 3,166 | 1,529 | 767 |
| Other comprehensive income – items that may be reversed to profit or loss: |
||||
| Translation differences for foreign operations | 217 | 363 | –343 | 8 |
| Share of other comprehensive income for joint ventures | 13 | 3 | –10 | –1 |
| Translation differences pertaining to hedge accounting Tax on items that may be reversed to profit or loss |
–143 3 |
–49 –29 |
181 7 |
–16 6 |
| Comprehensive income for the period | 4,201 | 3,454 | 1,365 | 764 |
| Earnings per Class A and B share, SEK1) | 12.15 | 9.24 | 4.61 | 2.21 |
| Earnings per Class A and B share after dilution, SEK1) | 12.13 | 9.24 | 4.60 | 2.21 |
| Earnings per Class D share, SEK | 2.00 | 2.00 | 2.00 | 0.50 |
| Average no. of Class A and B shares, millions1) | 319.0 | 316.7 | 319.0 | 316.7 |
| Average no. of Class A and B shares after dilution, millions1) | 319.5 | 316.9 | 319.5 | 316.9 |
| Average number of Class D shares, millions | 105.7 | 83.0 | 105.7 | 83.0 |
1) Comparative figures have been adjusted for the bonus issue of Class A and B shares in 2019, by multiplying the number of shares by 2. The terms of the bonus issue were 1 Class A and 1 Class B share for each Class A and Class B share. The record date for the bonus issue was 3 June 2019.
| 2019 | 2018 | |
|---|---|---|
| Amounts in SEK M | 31 Dec | 31 Dec |
| Investment properties | 32,333 | 28,769 |
| Investment properties for sale | 292 | 255 |
| Leases, right-of-use assets | 346 | – |
| Joint ventures and associated companies | 5,693 | 3,286 |
| Fixed-income derivatives | 1 | 4 |
| Other fixed assets | 568 | 14 |
| Total fixed assets | 39,233 | 32,328 |
| Cash and bank balances | 86 | 73 |
| Listed shares | 405 | 872 |
| Other current assets | 429 | 417 |
| Total current assets | 921 | 1,362 |
| Total assets | 40,154 | 33,690 |
| Equity | 19,257 | 15,416 |
| Non-current interest-bearing liabilities | 16,052 | 13,866 |
| Deferred tax liabilities | 2,018 | 1,599 |
| Fixed-income derivatives | 119 | 122 |
| Other non-current liabilities | 464 | 67 |
| Total non-current liabilities | 18,653 | 15,654 |
| Commercial paper | 1,192 | 1,505 |
| Other current interest-bearing liabilities | 193 | 312 |
| Other current liabilities | 858 | 803 |
| Total current liabilities | 2,243 | 2,620 |
| Total equity and liabilities | 40,154 | 33,690 |
| Amounts in SEK M | 2019 Jan-Dec |
2018 Jan-Dec |
2019 Oct-Dec |
2018 Oct-Dec |
|---|---|---|---|---|
| Profit before tax Changes in value of financial instruments |
4,627 –889 |
3,611 –247 |
1,753 –146 |
828 –15 |
| Change in value of properties | –1,261 | –1,244 | –755 | –217 |
| Result from ownership of joint ventures and associated | ||||
| companies | -917 | –830 | -463 | –272 |
| Dividend from joint ventures and associated companies | 281 | 254 | 17 | – |
| Dissolution of allocated borrowing costs | 42 | 46 | 8 | 14 |
| Tax paid | –74 | –87 | –2 | –21 |
| Other items not included in cash flow | –14 | –15 | 13 | –1 |
| Cash flow from operating activities before changes in working capital |
1,795 | 1,490 | 426 | 316 |
| Cash flow from changes in current receivables | –4 | –88 | 108 | 3 |
| Cash flow from changes in current liabilities | 20 | 188 | –142 | –28 |
| Cash flow from operating activities | 1,811 | 1,590 | 392 | 291 |
| Acquisition of properties | –2,836 | –3,026 | –921 | –777 |
| Property sales | 1,413 | 24 | 492 | 1 |
| Investments in existing properties | –707 | –456 | –184 | –221 |
| Acquisition of listed shares | –64 | –450 | – | –253 |
| Sales of listed shares | – | 129 | – | 57 |
| Acquisition of financial instruments | –503 | – | –503 | – |
| Acquisition of joint ventures and associated companies | –178 | – | –178 | – |
| Capital contribution to joint ventures and associated | –150 | – | – | – |
| companies Change in other fixed assets |
–25 | 8 | –21 | – |
| Cash flow from investing activities | –3,051 | –3,771 | –1,315 | 1,192 |
| Issue of Class D and B shares | 198 | 1,125 | – | 165 |
| Dividend paid to shareholders | –560 | –479 | –62 | –57 |
| Incentive Plan | 9 | –2 | – | – |
| Borrowings | 7,322 | 8,487 | 1,087 | 1,831 |
| Repayment of loans | –5,734 | –6,707 | –482 | –1,274 |
| Early redemption of financial derivatives | – | –242 | – | – |
| Deposits from tenants | 28 | 14 | 5 | 2 |
| Change in other non-current liabilities | –11 | –2 | –3 | – |
| Cash flow from financing activities | 1,252 | 2,195 | 544 | 667 |
| Cash flow for the period | 12 | 14 | –380 | –234 |
| Exchange rate differences in cash and cash equivalents | 1 | –1 | –1 | – |
| Change in cash and cash equivalents | 13 | 13 | –381 | –234 |
| Cash and cash equivalents at beginning of period | 73 | 60 | 467 | 307 |
| Cash and cash equivalents at end of period | 86 | 73 | 86 | 73 |
| Amounts in SEK M | Share capital | Other contributed capital |
Reserves, translation differences |
Profit earned incl. net profit for the period |
Total equity1) |
|---|---|---|---|---|---|
| Equity, 31 December 2017 | 419 | 2,069 | 297 | 8,570 | 11,356 |
| Issue of Class D shares | 68 | 1,055 | – | – | 1,123 |
| Transaction costs | – | –8 | – | – | –8 |
| Issue of Class B shares, Incentive Plan | – | 10 | – | – | 10 |
| Dividends | – | – | – | –517 | –517 |
| Redemption of Incentive Plan | – | – | – | –4 | –4 |
| Incentive Plan | – | – | – | 3 | 3 |
| Comprehensive income, January-December 2018 |
– | – | 288 | 3,166 | 3,454 |
| Equity, 31 December 2018 | 487 | 3,126 | 585 | 11,218 | 15,416 |
| Issue of Class D shares | 10 | 191 | – | – | 201 |
| Transaction costs | –3 | – | – | –3 | |
| Bonus issue | 279 | –279 | – | – | – |
| Issue of Class B shares, Incentive Plan | 0 | 11 | – | – | 11 |
| Dividends | – | – | – | –566 | –566 |
| Redemption of Incentive Plan | – | – | – | –7 | –7 |
| Incentive Plan | – | – | – | 4 | 4 |
| Comprehensive income, | |||||
| January-December 2019 | – | – | 90 | 4,111 | 4,201 |
| Equity, 31 December 2019 | 776 | 3,046 | 675 | 14,760 | 19,257 |
1) Equity is attributable in its entirety to the Parent Company's shareholders.
| Profit items | Profit from property | Changes in value, properties | Profit | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| per segment | Rental revenue1) | management | Unrealised | Realised | before tax | |||||
| Amounts in SEK M | 2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
| Stockholm | 657 | 636 | 390 | 330 | 362 | 630 | – | – | 752 | 960 |
| Helsinki | 581 | 512 | 428 | 315 | 65 | 383 | –12 | 2 | 481 | 699 |
| Finland, university cities | 317 | 249 | 242 | 150 | 52 | 112 | –3 | – | 291 | 262 |
| Paris | 242 | 168 | 164 | 98 | 223 | 39 | –1 | – | 387 | 137 |
| Netherlands | 212 | 126 | 184 | 81 | 277 | 30 | – | – | 461 | 111 |
| Rest of Sweden | 195 | 206 | 126 | 156 | 16 | –40 | –14 | –1 | 130 | 115 |
| Rest of Finland | 233 | 226 | 184 | 161 | 179 | 86 | –13 | –23 | 351 | 224 |
| Rest of Europe | 144 | 123 | 129 | 93 | 128 | 24 | 1 | – | 258 | 118 |
| Sub-total | 2,581 | 2,247 | 1,850 | 1,384 | 1,301 | 1,264 | –40 | –22 | 3,110 | 2,626 |
| Financial instruments | – | – | – | – | – | – | – | – | 889 | 247 |
| Joint ventures | – | – | 441 | 312 | 692 | 369 | –5 | 1 | 917 | 830 |
| Other, non-specified | – | – | -289 | –93 | – | – | – | – | -289 | –93 |
| Total | 2,581 | 2,247 | 2,001 | 1,603 | 1,993 | 1,633 | –45 | –21 | 4,627 | 3,611 |
| Asset items per segment |
Market value properties |
Investment properties |
Acquisition properties |
Divestment properties |
||||
|---|---|---|---|---|---|---|---|---|
| Amounts in SEK M | 2019 31 Dec |
2018 31 Dec |
2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
2019 Jan-Dec |
2018 Jan-Dec |
| Stockholm | 9,840 | 9,822 | 302 | 232 | 27 | 290 | –672 | – |
| Helsinki | 6,708 | 6,333 | 206 | 177 | 53 | 541 | –43 | – |
| Finland, university cities | 3,148 | 2,732 | 23 | 19 | 309 | 694 | –4 | – |
| Paris | 2,919 | 1,995 | 125 | 8 | 674 | 501 | –117 | – |
| Netherlands | 2,982 | 1,817 | 16 | 4 | 859 | 895 | – | – |
| Rest of Sweden | 1,828 | 2,392 | 2 | 3 | – | – | –583 | -16 |
| Rest of Finland | 2,634 | 2,373 | 31 | 10 | 43 | – | –25 | -29 |
| Rest of Europe | 2,565 | 1,560 | 3 | 3 | 871 | 105 | –10 | – |
| Total | 32,625 | 29,024 | 707 | 456 | 2,836 | 3,026 | –1,453 | -45 |
1) All rental revenue pertains to external tenants.
| 2019 Jan-Dec |
2018 Jan-Dec |
2017 Jan-Dec |
2016 Jan-Dec |
2015 Jan-Dec |
2014 Jan-Dec |
|
|---|---|---|---|---|---|---|
| Property-related key figures | ||||||
| Yield, % | 6.4 | 6.8 | 6.9 | 7.1 | 7.4 | 7.6 |
| Surplus ratio, % | 83 | 83 | 83 | 85 | 86 | 86 |
| Occupancy rate by area, % | 95 | 95 | 95 | 93 | 97 | 95 |
| Economic occupancy rate, % | 95 | 95 | 94 | 94 | 96 | 94 |
| Lettable area at the end of the period, 000 sqm | 3,022 | 2,850 | 2,489 | 2,312 | 1,860 | 1,634 |
| No. of properties at the end of the period | 553 | 512 | 495 | 440 | 225 | 184 |
| Financial key figures | ||||||
| Return on total capital, % | 7 | 7 | 7 | 7 | 8 | 8 |
| Return on equity, % | 24 | 24 | 30 | 33 | 32 | 18 |
| Average interest rate, % | 1.9 | 2.2 | 3.0 | 3.1 | 3.3 | 4.1 |
| Fixed-interest period incl. derivatives, years | 3.5 | 3.0 | 2.1 | 2.7 | 3.0 | 3.0 |
| Loan maturity, years | 3.8 | 3.6 | 3.1 | 3.6 | 4.2 | 3.2 |
| Equity/assets ratio, % | 48 | 46 | 42 | 38 | 34 | 32 |
| Debt ratio, % | 44 | 47 | 50 | 54 | 59 | 59 |
| Net debt/EBITDA, multiple | 6.6 | 7.4 | 8.1 | 8.7 | 9.3 | 8.8 |
| Interest coverage ratio, multiple | 4.9 | 4.2 | 3.7 | 3.4 | 2.9 | 2.6 |
| Interest coverage ratio, EMTN programme, multiple | 5.3 | 4.3 | 4.0 | 3.7 | 3.3 | 2.9 |
| Data per Class A and B share1) | ||||||
| Price of Class B share at the end of the period, SEK | 136.20 | 65.70 | 49.10 | 40.87 | 35.87 | 22.00 |
| Net asset value, SEK | 56.77 | 44.22 | 35.04 | 26.89 | 17.76 | 13.62 |
| Equity, SEK | 46.86 | 35.70 | 27.15 | 19.61 | 13.01 | 8.75 |
| Equity after dilution, SEK | 46.78 | 35.67 | 27.13 | 19.57 | 12.96 | 8.72 |
| Earnings, SEK | 12.15 | 9.24 | 8.86 | 7.27 | 4.94 | 2.03 |
| Earnings after dilution, SEK | 12.13 | 9.24 | 8.85 | 7.25 | 4.93 | 2.03 |
| Profit from property management, SEK | 5.51 | 4.31 | 3.71 | 2.99 | 2.46 | 1.87 |
| Profit from property management after dilution, SEK | 5.51 | 4.31 | 3.70 | 2.98 | 2.45 | 1.87 |
| Cash flow, SEK | 4.86 | 3.95 | 3.27 | 2.57 | 2.00 | 1.50 |
| Cash flow after dilution, SEK | 4.86 | 3.95 | 3.26 | 2.56 | 2.00 | 1.50 |
| Dividend per share, SEK (proposed for 2019) | 1.30 | 1.00 | 0.90 | 0.72 | 0.58 | 0.40 |
| No. at end of period, millions | 319.1 | 316.8 | 316.5 | 316.5 | 316.5 | 316.5 |
| No. at end of period after dilution, millions | 319.5 | 317.1 | 316.7 | 317.1 | 317.5 | 317.4 |
| Average no., millions | 317.9 | 316.7 | 316.5 | 316.5 | 316.5 | 316.5 |
| Average no. after dilution, millions | 318.3 | 316.9 | 317.0 | 317.2 | 317.6 | 317.3 |
| Data per Class D share | ||||||
| Share price at the end of period, SEK | 36.35 | 31.70 | 29.92 | 28.30 | – | – |
| Equity, SEK | 35.00 | 35.00 | 35.00 | 35.00 | – | – |
| Earnings, SEK | 2.00 | 2.00 | 2.00 | 2.00 | – | – |
| Dividend per share, SEK | 2.00 | 2.00 | 2.00 | 2.00 | – | – |
| No. at end of period, millions | 107.8 | 101.9 | 63.6 | 18.2 | – | – |
| Average no., millions | 105.7 | 83.0 | 43.1 | 2.9 | – | – |
| Data per preference share | ||||||
| Share price at the end of period, SEK | 38.40 | 34.85 | 33.40 | 30.40 | 31.30 | 36.00 |
| Equity, SEK | 32.00 | 32.00 | 32.00 | 32.00 | 32.00 | 32.00 |
| Earnings, SEK | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
| Dividend per share, SEK | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
| No. at end of period, millions | 16.8 | 16.8 | 16.8 | 58.2 | 58.2 | 55.5 |
| Average no., millions | 16.8 | 16.8 | 35.5 | 58.2 | 57.8 | 52.2 |
1) Excluding 2,000,000 Class B shares bought back by AB Sagax. Comparative figures have been adjusted for the bonus issue of Class A and B shares in 2019, by multiplying the number of shares by 2. The terms of the bonus issue were 1 Class A and 1 Class B share for each Class A and Class B share.
The record date for the bonus issue was 3 June 2019.
| 2019 2018 Amounts in SEK M Jan-Dec Jan-Dec Net sales 73 62 Administration costs –89 –107 Loss before financial income and expenses –16 –45 Profit from participations in Group companies 258 145 Profit from participations in joint ventures 64 54 Financial income 616 460 Financial expenses –673 –395 Profit before tax and appropriations 249 219 Appropriations 98 –6 Tax –4 –5 Profit for the period 343 208 Other comprehensive income Other comprehensive income – – |
|||
|---|---|---|---|
| Comprehensive income for the period | 343 | 208 |
| 2019 | 2018 | |
|---|---|---|
| Amounts in SEK M | 31 Dec | 31 Dec |
| Tangible fixed assets | 2 | 2 |
| Receivables from Group companies | 1,627 | 2,144 |
| Other financial fixed assets | 6,776 | 5,919 |
| Total fixed assets | 8,404 | 8,065 |
| Cash and bank balances | 1 | 2 |
| Receivables from Group companies | 11,497 | 9,630 |
| Other current assets | 58 | 69 |
| Total current assets | 11,556 | 9,701 |
| Total assets | 19,961 | 17,766 |
| Equity | 3,821 | 3,842 |
| Untaxed reserves | 30 | 23 |
| Non-current interest-bearing liabilities | 7,868 | 9,311 |
| Liabilities to Group companies | 3,423 | 257 |
| Deferred tax liabilities | 3 | 3 |
| Total non-current liabilities | 11,294 | 9,571 |
| Current interest-bearing liabilities | 1,295 | 1,625 |
| Liabilities to Group companies | 3,223 | 2,481 |
| Other current liabilities | 298 | 223 |
| Total current liabilities | 4,815 | 4,330 |
| Total equity, untaxed reserves and liabilities | 19,961 | 17,766 |
At the end of the period, Sagax had 14,830 (10,867) shareholders. Sagax's market capitalisation amounted to SEK 47,812 M (24,664). Sagax has four classes of shares: Class A, B and D common shares, and preference shares. The shares are listed on Nasdaq Stockholm, Large Cap.
On 3 June, Sagax implemented a 1:1 bonus issue with the issue of new Class A and Class B common shares. The bonus issue reduced the share price of the relevant shares and increased the number of shares outstanding.
A total of 443,575,439 shares were outstanding at the end of the period, of which 2,000,000 were Class B treasury shares. According to the Articles of Association, each preference share confers a preferential right to SEK 2.00 in annual dividends. Class D shares are entitled to five times the total dividend on Class A and B shares, although not more than SEK 2.00 per share annually.
Sagax has three warrant plans for the company's employees. In total, Sagax's employees hold warrants corresponding to 0.6% of the number of Class A and B shares outstanding. The company's CEO and Board Members do not participate in the plans. These plans are valid for three years, and encompass the periods 2017-2020, 2018-2021 and 2019-2022. The subscription price corresponds to the price paid for the Class B share at the start of the warrant plan, converted using the average share price trend for the listed property companies in accordance with Carnegie's property index (CREX) during the corresponding period. Accordingly, the warrants will have a value on condition that the price performance of the Sagax share exceeds the average for the listed property companies during each three-year period.
Profit from property management per Class B share after dilution on a rolling 12-month basis amounted to SEK 5.51 (4.31), which, compared with the share price of the Class B share at the end of the period, corresponded to a multiple of 24.7 (15.0).
Equity per Class A and B share after dilution amounted to SEK 46.78 (35.67). Net asset value per Class A and B share amounted to SEK 56.77 (44.22). The share price for the Class B share at the end of the period was 292% (182) of equity per Class B share and 240% (147) of net asset value per Class B share.
| Price paid, SEK | Turnover rate on an annual basis, % |
Average trading volume per trading day, SEK M |
||||
|---|---|---|---|---|---|---|
| 31 Dec 2019 | 31 Dec 2018 Jan–Dec 2019 Jan–Dec 2018 Jan–Dec 2019 Jan–Dec 2018 | |||||
| Class A shares | 139.00 | 76.75 | 3 | 3 | 0.4 | 0.2 |
| Class B shares | 136.20 | 64.70 | 9 | 9 | 9.5 | 5.6 |
| Class D shares | 36.35 | 31.70 | 62 | 40 | 9.3 | 4.5 |
| Preference shares | 38.40 | 34.85 | 36 | 33 | 0.9 | 0.8 |
| 2019 31 Dec |
2018 31 Dec |
2017 31 Dec |
2016 31 Dec |
2015 31 Dec |
2014 31 Dec |
|
|---|---|---|---|---|---|---|
| Price of Class B share at the end of the period, SEK | 136.20 | 64.70 | 49.10 | 40.87 | 35.87 | 22.00 |
| Profit from property management after dilution, SEK 2) | 5.51 | 4.30 | 3.70 | 2.98 | 2.45 | 1.86 |
| Cash flow after dilution, SEK 2) 3) | 4.86 | 3.94 | 3.26 | 2.56 | 2.00 | 1.50 |
| Equity after dilution, SEK | 46.78 | 35.67 | 27.13 | 19.57 | 12.96 | 8.72 |
| Net asset value, SEK | 56.77 | 44.22 | 35.04 | 26.89 | 17.76 | 13.62 |
| Price of Class B share/Profit from property management, | ||||||
| multiple2) | 24.7 | 15.0 | 13.3 | 13.7 | 14.6 | 11.8 |
| Price of Class B share/Cash flow, multiple 2) 3) | 28.0 | 16.4 | 15.1 | 16.0 | 18.0 | 14.7 |
| Price of Class B share/Equity, % | 292 | 182 | 181 | 209 | 277 | 252 |
| Price of Class B share/Net asset value, % | 240 | 147 | 140 | 152 | 202 | 162 |
1) Comparative figures have been adjusted for the bonus issue of Class A and B shares in 2019, by multiplying the number of shares by 2. The terms of the bonus issue were 1 Class A and 1 Class B share for each Class A and Class B share. The record date for the bonus issue was 3 June 2019.
2) Profit from property management and cash flow pertain to a rolling 12 months.
3) Cash flow pertains to cash flow from operating activities before changes in working capital.
Share price in relation to equity and Net asset value
| No. of shares | No. of shareholders |
Shareholder category | No. of share holders |
Share of vot ing power |
Shareholders by country |
No. of shareholders |
Share of voting power |
|---|---|---|---|---|---|---|---|
| 1–500 | 8,719 | Private individuals | Sweden | 13,896 | 89% | ||
| 501–1,000 | 1,446 | residing in Sweden | 13,131 | 9% | Switzerland | 18 | 3% |
| 1,001–2,000 | 1,226 | Private individuals residing abroad |
97 | 0% | USA | 58 | 2% |
| 2,001–5,000 | 1,420 | Companies/institutions | |||||
| 5,001–10,000 | 751 | in Sweden | 765 | 81% | UK | 27 | 2% |
| 10,001–50,000 | 877 | Companies/institutions | Luxembourg | 51 | 2% | ||
| 50,001– | 391 | abroad | 837 | 10% | Other | 780 | 3% |
| Total | 14,830 | Total | 14,830 | 100% | Total | 14,830 | 100% |
| 1) Including shares held by AB Sagax. |
| No. of shares | Percentage of | ||||||
|---|---|---|---|---|---|---|---|
| Class A | |||||||
| David Mindus and companies | shares 10,548,800 |
Class B shares 76,402,050 |
Class D shares 262,228 |
Preference shares Share capital 775 |
19.7% | Votes2) 26.7% |
|
| Rutger Arnhult and companies | 5,723,170 | 34,763,194 | 4,401,254 | 3,017 | 10.1% | 14.1% | |
| Staffan Salén and companies | 4,264,928 | 34,970,660 | 50,600 | – | 8.9% | 11.4% | |
| Third Swedish National Pension Fund | – | 24,227,658 | – | – | 5.5% | 3.5% | |
| Fourth Swedish National Pension Fund | 5,716 | 12,804,340 | 6,422,494 | – | 4.3% | 2.8% | |
| Länsförsäkringar Fonder | – | 17,333,086 | – | – | 3.9% | 2.5% | |
| SEB Fonder | – | 12,987,095 | 190,753 | – | 3.0% | 1.9% | |
| Avanza Pension | 47,769 | 1,016,029 | 9,953,870 | 1,405,241 | 2.8% | 1.9% | |
| Erik Selin and companies | 1,148,760 | 4,515,000 | 2,021,759 | – | 1.7% | 2.6% | |
| Swedbank Robur Fonder | 500,000 | 6,694,142 | 190,216 | – | 1.7% | 1.7% | |
| Swedish Foundation for Strategic Research | – | – | 5,576,376 | – | 1.3% | 0.8% | |
| Ilmarinen Mutual Pension Insurance Company | – | – | 4,900,000 | – | 1.1% | 0.7% | |
| ICA-Handlarnas Förbund | – | – | 4,005,000 | – | 0.9% | 0.6% | |
| Second Swedish National Pension Fund | – | 3,869,050 | 645 | – | 0.9% | 0.6% | |
| Vanguard | – | – | 3,196,582 | 498,597 | 0.8% | 0.5% | |
| Lars Ingvarsson and companies | 100,000 | 3,346,410 | 100,000 | – | 0.8% | 0.7% | |
| Filip Engelbert | 241,000 | 2,119,784 | – | – | 0.5% | 0.7% | |
| Johan Thorell and companies | 203,254 | 2,032,540 | – | – | 0.5% | 0.6% | |
| Livförsäkringsbolaget Skandia | 258,288 | 1,709,092 | 22,096 | 20,212 | 0.5% | 0.6% | |
| T. Ljungberg B.V. | 370,000 | – | 32,066 | – | 0.1% | 0.5% | |
| Total 20 largest shareholders | 23,411,685 238,790,130 | 41,325,939 | 1,927,842 | 68.9% | 75.6% | ||
| Other shareholders | 3,421,859 | 51,367,737 | 66,474,061 | 14,856,186 | 30.7% | 24.4% | |
| Sub-total | 26,833,544 290,157,867 | 107,800,000 | 16,784,028 | 99.5% | 100.0% | ||
| Shares held by AB Sagax | - | 2,000,000 | - | - | 0.5% | 0.0% | |
| Total | 26,833,544 | 292,157,867 | 107,800,000 | 16,784,028 | 100.0% | 100.0% | |
| – of which, Board and employees | 15,454,838 | 119,610,177 | 690,413 | 923 | 30.6% | 40.2% |
1) The ownership structure at 31 December 2019 is based on information from Euroclear Sweden and Modular Finance. 2) Voting rights for treasury shares held by AB Sagax have been excluded.
| Voting rights and proportion of share capital | |||||
|---|---|---|---|---|---|
| Class of share | No. of shares | Voting rights per share |
No. of votes | Proportion of votes |
Proportion of share capital |
| Class A shares | 26,833,544 | 1.00 | 26,833,544 | 39% | 6% |
| Class B shares | 292,157,867 | 0.10 | 29,215,787 | 43% | 66% |
| Class D shares | 107,800,000 | 0.10 | 10,780,000 | 16% | 24% |
| Preference shares | 16,784,028 | 0.10 | 1,678,403 | 2% | 4% |
| Total | 443,575,439 | 68,507,734 | 100% | 100% |
To prepare the accounts based on generally accepted accounting policies, company management must make judgements and assumptions that affect asset and liability items, revenue and expense items recognised in the accounts and other information provided. The actual outcome may differ from these judgements.
The valuation of investment properties can be significantly affected by the judgments and assumptions made by company management. To reduce the risk of incorrect valuations, Sagax has engaged authorised external appraisers to assess the market value of the majority of the properties as of 31 December 2019, see page 10. When valuing properties, the constant existence of uncertainties regarding the assumptions made must be taken into account. A sensitivity analysis for property values in relation to changes in the assumptions on yield requirements, cost of capital, rental revenue and property expenses is presented below.
Sagax prioritises leasing to tenants with a high credit rating and long-term leases, despite these entailing slightly lower immediate earnings. The intention is to reduce the risk of rent losses and the risk of vacancies.
The geographic distribution of Sagax's property portfolio and the industries of its tenants are highly diversified. Sagax's lease structure of many small leases help reduce the risks of vacancies and rent losses.
Sagax's financial expenses comprise the single largest expense for the Group. To reduce Sagax's exposure to rising interest rates, the Group has a significant number of its interest expenses from fixed-rate loans. To limit interest-rate risk for loans at floating interest rates, interest-rate swaps and interest-rate caps are used. Calculated on the existing funding terms for the Group's interest-bearing liabilities on 31 December 2019, a rise in market interest rates of 1 percentage point would have increased Sagax's annualised interest expenses by SEK 46 M (65). A reduction in market interest rates of 1 percentage point would have lowered Sagax's interest expenses by SEK 4 M (3) on an annual basis.
Sagax's funding primarily comprises equity and interestbearing liabilities. Sagax endeavours to secure a long, average remaining term of interest-bearing liabilities in a bid to limit its refinancing risk, defined as the risk that refinancing existing debt cannot take place on reasonable terms. The company's long-term funding comprises listed bond loans and bank loans. Both the bond loans and bank loans are subject to covenants, for example, with respect to debt ratio and maintaining an interest coverage ratio. This means that creditors may be entitled to demand repayment of granted credit lines prematurely or request changed conditions if these covenants are not met by the borrower. The complete terms and conditions for the bond loans are available at www.sagax.se. A sensitivity analysis is presented below, showing the effects of a change in properties' occupancy rate on Sagax's interest coverage ratio. A sensitivity analysis is presented below, showing the effects of a change in the properties' market value on Sagax's debt ratio.
The amounts in the consolidated balance sheet are partly exposed to exchange-rate fluctuations, particularly for the EUR. Net exposure on 31 December 2019, assets less liabilities in EUR, amounted to SEK 6,205 M (5,514). In accordance with
| –20% | –10% | 0% | +10% | +20% | |
|---|---|---|---|---|---|
| Value change, SEK M | –6,525 | –3,262 | – | 3,262 | 6,525 |
| Debt ratio, % | 52 | 48 | 44 | 40 | 38 |
| Change | Value change, SEK M |
|
|---|---|---|
| Yield requirement | +/– 0.25% points | –830/+931 |
| Cost of capital | +/– 0.25% points | –763/+803 |
| Rental revenue | +/– 5% | +1,207/–1,221 |
| Property expenses | +/– 5% | –216/+206 |
| –10% | –5% | 0% | +5% | +10% | |
|---|---|---|---|---|---|
| Occupancy rate, % Interest coverage |
86 | 91 | 96 | 100 | N/A |
| ratio, % | 437 | 464 | 492 | 519 | N/A |
IAS 21, the currency effects for foreign operations and hedge accounting are recognised in Other comprehensive income. Other currency effects are recognised in profit or loss.
In a decision of 20 December 2016 pertaining to the 2014 income year, the Swedish Tax Agency denied the Group company Sagax Bruket Fastigheter AB deductions for loss carryforwards of SEK 277 M and imposed additional tax of SEK 28 M. In a ruling on 27 February 2018, the Administrative Court upheld the Swedish Tax Agency's claim. On 2 December 2019, the Administrative Court of Appeal upheld Sagax's appeal of the Administrative Court's ruling and the decision was annulled. The Tax Agency has appealed the Administrative Court of Appeal's ruling.
In a decision of 7 December 2017 pertaining to the 2015 income year, the Tax Agency also denied the group company Firethorne AB deductions for loss carryforwards of SEK 1,166 M. In a ruling on 7 February 2019, the Administrative Court upheld the Tax Agency's decision. Sagax is of the opinion that the Tax Agency's decisions are incorrect and the companies concerned have appealed the decision. If the Tax Agency's decisions were to be upheld, Sagax estimates that the negative effect recognised in earnings for the Group would be SEK 85 M and SEK 156 M, respectively.
Sagax's other risks are described in the 2018 Annual Report, on pages 50-53.
Sagax's exposure to material risks in the company's operations is presented below.
| Sensitivity analysis at 31 December 20191) | ||||
|---|---|---|---|---|
| Amounts in SEK M | Change | Effect on profit from property management, annual basis |
Effect on profit after tax, annual basis |
Effect on equity |
| Economic occupancy rate | +/–1% | +/–26 | +/–21 | +/–21 |
| Rental revenue | +/–1% | +/–26 | +/–21 | +/–21 |
| Property expenses | +/–1% | +/–5 | +/–4 | +/–4 |
| Interest expenses for liabilities in SEK including fixed-income derivatives | +/–1% | –28/+11 | –23/+9 | –23/+9 |
| Interest expenses for liabilities in EUR including fixed-income derivatives | +/–1% | –18/–7 | –15/–5 | –15/–5 |
| Interest expenses for liabilities in SEK excluding fixed-income derivatives | +/–1% | –41/+24 | –33/+19 | –33/+19 |
| Interest expenses for liabilities in EUR excluding fixed-income derivatives | +/–1% | –25/+1 | –20/– | –20/– |
| Change in SEK/EUR exchange rate2) | +/–10% | +/–118 | +/–92 | +/–621 |
| Changed rent level for contract maturity in 2019 | +/–10% | +/–32 | +/–26 | +/–26 |
1) Excluding share in profit of joint ventures.
2) Sagax's net exposure to the SEK/EUR exchange rate comprises assets and liabilities recognized in EUR, in addition to revenue and expenses in EUR.
On 24 January, it was announced in a press release that Sagax has signed an agreement to acquire properties in Spain for an amount corresponding to SEK 1,560 M. The acquisition is conditional on certain pre-emption rights not being exercised and that a due diligence is completed with satisfactory results. These conditions are expected to be met in February 2020, at which point the transaction will then be completed during the first quarter of 2020. The acquisition refer to 37 encompassing 172,000 square metres of lettable area and 332,000 square metres of land. The properties have been developed with industrial buildings surrounded by car parks and marshalling yards. The properties are let to MAG which uses the premises for foodstuff wholesale operations for the HORECA segment. MAG, a leading Spanish food wholesale, generated sales of SEK 11 billion in 2018. MAG is part of the Bright Food (Group) Co., Ltd. 48% of the property value is concentrated to Catalonia. 27% of the portfolio is found in Barcelona and Madrid. The remaining average lease term is 5.8 years and the annual rental value corresponds to SEK 106 M.
On 27 January, it was announced in a press release that Sagax had issued an unsecured bond loan of EUR 300 M in the European capital market as part of its EMTN programme. The bond loan has a duration of seven years and extends to 30 January 2027 with a fixed interest coupon of 1.125%.
On 29 January, it was announced in a press release that Sagax had acquired an undeveloped property comprising 23,600 square metres of land in Vantaa, 20 minutes north of central Helsinki and ten minutes from Helsinki-Vantaa Airport. Sagax has also agreed on a turnkey contract with the Finnish construction group SRV Group Plc for 10,000 square metres of warehouse and business premises with offices. Sagax's total investment corresponds to SEK 245 M. The
contract will commenced in the first quarter of 2020 and is scheduled for completion in the first quarter of 2021. The occupancy rate of the property is 76%. The average term of the lease will be 12 years on completion of the contract. The remaining 24% of the rental value of the property is subject to a five-year rental guarantee. The total rental value corresponds to SEK 20 M per year. The investment will contribute to Sagax's profit from property management and cash flow from the second quarter of 2021.
On 7 February, it was announced in a press release that the Board of Directors of AB Sagax (publ) intends to propose a distribution in kind of shares in which 30 Class A or Class B common shares in Sagax will confer the right to one (1) share in Torslanda Property Investment AB (publ) ("TPI") following a 10:1 split of the TPI share. The proportion of distributed shares corresponds to 15% of the number of shares in TPI. The Board intends to present this proposal to shareholders at Sagax's Annual General Meeting on 6 May 2020. Sagax owns 78% of the number of outstanding shares and votes in TPI through Söderport Holding AB, which is jointly owned by Sagax and Nyfosa AB. Sagax and Nyfosa AB intend to jointly distribute a holding corresponding to a total of 30% of the number of outstanding shares and votes in TPI to their respective shareholders. The distribution will increase the number of shareholders in TPI, which will create a platform for more appropriate trading, which will benefit shareholders and facilitate the continued development of the company. It is proposed that 30 Class A or Class B common shares in Sagax will confer the right to one (1) share in TPI following a 10:1 split of the TPI share. Sagax will make arrangements for selling excess units (fractions) on behalf of the affected shareholders.
Sagax complies with the International Financial Reporting Standards (IFRS), as adopted by the EU, and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). In addition, the consolidated financial statements have been prepared in accordance with Swedish law applying Recommendation RFR 1 Supplementary Accounting Rules for Corporate Groups of the Swedish Financial Reporting Board.
This interim report has been prepared in accordance with International Accounting Standards (IAS) 34.
IFRS 16 Leases entered force on 1 January 2019 and has been applied by Sagax from that date without retrospective restatement. Accounting for lessors is essentially unchanged. Under the new standard, lessees recognise leases in the balance sheet as a right-of-use asset and as a corresponding liability. Sagax analysed the Group's leases and identified site leasehold agreements as the most material. On 1 January 2019, the value of the right-of-use asset for site leasehold agreements amounted to SEK 340 M.Sagax also has other leases pertaining to offices, vehicles, office equipment and land leases. According to the new standard, site leasehold fees will no longer be recognised as property expenses but instead as a financial expense. Lease expenses for other leases are distributed between depreciation and financial expense. The change in recognition has a limited impact on a few KPIs, such as return on total capital, net debt/ total assets and the interest coverage ratio.
IFRIC 23 entered force on 1 January 2019 and has been applied by Sagax from that date without retrospective restatement. IFRIC 23 addresses how uncertainty over amounts of income tax are to be recognised and has a highly limited impact on the Group's financial statements.
Aside from the adjustments to IFRS 16, the accounting policies and calculation methods applied in this report are essentially unchanged compared with those applied in the 2018 Annual Report.
The properties were valued in accordance with level 3 of the IFRS fair value hierarchy. The fair value of financial instruments essentially corresponds with the carrying amount. No changes to the categorisation of financial instruments were made during the period. The derivatives were measured in accordance with level 2 of the fair value hierarchy.
The Parent Company applies the Swedish Annual Accounts Act and RFR 2 Accounting for Legal Entities.
Rounding-off differences may occur in this report.
The Board of Directors and CEO give their assurance that this interim report provides a fair overview of the company's and the Group's operations, financial position and earnings and describes significant risks and uncertainties faced by the company and the companies included in the Group.
Stockholm, 7 February 2020 AB SAGAX (publ) Corporate Registration Number 556520-0028
Staffan Salén Johan Cederlund Filip Engelbert Chairman of the Board Board member Board member
David Mindus Johan Thorell Ulrika Werdelin CEO and Board member Board member Board member
This constitutes information that AB Sagax (publ) is legally obliged to publish under the EU's Market Abuse Regulation. The information was released for publication on 7 February 2020 at 3:30 p.m. CET.
| Interim Report January-March 2020 | 6 May 2020 |
|---|---|
| Annual Report | April 2020 |
| Annual General Meeting 2020 | 6 May 2020 |
| Interim Report January-June 2020 | 13 July 2020 |
| Interim Report January-September 2020 | 27 October 2020 |
| ■ Final day for trading including dividend rights ■ First day for trading excluding dividend rights ■ Record date for dividend payment ■ Expected payment date by Euroclear1) |
27 March 2020 30 March 2020 31 March 2020 3 April 2020 |
|---|---|
| June 2020 ■ Final day for trading including dividend rights ■ First day for trading excluding dividend rights ■ Record date for dividend payment ■ Expected payment date by Euroclear1) |
26 June 2020 29 June 2020 30 June 2020 3 July 2020 |
| September 2020 ■ Final day for trading including dividend rights ■ First day for trading excluding dividend rights ■ Record date for dividend payment ■ Expected payment date by Euroclear1) |
28 September 2020 29 September 2020 30 September 2020 5 October 2020 |
| December 2020 ■ Final day for trading including dividend rights ■ First day for trading excluding dividend rights ■ Record date for dividend payment ■ Expected payment date by Euroclear1) |
28 December 2020 29 December 2020 30 December 2020 7 January 2021 |
1) Payment is made on the third banking day following the record date for Swedish issuers. Sagax is unable to affect this date.
David Mindus, CEO +46 8 545 83 540, [email protected]
Agneta Segerhammar, CFO +46 8 545 83 540, [email protected]
Visit us at www.sagax.se.
Sagax applies the European Securities and Market Authority's (ESMA) Guidelines on the Alternative Performance Measures. Alternative performance measures refer to financial measures of historical or future earnings trends, financial position, financial results or cash flows that are not defined or stated in the applicable rules for financial reporting, which in Sagax's case is IFRS. The basis of the alternative performance measures provided is that they are used by company management to assess the financial performance and thus are considered to provide valuable information to shareholders and other stakeholders.
The table below presents definitions of Sagax's key performance indicators. The calculation of alternative performance measures is described separately on the following pages.
| Key performance indicators | Description | Reason for alternative performance measure |
|---|---|---|
| Return on equity | Profit for the period, recalculated to 12 months, as a percentage of aver age equity (opening and closing balances)/2 for the period. |
This key performance indicator shows how shareholders' capital yields interest during the period. |
| Return on total capital | Profit for the period, recalculated to 12 months, after net financial items after reversal of financial expenses as a percentage of average total assets for the period. |
This key performance indicator shows the ability to generate earnings on the Group's assets, excluding financing costs. |
| Occupancy rate by area | Contracted area directly after the end of the period as a percentage of total lettable area directly after the end of the period. |
This key performance indicator shows the occupancy situation. |
| Debt ratio | Interest-bearing liabilities at the end of the period as a percentage of total assets at the end of the period. |
This key performance indicator shows financial risk. |
| Yield | Net operating income for the period (including property administration) with add-back of site leasehold fees, recalculated to 12 months, adjusted for the holding periods of the properties during the period as a percent age of the carrying amounts of the properties at the end of the period. |
The key performance indicator shows the earnings gen eration of the operations before financial expenses and central administration costs are taken into account. |
| EBITDA | Net operating income less central administration costs plus dividends received from joint ventures. |
Sagax uses EBITDA so that the EBITDA/Net debt key performance indicator shows financial risk. |
| Equity per Class A and B share | Equity at the end of the period in relation to the number of Class A and B shares at the end of the period after taking into account equity attribut able to Class D shares and preference shares. |
The key performance indicator shows the owner's share of equity. |
| Equity per Class D share | Equity at the end of the period in relation to the number of common shares at the end of the period after taking into account equity attribut able to preference shares. Equity is restricted to SEK 35.00 per Class D share. |
The key performance indicator shows the owner's share of equity. |
| Equity per preference share | Equity per preference share corresponds to the preferential right of the preference share on liquidation of the company (SEK 30 per preference share) and the share's accumulated preferential right to dividends (SEK 2 per year). |
The key performance indicator shows the owner's share of equity. |
| Economic occupancy rate | Contractual annual rent directly after the end of the period as a percent age of rental value directly after the end of the period. |
The key performance indicator shows the economic degree of utilisation of the Group's properties. |
| EURIBOR | EURIBOR, or the Euro Interbank Offered Rate, is a daily reference rate based on the average of the interest rates at which euro interbank term deposits are being offered by one prime bank to another within the EMU zone. |
Not an alternative performance measure. |
| Property | Pertains to properties held under title or site leasehold. | Not an alternative performance measure. |
| Profit from property management | Profit excluding changes in value and tax. | An indicator of the earnings generation in the opera tions, excluding changes in value. |
| Profit from property management per Class A and B share after dilution |
Profit from property management for the period reduced by dividends on Class D shares and preference shares, divided by the average number of Class A and B shares after dilution. |
An indicator of the earnings generation of the assets, excluding the changes in value accruing to holders of Class A and B shares. |
| Rental value | The contractual annual rent applicable directly after the end of the peri od, with supplements for estimated market rents for vacant premises. |
The key performance indicator shows the Group's income potential. |
| IFRS | International Financial Reporting Standards. International Financial Reporting Standards (IFRS), to be applied for consolidated financial state ments by listed companies within the EU. |
Not an alternative performance measure. |
| Joint venture | Partnership form whereby several owners have a shared controlling influence. |
Not an alternative performance measure. |
| Key performance indicators | Description | Reason for alternative performance measure |
|---|---|---|
| Cash flow per Class A and B share | Profit before tax adjusted for items not included in cash flow less tax paid in relation to the average number of Class A and B shares. Dividends on Class D shares and preference shares for the period have also been deducted from profit before tax. Dividends received from joint ventures have been added to profit before tax. |
The key performance indicator shows the amount of cash flow for the period that can be considered to be attributable to owners of Class A and Class B shares. |
| Net debt | Interest-bearing liabilities less interest-bearing assets, cash and cash equivalents, and listed shares. |
The key performance indicator shows the Group's indebtedness. |
| Net debt/Total assets | Interest-bearing liabilities less interest-bearing assets, cash and cash equivalents, and listed shares as a percentage of total assets. |
This key performance indicator shows financial risk. |
| Preference equity | Equity per preference share multiplied by the number of preference shares outstanding. |
The key performance indicator shows equity attributable to preference shareholders. |
| Earnings per Class A and B share | Profit in relation to the average number of Class A and B shares after taking into account the portion of profit for the period represented by dividends on Class D shares and preference shares. |
Not an alternative performance measure. |
| Earnings per Class D share | Class D shares are entitled to five times the total dividend on Class A and B shares, although not more than SEK 2.00 per share. |
The key performance indicator shows the shareholders' share of profit. |
| Earnings per preference share | Each preference share entails a preferential right to SEK 2.00 in annual dividends. |
The key performance indicator shows the preference shareholders' share of profit. |
| Fixed-income derivatives | Agreements on lending rates that may include the factors of time, inflation and/or maximum interest rates. Usually signed to hedge interest rates for interest-bearing loans. |
Not an alternative performance measure. |
| Interest-rate swaps | An agreement between two parties to swap interest rate conditions on loans in the same currency. The swap entails that one party exchanges its floating interest rate for a fixed rate, while the other party receives a fixed rate in exchange for a floating rate. The purpose of an interest-rate swap is to reduce interest-rate risk. |
Not an alternative performance measure. |
| Interest coverage ratio | Profit from property management, excluding profit from joint ventures but including dividends from joint ventures, after reversal of financial expenses in relation to financial expenses. |
The key performance indicator shows financial risk. |
| Interest coverage ratio, covenant in EMTN programme |
Profit from property management after reversal of financial expenses as a percentage of financial expenses. |
The key performance indicator shows financial risk. |
| Equity/assets ratio | Equity in relation to total assets. | This key performance indicator shows financial risk. |
| STIBOR | STIBOR, or Stockholm Interbank Offered Rate, a daily reference rate based on the average of the interest rates at which banks offer to lend unsecured funds to other banks in SEK in the Swedish wholesale money market. |
Not an alternative performance measure. |
| Net asset value | Recognised equity according to the balance sheet with reversal of reserves for fixed-income derivatives, deferred tax on temporary differ ences on property values and deferred tax on reserves for fixed-income derivatives. |
An established indicator of the Group's net asset value that facilitates analyses and comparisons. |
| Secured liabilities/total assets | Liabilities secured with pledged assets as a percentage of total assets. | This key performance indicator shows financial risk for bond holders. |
| Total return on shares | Total of the change in the share price during the period and the dividend paid during the period as a percentage of the share price at the end of the preceding year. |
The key performance indicator shows the total return that accrues to shareholders. |
| Total yield on property | Total of yield and property revaluations during the period as a percentage of the closing property value adjusted for revaluations for the period. |
The key performance indicator shows earnings genera tion and value growth for the properties for a period. |
| Triple net lease | A type of lease whereby the tenant pays, in addition to the rent, all costs incurred on the property that would normally have been paid by the property owner. These include operating expenses, maintenance, proper ty tax, site leasehold fees, insurance, property care-taking, etc. |
Not an alternative performance measure. |
| Dilution | Dilution due to outstanding warrants has been calculated, in line with IAS 33, as the number of Class A and B shares to be issued to cover the difference between the strike price and market price for all potential Class A and B shares (warrants) outstanding, insofar as it is probable that they will be utilised. |
Not an alternative performance measure. |
| Surplus ratio | Net operating income for the period as a percentage of rental revenue for the period. |
The key performance indicator shows the profitability of the properties. |
| Amounts in SEK M unless otherwise stated |
2019 Jan-Dec |
2018 Jan-Dec |
Amounts in SEK M unless otherwise stated |
2019 Jan-Dec |
2018 Jan-Dec |
|---|---|---|---|---|---|
| Return on equity | |||||
| Profit after tax | 4,111 | 3,166 | Profit from property management | ||
| Addition for translation to annual value | – | – | Profit after tax | 4,111 | 3,166 |
| Average equity | 17,337 | 13,386 | Tax | 730 | 605 |
| Return on equity | 24% | 24% | Changes in value | -2,840 | –2,168 |
| Profit from property management | 2,001 | 1,603 | |||
| Return on total capital | |||||
| Profit from property management | 2,001 | 1,603 | Profit from property management per Class A and B share | ||
| Addition for translation to annual value | – | – | after dilution | ||
| Financial expenses | 470 | 481 | Profit from property management | 2,001 | 1,603 |
| Addition for translation to annual value | – | – | Dividends attributable to preference | ||
| Profit before financial expenses | 2,471 | 2,084 | and Class D shares Adjusted profit from property manage |
–249 | –237 |
| Average total capital | 36,922 | 30,465 | ment | 1,752 | 1,367 |
| Return on total capital | 7% | 7% | Profit from property management per | ||
| Class A and B share after dilution, SEK | 5.51 | 4.31 | |||
| Occupancy rate by area | |||||
| Contracted area, 000s of square metres | 2,868 | 2,708 | Cash flow per Class A and B share | ||
| Total lettable area, 000s of square | Profit before tax | 4,627 | 3,611 | ||
| metres Occupancy rate by area |
3,022 95% |
2,850 95% |
Items not affecting cash flow | –2,758 | –2,035 |
| Tax paid | –74 | –87 | |||
| Debt ratio | Dividends attributable to preference and Class D shares |
–249 | –237 | ||
| Interest-bearing liabilities | 17,519 | 15,763 | Cash flow | 1,546 | 1,252 |
| Total assets | 40,154 | 33,690 | Cash flow per Class A and B share | ||
| Debt ratio | 44% | 47% | after dilution, SEK | 4.86 | 3.95 |
| Yield | Net debt | ||||
| Net operating income | 2,133 | 1,869 | Interest-bearing liabilities | 17,519 | 15,763 |
| Add-back of site leasehold fees | –24 | – | Interest-bearing assets | –511 | –6 |
| Addition for translation to annual value | – | – | Cash and cash equivalents and listed | ||
| Holding adjustment, acquisitions/divest | shares | –1,776 | –945 | ||
| ments | 10 | 91 | Net debt | 15,232 | 14,812 |
| Currency translation to closing rate | –19 | 2 | |||
| Adjusted net operating income | 2,100 | 1,962 | Net debt/EBITDA | ||
| Carrying amount of properties | 32,625 | 29,024 | Net debt | 15,232 | 14,812 |
| Yield | 6.4% | 6.8% | EBITDA rolling 12 months | 2,292 | 1,991 |
| Net debt/EBITDA | 6.6x | 7.4x | |||
| EBITDA rolling 12 months | |||||
| Net operating income | 2,133 | 1,869 | Net debt/Total assets | ||
| Central administration | –122 | –132 | Net debt | 15,232 | 14,812 |
| Dividends from joint ventures | 281 | 254 | Total assets | 40,154 | 33,690 |
| EBITDA | 2,292 | 1,991 | Net debt/Total assets | 38% | 44% |
| Economic occupancy rate | Preference equity | ||||
| Contractual annual rent | 2,600 | 2,378 | Equity per preference share, SEK | 32.00 | 32.00 |
| Rental value | 2,735 | 2,510 | |||
| Economic occupancy rate | 95% | 95% |
1) Comparative figures have been adjusted for the bonus issue of Class A and B shares in 2019, by multiplying the number of shares by 2. The terms of the bonus issue were 1 Class A and 1 Class B share for each Class A and Class B share. The record date for the bonus issue was 3 June 2019.
| Amounts in SEK M unless otherwise stated |
2019 Jan-Dec |
2018 Jan-Dec |
Amounts in SEK M unless otherwise stated |
2019 Jan-Dec |
2018 Jan-Dec |
|---|---|---|---|---|---|
| Number of preference shares outstand | Equity/assets ratio | ||||
| ing | 16,784,028 | 16,784,028 | Equity | 19,257 | 15,416 |
| Preference equity | 537 | 537 | Total assets | 40,154 | 33,690 |
| Equity/assets ratio | 48% | 46% | |||
| Earnings per Class A and B share1) | |||||
| Profit after tax | 4,111 | 3,166 | |||
| Dividends attributable to | Net asset value | ||||
| preference and | Equity | 19,257 | 15,416 | ||
| Class D shares | –249 | –237 | Equity attributable to | ||
| Adjusted profit after tax | 3,862 | 2,929 | preference and Class D shares | –4,310 | –4,104 |
| Earnings per Class A and | Reversal of derivatives | 119 | 117 | ||
| B share after dilution, SEK | 12.13 | 9.24 | Reversal of deferred tax, | ||
| temporary differences | 2,333 | 1,967 | |||
| Interest coverage ratio | Reversals attributable to joint ventures | 741 | 627 | ||
| Profit from property management | 2,001 | 1,603 | Net asset value | 18,140 | 14,023 |
| Add-back of profit from property man | Net asset value per Class | ||||
| agement JV | –441 | –312 | A and B share after dilution, SEK | 56.77 | 44.23 |
| Dividends from joint ventures | 281 | 254 | |||
| Financial expenses | 470 | 481 | Secured liabilities/total assets | ||
| Corrected profit from property | Secured liabilities | 5,449 | 7,045 | ||
| management before financial expenses | 2,311 | 2,026 | Total assets | 40,154 | 33,690 |
| Interest coverage ratio | 4.9x | 4.2x | Secured liabilities/total assets | 14% | 21% |
| Interest coverage ratio, EMTN programme | |||||
| Profit from property management | 2,001 | 1,603 | Surplus ratio | ||
| Financial expenses | 470 | 481 | Net operating income | 2,133 | 1,869 |
| Profit from property management | Rental revenue | 2,581 | 2,247 | ||
| before financial expenses | 2,471 | 2,084 | Surplus ratio | 83% | 83% |
| Interest coverage ratio | 5.3x | 4.3x | |||
| 1) Not an alternative performance measure. |
AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment. Sagax's property holdings at 31 December 2019 amounted to 3,022,000 square metres, distributed between 553 properties. AB Sagax (publ) is listed on Nasdaq Stockholm, Large Cap. More information is available at www.sagax.se.
AB Sagax (publ), Engelbrektsplan 1, SE-114 34 Stockholm, Sweden Corp. Reg. No. 556520–0028 Tel: +46 8 545 83 540, fax: +46 8 545 83 549 www.sagax.se
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