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Castellum — Interim / Quarterly Report 2016
Jul 15, 2016
2900_ir_2016-07-15_d0e65f21-0abb-439b-ac00-2fe5f3d7fabe.pdf
Interim / Quarterly Report
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HALF-YEAR REPORT JANUARY-JUNE
Castellum Half-year Report January-June 2016 a s t e l l u m H a l f - y e a r R e p o r t J a n u a r y - J u n e 2 0 1 6
Half-year Report January-June 2016
Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to SEK 72 billion, and comprises of commercial properties for offi ce, retail, warehouse and industrial totaling 4.7 million sq.m. The real estate portfolio is owned and managed under the Castellum brand through a decentralized organization with strong and clear local presence in fi ve growth regions in Sweden and Denmark. The fi ve growth regions is Central (Örebro, Västerås, Uppsala, Linköping, Norrköping, Jönköping and Växjö), Öresund (Malmö, Lund, Helsingborg and Copenhagen), West (Greater Gothenburg incl. Borås and Halmstad), Stockholm and North (Gävle, Sundsvall, Östersund, Umeå and Luleå).
Castellum is listed on Nasdaq Stockholm Large Cap.
- Rental income for the period January-June 2016 amounted to SEKm 1,807 (SEKm 1,617 corresponding period previous year).
- Income from property management amounted to SEKm 820 (716), corresponding to SEK 4.20 (3.79) per share, an increase of 11%.
- Changes in value on properties amounted to SEKm 616 (880) and on derivatives to SEKm –223 (137).
- Net income after tax for the period amounted to SEKm 844 (1,399), corresponding to SEK 4.32 (7.40) per share.
- Net investments amounted to SEKm 29,658 (1,730) of which SEKm 28,889 (1,422) were acquisitions, SEKm 802 (569) new constructions, extensions and reconstructions and SEKm 33 (261) sales.
- In Q2, Castellum acquired the Norrporten AB (publ) shares for SEKm 13,594 including transaction costs of SEKm 126, with an underlying property value of SEK 26 billion.
- Net lease for the period was SEKm 47 (37).
- Jörgen Lundgren was appointed CEO of Castellum's Northern Region and becomes a member of Castellum's Executive Group Management. Jörgen was previously CEO of Norrporten.
| 2016 April-June |
2015 April-June |
2016 jan-June |
2015 Jan-June |
|
|---|---|---|---|---|
| Rental income, SEKm | 952 | 816 | 1,807 | 1,617 |
| Net operating income, SEKm | 653 | 560 | 1,209 | 1,078 |
| Income of property management, SEKm | 444 | 378 | 820 | 716 |
| D:o SEK/share*) | 2.20 | 2.00 | 4.20 | 3.79 |
| D:o growth | +10% | – 2% | +11% | +2% |
| Net income after tax, SEKm | 267 | 948 | 844 | 1,399 |
| Net investments SEKm | 27,216 | 691 | 29,658 | 1,730 |
| Net leasing, SEKm | 47 | 16 | 47 | 37 |
| Loan to value ratio | 54% | 51% | 54% | 51% |
| Interest coverage ratio | 357% | 347% | 351% | 336% |
| Long term net asset value (EPRA NAV) SEK/share*) | 116 | 103 | 116 | 103 |
| Actual net asset value (EPRA NNNAV) SEK/share*) | 104 | 91 | 104 | 91 |
KEY RATIOS
*) The number of historical shares that have been recalculated with reference to the bonus-issue element (i.e. the value of the subscription right)
in the completed new share issue. For more detailed information about Castellum see www.castellum.se.
Welcome to a new Castellum!
New, because today's Castellum is 70% larger than at the previous interim report, through acquiring and accessing Norrporten on June 15th.
New, because over the past few weeks, Castellum has taken on a completely transformed organization, featuring fi ve customer-close regions and strong centralsupport functions.
New, because the entire Group is now working under the joint brand name Castellum. 1,000 Castellum fl ags are now fl ying from our 742 properties, from Luleå to Copenhagen.
We create shareholder value
All of the above was basically completed in the fi rst half of 2016. But it's not simply novelty that we've been pursuing in this intense change process. The goal was, and is, to create shareholder value – sustainably – from every conceivable angle. Norrporten is a positive deal in itself, one that will yield signifi cant synergies. The reorganization and branding activities will lead directly to increased cost and revenue effi ciency within the Group.
The challenge right now is of course – immediately and precisely on schedule – to quantify all of these eff ects. Especially in combination with a major new shares issue, containing signifi cant bonus-issue elements and many new shares. These activities will change all previous comparison fi gures per share and make historical comparisons diffi cult for many, including analysts, investors and the media. Furthermore, we have also announced that we will sell properties worth approx. SEK 4 billion. This is an ongoing process, drawing considerable interest from the market, but we cannot assess with certainty either precise timing or the economic outcome.
To sum up: positive synergies, integration costs, cost savings, sales results – in the next six months these important factors will have a great impact on this year's fi nancial result. However, timing and totals will determine the exact nature of that impact.
Diffi cult to interpret comparative fi gures
Castellum accessed Norrporten on the 15th of June, so this large acquisition has only posted a marginal eff ect on the period's income from property management, whereas the full impact of the deal is completely factored into the midyear balance sheet. This in turn means that for 2016, we will receive the entire dilutive eff ect per share, but only half the earnings impact of the acquisition. Looking at the period's outcome, it remains strong – with an income from property management improved by 15% to SEKm 820 (716).
For the full year, we expect that the growth in income from property management for "the old" Castellum (on an annual basis) will be near our target – but because Norrporten is only included in the accounts for six months, the acquisition will not be fully refl ected in earnings per share in 2016.
Let me therefore be clear that this year's income from
property management per share will not have a "normal" forecast value. Castellum has raised the dividend for 17 consecutive years. And we are the only ones to have done so on the Swedish stock exchange. Last year's dividend, SEK 4.90, corresponds to SEK 4.25 when recalculated for the bonus-issue element of the new issue. This year, we have an exceptional situation where the number of shares has increased, whereas the income results of the acquired company are only included for the last 6 months. Nonetheless, it's my fi rm belief that we're able to continue our positive trend, even during this exceptional year.
Bright future
But of course what's really important is how we will perform in the future. Right now, it's all developing very positively: The integration of Norrporten, including synergies, is proceeding faster than the original timeplan. We're particularly pleased that the former CEO of Norrporten, Jörgen Lundgren, has agreed to become the new CEO of Castellum's Northern Region. In addition, agreement have been made with Norrporten's former executive management team that they will gradually phase out their posts and leave the company - most of them before year end.
The rental market is strong: we're renegotiating several leases, featuring substantial rent increases, in our nownumerous city locations. And from next year onwards, Norrporten will contribute fully to the Group's income from property management.
We retain the same long-term vision as before: 10% growth in income from property management (and likewise for dividend) driven by 5% net investment of the total property value annually, approximately SEK 3.5 billion. A substantial portion of these investments will involve our own projects. In addition, there will be synergies (both on the cost and revenue side) and generally increased cost effi ciency. I'm of the opinion that the stronger company we've created makes it easier for us to reach this ambitious goal. company reach thisamb
Mission and vision
One of the largest real estate companies, while remaining equipped to act as close to the market as the smallest.
Business concept
To develop and add value to the real estate portfolio, focusing on the best possible earnings and asset growth, by off ering customized commercial properties, through a strong and clear presence in fi ve growth regions.
Objective
Castellum's operations are focused on growth in cash fl ow, which along with a low fi nancial risk provides the preconditions for robust growth in the company, and off ers shareholders a competitive dividend.
The objective is an annual growth in cash fl ow, i.e., income from property management per share, of at least 10%. In order to achieve this objective, net investments of at least 5% of the property value will be made yearly. At the moment, this is equivalent to approx. SEK 3.5 billion. All investments shall contribute to the objective of growth in income from property management within 1-2 years and have a potential asset growth of at least 10%. Sales of properties will take place when justifi ed from a business standpoint and when an alternative investment with a higher return can be found. In operations, there shall be an continuing focus on improved productivity and effi ciency.
Strategy for funding
Capital structure
Castellum shall have low fi nancial risk, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%.
Purchase or transfer of own shares shall be available as a method for adjusting the company's capital structure to the company's capital need and as payment or funding of real estate investments. Company-owned shares may not be traded for short term purpose of capital gain.
Dividend
At least 50% of pre-tax property management income will be distributed. However, investment plans, consolidation needs, liquidity and fi nancial position in general will be taken into account.
The stock and credit markets
Castellum will work for a competitive total return on the company's share relative to risk and also strive for high liquidity.
All actions will be made from a long-term perspective and the company will hold frequent, open and fair reports to shareholders, the capital and credit markets and the media, without disclosing any individual business relationship.
In the long term, Castellum will be one of the largest listed real estate companies in Sweden.
Sustainable business
Castellum has a dedicated focus on long-term eff orts and strategies, and this goes hand-in-hand with all sustainability perspectives. Business operations are to contribute to sustainable development taking ecological, social and economic aspects into account. It's crucial for the long-term success of the company that operations are conducted in a responsible manner, wherein all actions should be characterized by high skills levels, high ethical standards and a high, hands-on sense of responsibility.
By being locally present and engaged in the cities where the company operates, prosperous environments can be built, developed and managed. Castellum is to be fi nancially strong, as this enables us to act wisely, with a long-term perspective.
Sustainability eff orts are focused on:
- taking responsibility for, and contributing to, the development of the communities wherein we operate,
- utilizing resources effi ciently and eff ectively,
- maintaining a sustainable real estate portfolio,
- cooperating with other stakeholders to promote development.
Market comments
Swedish economy
The Swedish economy appears to continue its positive development, with strong GDP growth for the remainder of 2016, although GDP forecasts onwards have been revised down. Growth is still driven by investments – primarily construction and infrastructure investments – and domestic private consumption. The export of services remains strong and export of goods has begun to show signs of increased demand. Geopolitical turmoil continues to dampen the mood – especially for industry. In addition, the outcome of the British referendum and its eff ects have created further uncertainty as potential repercussions are diffi cult to assess.
Higher public spending as a result of migration is also expected to contribute to GDP growth. Increased transfers help maintain household consumption. Despite higher tax revenues, the rise in government expenditure is expected to lead to increased defi cits in public fi nances in 2016.
The labour market is positively aff ected by the strong economy. Labour shortages are expected for several groups, primarily within the construction and public sectors. However, the unemployment rate is expected to be only marginally aff ected. There are early signs of a rising infl ation trend, but infl ation remains low due to subdued commodity prices and low infl ation abroad. Development of the krona exchange rate plays a key role for infl ation in Sweden, where a stronger krona will dampen infl ation.
Macro indicators
| GDP growth | 0.5% | (Q1 2016 compared to Q4 2015) | |
|---|---|---|---|
| Infl ation | 1.0% | (June 2016 compared to June 2015) | |
| Unemployment | 7.6% | (May 2016) |
Swedish rental market
During the period, the rental market in Castellum's submarkets was generally stronger than the corresponding period last year – although with local variation. Demand was high in terms of both new construction and existing premises. This led to lower vacancy rates as the supply of office space, especially in central locations, was not in line with demand. Rental increases were seen in central locations – due to limited supply – as well as in areas in proximity to these locations.
The supply of new space is relatively stable in all Swedish growth regions, but the new projects cannot meet demand because of strong urban growth.
Generally, the logistics market is growing for the logistics centres established in Sweden, and vacancy rates are low. A considerable need exists for new, modern logistics facilities.
Swedish property market
The Swedish real estate market is still attractive, and transaction volumes for the fi rst two quarters of 2016 amounted to SEK 86 billion – signifi cantly exceeding the 2015 level of SEK 58 billion. Castellum's acquisition of Norrporten, corresponding to about SEK 26 billion, was a major contributing factor. The offi ce and residential segments represented 68% (54%) of the transaction volume, and listed companies were most active on the acquisition side.
So far in 2016, the share of foreign investors has been 13% (22%), which is signifi cantly lower than last year. This too is an eff ect of Castellum's acquisition of Norrporten.
Castellum's assessment is that the Swedish transaction market remains strong this year. High demand and rising rents have led to a lowering of the required yield – mainly on offi ce properties in prime locations in major cities. How Brexit will aff ect the Swedish transaction market remains to be seen. Another variable is whether we can hope for increased allocation of investments to Swedish properties – primarily within the core segment – in a Swedish real estate market that continues to be liquid, transparent and attractive.
Interest and credit market
The Riksbank's clear focus on an infl ation target (CPI) of 2% continues. At monetary policy meetings, the Riksbank has gradually lowered the repo rate, most recently in February 2016 to a historically low –0.5%. The Riksbank has also continued stimulating monetary policy by buying government bonds from the market, and this contributes to reducing the long-term market rates as well. At the July meeting, the Riksbank announced that the period of negative repo rate may be further extended, and is only expected to increase at the end of 2017. However, the repo rate is not assumed to leave negative territory until mid-2018.
The 3-month STIBOR rate – of great signifi cance to Castellum – fell during the fi rst half of the year: First sharply in February, after the Riksbank's historic cut, and then even further after the Brexit referendum.
The spread between short- and long-term interest rates decreased during the year. Long-term rates rose last summer and around year end, but dropped signifi cantly during the fi rst and second quarters of this year. They have now reached new lows.
Availability of bank fi nancing and fi nancing in the capital market is considered favourable and very favourable, respectively. In the latter part of 2015, credit margins in the capital market turned upward considerably and continued to increase at the beginning of this year. However, during the spring and early summer, credit margins gradually fell and then bounced back up again after the Brexit referendum. Access to capital market fi nancing is mainly available at short maturities. Credit margins for bank fi nancing, which increased slightly at the end of 2015, are expected to remain relatively stable or rise slightly.
Income, Costs and Results
Comparisons, shown in brackets, are made with the corresponding period previous year except in parts describing assets and fi nancing, where comparisons are made with the end of previous year. When calculating the historical number of shares, adjustments were made with reference to the bonus-issue element (i.e. the value of the subscription right) in the new share issue.
Income from property management, i.e. net income excluding transaction and restructuring costs, changes in value and tax in the concern as well as in the joint venture, amounted for the period January-June 2016 to SEKm 820 (716), equivalent to SEK 4.20 (3.79) per share - an increase with 11%. Income from property management rolling four quarters amounted to SEKm 1,637 (1,463) equivalent to SEK 8.52 per share (7.74) - an increase of 10%.
During the period, changes in value on properties amounted to SEKm 616 (880) and on derivatives to SEKm –223 (137). Net income after tax for the period was SEKm 844 (1,399), equivalent to SEK 4.32 (7.40) per share.
Rental income
Group's rental income amounted to SEKm 1,807 (1,617). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,532 per sq.m., whereas for warehouse and industrial properties, it amounted to SEK 804 per sq.m. Rental levels, which are considered to be in line with the market, have in comparable portfolio increased by approx. 1.3% compared with previous year, which inter alia is an eff ect from indexation and can be compared with the usual industry index clause (October to October), which was 0.1% in 2016. Castellum's higher indexation is due to the Groups focus on index clauses with minimum upward adjustment in the contract portfolio, which off ers protection against low defl ation and infl ation.
Rental value and economic occupancy rate
The average economic occupancy rate was 91.0% (88.7%). The total rental value for vacant premises on yearly basis amounted to approx. SEKm 596 (438).
The rental income for the period includes a lump sum of SEKm 10 (5) as a result of early termination of leases.
Gross leasing (i.e. the annual value of total leasing) during the period was SEKm 208 (177), of which SEKm 48 (23) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 161 (140), of which bankruptcies were SEKm 10 (5) and SEKm 1 (7) were notices of termination with more than 18 months remaining length of contract. Net lease for the period was hence SEKm 47 (37).
The time diff erence between reported net leasing and the eff ect in income thereof is estimated to be between 9-18 months.
Property costs
Property costs amounted to SEKm 598 (539) corresponding to SEK 360 per sq.m. (319). Consumption for heating during the period has been calculated to 95% (91%) of a normal year according to the degree day statistics.
| Property costs | Offi ce/ | Warehouse/ | 2016 | 2015 |
|---|---|---|---|---|
| SEK/sq.m | Retail | Industrial | Total | Total |
| Operating expenses | 217 | 123 | 186 | 157 |
| Maintenance | 53 | 22 | 43 | 34 |
| Ground rent | 3 | 8 | 5 | 8 |
| Real estate tax | 87 | 22 | 66 | 50 |
| Direct property costs | 360 | 175 | 300 | 249 |
| Leasing and property administration | – | – | 60 | 70 |
| Total | 360 | 175 | 360 | 319 |
| Previous year | 308 | 176 | 319 |
Central administrative expenses
Central administrative expenses totalled SEKm 68 (61) and has during the period been charged with SEKm 8 for non-recurring costs related to ongoing work to collect
the Group under the joint name Castellum and coordination of support functions. This also includes costs for a profit-and-share-price related incentive plan for 10 persons in executive management of SEKm 11 (7).
Transaction and restructuring costs
During the period, Castellum acquired Norrporten, resulting in transaction costs of SEKm 126. In addition, a major business restructuring was initiated, and this is expected to generate synergies of SEKm 150.
The cost of restructuring has been estimated at approx. SEKm 40, an increase of SEKm 15 against the previously announced SEKm 25. Of the increase, SEKm 7 have been charged to the period's result. The increase is explained by a higher pace of integration than planned. Among other developments, an agreement has already been reached with all members of Norrporten's former executive management team that they will gradually phase out their posts and leave the company – most of them before year end. The remaining restructuring costs are estimated to mainly occur in the second half of this year. However, the higher pace of integration entails that some of the synergies have been achieved earlier than planned.
Income from joint venture
In Q2 2015, Castellum AB (publ) closed a deal with Heimstaden AB (publ), which meant that Castellum acquired 50% of the property management company CORHEI Fastighets AB (previously Ståhls) for SEKm 505. Castellum gained access in May/June 2015. The agreement provided an opportunity to acquire, through an option, the remaining 50% at market value during the autumn 2016 at the earliest. Thus, the option was used already during Q1 2016: Castellum has thereby owned 100% of CORHEI Fastighets AB since the beginning of March this year. The acquisition price for the remaining 50% amounted to SEKm 555.
The acquisition constitutes a company acquisition
Income from property management per share
in phases, resulting in a revaluation of SEKm 27 of the 50% already owned. The revaluation is the diff erence between the purchase price paid, SEKm 555, and the previously recognized net asset value of SEKm 528 on the access date in March. As a result of the stepwise company acquisition, there is a goodwill entry of SEKm 141, corresponding to the net deferred tax liability.
Income from joint ventures amounted to SEKm 3 (2) and refers to Castellum's 50% share of the income in CORHEI Fastighets AB (former Ståhls). Of this income, SEKm 4 (2) refers to income from property management and SEKm –1 (0) to tax.
Net interest
Net interest items were SEKm –325 (–303). The average interest rate level was 2.8% (3.1%). Net interest income was positively aff ected by approx. SEKm 25 due to the average interest rate level decrease by 0.3%-units.
Changes in value
The real estate market is characterized, as well as the fi rst quarter, by continued high activity, strong demand and continued limited supply, resulting in rising prices. The price increase is mainly attributable to centrally located offi ce properties in growth areas. This price rise is refl ected in Castellum's internal valuation through a decrease in required yield, which at portfolio level corresponds to about 7 percentage points. This, primarily in combination with project profi ts and improved cash fl ow results, resulted in a change in value for the fi rst half year of SEKm 611, corresponding to 1%. Norrporten's SEKm 638, coorespong to 3%, change in value over the fi rst half-year is included in the purchase price allocation and thus does not aff ect Castellum's income. Also included was an additional payment, received during the period, of SEKm 5 for previously sold properties. Furthermore, three properties were sold for SEKm 28 which was in line with the valuation. As each property is valued
Income over time
individually, the portfolio premium that can be noted in the property market is not taken into account.
The value in the interest derivatives portfolio has changed by SEKm –226 (–140), mainly due to changes in long-term market interest rates. Castellum's currency derivatives has during the period changed SEKm –17 (15) where the eff ective part of the value change of SEKm –20 (18) is accounted for in other total net income.
Tax
The nominal corporate tax rate in Sweden is 22%. Due to the possibility to deduct depreciation and reconstructions for tax purposes, and to utilize tax loss carry forwards, the paid tax is low. Paid tax occurs since a few subsidiaries have no possibilities to group contributions for tax purpose.
Remaining tax loss carryforwards can be calculated to SEKm 2,643 (809). Furthermore, there are derivatives at an undervalue of SEKm 636, which are not tax deductible, as well as untaxed reserves totalling SEKm 27. Fair values for the properties exceed their fi scal value by SEKm 35,247 (22,239) of which SEKm 2,015 (1,893) relates to the acquisition of properties accounted for as asset acquisitions. As deferred tax liability, a full nominal 22% tax of the net diff erence is reported, reduced by the deferred tax relating to asset acquisitions, i.e., SEKm 6,596 (4,299).
Castellum has no current tax disputes.
Tax calculation 2016-06-30
| SEKm | Basis current tax |
Basis deferred tax |
|---|---|---|
| Income from property management | 820 | |
| D:o attributable to joint venture | – 4 | |
| Deductions for tax purposes | ||
depreciations |
– 375 | 375 |
reconstructions |
– 143 | 143 |
| Other tax allowances | – 7 | 4 |
| Taxable income from property management | 291 | 522 |
| - current income tax is 22%, if tax losses are not utilized | – 64 | |
| Properties sold | 2 | – 14 |
| Changes in value on properties | – | 611 |
| Changes in value on derivatives | – 223 | – |
| Issue expenses | – 123 | 123 |
| Taxable income before tax loss carry forwards | – 53 | 1,242 |
| Tax loss carry forwards, opening balance | – 809 | 809 |
| Acquired loss CORHEI and Norrporten | – 1,736 | 1,736 |
| Tax loss carry forwards, closing balance | 2,643 | – 2,643 |
| Taxable income | 45 | 1,144 |
| Tax according to the income statement for the period |
– 10 | – 252 |
Acquisition of Norrporten
On 13 April 2016, Castellum signed an agreement with the Second AP Fund and the Sixth AP Fund to acquire all shares in Norrporten AB (publ). Access to the shares was gained on 15 June 2016, for an acquisition value of SEKm 13,468, distributed as follows: SEKm 10,393 in cash and 27.2 million shares worth approx. SEKm 3,075, divided among 19,194,458 newly issued shares and 8,006,708 shares held in treasury. The valuation of these shares was made at market value on the date of transaction, amounting to SEK 113/share (market price quoted on Nasdaq). Acquisition costs amounted to SEKm 126 and are accounted for in the income statement.
The acquisition is accounted for as a business combination, hence the occurrence of a goodwill item of SEKm 1,891 – corresponding to net deferred-tax liabilities at the time of acquisition.
Norrporten is one of Sweden's largest real estate companies, focused on the management and development of modern, high-quality offi ce space, centrally located in growth areas of Sweden and Copenhagen. The acquisition complements and strengthens Castellum's market position – the supply of real estate entities and type-ofpremises increases while our geographical presence expands. Moreover, it also reinforces Castellum's presence and market position in fi ve locations where Castellum is already established: Stockholm, Copenhagen, Helsingborg, Örebro and Jönköping. In addition, the acquisition also means that Castellum establishes itself sizably, with attractively located properties in Gävle, Sundsvall, Östersund, Umeå, Luleå and Växjö.Adding further dimension, Norrporten's tenant structure contributes to a longer duration of the lease portfolio, including an increased government-agency element.
The acquisition is expected to result in synergies of approximately SEKm 150, of which about SEKm 120 are estimated to be realized in the next 18 months. The remaining SEKm 30, primarily attributable to operating costs, will be realized over a three-year period.
Balance sheet Norrporten
| SEKm | 30 June 2016 | 15 June 2016 |
|---|---|---|
| Assets | ||
| Investment properties | 26,430 | 26,415 |
| Other fi xed assets | 38 | 38 |
| Current receivables | 278 | 278 |
| Liquid assets | 379 | – |
| Total assets | 27,125 | 26,731 |
| Shareholders' equity and liabilities | ||
| Shareholders' equity | 11,943 | 11,918 |
| Deferred tax liability | 1,597 | 1,590 |
| Interest-bearing liabilities | 12,155 | 11,858 |
| Non interest-bearing liabilities | 1,430 | 1,365 |
| Total shareholders' equity and liabilities | 27,125 | 26,731 |
Income statement Norrporten
| 15 - 30 | ||
|---|---|---|
| SEKm | June 2016 | Jan - June 2016 |
| Rental income | 80 | 955 |
| Property costs | – 31 | – 337 |
| Central administrative expenses | 1 | – 32 |
| Net interest income/expense | – 10 | – 150 |
| Income from property management | 40 | 436 |
| Change in value properties | – | 638 |
| Change in value derivatives | – 9 | – 244 |
| Current tax | 0 | – 17 |
| Deferred tax | – 6 | – 182 |
| Net income | 25 | 631 |
| Translation currencies | 0 | 21 |
| Total net income for the period | 25 | 652 |
Real Estate Portfolio
The real estate portfolio is located in growth areas in Sweden and Copenhagen. The commercial portfolio consists of 80% offi ce and retail properties as well as 17% warehouse and industrial properties. The properties are located from inner city sites to well-situated workingareas with good means of communication and services. The remaining 3% consist of projects and undeveloped land.
Castellum owns approx. 915,000 sq.m. of unutilized building rights and furthermore ongoing projects with remaining investments of approx. SEKm 2,000.
Investments
During the period, investments totalling SEKm 29,691 (1,991) were carried out, of which SEKm 802 (569) were new constructions, extensions and reconstructions and SEKm 28,889 (1,422) were acquisitions. After sales of SEKm 33 (261) net investments amounted to SEKm 29,658 (1,730).
During the fi rst quarter Castellum acquired the remaining 50% of the shares in CORHEI Fastighets AB (former Ståhls) corresponding to a property value of SEKm 2,083. During the second quarter Castellum acquired Norrporten with un underlying property value of SEKm 26,415. During the last quarter 2015 agreements have also been concluded for the acquisition of one offi ce property under construction, in Hagastaden, Stockholm for SEK 1.6 billion with change of possession scheduled to February 2017. The property will be accounted for when the change of possession has taken place due to the agreements which is conditional upon i.e. completion.
Changes in the real estate portfolio
| Value, SEKm | Number | |
|---|---|---|
| Real estate portfolio on 1 January, 2016 | 41,818 | 597 |
| + Acquisitions | 28,889 | 146 |
| + New constructions, extensions and reconstructions | 802 | 2 |
| – Sales | – 28 | – 3 |
| +/– Unrealized changes in value | 611 | – |
| +/– Currency translation | 17 | – |
| Real estate portfolio on June 30, 2016 | 72,109 | 742 |
Property value
Internal valuations
Castellum assesses the value of the properties through internal valuations, as at the year-end, corresponding to level 3 in IFRS 13. The valuations are based on a 10-year cash fl ow based model with an individual valuation for each property of both its future earnings capacity and the required market yield. In the valuation of a property's future earnings capacity, consideration has been taken of potential changes in rental levels, occupancy rates and property costs - as well as an assumed infl ation level of 1.5%.
Projects in progress have been valued using the same principle, but with deductions for remaining investments. Properties with building rights have been valued on the basis of an estimated market value per square metre, on average approx. SEK 1,600 (1,700) per sq.m. In order to ensure and validate the quality of the internal valuations, an external valuation – representing over 50% of the portfolio – is made every year-end. The diff erence between the internal and external valuations has historically been small.
Based on these internal valuations, property value at the end of the period were assessed to SEKm 72,109 (40,187), corresponding to SEK 15,363 per sq.m.
Average valuation yield, SEKm
| (excl. project/land and building rights) SEKm |
||||||||
|---|---|---|---|---|---|---|---|---|
| Net operating income properties | 2,004 | |||||||
| + Real occupancy rate, 94% at the lowest | 159 | |||||||
| + Property cost annual rate | 9 | |||||||
| – Property administration, 30 SEK/sq.m. | – 72 | |||||||
| Normalized net operating income (6 months) | 2,100 | |||||||
| Valuation (excl. building rights of SEKm 570) 69,600 |
||||||||
| Average valuation yield | 6.0% |
Investments
Average valuation yield over time
Castellums' real estate portfolio 30-06-2016
| 30-06-2016 | January - June 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| No. of proper ties |
Area thous. sq.m |
Property value SEKm |
Property value SEK/sq.m |
Rental value SEKm |
Rental value SEK/ sq.m |
Economic occupancy rate |
Rental income SEKm |
Property costs SEKm |
Property costs SEK/sq.m |
Net operating income SEKm |
|
| Offi ce/retail | |||||||||||
| Central | 144 | 1,025 | 16,113 | 15,719 | 697 | 1,359 | 92.3% | 643 | 178 | 348 | 465 |
| Öresund | 86 | 643 | 13,701 | 21,303 | 567 | 1,763 | 87.0% | 493 | 131 | 407 | 362 |
| West | 85 | 477 | 8,694 | 18,247 | 333 | 1,397 | 92.5% | 308 | 74 | 312 | 234 |
| Stockholm | 46 | 367 | 9,780 | 26,613 | 333 | 1,812 | 93.4% | 311 | 63 | 343 | 248 |
| North | 75 | 563 | 9,572 | 16,999 | 426 | 1,514 | 92.6% | 395 | 108 | 382 | 287 |
| Total offi ce/retail | 436 | 3,075 | 57,860 | 18,815 | 2,356 | 1,532 | 91.3% | 2,150 | 554 | 360 | 1,596 |
| Warehouse/industrial | |||||||||||
| Central | 48 | 250 | 1,613 | 6,451 | 88 | 708 | 86.0% | 76 | 21 | 165 | 55 |
| Öresund | 44 | 287 | 1,930 | 6,731 | 107 | 743 | 86.3% | 92 | 24 | 169 | 68 |
| West | 104 | 666 | 5,431 | 8,156 | 254 | 763 | 91.3% | 232 | 54 | 163 | 178 |
| Stockholm | 51 | 290 | 3,336 | 11,516 | 151 | 1,044 | 91.2% | 138 | 31 | 216 | 107 |
| Total warehouse/industrial | 247 | 1,493 | 12,310 | 8,249 | 600 | 804 | 89.6% | 538 | 130 | 175 | 408 |
| Total | 683 | 4,568 | 70,170 | 15,363 | 2,956 | 1,294 | 91.0% | 2,688 | 684 | 300 | 2,004 |
| Leasing and property administration | 136 | 60 | – 136 | ||||||||
| Total after leasing and property administration | 820 | 360 | 1,868 | ||||||||
| Development projects | 29 | 123 | 1,605 | – | 55 | – | – | 25 | 14 | – | 11 |
| Undeveloped land | 30 | – | 334 | – | – | – | – | – | – | – | – |
| Total | 742 | 4,691 | 72,109 | – | 3,011 | – | – | 2,713 | 834 | – | 1,879 |
The table above relates to the properties owned by Castellum at the end of the period and refl ects the income and costs of the properties as if they had been owned during the period. The discrepancy between the net operating income of SEKm 1,879 accounted for above and the net operating income of SEKm 1,209 in the income statement is explained by the deduction of the net operating income of SEKm 1 on properties sold during the year, as well as the adjustment of the net operating income of SEKm 671 on properties acquired/completed during the year, which are recalculated as if they had been owned or completed during the whole period.
Property related key ratios
| 2016 Jan-June |
2015 Jan-June |
2015 Jan-Dec |
|
|---|---|---|---|
| Rental value, SEK/sq.m. | 1,294 | 1,088 | 1,095 |
| Economic occupancy rate | 91.0% | 88.7% | 90.3% |
| Property costs, SEK/sq.m. | 360 | 319 | 316 |
| Net operating income, SEK/sq.m. | 818 | 646 | 673 |
| Property value, SEK/sq.m. | 15,363 | 11,602 | 12,282 |
| Number of properties | 742 | 605 | 597 |
| Lettable area, thousand sq.m. | 4,691 | 3,433 | 3,392 |
| Valuation yield, on average | 6.0% | 6.8% | 6.5% |
Segment information
| Rental income | Income from property management |
||||
|---|---|---|---|---|---|
| SEKm | 2016 Jan-June |
2015 Jan-June |
2016 Jan-June |
2015 Jan-June |
|
| Central | 528 | 414 | 234 | 182 | |
| Öresund | 348 | 324 | 163 | 154 | |
| West | 557 | 535 | 273 | 255 | |
| Stockholm | 341 | 344 | 178 | 160 | |
| North | 33 | – | 16 | – | |
| Total | 1,807 | 1,617 | 864 | 751 |
The diff erence between the income from property management of SEKm 864 (751) above and the groups accounted income before tax of SEKm 1,106 (1,733) consists of unallocated income from property management of SEKm –44 (–35), transaction and restructuring costs of SEKm – 133 (–), changes in property value of SEKm 616 (880) and changes in values of derivatives of SEKm –223 (137) and stepwise acquisition tax in joint venture of SEKm 27 (–) respectively SEK –1 (–).
Property value by property type Property value by region
Larger investments and sales
Larger projects
| Area, | Rental value | Econ. occup. | Total inv., land | Remain. inv. | ||||
|---|---|---|---|---|---|---|---|---|
| Property | sq.m | SEKm SEK/sq.m | July 2016 | incl. SEKm | SEKm Completed Comment | |||
| Lindholmen 30:5, Gothenburg | 9,243 | 23 | 2,500 | 53% | 265 | 82 Q1 2017 | New construction offi ce | |
| Nordstaden 2:16, Gothenburg | 9,200 | 5 | 3,300 | 0% | 135 | 133 Q2 2017 | Reconstruction offi ce and retail and facing |
|
| Drottningparken, Örebro | 4,280 | 9 | 2,050 | 100% | 100 | 1 Q3 2016 | New construction offi ce | |
| Kranbilen 2, Huddinge | 8,571 | 9 | 1,050 | 40% | 94 | 61 Q1 2017 | New construction warehouse/ logistic |
|
| Inom Vallgraven 4:1, Gothenburg | 2,500 | 9 | 3,700 | 100% | 92 | 70 Q2 2017 | Extension and reconstruction cultural and entertainment venue |
|
| Majorna 163:1, Gothenburg | 5,867 | 9 | 1,500 | 75% | 88 | 35 Q4 2016 | Reconstruction offi ce/warehouse | |
| Varpen 10, Huddinge | 2,520 | 5 | 2,050 | 100% | 66 | 29 Q4 2016 | New construction car retail | |
| Tjurhornet 15, Stockholm | 5,786 | 1 | 250 | – | 65 | 40 Q3 2016 | Parking facilities | |
| Ringspännet 5, Malmö | 3,333 | 5 | 1,350 | 100% | 49 | 11 Q4 2016 | New construction car retail/ garage |
|
| Sändaren 1, Malmö | 2,771 | 4 | 1,550 | 100% | 47 | 36 Q2 2017 | Reconstruction offi ce | |
| Gamla Rådstugan 1, Norrköping | 2,185 | 5 | 2,100 | 30% | 47 | 29 Q4 2016 | Reconstruction offi ce | |
| Verkstaden 14, Västerås | 1,844 | 4 | 2,000 | 85% | 45 | 31 Q1 2017 | New construction offi ce | |
| Bangården 4, Solna | 4,120 | 4 | 1,100 | 100% | 42 | 34 Q4 2016 | Reconstruction apartment hotel | |
| Nytorget 2, Umeå | 3,508 | 2 | 1,800 | 100% | 39 | 24 Q4 2016 | Reconstruction offi ce | |
| Projects completed/partly moved in | ||||||||
| Verkstaden 14, Västerås | 6,100 | 9 | 1,400 | 100% | 84 | 5 Q1 2016 | Extension and reconstruction educations facilities |
Larger acquisitions during 2016
| Area, | Rental value | Econ. occup. | Acquisition | |||||
|---|---|---|---|---|---|---|---|---|
| Property | sq.m | SEKm SEK/sq.m | July 2016 | SEKm | Access | Category | ||
| Norrporten's property portfolio in Stockholm, Luleå, Umeå, Östersund, Sundsvall, Gävle, Örebro, Jönköping, Växjö, Helsingborg and Copenhagen |
1,114,274 | 2,053 | 1,850 | 93% | 26,415 | June 2016 | Offi ce and retail | |
| CORHEIs portfolio in Linköping and | ||||||||
| Norrköping | 162,504 | 196 | 1,200 | 83% | 2,083 | March 2015 Offi ce och logistic | ||
| Mässhallen 2, Malmö | 7,318 | 18 | 2,450 | 100% | 328 | April 2016 | Offi ce | |
| Lerstenen 1 and 2, Lund | 3,649 | 3 | 700 | 95% | 26 | Feb 2016 | Warehouse | |
| Hamnen 22:28 and 22:31, Malmö | 5,107 | 1 | 300 | 85% | 25 | May 2016 | Warehouse |
| Större fastighetsförsäljningar under 2016 |
|---|
| Property | Area, sq.m |
Rental value SEKm SEK/sq.m |
Underlying prop. price, SEKm |
Deferred tax and Trans. costs SEKm |
Net sales price, SEKm Access |
Category |
|---|---|---|---|---|---|---|
| Sadelknappen 1, 4 and Stångbettet, Malmö |
5,248 | 4 800 |
28 | 1 | 27 July 2016 | Warehouse and offi ce |
Financing
Castellum shall have a low fi nancial risk, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%. Castellum's assets had on June 30, 2016, a value of SEKm 75,205 (42,652) and are fi nanced by shareholders´s equity of SEKm 25,089 (15,768), deferred tax liabilities of SEKm 6,596 (4,299), interest bearing liabilities of SEKm 39,356 (20,396) and non interest bearing liabilities of SEKm 4,164 (2,189).
Shareholders' equity
As part of the acquisition of Norrporten, Castellum completed a rights issue as well as a directed share issue.
The rights issue of 82,000,000 new shares, which ended in June, meant that Castellum raised approximately SEK 6.3 billion before deduction of issue costs of about SEKm 123 (SEKm 95 net after deduction of deferred tax). In addition, a total of 27,201,166 Castellum shares constituted part of the consideration for the Norrporten shares, corresponding to a value of SEKm 3,075 at the time of access. Relying on the share-issue authorization from the Extraordinary General Meeting on 20 May 2016, the Castellum Board decided on a directed share issue to the Second and Sixth Swedish National Pension Funds totalling 19,194,458 consideration shares. Pursuant to the authorization from the AGM on 17 March 2016, the Castellum Board also decided to transfer all previously repurchased shares, representing 8,006,708 shares. Castellum's repurchased shares were acquired in year 2000 for a total purchase price of SEKm 194.
After the rights and directed share issues, the number of outstanding Castellum shares totals 273,201,166.
Interest bearing liabilities
At the end of the period Castellum had binding credit agreements totalling SEKm 48,753 (30,325) of which SEKm 33,132 (25,141) was long term and SEKm 15,621 (5,184) short term.
The acquisition of Norrporten meant the takeover of a total of SEKm 14,172 in credit agreements. In direct connection to this action, agreements totalling SEKm 4,269 were renegotiated and guarantee contracts were entered into for agreements totalling SEKm 8,117.
In addition, during the period MTN of nominally SEKm 100 were issued, a new credit agreement of SEKm 1,600 were signed and credit agreement of SEKm 2,000 were
repurchased and/or extended.
Furthermore CORHEI's fi nancing amounting SEKm 1,069 has been included in Castellum's interest bearing liabilities. After the reporting period another new credit agreement of SEKm 3,000 were signed.
After deduction of cash of SEKm 425 (39), net interest bearing liabilities were SEKm 38,931 (20,357), of which SEKm 6,597 (6,499) were MTN and SEKm 4,746 (3,157) outstanding commercial papers. (Nominal SEKm 6,600 respectively SEKm 4,750.)
Most of Castellum's loans are short-term revolving loans, utilized in long-term binding credit agreements in Nordic banks. This means great fl exibility. Bonds issued under the MTN program and the commercial papers are a complement to the existing funding in banks and broaden the funding base. At the end of the period the fair value of the liabilities is in principle in line with the value accounted for.
Long-term loan commitments in banks are secured by pledged mortgages in properties and/or fi nancial covenants. Outstanding commercial papers and bonds under the MTN-program are unsecured.
Net interest bearing liabilities amounted to SEKm 38,931 (20,357) of which SEKm 27,074 (10,460) were secured by the company's properties and SEKm 11,857 (9,897) unsecured. The proportion of used secured fi nancing was thus 38% of the property value. The fi nancial covenants state a loan-to-value ratio not exceeding 65% and an interest coverage ratio of at least 150%, which Castellum fulfi ls with comfortable margins, 54% and 351% respectively. The average duration of Castellum's credit agreements was 2.6 years (3.1). Margins and fees on long-term credit agreements had an average duration of 2.0 years (3.1).
Credit maturity structure 30-06-2016
| Credit | Utilized in | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| SEKm | agreements | Bank | MTN/Cert | Total | |||||
| 0-1 year | 15,621 | 7,943 | 6,596 | 14,539 | |||||
| 1-2 years | 3,195 | 1,895 | 1,300 | 3,195 | |||||
| 2-3 years | 19,836 | 11,096 | 1,000 | 12,096 | |||||
| 3-4 years | 4,785 | 2,085 | 1,700 | 3,785 | |||||
| 4-5 years | 2,523 | 2,026 | 497 | 2,523 | |||||
| > 5 years | 2,793 | 2,543 | 250 | 2,793 | |||||
| Total | 48,753 | 27,588 | 11,343 | 38,931 |
Secured credit facilities 30-06-2016
Interest rate maturity structure 30-06-2016
| Credit, SEKm |
Interest rate derivates SEKm |
Net. SEKm | Closing interest rate |
Average fi xed interest rate term |
|
|---|---|---|---|---|---|
| 0-1 year | 35,784 | – 17,639 | 18,145 | 2.8% | 0.2 year |
| 1-2 years | – | 2,450 | 2,450 | 1.7% | 1.5 years |
| 2-3 years | – | 2,250 | 2,250 | 1.8% | 2.5 years |
| 3-4 years | 650 | 4,489 | 5,139 | 2.0% | 3.7 years |
| 4-5 years | 2,497 | 2,800 | 5,297 | 2.7% | 4.6 years |
| 5-10 years | – | 5,650 | 5,650 | 2.6% | 6.7 years |
| Total | 38,931 | – | 38,931 | 2.5% | 2.4 years |
Interest rate maturity structure
In order to secure a stable and low net interest cash fl ow the interest rate maturity structure is distributed over time. The average fi xed interest term on the same date was 2.4 years (2.5). The average effective interest rate as per June 30, 2016 was 2.5% (2.9%).
Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. Interest rate derivatives is a cost eff ective and fl exible way to achieve the desired fi xed interest term. In the interest rate maturity structure, interest rate derivatives are accounted for in the earliest time segment in which they can mature.
Credit margins and fees are distributed in the table by reported underlying loans.
Currency
Castellum owns properties in Denmark with a value of SEKm 5,127 (954), which means that the Group is exposed to currency risk. The currency risk is primarily related to when income statement and balance sheet in foreign currencies are translated into Swedish kronor.
Interest rate and currency derivatives
Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. According to the accounting standard IAS 39, derivatives are subject to market valuation. If the agreed interest rate deviates from the market interest rate, notwithstanding credit margins, there is a theoretical surplus or sub value in the interest rate derivatives where the non-cash-fl ow aff ecting changes in value are reported in the income statement. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not aff ected equity. Castellum also has derivatives in order to hedge currency fl uctuation in its investment in Denmark. As for currency derivatives, a theoretical surplus/sub value occurs if the agreed exchange rate deviates from the current exchange rate, where the eff ective portion of value changes is accounted for in other total income.
To calculate the market value of derivatives, market rates for each term and, where appropriate, exchange rates, as quoted on the market at the closing date are used. Interest rate swaps are valued by discounting future cash fl ows to present value while instruments containing options are valued at current repurchase price.
As of June 30, 2016, the market value of the interest rate derivatives portfolio amounted to SEKm – 1,915 (–1,124) and the currency derivative portfolio to SEKm – 10 (7). All derivatives are, as at previous year, classifi ed in level 2 according to IFRS 13.
Castellum's financial policy and commitments in credit agreements
| Policy | Committment | Outcome | |
|---|---|---|---|
| Loan to value ratio | Not in the long run exceeding 55% | No more than 65% | 54% |
| Interest coverage ratio | At least 200% | At least 150% | 351% |
| Funding risk | |||
| – average capital tied up | At least 2 years | 2.6 years | |
| – proportion maturing within 1 year | No more than 30% of outstanding loans and unutilized credit agreements |
25% | |
| – average maturing credit price | At least 1.5 years | 2.0 years | |
| – propotion capital market financing* | No more than 75% of outstanding interest bearing liabilities | 29% | |
| – liquidity reserve* | Secured credit agreements corresponding to SEKm 750 and 4.5 months upcoming loan maturities |
Fulfi lled | |
| Interest rate risk | |||
| – average interest duration | 1.0-3.5 years | – | 2.4 years |
| – proportion maturing within 6 months | At least 20%, no more than 55% | – | 42% |
| Credit and counterparty risk | |||
| – rating restrictions | Credit institutions with high ratings, at least S&P BBB+ | Satisfi ed | |
| Currency risk | |||
| – translation exposure | Shareholders equity is not secured | – | Not secured |
| – transaction exposure | Handled if exceeding SEKm 25 | – | Under SEKm 25 |
Castellum Half-year Report January-June 2016 a s t e l l u m H a l f - y e a r R e p o r t J a n u a r y - J u n e 2 0 1 615
Condensed Consolidated statement of Comprehensive Income
| SEKm | 2016 April-June |
2015 April-June |
2015 Jan-June |
2016 Jan-June |
Rolling 4 quarters July 15 - June 16 |
2015 Jan–Dec |
|---|---|---|---|---|---|---|
| Rental income | 952 | 816 | 1,807 | 1,617 | 3,489 | 3,299 |
| Operating expenses | – 134 | – 110 | – 299 | – 267 | – 539 | – 507 |
| Maintenance | – 32 | – 32 | – 60 | – 57 | – 136 | – 133 |
| Ground rent | – 6 | – 6 | – 11 | – 13 | – 25 | – 27 |
| Property tax | – 49 | – 43 | – 92 | – 85 | – 179 | – 172 |
| Leasing and property administration | – 78 | – 65 | – 136 | – 117 | – 254 | – 235 |
| Net operating income | 653 | 560 | 1,209 | 1,078 | 2,356 | 2,225 |
| Central administrative expenses | – 36 | – 32 | – 68 | – 61 | – 120 | – 113 |
| Transaction and restructuring costs | – 123 | – | – 133 | – | – 133 | – |
| Results from joint venture | – | 2 | 3 | 2 | 22 | 21 |
| – of which income from property management | – | 2 | 4 | 2 | 25 | 23 |
| – of which changes in property values | – | – | – | – | 3 | 3 |
| – of which tax | ||||||
| Net interest costs | – – 173 |
0 – 152 |
– 1 – 325 |
0 – 303 |
– 6 – 624 |
– 5 – 602 |
| Income from property management incl. results joint venture |
321 | 378 | 686 | 716 | 1,501 | 1,531 |
| – of which income from property management* | 444 | 378 | 820 | 716 | 1,637 | 1,533 |
| Revaluation of results due to stepwise acquisition |
– | – | 27 | – | 27 | – |
| Changes in value | ||||||
| Properties | 127 | 551 | 616 | 880 | 1,573 | 1,837 |
| Derivatives | – 75 | 239 | – 223 | 137 | – 144 | 216 |
| Income before tax | 373 | 1,168 | 1,106 | 1,733 | 2,957 | 3,584 |
| Current tax | – 9 | – 4 | – 10 | – 9 | – 17 | – 16 |
| Deferred tax | – 97 | – 216 | – 252 | – 325 | – 614 | – 687 |
| Net income for the period/year | 267 | 948 | 844 | 1,399 | 2,326 | 2,881 |
| Other total net income | ||||||
| Items that will be reclassified into net income | ||||||
| Translation difference of currencies | – 13 | – 6 | 9 | – 24 | 1 | – 32 |
| Change in value derivatives, currency hedge | – 13 | 6 | – 20 | 18 | – 14 | 24 |
|---|---|---|---|---|---|---|
| Total net income for the period/year | 241 | 948 | 833 | 1,393 | 2,313 | 2,873 |
| Total net income for the year related to: | ||||||
| – Shareholders in the parent company | 267 | 948 | 844 | 1,399 | 2,326 | 2,881 |
| – No minority interests | – | – | – | – | – | – |
| Average number of shares, thousand | 201,531 | 189,014 | 195,238 | 189,014 | 192,101 | 189,014 |
| Income, per share | 1.32 | 5.02 | 4.32 | 7.40 | 12.11 | 15.24 |
* For calculation see Finanial Key Ratios, page 20.
Condensed Consolidated Balance Sheet
| SEKm | 30 June 2016 | 30 June 2015 | 31 Dec 2015 |
|---|---|---|---|
| Assets | |||
| Investment properties | 72,109 | 40,187 | 41,818 |
| Share in joint venture | – | 479 | 526 |
| Goodwill | 2,032 | – | – |
| Other fixed assets | 63 | 25 | 27 |
| Current receivables | 576 | 464 | 242 |
| Liquid assets | 425 | 55 | 39 |
| Total assets | 75,205 | 41,210 | 42,652 |
| Shareholders' equity and liabilities | |||
| Shareholders' equity | 25,089 | 14,288 | 15,768 |
| Deferred tax liability | 6,596 | 3,937 | 4,299 |
| Other provisions | 18 | 19 | 14 |
| Derivatives | 1,925 | 1,202 | 1,117 |
| Interest-bearing liabilities | 39,356 | 20,483 | 20,396 |
| Non interest-bearing liabilities | 2,221 | 1,281 | 1,058 |
| Total shareholders' equity and liabilities | 75,205 | 41,210 | 42,652 |
| Pledged assets (property mortgages) | 34,803 | 18,761 | 18,164 |
| Pledged assets (chattel mortage) | 824 | – | – |
| Contingent liabilities | – | – | – |
Condensed Changes in Equity
| SEKm | Number of outstanding shares, thousand |
Share capital |
Other capital contribution |
Currency transl. reserve |
Currency hedge reserve |
Non controlling interest |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Shareholders equity 31-12-2014 | 164,000 | 86 | 4,096 | 20 | – 13 | – | 9,460 | 13,649 |
| Dividend, March 2015 (4.60 SEK/share) | – | – | – | – | – | – | – 754 | – 754 |
| Net income Jan-June 2015 | – | – | – | – | – | – | 1,399 | 1,399 |
| Other total net income Jan-June 2015 | – | – | – | – 24 | 18 | – | – | – 6 |
| Shareholders equity 30-06- 2015 | 164,000 | 86 | 4,096 | – 4 | 5 | – | 10,105 | 14,288 |
| Net income July-Dec 2015 | – | – | – | – | – | – | 1,482 | 1,482 |
| Other total net income July-Dec 2015 | – | – | – | – 8 | 6 | – | – | – 2 |
| Shareholders equity 31-12-2015 | 164,000 | 86 | 4,096 | – 12 | 11 | – | 11,587 | 15,768 |
| Dividend, March 2016 (4.90 SEK/share) | – | – | – | – | – | – | – 804 | – 804 |
| New issue of shares | 82,000 | 41 | 6,273 | – | – | – | – | 6,314 |
| Non-cash issue /Sales of own shares | 27,201 | 10 | 2,160 | – | – | – | 905 | 3,075 |
| Issue expenses | – | – | – 123 | – | – | – | – | – 123 |
| D:o Effect on tax | – | – | 28 | – | – | – | – | 28 |
| Acquired minority shareholding | – | – | – | – | – | – 2 | – | – 2 |
| Net income Jan-June 2016 | – | – | – | – | – | – | 844 | 844 |
| Other total net income Jan-June 2016 | – | – | – | 9 | – 20 | – | – | – 11 |
| Shareholders equity 30-06-2016 | 273,201 | 137 | 12,434 | – 3 | – 9 | – 2 | 12,532 | 25,089 |
Condensed Cash Flow Statement
| SEKm | 2016 April-June |
2015 April-June |
2016 Jan-June |
2015 Jan-June |
Rolling 4 quarters July 15 - June 16 |
2015 Jan-Dec |
|---|---|---|---|---|---|---|
| Net operating income | 653 | 560 | 1,209 | 1,078 | 2,356 | 2,225 |
| Central administrative expenses | – 36 | – 32 | – 68 | – 61 | – 120 | – 113 |
| Reversed depreciations | 4 | 3 | 7 | 6 | 13 | 12 |
| Net interest rates paid | – 134 | – 138 | – 276 | – 293 | – 588 | – 605 |
| Tax paid | 42 | 2 | 44 | – 2 | 38 | – 8 |
| Translation difference of currencies | – 9 | – 4 | – 10 | – 6 | – 11 | – 7 |
| Cash flow from operating activities before change in working capital |
520 | 391 | 906 | 722 | 1,688 | 1,504 |
| Change in current receivables | 89 | 62 | – 47 | – 96 | – 17 | – 66 |
| Change in current liabilities | 110 | – 57 | 411 | 249 | 231 | 69 |
| Cash flow from operating activities | 719 | 396 | 1,270 | 875 | 1,902 | 1,507 |
| Investments in new constructions, refurbish ments and extensions |
– 467 | – 274 | – 802 | – 569 | – 1,465 | – 1,232 |
| Property acquisitions | – 354 | – 600 | – 391 | – 1,422 | – 1,290 | – 2,321 |
| Change in liabilities at acquisitions of property | – | 15 | – 4 | 14 | – 35 | – 17 |
| Property sales | 57 | 185 | 60 | 261 | 934 | 1,135 |
| Change in receivables at sales of property | 1 | 47 | 18 | 46 | 210 | 238 |
| Business combination | – 10,728 | – | – 11,187 | – | – 11,187 | – |
| Investment joint venture | – | – 477 | – | – 477 | – 28 | – 505 |
| Other investments | 11 | – 2 | 5 | – 3 | – 1 | – 9 |
| Cash flow from investment activities | – 11,480 | – 1,106 | – 12,301 | – 2,150 | – 12,862 | – 2,711 |
| Change in long term liabilities | 4,848 | 692 | 6,033 | 2,037 | 5,946 | 1,950 |
| Change in long-term receivables | – 2 | – | – 2 | – | – 2 | - |
| New issue of shares | 6,190 | – | 6,190 | – | 6,190 | - |
| Dividend paid | – | – | – 804 | – 754 | – 804 | – 754 |
| Cash flow from financing activities | 11,036 | 692 | 11,417 | 1,283 | 11,330 | 1,196 |
| Cash flow for the period/year | 275 | – 18 | 386 | 8 | 370 | – 8 |
| Liquid assets opening balance | 150 | 73 | 39 | 47 | 55 | 47 |
| Liquid assets closing balance | 425 | 55 | 425 | 55 | 425 | 39 |
The Parent Company
| 2016 | 2015 | 2016 | 2015 |
|---|---|---|---|
| Apr-June | Jan-June | Jan-June | |
| 5 | 4 | 10 | 9 |
| – 20 | – 25 | – 55 | – 47 |
| – 3 | 0 | 1 | 3 |
| – 66 | 239 | – 214 | 137 |
| 2,784 | – | 2,784 | – |
| 2,700 | 218 | 2,526 | 102 |
| 18 | – 49 | 56 | –23 |
| 2,718 | 169 | 2,582 | 79 |
| Comprehensive income for the parent company | |||
| 2,718 | 169 | 2,582 | 79 |
| Items that will be reclassifi ed into net income | |||
| 13 | – 3 | 20 | – 18 |
| –13 | 6 | – 20 | 18 |
| 2,718 | 172 | 2,582 | 79 |
| Apr-June |
| Condensed Balance sheet SEKm |
30 June 2016 |
30 June 2015 |
31 Dec 2015 |
|---|---|---|---|
| Participations in group companies | 22,409 | 6,030 | 6,030 |
| Receivables, group companies | 21,410 | 19,275 | 19,918 |
| Other assets | 218 | 157 | 112 |
| Liquid assets | 0 | 10 | 0 |
| Total | 44,037 | 25,472 26,060 | |
| Shareholders' equity | 15,788 | 3,902 | 4,718 |
| Derivatives | 1,349 | 1,202 | 1,117 |
| Interest bearing liabilities | 23,943 | 18,325 | 18,005 |
| Interest bearing liabilities, group companies | 2,719 | 1,917 | 2,105 |
| Other liabilities | 238 | 126 | 115 |
| Total | 44,037 | 25,472 26,060 | |
| Pledged assets (receivables group companies) Contingent liabilities (guaranteed commitments for subsidiaries) |
18,754 10,363 |
15,675 2,157 |
15,309 2,150 |
Financial Key Ratios
A number of the financial measures presented by Castellum in the interim report are not defined in accordance with the IFRS accounting standards. However, the company believes that these measures provide useful supplementary information to both investors and Castellum management, as they facilitate evaluation of company performance. It is to be noted that, since not all companies calculate financial measurements in the same manner, these are not always comparable to measurements used by other companies. Hence, these financial measures should not be seen as a substitute for measures defined according to the IFRS. Unless otherwise stated, the table below presents measures, along with their reconciliation, which are not defined according to the IFRS. Definitions for these measures appear on the page 27.
| Rolling 12 months | ||||||
|---|---|---|---|---|---|---|
| April - June 2016 | April - June 2015 | Jan - June 2016 | Jan - June 2015 | July 15 - June 16 | Jan -Dec 2015 | |
| Average number of shares, thousand (related to fi nancial key ratios) * |
201,530 | 189,014 | 195,238 | 189,014 | 192,101 | 189,014 |
| Outstanding number of shares, thousand (related to balance sheet ratios) * |
273,201 | 189,014 | 273,201 | 189,014 | 273,201 | 189,014 |
*) The number of historical shares that have been recalculated with reference to the bonus-issue element (i.e. the value of the subscription right) in the completed new share issue, and utilized in all ratio calculations for SEK-per-share. The conversion factor is 1.15.
INCOME FROM PROPERTY MANAGEMENT
Castellum's operations are focused on cash-fl ow growth from ongoing management operations – i.e. income growth from property management – the prime yearly objective being a 10% increase in property management income. Income from property management also forms the basis of the annual shareholder dividend: at least 50% of property-management income. Income from property management is calculated before paid tax, as well as after the theoretical tax that Castellum would have paid on income from property management, had there been no loss carryforwards.
| Income from property management | April - June 2016 SEKm SEK/share |
April - June 2015 SEKm SEK/share |
Jan - June 2016 SEKm SEK/share |
Jan - June 2015 SEKm SEK/share |
Rolling 12 months July 15 - June 16 Mkr SEK/share |
Jan - Dec 2015 SEKm SEK/share |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Income before tax | 373 | 1.85 | 1,168 | 6.18 | 1,106 | 5.66 | 1,733 | 9.17 | 2,957 | 15.29 | 3,584 | 18.96 |
| Reversed | ||||||||||||
Transaction and restructuring costs |
123 | 0.61 | – | – | 133 | 0.68 | – | – | 133 | 0.68 | – | – |
Revaluation of results due to stepwise acquisition |
– | – | – | – | – 27 | – 0.14 | – | – | – 27 | – 0.14 | – | – |
Changes in value, properties |
– 127 | – 0.63 | – 551 | – 2.92 | – 616 | – 3.15 | – 880 | – 4.66 | – 1,573 | – 8.19 | – 1,837 | – 9.72 |
Change in value, derivatives |
75 | 0,37 | – 239 | – 1.26 | 223 | 1.14 | – 137 | – 0.72 | 144 | 0.76 | – 216 | – 1.14 |
Changes in value, properties joint venture |
– | – | – | – | – | – | – | – | – 3 | – 0.02 | – 3 | – 0.02 |
Tax joint venture |
0 | 0.00 | 0 | 0.00 | 1 | 0.01 | 0 | 0.00 | 6 | 0.03 | 5 | – 0.03 |
| = Income from property management | 444 | 2.20 | 378 | 2.00 | 820 | 4.20 | 716 | 3.79 | 1,637 | 8.38 | 1,533 | 8.11 |
| EPRA Earnings (Income from prop. management after tax) |
||||||||||||
| Income from property management | 444 | 2.20 | 378 | 2.00 | 820 | 4.20 | 716 | 3.79 | 1,637 | 8.52 | 1,533 | 8.11 |
| Reversed; Current tax Income from property management |
– 34 | – 0.17 | – 9 | – 0.05 | – 64 | – 0,33 | – 27 | – 0.14 | – 89 | – 0.46 | – 52 | – 0.27 |
| EPRA Earnings / EPRA EPS | 410 | 2.03 | 369 | 1.95 | 756 | 3.87 | 689 | 3.65 | 1,548 | 8.06 | 1,481 | 7.84 |
NET ASSET VALUE
Net asset value is the total equity which the company manages for its owners. Based on this equity, Castellum wants to create return and growth at a low level of risk. Net asset value can be calculated both long and short term. Long-term net asset value is based on the balance sheet, with adjustments for items that will not lead to any short-term payment. In Castellum's case, these would include such things as goodwill, derivatives and deferred tax liability. Actual net asset value is equity according to the balance sheet, adjusted for the market value of the deferred tax liability.
| Net asset value | SEKm SEK/share | SEKm SEK/share | SEKm SEK/share | |||||
|---|---|---|---|---|---|---|---|---|
| Equity according to the balance sheet | 25,089 | 92 | 14,288 | 76 | 15,768 | 83 | ||
| Reversed: | ||||||||
Derivatives according to balance sheet |
1,925 | 7 | 1,202 | 6 | 1,117 | 6 | ||
Goodwill according to balance sheet |
– 2,032 | – 7 | – | – | – | – | ||
Deferred tax according to balance sheet |
6,596 | 24 | 3,937 | 21 | 4,299 | 23 | ||
| Long term net asset value (EPRA NAV) | 31,578 | 116 | 19,427 | 103 | 21,184 | 112 | ||
| Deduction | ||||||||
Derivatives as above |
– 1,925 | – 7 | –1,202 | – 6 | – 1,117 | – 6 | ||
Estimated real liability, deferred tax 4%* |
– 1,360 | – 4 | –968 | – 6 | – 1,121 | – 6 | ||
| Short term net asset value (EPRA NNNAV) | 28,293 | 104 | 17,257 | 91 | 18,946 | 100 |
* Estimated real deferred tax liability net has been calculated to 4% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realized in 2 years with a nominal tax of 22%, giving a present value of deferred tax liability of 21%, and that the properties are realized in 50 years where 33% are sold directly with a nominal tax of 22% and that 67% are sold indirect through company disposals where the buyers tax discount is 6%, which gives a present value of deferred tax liability of 6%. Furthermore, deferred tax assets attributable to non-deductible losses in the derivatives portfolio have been valued at a nominal tax of 22%.
FINANCIAL RISK
Castellum's strategy is to own, develop and manage properties at low fi nancial risk. This is expressed in a loan-to-value ratio not permanently exceeding 55% and an interest-coverage ratio of at least 200%.
| Interest coverage ratio | April - June 2016 | April - June 2015 | Jan - June 2016 | Jan - June 2015 | Rolling 12 months July 15 - June 16 |
Jan -Dec 2015 |
|---|---|---|---|---|---|---|
| Income from prop. management rolling 12 months |
444 | 378 | 820 | 716 | 1,637 | 1,533 |
| Reversed; | ||||||
Net interest |
173 | 152 | 325 | 303 | 624 | 602 |
Income from prop. management joint venture |
– | – 2 | – 4 | – 2 | – 25 | – 23 |
| Income from prop. management excl. net interest and JV |
617 | 528 | 1,141 | 1,017 | 2,236 | 2,112 |
| Interest coverage ratio | 357% | 347% | 351% | 336% | 358% | 351% |
| Loan to value ratio | ||||||
| Interest-bearing liabilities | 39,356 | 20,483 | 20,396 | |||
| Liquid assets | – 425 | – 55 | – 39 | |||
| Net interest-bearing liabilities net | 38,931 | 20,428 | 20,357 | |||
| Investment properties | 72,109 | 40,187 | 41,818 | |||
| Acquired properties not taken into possession | – 11 | – 46 | – 15 | |||
| Divested properties still in Castellum's possession |
– | 210 | 18 | |||
| Net investment properties | 72,098 | 40,351 | 41,821 | |||
| Loan to value ratio | 54% | 51% | 49% |
INVESTMENT
In order to achieve the overall objective of 10% growth, i. e. income from property management per share, annual net investments of at least 5% of the property value will be made.
| Net investments | Rolling 12 months | |||||
|---|---|---|---|---|---|---|
| April - June 2016 | April - June 2015 | Jan - June 2016 | Jan - June 2015 | July 15 - June 16 | Jan - Dec 2015 | |
| Acquisitions | 26,779 | 600 | 28,889 | 1,422 | 29,788 | 2,321 |
| New constructions, extensions and reconstructions |
467 | 274 | 802 | 569 | 1,465 | 1,232 |
| Total investment | 27,246 | 874 | 29,691 | 1,991 | 31,253 | 3,553 |
| Net sales price | – 30 | – 183 | – 33 | – 261 | – 912 | – 1,140 |
| Net investments | 27,216 | 691 | 29,658 | 1,730 | 30,341 | 2,413 |
| Proportion of the property value, % | 61% | 2% | 71% | 5% | 75% | 6% |
Other Financial Key Ratios
| 2016 | 2015 | 2016 | 2015 | Rolling 12 months | 2015 | |
|---|---|---|---|---|---|---|
| April - June | April - June | Jan - June | Jan - June | July 15 - June 16 | Jan – Dec | |
| Net operating income margin | 69% | 69% | 67% | 67% | 68% | 67% |
| Interest rate level, on average | 2.7% | 3.0% | 2.8% | 3.1% | 2.9% | 3.0% |
| Return on longterm net asset value | 15.5% | 19.9% | 15.0% | 17.1% | 15.5% | 18.2% |
| Return on actual net asset value | 2.3% | 26.0% | 7.4% | 19.7% | 11.8% | 20.4% |
| Return on total capital | 4.9% | 10.8% | 6.0% | 9.7% | 6.6% | 10.0% |
| Return on equity | 5.3% | 28.4% | 8.4% | 21.1% | 12.6% | 21.7% |
| Property value, SEK/share | 264 | 213 | 264 | 213 | 264 | 221 |
| Gross leasing | 106 | 92 | 208 | 177 | 347 | 316 |
| Net leasing | 47 | 16 | 47 | 37 | 28 | 18 |
Accounting Principles
Castellum follows the EU-adopted IFRS standards. This interim report has been prepared according to IAS 34 Interim Financial Reporting and the Annual Accounts Act. Disclosures in accordance with IAS 34 Interim Financial Reporting are presented either in the notes or elsewhere in the interim report. Otherwise, accounting principles and methods for calculations have remained unchanged compared with the Annual Report of the previous year.
Opportunities and Risks for Opportunities and Risks for Group and Parent Company
Opportunities and risks in the cash fl ow
Over time, increasing market interest rates normally constitute an eff ect of economic growth and increasing infl ation, which is expected to result in higher rental income. This is partly due to the fact that the demand for premises is thought to increase. This leads, in turn, to reduced vacancies and hence to the potential for increasing market rents. It is also partly due to the fact that the index clause in commercial contracts compensates for increased infl ation.
An economic boom therefore means higher interest costs but also higher rental income, while the opposite relationship is true during a recession. The changes in rental income and interest cost do not take place at the exact same time, which is why the eff ect on income in the short run may occur at diff erent points in time.
Sensitivity analysis - cash fl ow Eff ect on income next 12 months
| Eff ect on income, SEKm | Probable scenario | |||
|---|---|---|---|---|
| +/– 1% (units) | Boom | Recession | ||
| Rental level / Index | + 54/– 54 | + | – | |
| Vacancies | + 60/– 60 | + | – | |
| Property costs | – 17/+ 17 | – | 0 | |
| Interest costs | – 113/– 44* | – | + |
* Due to the interest-rate fl oor in credit agreements, Castellum is not able to take full advantage of negative interest rates. This results in a negative outcome, even for a one-percentage-point reduction of the interest rate.
Opportunities and risks in property values
Castellum reports its properties at fair value with changes in value in the income statement. This means that the result in particular but also the fi nancial position may be more volatile. Property values are determined by supply and demand, where prices mainly depend on the properties' expected net operating incomes and the buyers' required yield. An increasing demand results in lower required yields and hence an upwarded adjustment in prices, while a weaker demand has the opposite eff ect. In the same way, a positive development in net operating income results in an upward adjustment in prices, while a negative development has the opposite eff ect.
In property valuations, consideration should be taken of an uncertainty range of +/– 5-10%, in order to refl ect the uncertainty that exists in the assumptions and calculations made.
Sensitivity analysis - change in value
| Properties | – 20% | – 10% | 0% | + 10% | + 20% |
|---|---|---|---|---|---|
| Changes in value, SEKm | – 14,422 | – 7,211 | – | 7,211 | 14,422 |
| Loan to value ratio | 67% | 60% | 54% | 49% | 45% |
Financial risk
Ownership of properties presumes a working credit market. Castellum's greatest fi nancial risk is to lack access to funding. The risk is reduced by a low loan-to-value ratio and long-term credit agreements.
Signing of the Report
The Board of Directors and the Chief Executive Offi cer assure that the Half-year Report provide a fair view of the parent company's and the Group's operations, fi nancial position and result as well as describes signifi cant risks and uncertainties that the parent company and the companies included in the Group are faced with.
Gothenburg July 15, 2016
Charlotte Strömberg Per Berggren Chairman Board member
Board member Board member
Christina Karlsson Kazeem Nina Linander Board member Board member
Johan Skoglund Henrik Saxborn Board member CEO
Anna-Karin Hatt Christer Jacobson
Event after the reporting period
After the reporting period, Jörgen Lundgren was appointed CEO of Castellum's Northern Region and also became a member of Castellum's Executive Group Management. Jörgen has previously been CEO, as well as Assistant Manager of Norrporten. Jörgen Lundgren has extensive experience in the banking and fi nancing industry – for example, as Regional Manager of Nordea during 1999-2007.
Auditors' Report
Independent Auditors' Report on Review of Half-year Financial Information.
To the Board of Directors of Castellum AB (publ) Corporate indetity number: 556475-5550
Introduction
We have reviewed the half-year report for Castellum AB (publ) for the period January 1 – June 30, 2016. The Board of Directors and the President are responsible for the preparation and presentation of this half-year report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this halfyear report based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures. A review has a diff erent focus and is substantially less in scope than an audit conducted in accordance with ISA and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all signifi cant matters that might be identifi ed in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the half-year report is not, in all material respects, prepared for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.
Gothenburg July 15, 2016
Accountant Accountant
Hans Warén Magnus Fredmer Authorized Public Authorized Public
The Castellum Share
The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had about 23,900 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for one foreign shareholder who has fl agged for holding over 5%, Stichting Pensioenfonds ABP. Castellum has no direct registered shareholder with holdings exceeding 10%. The ten single largest shareholders registered in Sweden are presented in the table below.
| Shareholders on 30-06-2016 | Percentage of | ||
|---|---|---|---|
| Number of | voting rights | ||
| Shareholders | shares thousand | and capital | |
| Andra AP-fonden | 15,199 | 5.6% | |
| Sjätte AP-fonden | 13,601 | 5.0% | |
| SEB Fonder | 12,618 | 4.6% | |
| Lannebo Fonder | 8,330 | 3.1% | |
| AMF Försäkring & Fonder | 6,038 | 2.2% | |
| Stiftelsen Global Challenges | 3,750 | 1.4% | |
| Handelsbanken Fonder | 3,655 | 1.3% | |
| AFA Försäkring | 3,647 | 1.3% | |
| Länsförsäkringar Fonder | 3,279 | 1.2% | |
| Danske Invest & Danica Pension | 2,792 | 1.0% | |
| Board and executive management Castellum | 282 | 0.1% | |
| Other shareholders registered in Sweden | 66,417 | 24.3% | |
| Shareholders registered abroad | 133,594 | 48.9% | |
| Total registered shares | 273,202 | 100.0% |
There is no potential common stock (eg. convertibles)
Source: Modular Finance AB acoording to information from Euroclear Sweden AB
Distribution of shareholders by country 30-06-2016
The Castellum share price as at 30 June, 2016 was SEK 119.90 (101.08) equivalent to a market capitalization of SEK 32.8 billion (19.1), calculated on the number of outstanding shares.
Since the beginning of the year a total of 115 million (102) shares were traded, equivalent to an average of 628,000 shares (863,000) per day, corresponding on an annual basis to a turnover rate of 57% (127%). The share turnover is based on statistics from Nasdaq Stockholm, Chi-X, Turquoise and BATS Europe.
Net asset value
The net asset value is the aggregated capital that the company manages for its owners. From this capital, Castellum wants to generate return and growth at low risk.
The long term net asset value (EPRA NAV) can be calculated to SEK 116 per share (102). The share price at the end of the period was thus 103% (99%) of the long term net asset value.
Earnings
Income from property management adjusted for tax attributable to income from property management (EPRA EPS) amounted to SEK 8.06 (7.40) on rolling annual basis. This results in a share price yield of 6.7% (7.3%) corresponding to a multiple of 15 (14). Income from property management must be adjusted by a longterm increase in the property value and eff ective tax paid.
Net income after tax amounted on rolling annual basis to SEK 12.11 per share (10.85), which from the share price gives a yield of 10.1% (10.7%), corresponding to a P/E of 10 (9).
Dividend yield
The latest carried dividend of SEK 4.25 (3.99) corresponds to a yield of 3.6% (3.9%) based on the share price at the end of the period.
Total share yield
During the last 12-month period the total yield of the Castellum share has been 23% (2%), including a dividend of SEK 4.25.
Net asset yield including long-term change in value
In companies managing real assets, such as real estate, the income from property management only refl ects part – albeit a large part – of the overall result. The defi nition of a real asset is that its value is protected. This means that over time – and with proper maintenance – the real asset increases in value to compensate for infl ation.
The net asset value – i.e., the denominator of the yield ratio income/capital – is adjusted annually in accordance with IFRS regulations for changes in value. In order to provide an accurate fi gure of the yield, the numerator – i.e., income – must be similarly adjusted. Therefore, the recorded net income has to be supplemented with a component of value changes as well as with eff ective tax to provide an accurate view of income and yield.
One problem is that changes in value can vary greatly between years and quarters, thus leading to volatile results. However, by being a long-term player with stable cash fl ow and a balanced real estate portfolio, Castellum is able to make use of long-term value changes.
The Castellum share's price trend and turnover since the IPO May 23, 1997 until June 30, 2016
Net asset yield and earnings including long-term change in value
| Sensitivity analysis | ||
|---|---|---|
| –1%-unit | +1%-unit | |
| 1,637 | 1,637 | |
| 776 | 71 | 1,481 |
| 1.1% | 0.1% | 2.1% |
| – 82 | – 82 | – 82 |
| 2,331 | 1,626 | 3,036 |
| 12.14 | 8.47 | 15.81 |
| 11.8% | 8.9% | 14.8% |
| 10.1% | 7.1% | 13.2% |
| 10 | 14 | 8 |
| Income from prop. management rolling 12 months 1,637 |
| EPRA Key ratios | 30 June 2016 |
30 June 2015 |
31 Dec 2015 |
|---|---|---|---|
| EPRA Earnings (Income from property management after tax), SEKm |
756 | 689 | 1,481 |
| EPRA Earnings (EPS) SEK/share | 3.87 | 3.65 | 7.84 |
| EPRA NAV (Long term net asset value), SEKm | 31,578 | 19,427 | 21,184 |
| EPRA NAV, SEK/share | 116 | 102 | 112 |
| EPRA NNNAV (Net asset value), SEKm | 28,293 | 17,257 | 18,946 |
| EPRA NNNAV, SEK/share | 104 | 91 | 100 |
| EPRA Vacancy Rate | 9% | 11% | 10% |
Growth, yield and fi nancial risk
| average/ | average/ | |||
|---|---|---|---|---|
| 1 year | year | year | ||
| Growth | ||||
| Rental income SEK/share | 5% | 3% | 6% | |
| Income from prop. management SEK/share | 10% | 8% | 6% | |
| Net income for the year after tax SEK/share | 14% | 9% | 5% | |
| Dividend SEK/share | 7% | 7% | 6% | |
| Long term net asset value SEK/share | 13% | 10% | 6% | |
| Actual net asset value SEK/share | 15% | 9% | 6% | |
| Real estate portfolio SEK/share | 24% | 10% | 8% | |
| Change in property value | 3.8% | 2.5% | 1.1% | |
| Yield | ||||
| Return on actual long term net asset value | 15.5 | 13.6 | 11.4 | |
| Return on actual net asset value | 11.8 | 13.6 | 11.2 | |
| Return on total capital | 6.6 | 7.2 | 6.6 | |
| Total yield of the share (incl. dividend) | ||||
| Castellum | 23.1% | 19.1% | 10.3% | |
| Nasdaq Stockholm (SIX Return) | – 3.3% | 13.0% | 8.3% | |
| Real Estate Index Sweden (EPRA) | 28.6% | 27.0% | 12.9% | |
| Real Estate Index Europe (EPRA) | 1.1% | 16.0% | 3.0% | |
| Real Estate Index Eurozone (EPRA) | 15.8% | 17.4% | 5.1% | |
| Real Estate Index Great Britain (EPRA) | – 10.1% | 10.1% | – 0.5% | |
| Financial risk | ||||
| Loan to value ratio | 54% | 51% | 50% | |
| Interest coverage ratio | 358% | 334% | 302% |
3 years
10 years
Yield earnings per share
The share's dividend yield Share price/net asset value
Since 1997, Castellum's share has been listed on Nasdaq, Stockholm Large Cap under the name CAST.
Defi nitions
Data per share
In calculating income and cash flow per share the average number of shares has been used, whereas in calculating assets, shareholders' equity and net asset value per share the number of outstanding shares has been used. The number of historical shares that have been recalculated with reference to the bonus-issue element (i.e. the value of the subscription right) in the completed new share issue.
Dividend pay out ratio
Dividend as a percentage of income from property management.
Dividend yield
Proposed dividend as a percentage of the share price at the end of the period.
Economic occupancy rate
Rental income accounted for during the period as a percentage of rental value for properties owned at the end of the period. Properties acquired/completed during the period have been restated as if they had been owned or completed during the whole year, while properties disposed of have been excluded entirely. Development projects and undeveloped land have been excluded.
EPRA EPS (Earnings Per Share)
Income from property management adjusted for nominal tax attributable to income from property management, divided with the average number of shares. With taxable income from property management means income from property management with a deduction for tax purposes of depreciation and reconstruction.
EPRA NAV (Long term net asset value)
Reported equity according to the balance sheet, adjusted for interest rate derivatives and deferred tax.
EPRA NNNAV (Actual net asset value)
Reported equity according to the balance sheet, adjusted for actual deferred tax instead of nominal deferred tax.
Income from property management
Net income for accounted for after reversal of transaction and restructuring costs, revaluation of results due to stepwise acquisition, changes in value and tax, both for the Group and for joint venture.
Interest coverage ratio
Income from property management after reversal of net financial items and income from property management in joint venture as a percentage of net interest items.
Liquidity risk
The risk of not having access to liquidity or unutilized credit facilities in order to settle payments due.
Loan to value ratio
Interest-bearing liabilities after deduction for liquid assets as a percentage of of the properties' fair value with deduction for acquired properties not taken in possession, and with addition for properties disposed of, still in possession, at the year-end.
Net operating income margin
Net operating income as a percentage of rental income.
Number of shares
Registered number of shares - the number of shares registered at a given point in time.
Outstanding number of shares - the number of shares registered with a deduction for the company's own repurchased shares at a given point in time.
Average number of shares - the weighted average number of outstanding shares during a given period. The number of historical shares that have been recalculated with reference to the bonus-issue element (i.e. the value of the subscription right) in the completed new share issue.
Operating expenses, maintenance, etc.
This item includes both direct property costs, such as operating expenses, maintenance, ground rent and real estate tax, as well as indirect costs for leasing and property administration.
Property type
The property's primary rental value with regard to the type of premises. Premises for purposes other than the primary use may therefore be found within a property type.
Rental income
Rents debited plus supplements such as reimbursement of heating costs and real estate tax.
Rental value
Rental income plus estimated market rent for vacant premises.
Return on actual net asset value
Income after tax as a percentage of initial net asset value during the year, but with actual deferred tax instead of nominal tax. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.
Return on equity
Income after tax as a percentage of average equity. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.
Return on long term net asset value
Income after tax with reversed changes in value of derivatives and deferred tax as a percentage of initial long term net asset value. In the interim reports the return has been recalculated on annual basis, disregarding seasonal variations normally occuring in operations.
Return on total capital
Income before tax with reversed net financial items and changes in value on derivatives during the year as a percentage of average total capital. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.
SEK per square metre
Property-related key ratios, expressed in terms of SEK per square metre, are based on properties owned at the end of the period. Properties acquired/completed during the year have been restated as if they had been owned or completed for the whole year, while properties disposed of have been excluded entirely. Development projects and undeveloped land have been excluded. In the interim accounts key ratios have been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.
Total yield per share
Share price development with addition of the dividends during the period which was reinvested in shares that day shares traded exdividend.
Calendar
Interim Report January-September 2016 12 October 2016, around 1 pm Year-end Report 2016 19 January 2017 Annual General Meeting 2017 23 March 2017
www.castellum.se
On Castellum's website it is possible to download as well as subscribe to Castellum's Pressreleases and Interim Reports. For further information please contact Henrik Saxborn, CEO, tel +46 705 60 74 50 or Ulrika Danielsson, CFO, tel +46 706 47 12 61.
Local contacts
Central Region in Castellum
Rörvägen 1, Box 1824, 701 18 Örebro Telefon +46 19-27 65 00 [email protected] www.aspholmenfastigheter.se
Öresund Region in Castellum
Riggaregatan 57, Box 3158, 200 22 Malmö Telefon +46 40-38 37 20 [email protected] www.briggen.se
West Region in Castellum
Theres Svenssons gata 9, Box 8725, 402 75 Göteborg Telefon +46 31-744 09 00 [email protected] www.eklandia.se
Stockholm Region in Castellum
Tjurhornsgränd 6, Box 5013, 121 05 Johanneshov Telefon +46 8-602 33 00 [email protected] www.brostaden.se
North Region in Castellum
Box 225, 851 04 Sundsvall Telefon +46 60-64 12 00 [email protected] www.norrporten.se
In the event of confl ict in interpretation or differences between this report and the Swedish version, the latter will have priority.
Castellum AB (publ) • Box 2269, 403 14 Gothenburg • Visiting address Kaserntorget 5 Phone +46 (0)31-60 74 00 • Fax +46 (0)31-13 17 55 • Email [email protected] • www.castellum.se Domicile: Gothenburg • Corporate identity no: 556475-5550