Catena — Interim / Quarterly Report 2014

Apr 1, 2013

Interim Report, January–March 2014

• • Property income increased to SEK 100.1m (76.2m).
• • Operating surplus rose to SEK 71.0m (49.1m).
• • Profit from asset management rose to SEK 42.7m (37.4m).
• • Profit for the quarter was SEK 22.8m (32.4m), equivalent to earnings per share of SEK 0.90 (2.83), including changes totalling SEK 11.8m (4.3m) in property values. The fall in profit for the quarter compared with the previous year was due to changes amounting to SEK –25.3m (0.0) in derivative values.

Key events during the first quarter

• Since 2 January 2014, Catena's shares have been traded on the NASDAQ OMX Stockholm Nordic Mid Cap List.
• Catena acquired two properties for SEK 396m in Haninge and Nässjö. These properties contain 48,000 sq.m. of logistics floor space and yield an annual rent of some SEK 32m.
• A new share issue comprising 446,469 shares was implemented, raising the number of Catena's shares to 25,641,921.

Catena does not publish financial information in English. This is a direct translation of the report in Swedish, and should be seen as a service to readers.

2 Q1 in brief

Mission

Catena's mission is to own, efficiently manage and actively develop well-located properties with the capacity to generate a stable, growing cash flow and good value growth.

Regions	2014	2013	2013
SEK m	Jan–Mar	Jan–Mar	Jan–Dec
Property income
Stockholm	43.4	36.5	142.1
Gothenburg	29.4	21.5	90.9
Öresund	21.1	18.2	77.2
Solna Project	6.2	–	6.6
Total	100.1	76.2	316.8
Operating surplus
Stockholm	31.7	24.6	101.8
Gothenburg	19.8	13.0	62.0
Öresund	14.4	11.5	52.9
Solna Project	5.1	–	4.6
Total	71.0	49.1	221.3

	2014	2013	2013
The Group in figures	Jan–Mar	Jan–Mar	Jan–Dec
Property income, SEK m	100.1	76.2	316.8
Operating surplus, SEK m	71.0	49.1	221.3
Profit from asset management, SEK m	42.7	37.4	147.0
Interim profit, SEK m	22.8	32.4	138.4
Earnings per share, SEK	0.9	2.8	9.8
Surplus ratio, %	70.9	64.4	69.9
Equity ratio, %	31.6	21.8	32.6
Letting ratio, %	88.4	85.6	87.2

Focus on Stockholm Region

Catena's Stockholm Region comprises the company's properties in Norrköping, Katrineholm, Hallsberg, Örebro and Stockholm, and individual properties in northern Sweden. Acquiring 24,000 sq.m. of floor space in Haninge in February brought the total space owned up to 317,000 sq.m., making this region Catena's largest.

Catena has a regional, a technical and an administrative manager in place in the region. These three provide a local presence in the area and allow control of the letting process. This local presence also helps to make Catena a distinct and accessible landlord.

The biggest challenge in the Stockholm Region has been to boost the letting ratio. During the winter, extensive work has been done and the ratio has now reached 91%, against 85% at year-end 2013. The Stockholm Region is continuing its efforts to reduce operating costs, thereby reducing environmental impact and becoming an even more attractive landlord.

Törsjö 2:49, Örebro (cover picture)

Strong first quarter

Good cash flow, a higher letting ratio and a surplus ratio rising to 71%. The year has started well, with a strong first quarter.

Catena reports a cash flow of SEK 42.5m (37.2m) from current operations. In terms of results, too, this year's first quarter shows good performance, with an operating surplus of SEK 71.0m (49.1m), rising by as much as 45% and profit from assets up 14% to a total of SEK 42.7m (37.4m).

Our two focus areas this year, and this of course includes the first quarter, are to boost letting and find ways of using energy more efficiently. Our progress in these two areas is reflected, for example, in the trends of our letting and surplus ratios respectively.

Despite some major tenant departures, we note a positive trend of the letting ratio: at the end of the quarter it was just over 88%, compared with 87% at year-end. The upward trend of the surplus ratio is also gratifying; for the quarter, it was a favourable 71% – very good for a winter quarter, and higher than last year's figure of 70% on a whole-year basis. Our continuously improving surplus ratio can be explained partly by our successful efforts to enhance energy efficiency. The greatest potential for raising efficiency lies in a switch to heating based on geothermal energy, combined with efficient ventilation recovery. There are also major savings to be made from switching from old types of lighting to modern, energy-saving ones that can also be controlled by means of movement sensors.

The fact that interim profit is lower than in the same quarter last year may be explained mainly by a negative value trend of our financial instruments due to falling market interest rates. But, as we all know, this is not an expense and does not affect our earnings or cash flow. That earnings per share fell below last year's corresponding figure is mainly an effect of the major share issue implemented by Catena in connection with the acquisition of the logistics operations in October 2013.

In general, our market seems somewhat hesitant and is difficult to interpret. Many of our customers have noticed increased competition since new 'price pressures' are continuously turning up on the transport side, and also in third-party logistics.

During the quarter, we completed our purchase of the properties in Jordbro and Nässjö, and the Dikartorp 3:6 property has now been incorporated into our regular business.

With some gratification, we now see that the local development plan for our site in Sunnanå near Malmö has finally been adopted. This means that, in the long term, we shall be able to provide new logistics premises in the absolutely best location.

As for our Haga North project, we are making progress, both having preconstruction surveys done and meeting potential partners for the planned new production, pending the entry into force of the local plan.

Since the end of the quarter, Catena has renegotiated loan limits for a total of SEK 2,050m. Summing up, then, we have had a good start to the year, with strong growth coupled with low interest payments and, accordingly, a very good cash flow.

Ängelholm, May 2014 Gustaf Hermelin, Chief Executive Officer

Interim Report, January–March 2014

Income statement

	2014	2013	Rolling	2013
SEK m	Jan–Mar	Jan–Mar	12-month	Jan–Dec
Property income	100.1	76.2	340.7	316.8
Property costs	−29.1	−27.1	−97.5	−95.5
Operating surplus	71.0	49.1	243.2	221.3
Central administration	−5.4	−	−14.0	−8.6
Other operating income	0.4	−	2.5	2.1
Other operating costs	−	−	−2.1	−2.1
Interests in joint-venture profits	0.4	0.1	4.9	4.6
Other financial income	0.2	5.1	13.5	18.4
Other financial costs	−23.9	−16.9	−95.7	−88.7
Profit from asset management	42.7	37.4	152.3	147.0
Realised changes in value of investment properties	−	−0.1	2.5	2.4
Unrealised changes in value of investment properties	11.8	4.3	38.4	30.9
Changes in value of derivatives	−25.3	−	−20.9	4.4
Pre-tax profit	29.2	41.6	172.3	184.7
Tax paid	−	−	−	−
Tax deferred	−6.4	−9.2	−43.5	−46.3
Interim profit	22.8	32.4	128.8	138.4
Interim profit distributed among parent company's shareholders	23.1	32.7	130.9	140.2
Interim profit distributed among holdings without decisive influence	−0.3	−0.3	−2.1	−1.8
Key figures before and after dilution
Shareholders' equity, SEK per share	66.7	65.8	66.7	65.0
Profit for the period, SEK per share (earnings per share)	0.9	2.8	5.1	9.8
Number of outstanding shares, million	25.6	11.6	25.6	25.2
Overall profit
Interim profit	22.8	32.4	128.8	138.4
Other overall interim profit	−	−	−	−
Total overall interim profit	22.8	32.4	128.8	138.4
Overall interim profit distributed among parent company's shareholders	23.1	32.7	130.9	140.2
Overall interim profit distributed among holdings without decisive influence	−0.3	−0.3	−2.1	−1.8

Kopparverket 11, Helsingborg

Year of expiry	No. of	Contractual	Contractual
	contracts	annual rent, SEK m	annual rent, %
2014	68	22.0	5
2015	31	10.3	3
2016	25	84.0	21
2017	30	69.6	17
2018	6	10.7	3
2019	4	0.1	0
2020+	35	204.0	51
Total	199	400.7	100

Expiry of rental contracts

Property income

Of Catena's contractual annual rent, earnings from longterm contracts account for some 71% of the total annual figure. This means stable income with no appreciable variation from one period to the next, apart from the effects of acquisitions and sales. Thanks to well-implemented renegotiations and tenancy contracts on new lettings, the average outstanding period of tenancy agreements is nearly six years.

Compared with the same period in the previous year, property income rose by SEK 23.9m, mainly owing to properties acquired and projects completed.

Property costs

Property costs rose by SEK 2.0m, mainly owing to the properties acquisitions.

Financial expense

Financial expense rose by SEK 7.0m. This increase is attributable mainly to renegotiations of debts to credit institutions and to the acquisitions that took place during the period.

Interim profit

Compared with the previous year, interim profit fell by SEK 9.6m to SEK 22.8m. The positive effect of acquisitions on profit was offset by changes in the value of derivatives, which were adversely affected by falling market interest rates during the first quarter.

Associated companies

The figure for interim profit includes transactions with three associated companies: Backahill AB, Hansan AB and TAM Group AB. These transactions, relating to tenancies and consultancy services, do not amount to a substantial sum.

6 Group

Cash flow

	2014	2013	2013
SEK m	Jan–Mar	Jan–Mar	Jan–Dec
Profit before tax	29.2	41.6	184.7
Adjustment for items not included in cash flow	13.3	−4.4	3.1
Cash flow from current operations before changes
in operating capital	42.5	37.2	187.8
Change in operating receivables	13.2	−1.5	3.9
Change in operating liabilities	−43.0	−22.2	−9.8
Cash flow from current operations	12.7	13.5	181.9
Acquisition of assets through
subsidiaries	−55.2	–	89.2
Acquisition of investment properties	−34.1	−70.8	−268.9
Sale of investment properties	–	–	4.8
Acquisition of tangible assets	−0.2	–	−1.3
Change in financial assets	1.3	–	−230.9
Cash flow from investment
operations	−88.2	−70.8	−407.1
Change in loans	19.3	57.3	438.6
Cash flow from financing
operations	19.3	57.3	438.6
Interim cash flow	−56.2	–	213.4
Opening liquid funds	213.6	0.2	0.2
Closing liquid funds	157.4	0.2	213.6

Balance sheet

	2014	2013	2013
SEK m	31 Mar	31 Mar	31 Dec
Assets
Fixed assets
Investment properties	5,163.7	3,457.5	4,722.3
Tangible assets	1.2	–	1.1
Financial assets	27.0	27.0	31.3
Deferred tax claim	29.3	5.2	16.1
Current assets
Current receivables	43.1	29.9	53.6
Liquid funds	157.4	0.2	213.6
Total assets	5,421.7	3,519.8	5,038.0
Shareholders' equity and liabilities
Shareholders' equity attributable to
parent company's owners	1,709.5	760.4	1,636.5
Shareholders' equity attributable to
holdings without decisive influence	5.2	7.0	5.4
Long-term liabilities
Debts to credit institutions	3,210.7	2,184.7	2,954.5
Deferred tax liability	286.7	215.6	272.6
Other long-term liabilities	21.7	–	0.8
Current liabilities
Debts to credit institutions	8.5	10.8	8.5
Other current liabilities	179.4	341.3	159.7
Total shareholders' equity and
liabilities	5,421.7	3,519.8	5,038.0

Analysis of cash flow

Cash flow for the period under review amounted to SEK −56.2m. This cash flow was reduced by the acquisitions of properties in Haninge and Nässjö for the portion of the payment that did not consist of the new share issue to the vendors of these properties. Investments in existing properties have also had an adverse effect on cash flow. Catena funded the acquisitions partly by taking out new loans.

Mosås 4:66, Örebro Terminalen 3, Malmö

Debts to credit institutions

Debts to credit institutions amounted to SEK 3,219.2 (2,195.5m). The loan limit was SEK 3,265.6m. Since the end of the quarter, Catena has renegotiated loan limits applying to SEK 1,306m and increased the limit amount by SEK 744m. This means that the supply of credit is safeguarded for three years for SEK 1,500m and one year for SEK 550m. Agreements will be signed during the second quarter.

Debts to credit institutions

Year of		Interest,	Percen
maturity	SEK m	%1	tage
2014	2,219.2	2.3	69.0
2021	500.0	4.3	15.5
2022	500.0	3.7	15.5
Total	3,219.2	2.8	100.0

¹ Average interest rate concerned at 31 March 2014. Rates vary with overall rates, subject to current rate-cap limits.

Derivative instruments

Financial instruments consist of derivative instruments in category 2 of the valuation hierarchy.

The nominal value of the derivatives corresponds to 34% of the group's debts to credit institutions.

Interest-rate hedging through interest-rate caps

Start year	End year	Interest, %	SEK m
2009	2014	4.5	28.0
Total			28.0

Interest-rate hedging through interest-rate swaps

Start year	End year	Interest, %	SEK m
2009	2014	2.6	87.6
2011	2021	2.9	500.0
2012	2022	2.3	500.0
Total			1,087.6

Change in shareholders' equity

	2014	2013	2013
SEK m	31 Mar	31 Mar	31 Dec
Opening balance	1,641.9	735.0	735.0
Dividend paid to shareholders	–	–	−28.0
Reverse acquisition of Catena	–	–	616.3
New share issue	–50.0	–	–
Capital contribution	–	–	180.2
Overall interim profit attributable to holdings without decisive influence	−0.3	−0.3	−1.8
Overall interim profit attributable to parent company's shareholders	23.1	32.7	140.2
Closing balance	1,714.7	767.4	1,641.9
Attributable to:
Parent company's shareholders	1,709.5	760.4	1,636.5
Holdings without decisive influence	5.2	7.0	5.4

Asset distribution, %

Slottshagen 2:1, Norrköping

Property stock by region

Regions	No. of prop erties	Lettable space, '000 sq.m.	Book value, SEK m	Rental value, SEK m	Economic letting ratio	Contractual annual rent, SEK m	Surplus ratio
Stockholm	22	316.7	2,121.1	209.5	91%	190.4	73%
Gothenburg	11	209.2	1,350.8	134.1	82%	110.0	67%
Öresund	13	172.4	806.8	84.4	88%	74.2	68%
Solna Project	1	40.7	885.0	26.7	98%	26.1	82%
Total, properties	47	739.0	5,163.7	454.7	88%	400.7	71%

Changes in property stock

Investments in existing properties during the year amounted to SEK 34.1m (70.8m), most of which related to investments in new building at two properties: Högsbo 21:1 in Gothenburg and Ättehögen 2 in Jönköping.

On 13 February 2014, Catena acquired two properties, for SEK 396m, in Haninge and Nässjö. The properties comprise logistics space totalling 48,000 sq.m. and are expected to yield an aggregate income of some SEK 32m a year.

Since the land consolidation regarding Dikartorp 3:6 in Järfälla was completed, this property has been included in the property designated Dikartorp 3:12.

Property valuation

Every quarter, Catena implements an internal valuation of all the investment properties. This valuations then forms the basis for the actual values listed in the balance sheet. To verify the internal valuation, external valuations of a selection of our properties are also carried out. During the third quarter of 2013, external valuations of the entire stock were implemented.

Some leeway is allowed between the value according to the internal valuation and the actual (net realisable) value before adjustment of the latter is performed. The deviation must lie within a range governed by the permitted deviation of ±0.25% from the set yield requirement. Only when the deviation exceeds or falls short of this range is the actual value adjusted. This deviation is accepted since there is always some uncertainty in estimated figures.

Property acquisitions

Property designation	Completion date	Region	Munici pality	Space, sq.m.
Lagret 1	13 Feb 2014 Gothenburg		Nässjö	24,404
Jordbromalm 4:33 13 Feb 2014		Stockholm	Haninge	23,547
Totalt				47,951

Property stock

SEK m	Book value	Number of prop erties
Property stock at 1 January 2014	4,722.3	45
Acquisitions	395.5	2
Investments in existing properties	34.1
Sales	–	0
Unrealised value changes	11.8
Total, investment properties	5,163.7	47

Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012

Rental value: SEK 454.3m

Book value: SEK 5,163.7m

Market prospects

Demand for business premises in our market segments is good. Rents are unchanged compared with previous quarters, but contract negotiations afford scope for slightly raised levels, if with shorter agreed periods. Catena sees opportunities to expand over the next few years. The market for efficient, correctly located logistics properties remains attractive owing to raised requirements in terms of environmentally efficient and cost-effective deliveries. As for the Solna property, demand for building rights relating mainly to housing remains high.

Catena shares

On the closing day, Catena's shares were registered on the Nasdaq OMX Stockholm Nordic Mid Cap List. The closing price at 31 March 2014 was SEK 110.00, up 10% from the opening price of SEK 100.00 on 2 January 2014. During the quarter, the maximum price noted for Catena's shares was SEK 113.50 and the minimum SEK 100.00.

Net worth

Net worth per share, excluding deferred tax on property appreciation surplus, amounted to SEK 77.80 (84.4).

Ownership structure

	Number of shares, '000	Votes, %
Backahill	11,680	45.6
Endicott Sweden AB (CLS Holdings plc)	3,469	13.5
Fabege AB (publ)	3,469	13.5
SFU Sverige AB	1,851	7.2
Catella Fondförvaltning	854	3.3
JPM Chase NA	645	2.5
ABG Sundal Collier Norge ASA	310	1.2
Livförsäkrings AB Skandia	277	1.1
Banque Carnegie Luxembourg SA	214	0.8
Handelsbanken Fonder AB	118	0.5
Caesar Åfors	100	0.4
CBNY-DFA-INT SML CAP V	97	0.4
Gamla Livförsäkringsaktiebolaget	80	0.3
Other shareholders	2,478	9.7
Total	25,642	100.0

Dividend policy

The intention is that Catena's dividend will, in the long term, amount to 50% of profit from asset management, less estimated standard tax.

'Preppen', Högsbo 21:2, Gothenburg

Key figures¹

For definitions of key figures, see the last page.	2014 Jan-Mar	2013 Jan-Mar	2013 Jan–Dec	Rolling 12-month
Financial
Return on shareholders'
equity, %	1.4	4.3	11.7	10.4
Return on total capital, %	1.0	1.7	6.3	6.5
Interest coverage ratio, times	2.2	3.5	3.2	2.8
Equity ratio, %	31.6	21.8	32.6	31.6
Profit from asset
management, SEK m	42.7	37.4	147.0	152.3
Pre-tax profit, SEK m	29.2	41.6	184.7	172.3
Interim profit, SEK m	22.8	32.4	138.4	128.8
Balance-sheet total, SEK m		5,421.7 3,519.8 5,038.0		5,421.7
Share-related
Before and after dilution
Shareholders' equity, SEK
per share	66.67	65.75	64.95	66.67
Profit from asset management
per share, SEK m	1.67	3.23	10.29	5.96
Earnings per share, SEK	0.90	2.83	9.81	5.12
Cash flow per share, SEK	−2.20	–	14.93	6.15
Number of outstanding
shares, million	25.6	11.6	25.2	25.6
Property-related
Property income, SEK m	100.1	76.2	316.8	340.7
Operating surplus, SEK m	71.0	49.1	221.3	243.2
Rental value, SEK m3	454.7	348.8	419.3	453.3
Economic letting ratio, %	88.4	85.6	87.2	88.4
Surplus ratio, %	70.9	64.4	69.9	71.4
Lettable space, '000 sq.m.	739.0	574.5	690.6	739.0

1 On properties still held at 31 March.

Other major events during the period

Since 2 January 2014, Catena's shares have been traded on the NASDAQ OMX Stockholm Nordic Mid Cap List.

On 13 February 2014, Catena acquired two properties for SEK 396m in Haninge and Nässjö. These properties comprise logistics space measuring 48,000 sq.m. The property income is expected to total some SEK 32m a year.

A new issue of 446,469 shares was implemented in conjunction with the above acquisitions, raising the number of shares in Catena to 25,641,921.

Events since 31 March

Since the end of the period under review, Catena has renegotiated loan limits applying to SEK 1,306m and increased the limit amount by SEK 744m. Agreements will be signed during the second quarter.

Comment on the bar charts below:

Financial targets

The target return on equity is at least 5 percentage points higher than the interest rate on a Swedish five-year government bond, while the interest coverage ratio should not fall below 1.75 times and the equity ratio should be at least 30%.

* R12 = Rolling 12-month basis

Parent company's financial statements

Income statement	2014	2013	2013
	Jan–	Jan–	Jan−
SEK m	Mar	Mar	Dec
Net turnover	6.3	1.0	9.9
Cost of services performed	−11.2	−1.2	−21.4
Gross profit or loss	−4.9	−0.2	−11.5
Financial income and expense
Other interest income and similar
income	9.5	0.7	21.8
Profit from interests in group companies	−	−	11.1
Interest costs and similar expense	−39.9	−	−19.9
Pre-tax profit	−35.3	0.5	1.5
Tax on interim profit	7.7	−0.1	−2.9
Interim profit	−27.6	0.4	−1.4
Overall profit
Interim profit	−27.6	0.4	−1.4
Overall interim profit	−	−	–
Total overall interim profit	−27.6	0.4	−1.4
Balance sheet	2014	2013	2013
SEK m	31 Mar	31 Mar	31 Dec
Assets
Fixed assets
Tangible assets	1.2	−	1.1
Financial assets	1,227.3		56.5 1,227.3
Deferred tax claim	7.0	1.1	2.4
Current assets
Long-term claims	−	−	4.7
Claims on group companies	1,354.1		443.6 1,200.7
Current receivables	4.8	2.5	16.5
Liquid funds	144.3	40.5	209.9
Total assets	2,738.7		544.2 2,662.6
Shareholders' equity and liabilities
Shareholders' equity	1,320.0		168.8 1,297.5
Long-term liabilities Other long-term liabilities	21.8	10.0	1.8
Current liabilities
Debts to group companies Debts to joint ventures	1,357.8 15.4	−	357.7 1,315.3 14.1
Other current liabilities	23.7	7.7	33.9
Total shareholders' equity
and liabilities	2,738.7		544.2 2,662.6

Accounting and valuation principles

Catena AB draws up its consolidated accounts in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and with interpretive statements from the International Financial Interpretations Committee (IFRIC), as approved by the European Commission for application in the EU. The parent company applies the same accounting principles as the group, but taking into consideration the recommendations from the Swedish Financial Reporting Board in RFR 2, Accounting for Legal Entities. This interim report was drawn up in accordance with IAS 34, Interim Financial Reporting for the group and with the Swedish Annual Accounts Act for the parent company. None of the new standards and statements that have entered into force have exerted any influence on the financial reports, and the accounting principles applied are thus the same as in the previous year.

Risks and uncertainty factors

In order to draw up the accounts according to generally accepted accounting principles, the company management must make assessments and assumptions that affect the asset and liability items and the income and expense items disclosed in the annual accounts, and also other information disclosed. The actual outcome may diverge from these assessments. Catena's risks are described, in Swedish, on pages 36−39 of the Annual Report for 2013 (Årsredovisningen 2013). No essential changes have taken place since then.

Solna, May 2014 Catena Fastigheter AB (publ) The Board

This report has not been subjected to special examination by the company's auditors.

Definitions

Earnings per share

Profit for the period under review attributable to the parent company's shareholders, in relation to the average number of outstanding shares.

Economic letting ratio

Contractual rent for rental contracts in force at the end of the period under review, as a percentage of rental value.

Equity per share

Shareholders' equity attributable to the parent company's owners, in relation to the number of shares at the end of the period under review.

Equity ratio

Shareholders' equity, including minority interests, as a percentage of the balance-sheet total.

Interest coverage ratio

Pre-tax profit with adding-back of financial expense, in relation to financial expense.

Profit from asset management per share

Profit from asset management in relation to the average number of outstanding shares.

Rental value

Closing rent on an annual basis with the addition of estimated market rent for vacant floor space.

Return on equity

Profit for the period under review as a percentage of average shareholders' equity.

Return on total assets

Pre-tax profit with the addition of financial expense, as a percentage of the average balance-sheet total.

Surplus ratio

Operating surplus as a percentage of property income.

Contact Gustaf Hermelin, Chief Executive Officer gustaf.hermelin@catenafastigheter.se phone +46-(0)70-560 00 00

Peter Andersson, Chief Financial Officer peter.andersson@catenafastigheter.se phone +46-(0)42-449 22 44

Financial reporting

Annual General Meeting 2014, in Stockholm, 4.00 pm	6 May 2014
Interim Report, January–June	8 July 2014
Interim Report, January–September	7 November 2014
Year-End Report 2014	26 February 2015
Annual General Meeting 2015, in Stockholm, 4.00 pm	28 April 2015