Annual Report • Feb 14, 2019
Annual Report
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YEAR-END REPORT JANUARY – DECEMBER 2018
OUR PROPERTY MANAGEMENT INCOME INCREASED BY 9 PER CENT TO SEK 894 MILLION (822)
UNREALISED CHANGES IN VALUE OF PROPERTIES WERE SEK 678 MILLION (402) AND UNREALISED CHANGES IN VALUE OF DERIVATIVES WERE SEK 16 MILLION (27)
THE PROFIT AFTER TAX WAS SEK 1,341 MILLION (1,029)
EARNINGS PER SHARE WERE SEK 9.94 (7.78)
THE BOARD OF DIRECTORS PROPOSES A DIVIDEND OF SEK 3.00 PER SHARE (2.90), TO BE EVENLY DISTRIBUTED ON TWO OCCASIONS
EQUITY/ASSETS RATIO INTEREST COVERAGE RATIO LOAN-TO-VALUE RATIO
| NET PROFIT FOR THE PERIOD, SEKm |
2018 3 months Oct-Dec |
2017 3 months Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|---|---|---|---|---|
| Income | 447 | 443 | 1,810 | 1,719 |
| Operating surplus | 283 | 266 | 1,140 | 1,080 |
| Property management income | 225 | 197 | 894 | 822 |
| Profit before tax | 576 | 268 | 1,597 | 1,261 |
| Profit after tax | 451 | 256 | 1,341 | 1,029 |
| Surplus ratio, % | 64 | 61 | 64 | 64 |
| Occupancy rate, % | 91 | 91 | 91 | 91 |
| Equity/assets ratio, % | 37.2 | 34.9 | ||
| Property loan-to-value ratio, % | 53.4 | 57.1 | ||
| Equity per share, SEK | 58.3 | 51.2 | ||
| EPRA NAV per share, SEK | 67.6 | 59.7 |
For definitions of key performance indicators, see 27.
* Per share performance measures for 2017 have been affected by the rights issue.
Cover: Realsprint, a tenant in Diös' Björken 1 property in Umeå. Business Developer Daniel Alinder with Property Manager Sara 2 DIÖS FASTIGHETER ABBergh, Diös. YEAR-END REPORT JANUARY–DECEMBER 2018
This year's result is good! Profitable investments and a more clear-cut position will enable us to continue to grow.
Our property management income was up by 9 per cent to SEK 894 million, mainly on increased revenue, improved efficiency and reduced interest expenses. We see continued increases in rents in the central areas of our cities. Investments in our existing portfolio are enabling our tenants to grow their businesses, which increases our net operating income and raises the value of our properties. Unrealised changes in value for the year totalled SEK 678 million driven by an increase in net operating income.
We are proud to have achieved our target of a surplus ratio of 64 per cent in a year which saw costs increase due to a cold and snowy winter as well as an unusually warm summer. While new leasing activity has been very strong, a number of major leases were also terminated, which meant that net leasing for the year came in at SEK 10 million (55).
This year as well, the yield on our shares is among the highest in the industry and among listed Swedish companies. The dividend proposed by the Board, SEK 3.00 per share, to be distributed in two payouts, equates to a yield of 5.3 per cent based on the share price at year-end.
Our biggest source of financing is the Nordic banks. Thanks to our financing structure and cash flow, our financing rate is among the lowest in the industry. Our strong cash flow is also evident in our net debt to EBITDA ratio, which improved to 10.5. We expect interest rates to remain low for many years to come. Through profitable investments in our properties and repayment of debt, our loan-to-value ratio has been shrinking continually since 2009 and is now down to 53.4 per cent.
Growth rates and levels of economic activity in our cities have remained high. Although we are probably passed peak growth, we still see a very high level of activity amid new business openings, new peak rents and continued population growth.
The urbanisation trend is set to continue. More people will be living in cities in future in order to benefit from what the city has to offer. New technology and new behaviours will place an ever greater premium on
location and the content of the location. As property owners, we need to understand and respond to these changes by developing attractive places that create flows of people.
A few examples of our activities in 2018 include our transactions in Gävle, where we now have a better and clearer position in the central area of town and where we have deliberately reduced the proportion of industrial properties, the opening of our first solar cell facilities, and the sale of our properties in Ljusdal, which will enable us to further increase our focus on tenants in our selected cities. We have also reduced our retail and industrial space by converting premises into offices and for use by public-sector tenants. With a stronger organisation and better properties in the right locations, we are in a unique position to drive growth and development in a responsible and profitable way.
We want to develop our cities to be even more inspiring places. The goal is to contribute to sustainable urban development for all, which means that we need to take a responsible approach. What we mean is that growth creates growth. We therefore adopt a long-term target of 5 per cent annual growth in property management income per share. I am confident that we will become more profitable if we are able to enable growth for our tenants and the cities where we operate.
Our activities and investments should benefit current as well as future generations. With a clearer focus on generating growth through a long-term and responsible approach, we will drive urban development to create value for our shareholders, our tenants and our cities. By placing the emphasis on relationships and by seeking to understand the future, we are continuing our mission to create Sweden's most inspiring places.
Knut Rost, CEO
Diös aims to be the market-leading property company in northern Sweden. We own, manage and develop centrally located properties in ten growth cities.
OUR STRATEGY IS URBAN DEVELOPMENT. By developing our properties with attractive meeting places, shops, offices and homes, we enable our tenants, our cities and ourselves to grow. Deals and relationships are the key to continued success. We will meet the needs of tenants through local presence, a high degree of competency and long-term sustainable development.
NO. OF PROPERTIES
PROPERTY VALUE, SEK BN
LEASABLE AREA, '000 SQ.M ,464
Our employees know that long-term business is all about uncomplicated meetings, availability and decisiveness. We have in-depth knowledge of local areas and are courageous. It means that we can and do make a difference. Our business area managers lead the local teams with the goal of creating sustainable urban development.
Swedes are changing their behaviour in terms of how they consume, experience, work and socialise. E-trade developments, new logistics opportunities and types of office environments, and the need for attractive venues in city centres are creating new conditions and opportunities for us to develop our priority cities. The company's strong cash flow makes it possible to invest in and develop attractive venues at city centres, where the flow and activity level of people is high. We're convinced that the challenge lies in making city centres more attractive, by changing the offering and perhaps above all, creating more inspiring environments.
Long-term relationships are built on trust. We strive to have a reputation of honesty, expertise and professionalism in everything we do. We run our business on a foundation of high business ethics and zero tolerance to corruption. Our code of conduct is based on the ten principles of the UN Global Compact.
To be the most active and sought-after landlord in our market.
To own and develop commercial and residential properties in priority growth cities from local offices. We create long-term values with a focus on the tenant by operating in a responsible and sustainable manner.
DIÖS FASTIGHETER AB YEAR-END REPORT JANUARY–DECEMBER 2018 5
Our promise is that everything is possible. We strive to be perceived as simple, close and active. Simple by being open and honest. Close by having a local presence, being available and taking an interest. Active by developing, growing and taking advantage of opportunities.
| INCOME STATEMENT | 2018 3 mths Oct-Dec |
2017 3 mths Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|---|---|---|---|---|
| Rental income | 357 | 345 | 1,436 | 1,376 |
| Service income | 90 | 98 | 374 | 343 |
| Total income | 447 | 443 | 1,810 | 1,719 |
| Property costs | -164 | -177 | -670 | -639 |
| Operating surplus | 283 | 266 | 1,140 | 1,080 |
| Central administration | -19 | -21 | -71 | -73 |
| Net financial items | -39 | -48 | -175 | -185 |
| Property management income | 225 | 197 | 894 | 822 |
| Change in value, properties | 351 | 65 | 687 | 412 |
| Change in value, interest rate derivatives | 0 | 6 | 16 | 27 |
| Profit before tax | 576 | 268 | 1,597 | 1,261 |
| Current tax | -13 | -16 | -90 | -43 |
| Deferred tax | -112 | 4 | -166 | -189 |
| Profit after tax | 451 | 256 | 1,341 | 1,029 |
| Profit attributable to shareholders of the parent company | 451 | 257 | 1,338 | 1,027 |
| Profit attributable to non-controlling interests | 0 | -1 | 3 | 2 |
| Total | 451 | 256 | 1,341 | 1,029 |
| STATEMENT OF COMPREHENSIVE INCOME | ||||
| Profit after tax | 451 | 256 | 1,341 | 1,029 |
| Comprehensive income for the period | 451 | 256 | 1,341 | 1,029 |
| Comprehensive income attributable to shareholders of the parent company | 451 | 257 | 1,338 | 1,027 |
| Comprehensive income attributable to non-controlling interests | 0 | -1 | 3 | 2 |
| Total | 451 | 256 | 1,341 | 1,029 |
| Earnings per share, SEK | 3.35 | 1.91 | 9.94 | 7.78 |
| Number of shares at end of period ('000) | 134,512 | 134,512 | 134,512 | 134,512 |
| Average number of shares ('000) | 134,512 | 134,512 | 134,512 | 132,041 |
| Number of treasury shares at end of period | 0 | 0 | 0 | 0 |
| Average number of treasury shares | 0 | 0 | 0 | 0 |
Historical data for the number of shares has been restated to factor in the effect of bonus issues (i.e. the value of the subscription rights) in issues of new shares, and has been used in all KPI calculations for SEK per share. The conversion factor is 1.28. There is no dilutive effect, as no potential shares (such as convertibles) exist.
Accounting principles are presented on page 21.
Property management income for the period, i.e. income excluding changes in value and tax, was SEK 894 million (822). This is an increase of 9 per cent compared with the previous year. For comparable properties, our property management income increased by 3,8 per cent year on year.
Income for the reporting period was SEK 1,810 million (1,719), representing a 91 per cent (91) economic occupancy rate. For comparable properties, contracted rental income increased by 3 percent year on year. Other property management income totalled SEK 39 million (19) and consisted mainly of costs for work in leased premises that are passed on to tenants. Other property management income for the year includes a non-recurring payment attributable to property acquisitions in previous years.
| 2018 Jan-Dec |
2017 Jan-Dec |
Change % | |
|---|---|---|---|
| Comparable properties | 1,677 | 1,628 | 3.0 |
| Acquired properties | 63 | 0 | |
| Sold properties | 31 | 72 | |
| Contracted rental income | 1,771 | 1,700 | |
| Other property management income | 39 | 19 | |
| Income | 1,810 | 1,719 |
Total property costs were SEK 670 million (639). Winter-related costs increased by SEK 25 million compared with the same period last year and are attributable to the cold and snowy winter. Of total property costs, SEK 13 million (9) refers to work in leased premises for which the costs are passed on to tenants.
The operating surplus was SEK 1,140 million (1,080), representing a surplus ratio of 64 per cent (64). For comparable properties, our operating surplus increased by 3.1 per cent compared with the previous year.
The central administration expense was SEK 71 million (73). For 2017, this includes a non-recurring item of SEK 4 million, which refers to restructuring costs incurred in connection with acquisitions. Central administration includes costs for Group-wide functions such as senior management, IT, annual reports, auditors' fees, legal advice and so on.
Net financial items for the year totalled SEK -175 million (-185). The interest costs for the year, including costs for interest rate derivatives and loan commitments, represent borrowings at an average annual interest rate of 1.6 per cent (1.9).
The average valuation yield at the end of the year was 5.97 per cent (6.08). At portfolio level, this represents a change of -0.11 percentage points since year-end. The positive value change of SEK 678 million (402) is mainly attributable to a higher net operating income. The change in value represented 3.3 per cent (2.1) of market value. Last year's unrealised value changes were positively impacted by a oneoff effect of a discount on deferred tax in connection with property transactions. The market value was SEK 20,802 million (19,457) on 31 December.
During the year, 20 properties (15) were sold, resulting in a realised change in value of SEK 9 million (10). 11 properties (40) were acquired during the year.
DIÖS FASTIGHETER AB YEAR-END REPORT JANUARY–DECEMBER 2018 7
The portfolio of interest rate derivatives has been measured at fair value. If the contracted interest rate deviates from the market rate, a theoretical fair value gain or loss arises on the interest rate derivatives. The change in value is of an accounting nature and does not affect cash flow.
During the year, unrealised changes in value on derivatives totalled SEK 16 million (27), which have been fully recognised in the income statement. The change in the market values of derivatives is primarily attributable to the time effect.
The profit before tax was SEK 1,597 million (1,261). The improvement in earnings is mainly due to higher property values and increased revenue.
The profit after tax was SEK 1,341 million (1,029). The current tax expense is SEK -90 million (-43) and is mainly attributable to tax in subsidiaries which are not permitted to offset losses against Group profits, and to tax arising from property transactions in trading partnerships and limited partnerships. Deferred tax was SEK -166 million (-189) after a positive effect of SEK 75 million from restatement of deferred tax after the corporate tax rate was changed from 22 per cent to 20.6 per cent.
Property management income for the fourth quarter, i.e. income excluding changes in value and tax, was SEK 225 million (197). The operating surplus was SEK 283 million (266), representing a surplus ratio of 64 per cent (61).
Net financial items for the fourth quarter were SEK -39 million (-48). The profit before tax was SEK 576 million (268), with changes in the value of properties having a positive impact of SEK 351 million (65). Earnings after tax were SEK 451 million (256), of which deferred tax had an impact on earnings of SEK -112 million (-4). Current tax was SEK -13 million (-16).
The nominal corporate tax rate in Sweden is 22 per cent. Thanks to the option of using tax depreciation allowances, recognising the full amount of expenses for certain types of conversion projects in the first year and using tax losses, tax paid was low.
The remaining tax losses are estimated at SEK 0 million (21). The Group also has untaxed reserves of SEK 245 million (123). The fair value of the properties exceeds their tax base by SEK 6,288 million (5,339), less deferred tax relating to asset acquisitions. The tax liability has been calculated based on the tax rate applying at the time when the tax consequence is expected to arise.
While the reporting of taxes complies with the applicable accounting rules it should be noted that the amount of tax paid over the period generally differs from the reported amount. In addition, tax regulations are complex and hard to interpret. The application of the regulations may also change over time. Diös has no ongoing tax disputes.
| SEKm | Effective tax |
|---|---|
| Property management income | 894 |
| Tax adjustments | 31 |
| Taxable property management income | 925 |
| Sale of properties | -97 |
| Change in value, properties | 678 |
| Taxable profit | 1,506 |
| Tax for the year | 331 |
| Restatement of deferred tax1 | -75 |
| Tax for the period as per income statement | 256 |
1 The deferred tax liability has been restated according to new tax rules, see below. The deferred tax liability on the difference between the tax base and fair value of the properties has been calculated based on the tax rate applying at the time when the deferred tax liability is expected to be settled. No other items have been restated.
On 14 June 2018, the Swedish parliament adopted a new law on limitation of interest deductibility for businesses, which becomes effective on 1 January 2019. The new law restricts the right to deduct interest expenses while gradually lowering the income tax rate from 22 per cent currently to 20.6 per cent. As at 30 June 2018, Diös restated its deferred tax liability in accordance with the new tax rates, which had a positive one-off effect of SEK 75 million during the period. In view of Diös' strong cash flow and the prevailing historically low interest rates, the new law will have a minor impact on tax paid, but if interest rates were to rise it would have a negative impact (assuming cash flow remains unchanged).
Our tenant base is well diversified geographically and in terms of industry. The number of commercial leases was 3,007 (3,071). The number of residential leases was 1,635 (1,643). The ten largest tenants represent 16.1 per cent (15.8) of Diös' total contracted rental income. At 31 December, 26 per cent of contracted rental income came from tenants engaged in activities on behalf of the central government, county councils or local authorities.
Net leasing was SEK 10 million (55) for the year as a whole and SEK 1 million (32) for the fourth quarter. Noteworthy lets in 2018 included the contracts with Luleå Municipality in Råttan 18, Luleå, Swedbank in Sirius 25, Skellefteå, Olearys in Lyckan 6, Sundsvall and ÅF AB in Norr 31:9, Gävle.
| TENANTS AT 31 DEC 2018 |
No. of contracts |
Annual contract value, SEK '000 |
Average contract term, years |
|---|---|---|---|
| Swedish Transport Administration | 31 | 63,548 | 1.5 |
| Municipality of Östersund | 119 | 37,637 | 2.6 |
| Swedish Public Employment Service | 39 | 32,161 | 2.2 |
| Swedbank AB | 11 | 23,022 | 3.6 |
| Åhléns AB | 5 | 22,799 | 4.2 |
| Swedish Social Insurance Agency | 24 | 22,696 | 3.3 |
| Swedish Migration Board | 17 | 22,318 | 2.5 |
| Folksam ömsesidig sakförsäkring | 43 | 20,437 | 4.1 |
| Municipality of Falun | 7 | 20,251 | 1.9 |
| Telia Sverige AB | 24 | 20,219 | 10.0 |
| Total, largest tenants | 320 | 285,088 | 3.1 |
The average contract term for commercial premises at 31 December is 3.2 years (3.6).
Vacancies remained unchanged in the fourth quarter, with economic vacancies standing at 8 per cent (9) and physical vacancies at 13 per cent (14) at 31 December. Economic vacancies are highest in office and retail premises while physical vacancies are highest in office and industrial premises. The economic vacancy rate for the year, excluding discounts, was 8 per cent (8).
| Number contract |
Contract value SEKm |
Share of value, % |
|
|---|---|---|---|
| Leases for premises, maturity year | |||
| 2019 | 919 | 279 | 16 |
| 2020 | 824 | 339 | 19 |
| 2021 | 655 | 357 | 20 |
| 2022 | 348 | 196 | 11 |
| 2023+ | 261 | 416 | 23 |
| Total | 3,007 | 1,587 | 89 |
| Residential | 1,635 | 125 | 7 |
| Other leases1 | 4,128 | 63 | 4 |
| TOTAL | 8,770 | 1,775 | 100 |
1 Other leases refer mainly to garage and parking spaces.
DIÖS FASTIGHETER AB YEAR-END REPORT JANUARY–DECEMBER 2018 9
| ASSETS | 2018 31 Dec |
2017 31 Dec |
|---|---|---|
| Investment properties | 20,802 | 19,457 |
| Other non-current assets | 54 | 46 |
| Current receivables | 201 | 173 |
| Cash and cash equivalents | - | 32 |
| TOTAL ASSETS | 21,057 | 19,708 |
| EQUITY AND LIABILITIES | ||
| Equity | 7,839 | 6,887 |
| Deferred tax liability | 1,353 | 1,197 |
| Provisions | 9 | 9 |
| Interest-bearing liabilities | 11,099 | 11,104 |
| Overdraft facilities | 198 | - |
| Current liabilities | 559 | 511 |
| TOTAL EQUITY AND LIABILITIES | 21,057 | 19,708 |
| Equity | Attributable to shareholders of the parent |
Attributable to minority interests |
|
|---|---|---|---|
| Equity, 31 Dec 2016 | 4,313 | 4,270 | 43 |
| Profit for the period after tax | 1,029 | 1,027 | 2 |
| Comprehensive income for the period | 1,029 | 1,027 | 2 |
| Issue of new shares | 1,853 | 1,853 | - |
| Issue costs | -51 | -51 | - |
| Tax effect of issue costs | 11 | 11 | - |
| Dividend | -269 | -269 | - |
| Equity, 31 Dec 2017 | 6,887 | 6,841 | 45 |
| Profit for the period after tax | 1,341 | 1,338 | 3 |
| Comprehensive income for the period | 1,341 | 1,338 | 3 |
| Dividend | -390 | -390 | - |
| Equity, 31 Dec 2018 | 7,839 | 7,790 | 49 |
The property portfolio is concentrated to central locations in ten priority cities in northern Sweden. The portfolio is well diversified, consisting mainly of residential, office and retail properties. At the end of the period, the portfolio comprised 93 per cent (93) commercial properties and 7 per cent (7) residential properties based on rental value by type of premises.
At each closing date, all properties are measured at fair value. The aim is to determine the properties' individual values in a sale executed through a structured transaction between market players. Any portfolio effects are thus not taken into account. Diös' property portfolio is divided into a main portfolio and a subsidiary portfolio. The main portfolio comprises around 75 per cent of the property value, or SEK 15,124 million, and 115 properties. The valuation method requires that an external valuation of the entire main portfolio be made each year. The external valuation is made by valuation consultants Savills, who assess 25 per cent of the main portfolio each quarter. The remaining portion is valued internally. All properties in the main portfolio are also physically inspected by Savills within a three-year period. In addition to the regular inspections, physical visits are also made after major changes. Properties in the secondary portfolio are valued internally with assistance from Savills. All property valuations are based on a number of assumptions about the future and the market. Savills' calculations thus have an uncertainty range of +/-7.5 per cent. For Diös, this translates into a value range of SEK 19,241-22,362 million. No changes in terms of valuation methodology or approach were made during the period. The valuations were made in accordance with IFRS 13 level 3.
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| SEKm | Number | SEKm | Number | ||
| Property portfolio, 1 January | 19,457 | 339 | 13,683 | 314 | |
| Acquisitions | 420 | 11 | 5,094 | 40 | |
| Investments in new builds, extensions and conversions |
677 | 505 | |||
| Sales | -441 | -20 | -227 | -15 | |
| Unrealised changes in value | 678 | 402 | |||
| Reclassifications | 10 | - | |||
| Value of property portfolio, 31 Dec | 20,802 | 330 | 19,457 | 339 |
Unrealised changes in value for the year totalled SEK 678 million (402) and were due to mainly higher net operating income.
| UNREALISED CHANGES IN VALUE | 31 Dec 2018 | ||
|---|---|---|---|
| SEKm | % | ||
| Change in net operating income, etc. | 549 | 81 | |
| Change in required rate of return | 129 | 19 | |
| Total | 678 | 100 |
One part of our strategy is to continuously strive to concentrate our property portfolio to central locations in our priority cities. In the fourth quarter, Diös completed on the purchase of three properties in Östersund and sold and vacated one property in Bräcke.
Acquired and completed
| Property | Quarter | City | Area, sq.m |
Price, SEKm |
|---|---|---|---|---|
| Polaris 39 | 1 | Skellefteå | 3,209 | |
| Idun 10 | 1 | Skellefteå | 2,157 | |
| Vale 18 | 2 | Umeå | 3,272 | |
| Portfolio of 4 properties | 3 | Gävle | 12,230 | |
| Norr 36:2 | 3 | Gävle | 1,173 | |
| Portfolio of 3 properties | 4 | Östersund | 12,002 | |
| Total | 34,043 | 420 | ||
| Property | Quarter | City | Area, sq.m |
Price, SEKm |
|---|---|---|---|---|
| Portfolio of 4 properties | 1 | Ljusdal | 24,007 | |
| Fisken 5 | 3 | Malung | 2,781 | |
| Portfolio of 13 properties | 3 | Gävle | 80,147 | |
| Hemsta 12:17 | 3 | Gävle | 3,425 | |
| Bräcke 4:4 | 4 | Bräcke | 12,000 | |
| Total | 122,360 | 450 |
| 31 Dec 2018 | 31 Dec 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Office | Retail | Residential | Industrial/ warehouse |
Other | Office | Retail Residential | Industrial/ warehouse |
Other | ||
| Yield for assessing residual value 1 , % |
6.8-5.6 | 6.8-5.9 | 5.3-4.7 | 8.3-7.0 | 7.0-6.1 | 7.0-5.7 | 6.8-6.0 | 5.3-4.7 | 8.1-7.0 | 7.0-6.0 |
| Cost of capital for discounting to present value, % | 8.0 | 8.1 | 7.2 | 9.9 | 8.7 | 8.1 | 8.2 | 7.4 | 9.8 | 8.6 |
| Long-term vacancy, % | 5.0 | 3.7 | 1.7 | 14.3 | 6.1 | 5.0 | 3.7 | 1.8 | 12.0 | 5.5 |
1 From lower to upper quartiles in the portfolio.
The valuation model is based on a five-year analysis period and a long-term inflation rate of 2 per cent.
We are continuously investing in our portfolio to improve, adapt and improve the efficiency of our premises for our tenants. New builds, conversions and extensions added SEK 677 million (505) to the value of Diös' property portfolio for the year.
Our investments in our existing portfolio comprise conversions and extensions as well as energy-saving measures. The investments must result in a higher occupancy rate, increased customer satisfaction, lower costs and a reduced impact on the environment. During the year, SEK 677 million (505) was invested in 799 projects (662). At the end of the year, 29 major1 improvement projects were ongoing, with a remaining investment volume of SEK 262 million and a total investment volume of SEK 571 million. In the fourth quarter, decisions were taken on 127 new investments. The return on completed investments for the year was 8.0 per cent on the invested amount while the return on our ongoing projects was 6.8 per cent. 1 Initial investment volume > SEK 4 million.
Our existing and potential development rights cover a gross area of over 150,000 square metres, of which around 50 per cent refers to development rights for residential properties and 50 per cent refers to development rights for commercial properties. Among these, Diös has identified various types of projects with a total estimated investment volume of around SEK 4,000 million.
The Falan 20 residential property project is ongoing and is expected to be completed in spring 2019. The Riverside hotel project in Sundsvall has been initiated, with preparatory work underway on the underground car park on which the hotel will stand. Construction is scheduled to begin in March 2019. Construction of the hotel project on the Magne 4 property in Umeå is expected to commence in the first half of 2019.
| Unit | 2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|
|---|---|---|---|
| Heating1 | kWh/sq.m | 84.1 | 87.5 |
| District cooling2 | kWh/sq.m | 15.2 | 10.5 |
| Electricity3 | kWh/sq.m | 58.1 | 58.9 |
| Carbon dioxide, total4 | g CO2/kWh | 25.5 | 25.4 |
| Water | m3 /sq.m |
0.4 | 0.4 |
1 Heating has been adjusted to a normal year.
2 District cooling does not include self-produced cooling.
3Electricity from energy use and tenants where electricity is included in the lease. 4 Carbon dioxide from electricity and heating.
All values have been provided by the suppliers. Floor area refers to tempered area. The comparative figures have been updated for the current portfolio and thus show changes for comparable properties.
Through a stronger emphasis on energy optimisation and clearly defined technical strategies for our properties, we achieved our annual target of reducing energy consumption by 3 per cent. This despite an unusually hot summer, which led to high demand for district cooling and electricity. Overall heat use was down significantly, by 4 per cent, while electricity use was down 1 per cent for the full year. The target for 2019 is to reduce energy consumption by 3 per cent.
To lower the environmental impact, we only purchase origin-labelled electricity and we can now see that 98 per cent of our energy use comes from renewable sources.
In the fourth quarter, eight new properties were environmentally certified. We now have 23 properties certified under the Miljöbyggnad, BREEAM In-Use and Greenbuilding standards, which represents 11 per cent of the total area of the property portfolio. Our target for 2019 for is to certify 16 properties under the BREEAM In-Use environmental certification standard.
At 31 December 2018, 37 per cent (35) of Diös' total assets of SEK 21,057 million were financed through equity, 53 per cent (56) through debt and 10 per cent (9) through other capital. Interestbearing liabilities comprise bank financing, covered bonds and commercial paper.
Equity at 31 December 2018 was SEK 7,839 million (6,887). The equity/assets ratio was 37.2 per cent (34.9), which exceeds the target of 30 per cent.
Interest-bearing liabilities in the Group were SEK 11,099 million (11,104). Of total interest-bearing liabilities, SEK 8,769 million (9,298) refers to bank financing, SEK 1,240 million (1,206) to covered bonds and SEK 1,090 million (600) to commercial paper. At the end of the period, the loan-to-value ratio in the Group was 53.4 per cent (57.1). The average annual interest rate, including the cost of derivatives and loan commitments, was 1.2 per cent (1.5) and the interest coverage ratio for the year was 5.9 times (3.5).
Out of the Group's total interest-bearing liabilities, SEK 4,000 million (4,600) has been hedged through derivatives. At 31 December 2018, the market value of the derivative portfolio was SEK -0,5 million (-16). The financial instruments limit the impact of changes in interest rates on our average borrowing cost. The value of derivatives is always
zero at maturity. All financial instruments are measured at fair value and are classified in Level 2 in accordance with IFRS 13, which means that the measurement is based on observable market data (see Note 21 in the Annual Report 2017). Changes in value are recognised through profit or loss.
| SENSITIVITY ANALYSIS | If market interest rates increase by 1 percentage point |
|||||
|---|---|---|---|---|---|---|
| AT 31 DEC 2018 | Change in average annual interest rate, % |
Change in average annual interest cost, SEKm |
Change in market value, SEKm |
|||
| Loan portfolio excl. derivatives | 0.3 | +38 | ||||
| Derivatives portfolio | 0.0 | 0 | +1 | |||
| Loan portfolio incl. derivatives |
0.3 | +38 | +1 |
The average fixed-rate term, including derivatives, was 1.4 years (1.4) and the average loan maturity 2.0 years (2.4). Of the Group's outstanding loans, SEK 7,327 million (7,965) is subject to fixed interest rates.
Consolidated cash and cash equivalents at the end of the year were SEK 0 million (32) and drawn overdraft facilities were SEK 198 million (0). The agreed limit on the overdraft facility was SEK 600 million (600).
| Interest rate and margin expiration | Loan maturity | ||||
|---|---|---|---|---|---|
| Maturity year | Loan amount, SEKm |
Average annual interest rate1 , % |
Credit agreements, SEKm |
Drawn, SEKm |
|
| 2019 | 3,508 | 0.9 | 2,418 | 2,418 | |
| 2020 | 7,371 | 1.3 | 6,109 | 5,609 | |
| 2021 | 220 | 0.4 | 220 | 220 | |
| 2022 | - | - | 3,135 | 2,155 | |
| 2027 | - | - | 697 | 697 | |
| Drawn credit facilities | 11,099 | 1.1 | 12,579 | 11,099 | |
| Unutilised credit facilities2 | 1,480 | 0.1 | |||
| Financial instruments | 4,000 | 0.0 | |||
| TOTAL | 1.2 |
1 Average annual interest rate refers to the average interest rate based on interest rate terms and the outstanding liability as at 31 December 2018. 2 The cost of unused credit facilities affects the average annual interest rate by 0.05 percentage points.
| OPERATING ACTIVITIES | 2018 3 mths Oct-Dec |
2017 3 mths Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|---|---|---|---|---|
| Operating surplus | 283 | 266 | 1,140 | 1,080 |
| Central administration | -19 | -21 | -71 | -73 |
| Reversal of depreciation, amortisation and impairment | 1 | 0 | 2 | 2 |
| Interest received | 3 | 2 | 8 | 4 |
| Interest paid | -55 | -65 | -185 | -219 |
| Tax paid | -13 | -16 | -90 | -43 |
| Operating cash flow before changes in working capital | 200 | 166 | 804 | 751 |
| Changes in working capital | ||||
| Decrease (+)/increase (-) in receivables | 20 | 93 | -35 | 82 |
| Decrease (-)/increase (+) in current liabilities | -14 | -53 | 31 | -142 |
| Total changes in working capital | 6 | 40 | -4 | -60 |
| Operating cash flow | 206 | 206 | 800 | 691 |
| INVESTING ACTIVITIES | ||||
| Investments in new builds, conversions and extensions | -157 | -117 | -557 | -502 |
| Acquisition of properties | -87 | -90 | -371 | -2,581 |
| Sale of properties | 5 | 88 | 443 | 240 |
| Other financial assets | -2 | - | -10 | - |
| Cash flow from investing activities | -241 | -119 | -495 | -2,843 |
| FINANCING ACTIVITIES | ||||
| Dividends paid | -195 | - | -390 | -269 |
| Issue of new shares | - | - | - | 1,802 |
| New borrowing, interest-bearing liabilities | 100 | 34 | 312 | 3,168 |
| Repayment and redemption of interest-bearing liabilities | -67 | -108 | -457 | -2,502 |
| Change in overdraft facility | 197 | - | 198 | -15 |
| Cash flow from financing activities | 35 | -74 | -337 | 2,184 |
| Cash flow for the period | 0 | 13 | -32 | 32 |
| Cash and cash equivalents at beginning of period | 0 | 19 | 32 | 0 |
| Cash and cash equivalents at end of period | 0 | 32 | 0 | 32 |
Amounts are expressed in millions of Swedish kronor unless otherwise indicated.
| By Business unit | Dalarna | Gävle | Sundsvall | Åre/Östersund | Skellefteå/Umeå | Luleå | the Group |
|---|---|---|---|---|---|---|---|
| Rental income | 221 | 152 | 227 | 246 | 322 | 267 | 1,435 |
| Service income | |||||||
| Tariff-based operations | 42 | 20 | 38 | 51 | 47 | 32 | 230 |
| Care and upkeep | 20 | 15 | 26 | 32 | 24 | 27 | 144 |
| Repair and maintenance | -13 | -7 | -13 | -14 | -16 | -12 | -75 |
| Tariff-based costs | -39 | -20 | -36 | -50 | -44 | -30 | -219 |
| Property tax | -12 | -10 | -14 | -15 | -20 | -18 | -89 |
| Other property costs | -31 | -24 | -38 | -41 | -37 | -40 | -211 |
| Property management | -13 | -9 | -12 | -15 | -14 | -12 | -75 |
| Operating surplus | 176 | 117 | 178 | 194 | 261 | 214 | 1,140 |
| Central administration/net financial items |
- | - | - | - | - | - | -246 |
| Property management income | - | - | - | - | - | - | 894 |
| Property, realised | 0 | 9 | - | 0 | - | - | 9 |
| Property, unrealised | 34 | 61 | 95 | 93 | 263 | 132 | 678 |
| Interest rate derivatives | - | - | - | - | - | - | 16 |
| Profit before tax | - | - | - | - | - | - | 1,597 |
| Leasable area, sq.m | 263,901 | 146,523 | 233,490 | 304,513 | 309,955 | 205,440 | 1,463,822 |
| Rental value | 304 | 207 | 325 | 356 | 414 | 330 | 1,936 |
| Economic occupancy rate, % | 91 | 90 | 88 | 92 | 93 | 95 | 91 |
| Surplus ratio, % | 63 | 63 | 62 | 60 | 68 | 69 | 64 |
| By Business unit | Dalarna | Gävle | Sundsvall | Åre/Östersund | Skellefteå/Umeå | Luleå | the Group |
|---|---|---|---|---|---|---|---|
| Rental income | 224 | 152 | 209 | 242 | 296 | 251 | 1,375 |
| Service income | |||||||
| Tariff-based operations | 42 | 25 | 36 | 49 | 44 | 29 | 225 |
| Care and upkeep | 16 | 13 | 20 | 26 | 22 | 22 | 118 |
| Repair and maintenance | -13 | -10 | -12 | -16 | -17 | -10 | -77 |
| Tariff-based costs | -38 | -24 | -35 | -48 | -43 | -27 | -216 |
| Property tax | -12 | -11 | -14 | -15 | -18 | -17 | -86 |
| Other property costs | -28 | -20 | -30 | -35 | -32 | -34 | -180 |
| Property management | -13 | -10 | -16 | -14 | -13 | -13 | -80 |
| Operating surplus | 172 | 129 | 166 | 185 | 227 | 201 | 1,080 |
| Central administration/Net financial items |
- | - | - | - | - | - | -258 |
| Property management income | - | - | - | - | - | - | 822 |
| Property, realised | - | -1 | 1 | - | 10 | - | 10 |
| Property, unrealised | -46 | 79 | 94 | 138 | 86 | 50 | 402 |
| Interest rate derivatives | - | - | - | - | - | - | 27 |
| Profit before tax | - | - | - | - | - | - | 1,261 |
| Leasable area, sq.m | 266,682 | 240,699 | 233,490 | 304,511 | 301,702 | 205,440 | 1,552,524 |
| Rental value | 302 | 225 | 312 | 342 | 381 | 313 | 1,875 |
| Economic occupancy rate, % | 90 | 89 | 87 | 91 | 91 | 95 | 91 |
| Surplus ratio, % | 64 | 65 | 61 | 59 | 65 | 68 | 64 |
Columns/rows may not add up due to rounding.
| Dalarna | Gävle | Sundsvall | Åre/ Östersund |
Skellefteå/ Umeå |
Luleå | the Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEKm | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Property portfolio, 1 January | 2,647 | 2,576 | 2,046 | 1,978 | 3,234 | 2,033 | 3,258 | 3,025 | 4,494 | 2,219 | 3,777 | 1,852 | 19,457 | 13,683 |
| Acquisitions | - | 1 | 196 | - | - | 1,047 | 86 | - | 138 | 2,240 | - | 1,806 | 420 | 5,094 |
| Investments in new builds, extensions and conversions |
135 | 116 | 86 | 44 | 93 | 92 | 124 | 95 | 96 | 89 | 143 | 69 | 677 | 505 |
| Sales | -15 | - | -418 | -55 | - | -32 | -8 | - | - | -140 | - | - | -441 | -227 |
| Reclassifications | 2 | - | 0 | - | 3 | - | 1 | - | 2 | - | 1 | - | 10 | - |
| Unrealised changes in value | 34 | -46 | 61 | 79 | 95 | 94 | 93 | 138 | 263 | 86 | 132 | 50 | 678 | 402 |
| Property portfolio, 31 December | 2,805 | 2,647 | 1,971 | 2,046 | 3,424 | 3,234 | 3,554 | 3,258 | 4,994 | 4,494 | 4,053 | 3,777 | 20,802 | 19,457 |
DIÖS FASTIGHETER AB YEAR-END REPORT JANUARY–DECEMBER 2018 Erik Wallström, Property Manager, at the office of Diös tenant NCC at Humlan 6 in Luleå. 17
The interim report presents non-IFRS performance measures. We consider that these measures provide valuable additional information for investors, analysts and the company's management, as they enable the evaluation of relevant trends and the company's performance. As not all companies calculate financial measures in the same way, these are not always comparable with the measures used by other companies. These financial measures should therefore not be viewed as substitutes for IFRS-defined measures. The following table presents non-IFRS measures unless otherwise stated. Definitions of these measures are found on page 27.
| Figures refer to SEK million unless otherwise indicated. | 2018 3 mths Oct-Dec |
2017 3 mths Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|---|---|---|---|---|
| Number of shares at end of period, thousands (balance sheet KPIs)1 | 134,512 | 134,512 | 134,512 | 134,512 |
| Average number of shares, thousands (income statement-related key ratios)1 | 134,512 | 134,512 | 134,512 | 132,041 |
1 Historical data for the number of shares has been restated to factor in the effect of bonus issues (i.e. the value of the subscription rights) in issues of new shares, and has been used in all KPI calculations for SEK per share. The conversion factor is 1.28.
There is no dilutive effect, as no potential shares (such as convertibles) exist.
The operations are governed based partly on the objective of generating capital growth by increasing the surplus ratio and thereby the cash flow from operating activities, i.e. increased income from property management. We also report the alternative performance indicators property management income and EPRA earnings, as these are deemed to be relevant for investors and analysts, and provide additional information on the company's operating results. The indicators provide a picture which excludes factors that are partly beyond our control, such as changes in the value of properties and derivatives.
| 2018 | 2017 | 2018 | 2017 | |
|---|---|---|---|---|
| Property management income | 3 mths Oct-Dec |
3 mths Oct-Dec |
12 mths Jan-Dec |
12 mths Jan-Dec |
| Profit before tax | 576 | 268 | 1,597 | 1,261 |
| Reversal | ||||
| Change in value, properties | -351 | -65 | -687 | -412 |
| Change in value, derivatives | 0 | -6 | -16 | -27 |
| Property management income | 225 | 197 | 894 | 822 |
| EPRA earnings (property management income after tax) | ||||
| Property management income | 225 | 197 | 894 | 822 |
| Reversal, current tax property management income | -13 | -11 | -77 | -88 |
| Minority share of earnings | 0 | 1 | -3 | -2 |
| EPRA earnings | 212 | 187 | 814 | 732 |
| EPRA earnings per share, SEK | 1.58 | 1.39 | 6.05 | 5.54 |
Our strategy is urban development. Diös seeks to run its business in a sustainable manner with a stable financial risk. This is expressed in the ambition to ensure that the loan-to-value ratio does not exceed 60 per cent over extended periods and to maintain an equity/assets ratio in excess of 30 per cent. The loan-to-value ratio and equity ratio show financial stability while the interest coverage ratio is a measure of the ability to pay interest. Net debt to EBITDA shows our ability to generate cash flow in relation to our liabilities. These key ratios are deemed to be relevant for investors and analysts from a financial risk perspective. Our loan-to-value ratio, equity ratio and interest coverage ratio also constitute covenants from the company's lenders and the Board has defined targets for these key ratios, which are used to govern the company's activities.
2018
2017
2018
2017
| Loan-to-value ratio | 3 mths Oct-Dec |
3 mths Oct-Dec |
12 mths Jan-Dec |
12 mths Jan-Dec |
|---|---|---|---|---|
| Interest-bearing liabilities | 11,099 | 11,104 | ||
| Investment properties | 20,802 | 19,457 | ||
| Loan-to-value ratio, % | 53.4 | 57.1 | ||
| Equity/assets ratio | ||||
| Equity | 7,839 | 6,887 | ||
| Total assets | 21,057 | 19,708 | ||
| Equity/assets ratio, % | 37.2 | 34.9 | ||
| Interest coverage ratio | ||||
| Property management income | 225 | 197 | 894 | 822 |
| Reversal | ||||
| Financial costs | 42 | 52 | 183 | 191 |
| Total | 267 | 249 | 1,077 | 1,013 |
| Financial costs | 42 | 52 | 183 | 191 |
| Interest coverage ratio, times | 6.3 | 4.8 | 5.9 | 5.3 |
| Interest-bearing liabilities as per balance sheet | 11,099 | 11,104 |
|---|---|---|
| Cash and cash equivalents | 0 | -32 |
| Overdraft facilities | 198 | 0 |
| Net debt | 11,297 | 11,072 |
| Operating surplus as per income statement | 1,140 | 1,080 |
| Central administration as per income statement | -71 | -73 |
| Reversal | ||
| Depreciation and amortisation | 2 | 2 |
| EBITDA | 1,071 | 1,009 |
| Net debt to EBITDA | 10.5 | 11.0 |
Net asset value is the total capital which the company manages on behalf of its owners. Based on this capital, we aim to generate returns and growth while maintaining a low risk. Net asset value can also be calculated on a long-term and short-term basis. Long-term NAV is based on the balance sheet after adjusting for items which involve no near-term outgoing payments, which refers, for example, to the fair value of financial instruments (derivatives) and deferred tax on temporary differences. The current net asset value consists of equity according to the balance sheet after adjusting for the market value of the deferred tax liability. EPRA NAV and EPRA NNNAV are designed to show the size of equity in case of a liquidation in the short and long term. These performance indicators can be compared with the company's share price to obtain a picture of how the shares are valued in relation to equity.
| Net asset value | 2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|---|---|---|
| Equity as per balance sheet | 7,839 | 6,887 |
| Minority share of equity | -49 | -45 |
| Reversal as per balance sheet | ||
| Fair value of financial instruments | -1 | 16 |
| Deferred tax on temporary differences | 1,299 | 1,175 |
| EPRA NAV (long-term net asset value) | 9,088 | 8,033 |
| EPRA NAV (long-term net asset value) per share, SEK | 67.6 | 59.7 |
| Deductions | ||
|---|---|---|
| Fair value of financial instruments | 1 | -16 |
| Estimated actual deferred tax on temporary differences, approx. 4%1 | -242 | -209 |
| EPRA NNNAV (short-term net asset value) | 8,847 | 7,808 |
| EPRA NNNAV (short-term net asset value) per share, SEK | 65.8 | 58.0 |
1 Estimated actual deferred tax has been calculated at approx. 4 per cent based on a discount rate of 3 per cent. The calculation is based on the assumption that the property portfolio will be realised over a period of 50 years, with ten per cent of the portfolio being sold directly subject to a nominal tax rate of 20.6 per cent, and the remaining 90 per cent being sold indirectly through companies subject to a nominal tax rate of six per cent. It is expected that it will be possible to use the tax losses during the year.
Other key ratios refer to a number of measures of return which are used to describe various aspects of the statement of financial position and to give investors and analysts further information about the operations. We report return on equity, equity per share and cash flow per share, as these performance indicators show the company's results and profitability, equity on a per share basis, and the company's ability to fulfil its obligations and pay dividends to the shareholders. These alternative performance indicators supplement the picture given of Diös' financial performance and enable investors and analysts to gain a better understanding of the company's return and results. Yield is a measure of the results generated by the properties in relation to their market value. It shows the profitability of the properties and is considered to provide supplementary information for investors and analysts concerning the risk in the portfolio. The debt/equity ratio is presented in order to supplement the picture of the company's financial situation. It shows the ratio of interest-bearing liabilities to equity. The measure is considered to enhance investors' and analysts' ability to assess our financial stability.
| 2018 3 mths Oct-Dec |
2017 3 mths Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|
|---|---|---|---|---|
| Return on equity, % | 5.9 | 3.8 | 18.2 | 18.3 |
| Equity per share, SEK | 58.3 | 51.2 | 58.3 | 51.2 |
| Cash flow per share, SEK | ||||
|---|---|---|---|---|
| Profit before tax | 576 | 268 | 1,597 | 1,261 |
| Reversal | ||||
| Unrealised change in value, properties | -351 | -67 | -678 | -402 |
| Unrealised change in value, derivatives | 0 | -6 | -16 | -27 |
| Depreciation and amortisation | 1 | 1 | 2 | 2 |
| Current tax | -13 | -16 | -90 | -43 |
| Total | 213 | 180 | 815 | 791 |
| Average number of shares ('000) | 134,512 | 134,512 | 134,512 | 132,041 |
| Cash flow per share, SEK | 1.58 | 1.34 | 6.05 | 6.00 |
| Earnings per share, SEK | 3.35 | 1.91 | 9.94 | 7.78 |
| Debt/equity ratio, times | 1.4 | 1.6 |
We also report data for economic occupancy and vacancy rate, as these performance indicators provide a more in-depth picture of the company's financial performance with regard to revenues in the properties and thus also in the company. These performance indicators are widely used in the industry, and enable investors and analysts to make comparisons between different property companies.
| 2018 3 mths Oct-Dec |
2017 3 mths Oct-Dec |
2018 12 mths Jan-Dec |
2017 12 mths Jan-Dec |
|
|---|---|---|---|---|
| Contracted rental income, SEKm | 441 | 437 | 1,771 | 1,700 |
| Economic occupancy rate, % | 91 | 91 | 91 | 91 |
| Surplus ratio, % | 64 | 61 | 64 | 64 |
| EPRA vacancy rate | ||
|---|---|---|
| Estimated market rent for vacant space | 154 | 153 |
| Annualised rental value for the whole portfolio | 1,904 | 1,875 |
| EPRA vacancy rate, % | 8.1 | 8.2 |
The activities of the parent company consist of central Group functions as well as the ownership and operation of the Group's subsidiaries. Income totalled SEK 164 million (170) and the profit after tax was SEK 602 million (436). Profit after tax includes dividends from Group companies in the amount of SEK 600 million (300) and received Group contributions of SEK 11 million (154). Net sales referred chiefly to services sold to the Group's subsidiaries. Cash and cash equivalents at 31 December 2018 were SEK 0 million (29)
and drawn overdraft facilities were SEK 201 million (0). External interest-bearing liabilities, excluding overdraft facilities, totalled SEK 2,238 million (3,208), of which SEK 1,090 million (600) referred to outstanding commercial paper. The average annual interest rate based on the situation at 31 December 2018 was 1.0 per cent (1.2). The parent company prepares its financial reports in compliance with RFR 2 Financial Reporting for Legal Entities.
| 2018 12 mths |
2017 | ||
|---|---|---|---|
| INCOME STATEMENT | Jan-Dec | 12 mths Jan-Dec |
|
| Income | 164 | 170 | |
| Gross profit | 164 | 170 | |
| Central administration | -204 | -214 | |
| Operating profit | -40 | -44 | |
| Income from interests in Group companies | 611 | 454 | |
| Financial income | 253 | 218 | |
| Financial costs | -222 | -192 | |
| Profit after financial items | 602 | 436 | |
| Current tax | - | - | |
| Profit after tax | 602 | 436 | |
| STATEMENT OF COMPREHENSIVE INCOME | |||
| Profit after tax | 602 | 436 | |
| Comprehensive income for the year | 602 | 436 |
| Condensed parent company balance sheet, SEKm ASSETS |
2018 31 Dec |
2017 31 Dec |
|---|---|---|
| Investments in Group companies | 2,124 | 2,124 |
| Receivables from Group companies | 11,214 | 11,439 |
| Other assets | 21 | 26 |
| Cash and cash equivalents | - | 29 |
| TOTAL ASSETS | 13,359 | 13,618 |
| EQUITY AND LIABILITIES | ||
| Equity | 3,307 | 3,095 |
| Interest-bearing liabilities | 2,238 | 3,208 |
| Liabilities to Group companies | 7,579 | 7,277 |
| Overdraft facilities | 201 | - |
| Other liabilities | 34 | 38 |
| TOTAL EQUITY AND LIABILITIES | 13,359 | 13,618 |
The number of employees as at 31 December 2018 was 158 (156), of whom 63 were women (61). The majority of our employees, 104 people (106), work in our business units and the rest at our head office in Östersund. In 2018, we strengthened our organisation by recruiting employees in the areas of urban development, sustainability and projects.
Material risks and uncertainties affecting the business include market and business intelligence, the business model, the properties, cash flow, financing and sustainability.
Demand and prices in the Swedish property are influenced by the level of economic activity globally and in Sweden as well as by interest rates.
Our properties are measured at fair value on an ongoing basis, and changes in value are recognised in the income statement. The effects of changes in value affect the income statement and balance sheet and thus also the related performance measures. Any significant negative impact is managed through a diversified portfolio of centrally located properties in growth cities.
| SENSITIVITY ANALYSIS, PROPERTY VALUE | Change in property value, % | |||
|---|---|---|---|---|
| -7.5 | 0.0 | +7.5 | ||
| Property value, SEKm | 19,241 | 20,802 | 22,362 | |
| Equity/assets ratio, % | 32.2 | 37.2 | 41.6 | |
| Loan-to-value ratio, % | 57.7 | 53.4 | 49.6 |
Cash flow consists of income and expenses and is primarily attributable to rent levels, property costs, occupancy rates and interest rates. A change in these items affects cash flow and thus also earnings. Any significant negative impact is managed through a diversified tenant structure, good cost control and active interest rate risk management.
| CASH FLOW SENSITIVITY ANALYSIS | Change | Impact on earnings, SEKm1 |
|---|---|---|
| Contracted rental income | +/- 1% | +/-18 |
| ECONOMIC OCCUPANCY RATE | +/- 1 percentage point | +/-19 |
| Property costs | -/+ 1% | +/-7 |
| Interest rate on interest-bearing liabilities -/+ 1 percentage point | +/-38 |
1 Annualised.
Access to financing is the biggest financial risk and is essential to running a property business. The risk is limited through good relations with banks, access to the capital market, and strong finances and KPIs.
A sustainable business model and sustainable behaviour are essential to creating long-term value. Through good internal control and procedures, we take responsibility for building a sustainable long-term business.
No material changes in the assessment of risks have been made after the publication of the annual report for 2017. For more information on risks and risk management, see Diös' annual report for 2017, pages 59–62.
There were no significant related party transactions in the period. Those related-party transactions which did occur are deemed to have been concluded on market terms.
Diös complies with EU-adopted IFRS standards and the interpretations of these (IFRIC). This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The report for the parent company is prepared in accordance with RFR 2 Financial Reporting for Legal Entities and the Swedish Annual Accounts Act. Disclosures under IAS 34 are provided elsewhere in the interim report than in a note. All property-related transactions have been recognised based on calculations of the preliminary consideration. The calculation of the final consideration will be completed in the first quarter of 2019. The accounting policies applied in preparing the interim report are consistent with the accounting policies applied in preparing the consolidated financial statements and annual accounts for 20171 , Note 1.
NEW OR AMENDED IFRS STANDARDS AND NEW INTERPRETATIONS WHICH HAVE NOT YET BECOME EFFECTIVE:
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement from 1 January 2018. The standard introduces changes in respect of the classification and measurement of financial instruments and liabilities. The new standard contains changes to the principles for hedge accounting and introduces an impairment model that is based on expected credit losses instead of incurred credit losses. The accounting treatment of financial assets and liabilities will not change as a result of the changed principles, and as Diös' credit losses are very small, the transition to the new standard will not have a material impact on the company's financial statements. No comparative figures will be restated.
The transition to IFRS 15 will be applied from 1 January 2018 and refers to the recognition of revenue from contracts with customers. In connection with the introduction of IFRS 15, a review was made of the company's contracts and revenue, as a result of which Diös identified that some parts of the Group had revenue which is covered by IFRS 15. A distinction has therefore been made between rental income (including the passing-on of property tax) and service income, which consists of income from tariff-based operations and income from care and upkeep of properties. Care and upkeep includes technical maintenance of the properties. Diös applies the retroactive method, which means that comparative figures are restated. In the income statement, revenue has therefore been divided into two rows, Rental income and Service income. Sales income from properties is also included. Diös recognises property transactions on the completion date, and IFRS 15 is therefore not deemed to have any impact on these transactions. There is thus no impact on revenue or reported profit, and IFRS 15 will not have any material impact on Diös' financial statements.
1 The Annual Report 2017 is available at www.dios.se
ACCOUNTING POLICIES CONTINUE ON THE NEXT PAGE
Diös will apply IFRS 16 for the financial year commencing on 1 January 2019 and will not apply the standard retroactively. The accounting treatment for lessors will remain essentially unchanged. For lessees, the standard will have the effect that most leases will be recognised in the balance sheet. For Diös, the main impact will be on the recognition of leasehold contracts and car leases, which will be recognised in the balance sheet and will thus have an impact on total assets. The leasing cost will be recognised as amortisation of the usufruct and as an interest expense, and will thus no longer be included in net operating income. The recognised right-of-use assets will be assigned the same value as the lease liability recognised at 1 January 2019. As Diös has a limited number of contracts, the impact on the financial statements is expected to be limited. As a lessee, Diös has reviewed and assessed the Group's leases, identifying leasehold contracts and car leases as being the most material. In addition to these, only minor leases have been identified, such as leases for office equipment and similar items. The lease liability for leasehold contracts at 1 January 2019 is SEK 35 million and includes a corresponding right-of-use asset. Thereafter, Diös will be recognising the right-of-use asset at fair value, as it is considered to be an investment property. As a result of the transition to IFRS
16, all ground rent costs will be treated as a financial expense, which differs from the current principle, under which these costs are treated as an operating expense that reduces the operating surplus. Property management income will remain unchanged, however. The recognised expense for ground rent in 2018 was SEK 3 million. The lease liability for car leases at 1 January 2019 is SEK 14 million and includes a corresponding right-of-use asset. These will be recognised at the value of the right-of-use asset at the beginning of the period less depreciation and a finance charge, which differs from the current principle, under which this is treated as an operating expense that reduces the operating surplus. The recognised expense for leased vehicles in 2018 was SEK 4 million.
Other changed and new IFRS standards entering into force during the coming periods are not assessed as having any significant impact on the Group's financial reporting.
Costs for operations and maintenance are subject to seasonal variations. Cold weather and snow affect the costs for heating, snow clearance and roof snow removal. The costs are normally higher in the first and fourth quarters.
| Q4 Q3 Q2 Q1 Q4 Q3 Q2 Revenue, SEKm 467 446 450 443 436 435 447 Operating surplus, SEKm 312 295 250 266 287 286 283 Property management income, SEKm 225 248 234 187 197 222 224 Profit for the period, SEKm 451 303 358 229 256 192 255 Surplus ratio, % 70 67 61 61 67 66 64 Economic occupancy rate, % 91 91 91 92 91 91 91 |
31 Dec 2018 | 30 Sep 2018 | 30 Jun 2018 | 31 Mar 2018 | 31 Dec 2017 | 30 Sep 2017 | 30 Jun 2017 | 31 Mar 2017 |
|---|---|---|---|---|---|---|---|---|
| Q1 | ||||||||
| 405 | ||||||||
| 241 | ||||||||
| 179 | ||||||||
| 326 | ||||||||
| 60 | ||||||||
| 90 | ||||||||
| Return on equity, % 5.9 4.2 5.0 3.3 3.8 2.9 3.9 |
6.0 | |||||||
| Equity/assets ratio, % 37.2 36.1 34.8 35.3 34.9 33.9 33.3 |
33.5 | |||||||
| Property loan-to-value ratio, % 54.6 55.8 56.7 57.1 57.8 58.3 53.4 |
59.1 | |||||||
| Average interest rate at end of period, %¹ 1.3 1.5 1.5 1.5 1.6 1.6 1.2 |
1.6 | |||||||
| Interest coverage ratio, times 6.3 6.0 6.3 4.9 4.8 5.5 5.8 |
5.2 | |||||||
| Property management income per share, SEK 1.84 1.74 1.38 1.46 1.65 1.67 1.67 |
1.44 | |||||||
| Earnings per share after tax, SEK 3.35 2.25 2.64 1.70 1.91 1.43 1.88 |
2.60 | |||||||
| Equity per share, SEK 58.3 54.9 52.7 52.9 51.2 49.3 47.9 |
48.0 | |||||||
| Market price per share, SEK 56.9 53.8 56.4 55.8 52.0 46.6 56.4 |
44.0 |
1 Includes expenses relating to commitment fees and derivatives.
| Targets 2018 | Outcome Jan-Dec 2018 | Target 2019 |
|---|---|---|
| - | 7 | >5 |
| 92 | 91 | not defined |
| 64 | 64 | 65 |
| -3 | -3 | -3 |
| -2 | 0 | not defined |
| - | 11 | 1001 |
| 76 | 72 | 76 |
| 70 | 62 | 67 |
| >12 | 18.2 | >12 |
| ~50 | 49,73 | ~50 |
| <60 | 53.4 | <55 |
| >30 | 37.2 | >35 |
1 Long-term target.
2 Profit after tax, excluding unrealised changes in value and deferred tax.
3 The Board of Directors' proposal.
Diös' share price at the end of the year was SEK 56.4 (55.8), which represents a market capitalisation of SEK 7,580 million (7,499), and the return for the past 12 months was 1.1 per cent (-18.5). If the dividend is included, the total return on the shares for the year was 6.5 per cent (23.9). The graph on the next page shows share prices for the past 12 months for both Diös and the indexes. The return on the OMX Stockholm 30 Index was -10.7 per cent (3.9) and the return on the OMX Stockholm Real Estate PI index 9.7 per cent (6.7).
At 31 December, Diös Fastigheter AB had 13,921 shareholders (14 513). The share of foreign-owned shares was 20.6 per cent (21.5) while the total number of shares during the period remained unchanged at 134,512,438 (134,512,438). The single largest shareholder was AB Persson Invest, with 15.4 per cent (15.4) of the shares. The ten largest shareholders accounted for 54.1 per cent (57.4) of the total number of shares and votes.
The Annual General Meeting 2018 resolved to authorise the company to buy back ten per cent of the total number of outstanding shares of the company. No repurchases were made during the period.
During the year, Nordstjernan AB flagged a holding exceeding 10 per cent (call option included) of the total number of shares while Bengtssons Tidnings AB flagged a holding of less than 10 per cent. The ten largest shareholders of Diös Fastigheter AB according to Euroclear Sweden AB are shown in the table above.
Diös Fastigheter AB is a publicly traded company listed on the NAS-DAQ OMX Nordic Exchange Stockholm, Mid Cap list. The ticker symbol is DIOS and the ISIN code SE0001634262.
Our goal is to generate a return on equity in excess of the risk-free rate plus 12 per cent. The annual return was 18.2 per cent (18.3). Equity
at the end of the year was SEK 7,839 million (6,887) and the longterm net asset value, EPRA NAV, was SEK 9,088 million (8,033). On a per share basis, EPRA NAV was SEK 67.6 (59.7), which means that the share price at 31 December represented 83 per cent (93) of the long-term net asset value. The net asset value per share for the year, expressed as EPRA NNNAV, was SEK 65.8 (58.0).
Earnings per share for the year were SEK 9.94 (7.78) while long-term earnings per share, expressed as EPRA EPS, were SEK 6.05 (5.54). EPRA EPS, which is designed to show an entity's long-term earnings per share, is calculated as property management income after deducting 22 per cent corporation tax attributable to property management income less minority share of earnings.
OF DIÖS FASTIGHETER AB AT 31 DECEMBER 2018
| SHAREHOLDER | No. of shares |
Capital and votes, % |
|---|---|---|
| AB Persson Invest | 20,699,443 | 15.4 |
| Backahill Inter AB | 14,095,354 | 10.5 |
| Pensionskassan SHB Försäkringsförening | 8,096,827 | 6.0 |
| Nordstjernan AB | 6,787,374 | 5.0 |
| Bengtssons Tidnings AB | 6,787,374 | 5.0 |
| Handelsbankens Fonder | 5,150,000 | 3.8 |
| Avanza Pension | 3,668,020 | 2.7 |
| SEB Fonder | 2,974,759 | 2.2 |
| Staffan Rasjö | 2,355,852 | 1.8 |
| Thompson, Siegel & Walmsley LLC | 2,324,079 | 1.7 |
| Total, largest shareholders | 72,939,082 | 54.1 |
| Other shareholders | 61,573,356 | 45.9 |
| TOTAL | 134,512,438 | 100.0 |
| Date | Event | Increase in number of shares | Increase in share capital, SEK | Total number of shares | Total share capital, SEK | Face value, SEK |
|---|---|---|---|---|---|---|
| 1 Jan 2005 | At the start of the period | - | - | 10,000 | 100,000 | 10.00 |
| 21 Jun 2005 | Share split | 990,000 | - | 1,000,000 | 100,000 | 0.10 |
| 21 Jun 2005 | Issue of new shares | 1,489,903 | 148,990 | 2,489,903 | 248,990 | 0.10 |
| 14 Sep 2005 | Non-cash issue | 1,503,760 | 150,376 | 3,993,663 | 399,366 | 0.10 |
| 2 Jan 2006 | Bonus issue | - | 39,537,264 | 3,993,663 | 39,936,630 | 10.00 |
| 2 Jan 2006 | Share split | 15,974,652 | - | 19,968,315 | 39,936,630 | 2.00 |
| 18 May 2006 | Issue of new shares | 8,333,400 | 16,666,800 | 28,301,715 | 56,603,430 | 2.00 |
| 11 Jul 2006 | Non-cash issue | 5,000,000 | 10,000,000 | 33,301,715 | 66,603,430 | 2.00 |
| 19 Apr 2007 | Non-cash issue | 666,250 | 1,332,500 | 33,967,965 | 67,935,930 | 2.00 |
| 29 Oct 2010 | Non-cash issue | 99,729 | 199,458 | 34,067,694 | 68,135,388 | 2.00 |
| 14 Dec 2010 | Issue of new shares | 3,285,466 | 6,570,332 | 37,353,160 | 74,705,720 | 2.00 |
| 17 Dec 2010 | Issue of new shares | 11,407 | 22,814 | 37,364,567 | 74,728,534 | 2.00 |
| 5 Dec 2011 | Issue of new shares | 22,854,136 | 45,708,272 | 60,218,703 | 120,436,806 | 2.00 |
| 14 Dec 2011 | Issue of new shares | 14,510,431 | 29,020,862 | 74,729,134 | 149,457,668 | 2.00 |
| 27 Jan 2017 | Issue of new shares | 59,629,748 | 119,259,496 | 134,358,882 | 268,717,164 | 2.00 |
| 31 Jan 2017 | Issue of new shares | 153,556 | 307,112 | 134,512,438 | 269,024,276 | 2.00 |
A comprehensive and diversified property portfolio ensures risk distribution between different markets, tenants and industries. The profit equalises over time. Our wide offering also provides us with great opportunities to offer our tenants new premises whenever their needs or business change.
Since 2013, the yield has amounted to 4.8 per cent on average, which is among the highest in the industry. According to the dividend policy, approx. 50 per cent of the profit for the year after tax, excluding unrealised changes in value and deferred tax, should be passed onto the shareholders as a dividend.
DIÖS FASTIGHETER AB YEAR-END REPORT JANUARY–DECEMBER 2018 25
Since 2013, the cash flow per share has increased by 69 per cent. This is the result of effective management, energy-saving measures, profitable investments and a tenant-focused organisation.
The Board of Directors and the CEO declare that the financial statement gives a true and fair view of the operations, financial position and income of the company and the Group, and describes the principal risks and uncertainties faced by the company and the Group's companies. This financial statement has not been subject to review by the Company's auditor.
Financial reports can be viewed in full on Diös' website, www.dios.se
Östersund, 14 February 2019
Bob Persson Chairman
Ragnhild Backman Board member
Anders Bengtsson Board member
Eva Nygren Board member
Anders Nelson Board member
Tomas Mellberg Board member Employee representative
Knut Rost Chief Executive Officer
| Annual Report 2018 | Week 13, 2019 |
|---|---|
| Q1 Interim Report January-March 2019 | 23 April 2019 |
| Annual General Meeting 2019 | 23 April 2019 |
| Q2 Interim Report January-June 2019 | 5 July 2019 |
| Q3 Interim Report January–September 2019 | 25 October 2019 |
The Annual Report 2018 will be available at www.dios.se. In early April, the annual report is sent to those Swedish shareholders who have notified that they wish to receive a printed version of the report.
In January 2019, Diös acquired three properties in Gävle, Borlänge and Mora. The properties have a total value of SEK 282 million and the completion date is 15 February 2019.
Knut Rost, CEO, +46 (0)770-33 22 00, +46 (0)70-555 89 33 [email protected]
Rolf Larsson, CFO, +46 (0)770-33 22 00, +46 (0)70-666 14 83, [email protected]
This constitutes information which Diös Fastigheter AB is required to publish under the EU's Market Abuse Regulation. The information was submitted for publication through the above contact person on 14 February 2019, at 7:00 a.m. CET.
Actual number of shares outstanding at the end of the period.
Profit for the period divided by average equity. Average equity is defined as the sum of the opening and closing balance divided by two.
Interest-bearing and other liabilities relating to properties, divided by the carrying amount of the properties at the end of the period.
Operating surplus for the period divided by the properties' market value at the end of the period.
Operating surplus less central administration after reversal of scheduled depreciation and amortisation. The calculation is made on 12-month rolling basis, unless otherwise stated.
Equity at the end of the period divided by the number of shares outstanding at the end of the period.
Contracted rental income for the period divided by rental value at the end of the period.
Estimated market rent for unused premises divided by total rental value.
Property management income less nominal tax attributable to property management income, divided by average number of shares. Taxable property management income refers to property management income less, inter alia, tax-deductible depreciation and amortisation and redevelopments.
Equity at the end of the period after reversal of interest rate derivatives and deferred tax attributable to temporary differences in properties and minority share of equity, divided by the number of outstanding shares at the end of the period.
Equity at the end of the period adjusted for actual deferred tax instead of nominal deferred tax and minority share of equity, divided by the number of shares outstanding at the end of the period.
Estimated market rent for vacant space divided by the annual rental value of the whole property portfolio.
Revenue less property costs, costs for central administration and net financial items.
Number of shares outstanding at the beginning of the period, adjusted by the number of shares issued or repurchased during the period weighted by the number of days that the shares were outstanding, in relation to the total number of days in the period.
Rents invoiced for the period less rent losses and rent discounts including service income.
Rent at the end of the period plus a supplement for the estimated market rent for unoccupied floor space.
Comparable properties refer to properties which have been owned throughout the period and the whole comparative period. The term is used to highlight growth in rental income, excluding one-off effects resulting from early vacating of properties, and property costs as well as acquired and sold properties.
Profit before tax, adjusted for unrealised changes in value plus depreciation/amortisation less current tax, divided by the average number of shares.
Net debt is calculated as interest-bearing liabilities less cash and cash equivalents plus overdraft facilities. Net debt is then divided by EBITDA.
Net annual rent, excluding discounts and supplements, for newly signed, terminated and renegotiated contracts. The length of contracts is not taken into account.
Refers to a property that is intended to be redeveloped or improved. Divided into the following sub-categories:
NEW BUILDS – land and properties with ongoing new builds or that are undergoing complete redevelopment.
IMPROVEMENT PROPERTY – properties with ongoing or planned conversion or extension work that materially affects the property's operating surplus or standard or changes the use of the premises.
TENANT IMPROVEMENTS – properties undergoing conversion or minor improvements to premises.
Profit for the period after tax, attributable to shareholders, divided by the average number of shares.
Income from property management after reversal of financial costs, divided by financial costs for the period.
Income from tariff-based operations and income from care and upkeep.
Interest-bearing liabilities divided by shareholders' equity at the end of the period.
Equity divided by total assets at the end of the period.
Operating surplus for the period divided by contracted rental income for the period.
The definitions have been updated since the previous quarterly report.
DIÖS FASTIGHETER AB (PUBL) FRITZHEMSGATAN 1A, BOX 188, 831 22 ÖSTERSUND, TEL: +46 (0)770-33 22 00 CRN: 556501-1771. REGISTERED OFFICE ÖSTERSUND. WWW.DIOS.SE
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