Quarterly Report • Jul 6, 2018
Quarterly Report
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INTERIM REPORT JANUARY – JUNE 2018
RENTAL INCOME INCREASED BY 7 PER CENT TO SEK 887 MILLION (832)
PROPERTY MANAGEMENT INCOME INCREASED BY 4.5 PER CENT AND WAS SEK 421 MILLION (403)
UNREALISED CHANGES IN VALUE OF PROPERTIES WERE SEK 227 MILLION (302) AND UNREALISED CHANGES IN VALUE OF DERIVATIVES WERE SEK 12 MILLION (14)
THE PROFIT AFTER TAX WAS SEK 587 MILLION (581).
EARNINGS PER SHARE WERE SEK 4.34 (4.46)*
RENTAL GROWTH, COMPARABLE PROPERTIES
INTEREST COVERAGE RATIO
| NET PROFIT FOR THE PERIOD, SEKm |
2018 6 mths Jan-Jun |
2,017 6 mths Jan-Jun |
2,017 12 mths Jan-Dec |
|---|---|---|---|
| Rental income | 887 | 832 | 1,700 |
| Operating surplus | 545 | 527 | 1,080 |
| Property management income | 421 | 403 | 822 |
| Profit before tax | 657 | 721 | 1,261 |
| Profit after tax | 587 | 581 | 1,029 |
| Surplus ratio, % | 62 | 63 | 64 |
| Occupancy rate, % | 91 | 90 | 91 |
| Equity/assets ratio, % | 34.9 | 33.3 | 34.9 |
| Property loan-to-value ratio, % | 55.8 | 58.3 | 57.1 |
| Equity per share, SEK | 52.7 | 47.9 | 51.2 |
| EPRA NAV per share, SEK | 61.1 | 56.1 | 59.7 |
For definitions of key performance indicators, see 27.
* Per share performance measures for 2017 have been affected by the rights issue.
LOAN-TO-VALUE RATIO
Cover: The tenant Volt in the Smedjan shopping centre, Luleå. Åsa Johansson, Shopping Centre Manager Diös, and Amanda Olin, Region Manager Volt. 2 DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–JUNE 2018
Our property management income continues to improve on the back of increased rental income and efficient property management. Economic occupancy for the period was 91 per cent and the loan-to-value ratio improved to 55.8 per cent.
Earnings growth remains strong. Our property management income increased by 4.5 per cent year on year and the surplus ratio for the period reached 62 per cent. Lettings activity has been high, resulting in a decrease in vacant floor space of 5 percentage points in just three years. We have continued to concentrate our portfolio to centrally located properties in our cities, which will enable us to further optimise the running of the properties and, above all, offer our tenants an unrivalled proposition.
Our latest let, to Internationella Engelska Skolan (International English School) in Luleå at the end of the period, is very important. The opening of the school will increase the attractiveness of the city, create more jobs and breathe new life into the city centre.
We have continued to make use of our development rights, and a very welcome development is the letter of intent that we signed with Nordic Choice Hotels during the period concerning the construction of another new hotel, this time in central Umeå. Umeå is our largest and fastest growing city, where there is a strong need for a new central meeting place. The hotel will raise the profile of the city, attracting more visitors and creating new flows.
The acquisition of the Vale 18 property in central Umeå at the end of the second quarter is strategic in the sense that we now own nearly the whole block. We intend to continue to develop the block by creating further new commercial and residential premises. We are currently at the detailed development plan stage and expect to be able to launch the project in the first half of 2019.
We have been making significant investments in tenant adaptations, committing some SEK 300 million during the period, which shows that demand is strong. Tenants' willingness to pay for the right location, high quality and more efficient premises remains good. Our return on tenant adaptations for the period was 10.3 per cent for completed projects. During the period, we opened our first solar cell facility in Sundsvall, which covers 1,000 square metres. We also ordered 19 new electric cars, which will be delivered in the autumn. We are upgrading our service vehicles to a greener option that will have a positive impact on the urban environment as well as benefiting the drivers.
We are convinced that location is key. Dynamic and attractive environments in central locations will be a success factor. There are many challenges in the retail sector today, but above all a whole host of opportunities. The Swedish retail sector is growing and is now worth nearly SEK 800 billion. New business models and concepts are being developed faster than ever before. For us as a property owner with a strong presence in the city centre, the challenge is to create new environments for consumption that can be remodelled ever more frequently. That's why we are complementing our retail offering with e-commerce concepts, pop-up stores, offices, housing, cafés, restaurants, culture and service. Coupled with our strong cash flow and unique position, our centrally located properties put us in an ideal situation to create attractive premises for continued growth.
Knut Rost, CEO
Diös aims to be the market-leading property company in northern Sweden. We own, manage and develop properties in the centre of 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
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 have changed their behaviour in terms of how they shop, 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 soughtafter landlord in our market.
To own and develop commercial and residential properties in priority growth cities from local offices. We create longterm values with a focus on the tenant by operating in a responsible and sustainable manner.
DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–JUNE 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 April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|---|---|---|---|---|---|
| Rental income | 442 | 432 | 887 | 832 | 1,700 |
| Other property management income | 4 | 3 | 9 | 8 | 19 |
| Property costs | -151 | -149 | -351 | -313 | -639 |
| Operating surplus | 295 | 286 | 545 | 527 | 1,080 |
| Central administration | -18 | -15 | -35 | -36 | -73 |
| Net financial items | -43 | -47 | -89 | -88 | -185 |
| Property management income | 234 | 224 | 421 | 403 | 822 |
| Change in value, properties | 118 | 94 | 224 | 304 | 412 |
| Change in value, interest rate derivatives | 6 | 5 | 12 | 14 | 27 |
| Profit before tax | 358 | 323 | 657 | 721 | 1,261 |
| Current tax | -22 | -9 | -39 | -17 | -43 |
| Deferred tax | 22 | -59 | -31 | -123 | -189 |
| Profit after tax | 358 | 255 | 587 | 581 | 1,029 |
| Profit attributable to shareholders of the parent company | -355 | 253 | 584 | 578 | 1,027 |
| Profit attributable to non-controlling interests | 3 | 2 | 3 | 3 | 2 |
| Total | 358 | 255 | 587 | 581 | 1,029 |
| STATEMENT OF COMPREHENSIVE INCOME | |||||
| Profit after tax | 358 | 255 | 587 | 581 | 1,029 |
| Comprehensive income for the period | 358 | 255 | 587 | 581 | 1,029 |
| Comprehensive income attributable to shareholders of the parent company |
-355 | 253 | 584 | 578 | 1,027 |
| Comprehensive income attributable to non-controlling interests | 3 | 2 | 3 | 3 | 2 |
| Total | 358 | 255 | 587 | 581 | 1,029 |
| Earnings per share, SEK | 2.64 | 1.88 | 4.34 | 4.46 | 7.78 |
| Number of shares at end of period ('000) | 134,512 | 134,512 | 134,512 | 134,512 | 134,512 |
| Average number of shares ('000) | 134,512 | 134,512 | 134,512 | 129,528 | 132,041 |
| Number of treasury shares at end of period | 0 | 0 | 0 | 0 | 0 |
| Average number of treasury shares | 0 | 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 421 million (403). In comparable properties, increased winter-related costs resulted in a decrease in property management income of 1.5 per cent compared with the previous year.
The rental income for the reporting period was SEK 887 million (832), representing a 91 per cent (90) economic occupancy rate. For comparable properties, rental income increased by 3.5 per cent year on year. Other property management income totalled SEK 9 million (8) and consisted mainly of costs for work in leased premises that are passed on to tenants.
| 2018 Jan-Jun |
2017 Jan-Jun |
Change % | |
|---|---|---|---|
| Comparable properties | 840 | 812 | 3.5 |
| Acquired properties | 44 | 0 | |
| Sold properties | 3 | 20 | |
| Rental income | 887 | 832 |
Total property costs were SEK 351 million (313). 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 6 million (4) refers to work in leased premises for which the costs are passed on to tenants.
The operating surplus was SEK 545 million (527), representing a surplus ratio of 62 per cent (63). The lower surplus ratio is mainly due to increased winter-related property costs. For comparable properties, our operating surplus increased by 1.1 per cent compared with the previous year.
The central administration expense was SEK 35 million (36). 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 period were SEK -89 million (-88). The interest costs for the period, including costs for interest rate derivatives and loan commitments, represent borrowings at an average annual interest rate of 1.5 per cent (1.8).
The average valuation yield at the end of the period was 6.03 per cent (6.11). At portfolio level, this represents a decrease of 0.05 percentage points since year-end. The positive value change of SEK 227 million (302) is mainly attributable to a higher net operating income. The change in value represented 1.1 per cent (1.6) of market value. Last year's unrealised value changes were positively impacted by a one-off effect of a discount on deferred tax in connection with property transactions. At 30 June, the market value was SEK 20,060 million (19,027).
During the period, 4 properties (1) were sold, resulting in a realised change in value of SEK -3 million (2). Three properties (33) were acquired during the period.
1 The figures for property management income, operating surplus and surplus ratio in Q2 2018 are on a rolling 12-month basis.
DIÖS FASTIGHETER AB INTERIM REPORT JANUARY–JUNE 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 period, unrealised changes in value on derivatives totalled SEK 12 million (14), 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 657 million (721). The change in profit primarily results from lower unrealised value changes for properties and higher winter-related costs.
The profit after tax was SEK 587 million (581). Current tax totalled SEK -39 million (-17). This is mainly attributable to tax in subsidiaries which do not have the right to offset losses against Group contributions. Deferred tax was SEK -31 million (-123) after a positive effect of SEK 75 million from restatement of deferred tax.
Property management income for the second quarter, i.e. income excluding changes in value and tax, was SEK 234 million (224). The operating
surplus was SEK 295 million (286), representing a surplus ratio of 67 per cent (66).
Net financial items for the second quarter were SEK -43 million (-47). The profit before
tax was SEK 358 million (323), with changes in the value of properties having a positive impact of SEK 118 million (94) and changes in the value of interest rate derivatives adding SEK 6 million (5). The profit after tax was SEK 358 million (255). Deferred tax had a positive impact on earnings of SEK 22 million (-59) as a result of a SEK 75 million restatement of deferred tax. Current tax was SEK -22 million (-9).
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. Tax paid arises from the fact that some subsidiaries are not able to avail themselves of the tax benefits of group contributions.
The remaining tax losses are estimated at SEK 10 million (78). The Group also has untaxed reserves of SEK 181 million (118). The fair value of the properties exceeds their tax base by SEK 5,704 million (5,108). The tax liability has been calculated based on the tax rate applying at the time when the tax consequence is expected to arise. The tax on the net balance of these items less the deferred tax attributable to asset purchases has been recognised as a deferred tax liability.
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 | Basis for current tax |
Basis for deferred tax |
|---|---|---|
| Property management income | 421 | |
| Tax-deductible | ||
| depreciation and amortisation | -113 | 113 |
| conversion projects | -44 | 44 |
| Other tax adjustments | -77 | 109 |
| Taxable property management income | 187 | 266 |
| Income tax at 22% if tax losses are not used | 41 | |
| Sale of properties | 2 | -21 |
| Change in value, properties | 0 | 226 |
| Taxable profit before tax losses | 189 | 471 |
| Tax losses, opening balance | -21 | 21 |
| Tax losses, closing balance | 10 | -10 |
| Taxable profit | 178 | 482 |
| Tax for the period | 39 | 106 |
| Restatement of deferred tax¹ | - | -75 |
| Tax for the period as per income statement | 39 | 31 |
1 The deferred tax liability has been restated as follows: 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 3,052 (3,045). The number of residential leases was 1,632 (1,896). The ten largest tenants represent 15.6 per cent (15.7) of Diös' total rental income.
Net leasing for the period was SEK -2 million (32). The reduction during the period is due to a small number of major terminated leases. Noteworthy lets during the period included the contracts with Internationella Engelska Skolan
in Stören 17, Luleå, and ÅF AB in Norr 31:9, Gävle.
The average contract term commercial premises at 30 June was 3.5 years (3.6).
At 30 June, the economic vacancy rate stood at 8 per cent (9) while physical vacancies were 13 per cent (14). 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 period, excluding discounts, was 8 per cent (9).
| TENANTS AT 30 JUNE 2018 |
No. of contracts |
Annual contract value, SEK '000 |
Average contract term, years |
|---|---|---|---|
| Swedish Transport Administration | 30 | 63,533 | 2.1 |
| Municipality of Östersund | 110 | 37,589 | 2.5 |
| Swedish Public Employment Service | 38 | 32,155 | 2.6 |
| Swedbank AB | 11 | 23,038 | 4.7 |
| Åhléns AB | 5 | 22,799 | 5.1 |
| Telia Sverige AB | 26 | 20,643 | 10.2 |
| Folksam Ömsesidig Sakförsäkring | 44 | 20,443 | 5.3 |
| Swedish Police Authority | 34 | 20,014 | 3.2 |
| Swedish Social Insurance Agency | 21 | 18,437 | 3.1 |
| Municipality of Falun | 6 | 17,920 | 2.0 |
| Total, largest tenants | 325 | 276,571 | 3.6 |
| Number contract |
Contract value SEKm |
Share of value, % |
|
|---|---|---|---|
| Commercial, maturity | |||
| 2018 | 459 | 104 | 6 |
| 2019 | 893 | 311 | 17 |
| 2020 | 725 | 340 | 19 |
| 2021 | 616 | 353 | 20 |
| 2022+ | 359 | 482 | 27 |
| Total | 3,052 | 1,590 | 89 |
| Residential | 1,632 | 125 | 7 |
| Other leases1 | 4,133 | 63 | 4 |
| TOTAL | 8,817 | 1,778 | 100 |
1 Other leases refer mainly to garage and parking spaces.
| ASSETS | 2018 30 Jun |
2017 30 Jun |
2017 31 Dec |
|---|---|---|---|
| Investment properties | 20,060 | 19,027 | 19,457 |
| Other non-current assets | 53 | 46 | 46 |
| Current receivables | 212 | 244 | 173 |
| Cash and cash equivalents | - | - | 32 |
| TOTAL ASSETS | 20,325 | 19,317 | 19,708 |
| EQUITY AND LIABILITIES | |||
| Equity | 7,084 | 6,438 | 6,887 |
| Deferred tax liability | 1,217 | 1,133 | 1,197 |
| Provisions | 9 | 9 | 9 |
| Interest-bearing liabilities | 11,190 | 11,095 | 11,104 |
| Overdraft facilities | 46 | 48 | - |
| Current liabilities | 779 | 594 | 511 |
| TOTAL EQUITY AND LIABILITIES | 20,325 | 19,317 | 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 | 581 | 578 | 3 |
| Comprehensive income for the period | 581 | 578 | 3 |
| Issue of new shares | 1,853 | 1,853 | - |
| Issue costs | -51 | -51 | - |
| Tax effect of issue costs | 11 | 11 | - |
| Dividend | -269 | -269 | - |
| Equity, 30 Jun 2017 | 6,438 | 6,392 | 46 |
| Profit for the period after tax | 448 | 449 | -1 |
| Comprehensive income for the period | 448 | 449 | -1 |
| Equity, 31 Dec 2017 | 6,887 | 6,841 | 45 |
| Profit for the period after tax | 587 | 584 | 3 |
| Comprehensive income for the period | 587 | 584 | 3 |
| Dividend | -390 | -390 | - |
| Equity, 30 Jun 2018 | 7,084 | 7,035 | 48 |
The property portfolio is concentrated to central locations in ten priority cities in northern Sweden. Diös has a well diversified portfolio of residential, office, retail and industrial 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 15,085 million, and 120 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. 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 with the help of 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 18,555-21,565 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 | 2,017 | |||
|---|---|---|---|---|
| SEKm | Number | SEKm | Number | |
| Property portfolio, 1 January | 19,457 | 339 | 13,683 | 315 |
| Acquisitions | 138 | 3 | 4,753 | 33 |
| Investments in new builds, extensions and conversions |
298 | 290 | ||
| Sales | -69 | -4 | -2 | -1 |
| Unrealised changes in value | 227 | 302 | ||
| Reclassifications | 10 | - | ||
| Value of property portfolio, 30 June | 20,060 | 338 | 19,027 | 347 |
Unrealised changes in value for the period totalled SEK 227 million (302) and were due to higher net operating income and lower required rates of return.
| UNREALISED CHANGES IN VALUE | 30 Jun 2018 | ||
|---|---|---|---|
| SEKm | % | ||
| Change in net operating income | 149 | 66 | |
| Change in required rate of return | 59 | 26 | |
| Capex | 19 | 8 | |
| Total | 227 | 100 | |
Our strategy is to continuously strive to concentrate our property portfolio to central locations in our priority localities. In the second quarter, Diös completed on the Vale 18 property in Umeå.
| 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 | |
| Total | 8,638 | 138 |
| Property | Quarter | City | Area, sq.m | Price, SEKm |
|---|---|---|---|---|
| Norrkämsta 16:3 | 1 | Ljusdal | 15,997 | |
| Norrkämsta 17:2 | 1 | Ljusdal | 2,300 | |
| Östernäs 14:4 | 1 | Ljusdal | 1,695 | |
| Tälle 23:8 | 1 | Ljusdal | 4,015 | |
| Total | 24,007 | 67 |
| 30 Jun 2018 | 30 Jun 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Office | Retail Residential | Industrial/ warehouse |
Other | Office | Retail Residential | Industrial/ warehouse |
Other | |||
| Yield for assessing residual value 1 , % |
7.0-5.6 | 6.8-5.9 | 5.3-4.7 | 8.0-7.0 | 7.0-6.0 | 7.0-5.7 | 6.9-6.0 | 5.5-4.7 | 8.0-7.3 | 7.0-6.2 |
| Cost of capital for discounting to present value, % | 8.1 | 8.2 | 7.3 | 9.8 | 8.7 | 8.1 | 8.2 | 7.4 | 9.8 | 8.8 |
| Long-term vacancy, % | 5.0 | 3.7 | 1.8 | 12.0 | 5.9 | 5.0 | 3.5 | 1.7 | 11.5 | 6.0 |
1 From lower to upper quartiles in the portfolio.
2 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 298 million (290) to the value of Diös' property portfolio for the period.
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 period, SEK 298 million (290) was invested in 564 projects (522). At the end of the period, 17 major1 development projects were ongoing, with a remaining investment volume of SEK 222 million and a total investment volume of SEK 888 million. During the period, 82 new project investments were approved. The return on completed investments for the period was 10.3 per cent on the invested amount while the return on our ongoing projects was 6.0 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 potential future investment volume of around SEK 4,000 million.
Project starts for Diös' own development rights during the period were concentrated to the Falan 20 residential property in Falun. The Riverside hotel project in Sundsvall is expected to commence in the second half of 2018 and the Thule hotel project in Umeå in the first half of 2019.
| Unit | 2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
|
|---|---|---|---|
| Heating1 | kWh/sq.m | 50.2 | 50.4 |
| District cooling2 | kWh/sq.m | 7.5 | 7.2 |
| Electricity3 | kWh/sq.m | 30.0 | 30.0 |
| Carbon dioxide, total4 | g CO2/kWh | 26.3 | 26.1 |
| Water | m3 /sq.m |
0.2 | 0.2 |
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. 4Carbon 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
Total energy use decreased by 0.2 per cent compared with the same period the year before. For the full-year 2018, our aim is to achieve a decrease in energy use of 3 per cent, which will be possible by increasing our energy optimisation efforts and further developing our technology strategies. Use of district cooling is increasing as we replace cooling machine solutions with district cooling solutions, and thus cut electricity and refrigerant use. In addition, more properties are installing district cooling. 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.
comparable properties.
During the period, two properties were certified under the BREEAM In-Use standard, Hunden 15 in Luleå and Hugin 4 in Umeå. We now have 16 properties certified under the Miljöbyggnad, BREEAM In-Use and Greenbuilding standards.
At 30 June 2018, 35 per cent (33) of Diös' total assets of SEK 20,325 million was funded through equity, 55 per cent (57) through debt securities and 10 per cent (10) through other capital. Interest-bearing liabilities comprise bank financing, covered bonds and commercial paper.
At 30 June 2018, equity was SEK 7,084 million (6,438). The equity/ assets ratio was 34.9 per cent (33.3), which exceeds the target of 30 per cent.
Interest-bearing liabilities in the Group were SEK 11,190 million (11,095). Of total interest-bearing liabilities, SEK 9,150 million (10,080) refers to bank financing, SEK 1,240 million (1 015) to covered bonds and SEK 800 million (0) to commercial paper. The bonds are issued through the covered MTN programme of a jointly controlled company, Svensk FastighetsFinansiering AB. At the end of the period, the loan-to-value ratio in the Group was 55.8 per cent (58.3). At 30 June, the average annual interest rate, including the cost of derivatives and loan commitments, was 1.5 per cent (1.6) and the interest coverage ratio for the period was 5.6 times (5.5).
Out of the Group's total interest-bearing liabilities, SEK 4,600 million (3,600) has been hedged through derivatives. At 30 June 2018, Diös' derivatives portfolio excluding interest rate caps had a market value of SEK -4 million (-29) and interest rate caps had a market value of SEK 1 million (4). 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.
| If market interest rates increase by 1 percentage point |
||||||
|---|---|---|---|---|---|---|
| AT 30 JUNE 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 | +28 | - | |||
| Derivatives portfolio | -1.0 | -6 | +2 | |||
| Loan portfolio incl. derivatives |
0.2 | +22 | +2 |
The average fixed-rate term including derivatives and the average loan maturity were 1.9 years (1.7) and 2.0 years (2.5), respectively. Of the Group's outstanding loans, SEK 8,410 million (7,197) is subject to fixed interest rates.
Consolidated cash and cash equivalents at the end of the period were SEK 0 million (0) and drawn overdraft facilities were SEK 46 million (48). 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 | |
| 2018 | 2,849 | 0.9 | 1,352 | 1,352 | |
| 2019 | 2,603 | 1.2 | 2,431 | 2,431 | |
| 2020 | 5,518 | 1.4 | 6,243 | 5,743 | |
| 2021 | 220 | 0.4 | 722 | 220 | |
| 2022 | - | - | 1,725 | 746 | |
| 2027 | - | - | 1,000 | 697 | |
| Drawn credit facilities | 11,190 | 1.2 | 13,473 | 11,190 | |
| Unutilised credit facilities2 | 2,291 | 0.1 | |||
| Financial instruments | 4,600 | 0.2 | |||
| TOTAL | 1.5 |
1 Average annual interest rate refers to the average interest rate based on interest rate terms and the outstanding liability as at 30 June 2018..
2 The cost of unused credit facilities affects the average annual interest rate by 0.07 percentage points.
| OPERATING ACTIVITIES | 2018 3 mths April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|---|---|---|---|---|---|
| Operating surplus | 295 | 286 | 545 | 527 | 1,080 |
| Central administration | -18 | -15 | -35 | -36 | -73 |
| Reversal of depreciation, amortisation and impairment | 1 | 0 | 1 | 0 | 2 |
| Interest received | 1 | 0 | 2 | 1 | 4 |
| Interest paid | -51 | -55 | -80 | -122 | -219 |
| Tax paid | -22 | -9 | -39 | -17 | -43 |
| Operating cash flow before changes in working capital | 206 | 207 | 394 | 353 | 751 |
| Changes in working capital | |||||
| Decrease (+)/increase (-) in receivables | 54 | -6 | -47 | -12 | 82 |
| Decrease (-)/increase (+) in current liabilities | -35 | -30 | 24 | -98 | -142 |
| Total changes in working capital | 19 | -36 | -23 | -110 | -60 |
| Operating cash flow | 225 | 171 | 371 | 243 | 691 |
| INVESTING ACTIVITIES | |||||
| Investments in new builds, conversions and extensions | -139 | -94 | -264 | -244 | -502 |
| Acquisition of properties | -69 | - | -111 | -2,316 | -2,581 |
| Sale of properties | - | 3 | 55 | 3 | 240 |
| Other financial assets | 5 | - | 5 | - | - |
| Cash flow from investing activities | -203 | -91 | -315 | -2,557 | -2,843 |
| FINANCING ACTIVITIES | |||||
| Dividends paid | -195 | -269 | -195 | -269 | -269 |
| Issue of new shares | - | - | - | 1,802 | 1,802 |
| New borrowing, interest-bearing liabilities | 37 | - | 212 | 3,124 | 3,168 |
| Repayment and redemption of interest-bearing liabilities | -33 | -23 | -151 | -2,376 | -2,502 |
| Change in overdraft facility | 46 | 48 | 46 | 33 | -15 |
| Cash flow from financing activities | -145 | -244 | -88 | 2,314 | 2,184 |
| Cash flow for the period | -123 | -164 | -32 | 0 | 32 |
| Cash and cash equivalents at beginning of period | 123 | 164 | 32 | 0 | 0 |
| Cash and cash equivalents at end of period | 0 | 0 | 0 | 0 | 32 |
| 2018 |
|---|
More information available at www.dios.se.
| By segment | Dalarna | Gävle | Sundsvall | Åre/Östersund | Skellefteå/Umeå | Luleå | the Group |
|---|---|---|---|---|---|---|---|
| Rental income | 140 | 98 | 142 | 162 | 191 | 155 | 887 |
| Other income | 2 | 0 | 1 | 2 | 2 | 2 | 9 |
| Repair and maintenance | -6 | -3 | -4 | -5 | -8 | -4 | -30 |
| Tariff-based costs | -21 | -12 | -19 | -26 | -23 | -15 | -116 |
| Property tax | -6 | -5 | -7 | -7 | -10 | -9 | -44 |
| Other property costs | -16 | -14 | -23 | -23 | -20 | -24 | -120 |
| Property management | -7 | -5 | -7 | -8 | -8 | -6 | -40 |
| Operating surplus | 87 | 60 | 82 | 94 | 124 | 99 | 545 |
| Central administration/net financial items | - | - | - | - | - | - | -124 |
| Property management income | - | - | - | - | - | - | 421 |
| Property, realised | - | -3 | - | - | - | - | -3 |
| Property, unrealised | 5 | 5 | 30 | 40 | 111 | 36 | 227 |
| Interest rate derivatives | - | - | - | - | - | - | 12 |
| Profit before tax | - | - | - | - | - | - | 657 |
| Leasable area, sq.m | 266,682 | 216,692 | 233,490 | 304,511 | 310,340 | 205,440 | 1,537,155 |
| Rental value | 153 | 109 | 161 | 177 | 205 | 164 | 969 |
| Economic occupancy rate, % | 92 | 90 | 88 | 91 | 93 | 95 | 91 |
| Surplus ratio, % | 62 | 61 | 58 | 58 | 65 | 64 | 62 |
| By segment | Dalarna | Gävle | Sundsvall | Åre/Östersund | Skellefteå/Umeå | Luleå | the Group |
|---|---|---|---|---|---|---|---|
| Rental income | 133 | 101 | 131 | 156 | 167 | 145 | 832 |
| Other income | 3 | 1 | 1 | 1 | 1 | 2 | 8 |
| Repair and maintenance | -5 | -4 | -5 | -6 | -8 | -5 | -33 |
| Tariff-based costs | -19 | -13 | -18 | -25 | -21 | -13 | -109 |
| Property tax | -6 | -5 | -7 | -8 | -9 | -9 | -44 |
| Other property costs | -14 | -11 | -15 | -16 | -16 | -16 | -87 |
| Property management | -7 | -5 | -8 | -8 | -6 | -6 | -40 |
| Operating surplus | 86 | 63 | 79 | 95 | 107 | 98 | 527 |
| Central administration/Net financial items | - | - | - | - | - | - | -124 |
| Property management income | - | - | - | - | - | - | 403 |
| Property, realised | - | 2 | - | - | - | - | 2 |
| Property, unrealised | -13 | 49 | 62 | 78 | 92 | 34 | 302 |
| Interest rate derivatives | - | - | - | - | - | - | 14 |
| Profit before tax | - | - | - | - | - | - | 721 |
| Leasable area, sq.m | 266,682 | 250,733 | 238,402 | 304,511 | 313,798 | 205,440 | 1,579,567 |
| Rental value | 150 | 114 | 151 | 171 | 183 | 152 | 920 |
| Economic occupancy rate, % | 89 | 89 | 87 | 91 | 92 | 95 | 90 |
| Surplus ratio, % | 64 | 63 | 60 | 61 | 64 | 67 | 63 |
| Dalarna | Gävle | Sundsvall | Åre/Östersund | Skellefteå/Umeå | Luleå | the Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2,017 | 2018 | 2,017 | 2018 | 2,017 | 2018 | 2,017 | 2018 | 2,017 | 2018 | 2,017 | 2018 | 2,017 | |
| Property portfolio, 1 January | 2,649 | 2,576 | 2,045 | 1,978 | 3,234 | 2,033 | 3,257 | 3,025 | 4,494 | 2,219 | 3,778 | 1,852 | 19,457 | 13,683 |
| Acquisitions | - | - | - | - | - | 1,044 | - | - | 138 | 1,943 | - | 1,806 | 138 | 4,753 |
| Investments in new builds, extensions and conversions |
60 | 58 | 26 | 18 | 41 | 69 | 59 | 53 | 45 | 56 | 67 | 36 | 298 | 290 |
| Sales | - | - | -69 | -2 | - | - | - | - | - | - | - | - | -69 | -2 |
| Reclassifications | 2 | - | 0 | - | 3 | - | 1 | - | 2 | - | 1 | - | 10 | - |
| Unrealised changes in value | 5 | -13 | 5 | 49 | 30 | 62 | 40 | 78 | 111 | 92 | 36 | 34 | 227 | 302 |
| Property portfolio, 30 June | 2,715 | 2,621 | 2,007 | 2,043 | 3,309 | 3,168 | 3,356 | 3,156 | 4,791 | 4,311 | 3,882 | 3,728 | 20,060 | 19,027 |
Columns/rows may not add up due to rounding.
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 April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
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 | 134,512 |
| Average number of shares, thousands (income statement-related key ratios)1 | 134,512 | 134,512 | 134,512 | 129,528 | 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. The target for the year is a surplus ratio in excess of 64 per cent. The income from property management is also the basis for what is distributed annually to the shareholders – around 50 per cent of the profit for the year after tax, excluding unrealised changes in value and deferred tax. We also report the alternative performance indicators property management income, EPRA earnings and surplus ratio, 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.
| Property management income | 2018 3 mths April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|---|---|---|---|---|---|
| Profit before tax | 358 | 323 | 657 | 721 | 1,261 |
| Reversal | |||||
| Change in value, properties | -118 | -94 | -224 | -304 | -412 |
| Change in value, derivatives | -6 | -5 | -12 | -14 | -27 |
| Property management income | 234 | 224 | 421 | 403 | 822 |
| EPRA earnings (property management income after tax) | |||||
| Property management income | 234 | 224 | 421 | 403 | 822 |
| Reversal, current tax property management income | -24 | -30 | -41 | -50 | -88 |
| Minority share of earnings | -3 | -2 | -3 | -3 | -2 |
| EPRA earnings / EPRA EPS | 207 | 192 | 377 | 350 | 732 |
| EPRA earnings / EPRA EPS per share, SEK | 1.54 | 1.43 | 2.80 | 2.70 | 5.54 |
| SURPLUS RATIO | |||||
| Operating surplus as per income statement | 295 | 286 | 545 | 527 | 1,080 |
| Rental income as per income statement | 442 | 432 | 887 | 832 | 1,700 |
| Surplus ratio, % | 67 | 66 | 62 | 63 | 64 |
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 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|---|---|---|---|
| Equity as per balance sheet | 7,084 | 6,438 | 6,887 |
| Minority share of equity | -48 | -46 | -45 |
| Reversal as per balance sheet | |||
| Fair value of financial instruments | 4 | 29 | 16 |
| Deferred tax on temporary differences | 1,179 | 1,124 | 1,175 |
| EPRA NAV (long-term net asset value) | 8,219 | 7,545 | 8,033 |
| EPRA NAV (long-term net asset value) per share, SEK | 61.1 | 56.1 | 59.7 |
| Deductions | |||
|---|---|---|---|
| Fair value of financial instruments | -4 | -29 | -16 |
| Estimated actual deferred tax on temporary differences, approx. 4%1 | -219 | -199 | -209 |
| EPRA NNNAV (short-term net asset value) | 7,997 | 7,317 | 7,808 |
| EPRA NNNAV (short-term net asset value) per share, SEK | 59.5 | 54.4 | 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.
Our strategy is to own, develop and manage properties in a value-creating sustainable manner that promotes development while maintaining 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. These key ratios are deemed to be relevant for investors and analysts from a financial risk perspective. They 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.
| Loan-to-value ratio | 2018 3 mths April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|---|---|---|---|---|---|
| Interest-bearing liabilities | 11,190 | 11,095 | 11,104 | ||
| Investment properties | 20,060 | 19,027 | 19,457 | ||
| Loan-to-value ratio, % | 55.8 | 58.3 | 57.1 | ||
| Equity/assets ratio | |||||
| Equity | 7,084 | 6,438 | 6,887 | ||
| Total assets | 20,325 | 19,317 | 19,708 | ||
| Equity/assets ratio, % | 34.9 | 33.3 | 34.9 | ||
| Interest coverage ratio | |||||
| Property management income | 234 | 224 | 421 | 403 | 822 |
| Reversal | |||||
| Financial costs | 44 | 47 | 92 | 90 | 191 |
| Total | 278 | 271 | 513 | 493 | 1,013 |
| Financial costs | 44 | 47 | 92 | 90 | 191 |
| Interest coverage ratio, times | 6.3 | 5.8 | 5.6 | 5.5 | 5.3 |
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 April-June |
2017 3 mths April-June |
2018 6 mths Jan-Jun |
2017 6 mths Jan-Jun |
2017 12 mths Jan-Dec |
|
|---|---|---|---|---|---|
| Return on equity, % | 5.0 | 3.9 | 8.4 | 10.8 | 18.3 |
| Equity per share, SEK | 52.7 | 47.9 | 52.7 | 47.9 | 51.2 |
| Rental income, SEKm | 442 | 432 | 887 | 832 | 1,700 |
| Cash flow per share, SEK | |||||
| Profit before tax | 358 | 323 | 657 | 721 | 1,261 |
| Reversal | |||||
| Unrealised change in value, properties | -118 | -93 | -227 | -302 | -402 |
| Unrealised change in value, derivatives | -6 | -5 | -12 | -14 | -27 |
| Depreciation and amortisation | 0 | 1 | 1 | 1 | 2 |
| Current tax | -22 | -9 | -39 | -17 | -43 |
| Total | 212 | 217 | 380 | 389 | 791 |
| Average number of shares ('000) | 134,512 | 134,512 | 134,512 | 129,528 | 132,041 |
| Cash flow per share, SEK | 1.58 | 1.61 | 2.83 | 3.00 | 6.00 |
| Earnings per share, SEK | 2.64 | 1.88 | 4.34 | 4.46 | 7.78 |
| Debt/equity ratio, times | 1.6 | 1.7 | 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 | 2017 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|---|
| 3 mths | 3 mths | 6 mths | 6 mths | 12 mths | |
| April-June | April-June | Jan-Jun | Jan-Jun | Jan-Dec | |
| Economic occupancy rate, % | 91 | 91 | 91 | 90 | 91 |
| Estimated market rent for vacant space | 153 | 162 | 153 | |
|---|---|---|---|---|
| Annualised rental value for the whole portfolio | 1,921 | 1,885 | 1,875 | |
| EPRA vacancy rate, % | 8.0 | 8.6 | 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. Sales totalled SEK 88 million (91) and the profit after tax was SEK 604 million (318). Profit after tax includes dividends from Group companies in the amount of SEK 600 million (300). Net sales refer chiefly to services sold to the Group's subsidiaries. Cash and cash equivalents were SEK 0 million (0) at 30 June 2018 and drawn overdraft facilities were SEK
49 million (51). External interest-bearing liabilities, excluding overdraft facilities, totalled SEK 3,306 million (3,530) and outstanding commercial paper totalled SEK 800 million (0). The average annual interest rate at 30 June 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.
| INCOME STATEMENT | 2018 6 mths Jan-Jun |
2,017 6 mths Jan-Jun |
2,017 12 mths Jan-Dec |
|---|---|---|---|
| Net revenue | 88 | 91 | 170 |
| Gross profit | 88 | 91 | 170 |
| Central administration | -104 | -112 | -214 |
| Operating profit | -16 | -21 | -44 |
| Income from interests in Group companies | 599 | 300 | 454 |
| Financial income | 115 | 143 | 218 |
| Financial costs | -93 | -104 | -192 |
| Profit after financial items | 605 | 318 | 436 |
| Current tax | -1 | - | - |
| Profit after tax | 604 | 318 | 436 |
| STATEMENT OF COMPREHENSIVE INCOME | |||
| Profit after tax | 604 | 318 | 436 |
| Comprehensive income for the year | 604 | 318 | 436 |
| Condensed parent company balance sheet, SEKm ASSETS |
2018 30 June |
2,017 30 June |
2,017 31 Dec |
|---|---|---|---|
| Investments in Group companies | 2,124 | 2,124 | 2,124 |
| Receivables from Group companies | 10,809 | 11,016 | 11,439 |
| Other assets | 25 | 25 | 26 |
| Cash and cash equivalents | - | - | 29 |
| TOTAL ASSETS | 12,958 | 13,165 | 13,618 |
| EQUITY AND LIABILITIES | |||
| Equity | 3,309 | 2,978 | 3,095 |
| Interest-bearing liabilities | 3,306 | 3,530 | 3,208 |
| Liabilities to Group companies | 6,071 | 6,576 | 7,277 |
| Overdraft facilities | 49 | 51 | - |
| Other liabilities | 223 | 30 | 38 |
| TOTAL EQUITY AND LIABILITIES | 12,958 | 13,165 | 13,618 |
The number of employees on 30 March 2018 was 155 (156), of whom 61 were women (64). The majority of Diös' employees, 100 people (107), work in our local business units.
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 | 18,555 | 20,060 | 21,565 | |
| Equity/assets ratio, % | 29.6 | 34.9 | 39.3 | |
| Loan-to-value ratio, % | 60.3 | 55.8 | 51.9 |
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, SEKm |
|---|---|---|
| Contracted rental income | +/- 1% | +/-17 |
| ECONOMIC OCCUPANCY RATE | +/- 1 percentage point | +/-19 |
| Property costs | -/+ 1% | +/-6 |
| Interest rate on interest-bearing liabilities | -/+ 1 percentage point | +/-22 |
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. The accounting principles applied in the interim report are, with the exception of name changes to segments, consistent with the accounting principles applied in preparing the consolidated financial statements and Annual Report for 20171 , Note 1.
New or amended IFRS standards and new interpretations which have not yet become effective:
The transition to IFRS 15 is applied from 1 January 2018 and refers to the recognition of revenue from contracts with customers broken down by rental income (including the passing-on of property tax) and service income such as the passing-on of costs for heating, electricity, etc. Revenue mainly comprises rental income, and it is considered that the service provided is subordinate to the lease. All payments are therefore accounted for as rent. The change is not expected to have a material impact on our financial statements and no comparative figures will be restated.
IFRS 9 replaced IAS 39 on 1 January 2018. The standard introduces new principles for the classification of financial assets, hedge accounting and provisions for credit losses. Another change under IFRS 9 is that the principles for provisions for credit losses must be based on an estimate of expected losses. As Diös' credit losses are very small, the transition has not had a material impact on our financial statements and no comparative figures will be restated.
IFRS 16 Leases applies for financial years beginning on 1 January 2019. 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 us, 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 operating surplus. As the number of contracts is limited, the impact on the financial statements is not expected to be material.
1 The Annual Report 2017 is available at www.dios.se
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.
| 30 Jun 2018 31 Mar 2018 31 Dec 2017 30 Sep 2017 30 Jun 2017 31 Mar 2017 31 Dec 2016 30 Sep 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |
| Revenue, SEKm | 446 | 450 | 443 | 436 | 435 | 405 | 337 | 335 |
| Operating surplus, SEKm | 295 | 250 | 266 | 287 | 286 | 241 | 195 | 212 |
| Property management income, SEKm | 234 | 187 | 197 | 222 | 224 | 179 | 132 | 147 |
| Profit for the period, SEKm | 358 | 229 | 256 | 192 | 255 | 326 | 266 | 229 |
| Surplus ratio, % | 67 | 56 | 61 | 67 | 66 | 60 | 59 | 64 |
| Economic occupancy rate, % | 91 | 92 | 91 | 91 | 91 | 90 | 90 | 90 |
| Return on equity, % | 5.0 | 3.3 | 3.8 | 2.9 | 3.9 | 6.0 | 6.4 | 5.8 |
| Equity/assets ratio, % | 34.9 | 35.3 | 34.9 | 33.9 | 33.3 | 33.5 | 31.0 | 29.8 |
| Property loan-to-value ratio, % | 55.8 | 56.7 | 57.1 | 57.8 | 58.3 | 59.1 | 58.6 | 59.6 |
| Average interest rate at end of period, %¹ | 1.5 | 1.5 | 1.5 | 1.6 | 1.6 | 1.6 | 2.0 | 1.9 |
| Interest coverage ratio, times | 6.3 | 4.9 | 4.8 | 5.5 | 5.8 | 5.2 | 3.9 | 3.8 |
| Property management income per share, SEK | 1.74 | 1.38 | 1.46 | 1.65 | 1.67 | 1.44 | 1.39 | 1.54 |
| Earnings per share after tax, SEK | 2.64 | 1.70 | 1.91 | 1.43 | 1.88 | 2.60 | 2.79 | 2.39 |
| Equity per share, SEK | 52.7 | 52.9 | 51.2 | 49.3 | 47.9 | 48.0 | 45.3 | 42.5 |
| Market price per share, SEK | 53.8 | 56.4 | 55.8 | 52.0 | 46.6 | 44.0 | 47.1 | 50.8 |
1 Includes expenses relating to commitment fees and derivatives.
| OPERATIONAL TARGETS | Targets 2018 | Outcome Jan-Jun 2018 |
|---|---|---|
| Economic occupancy rate, % | 92 | 91 |
| Surplus ratio, % | 64 | 62 |
| Energy use, % | -3 | -0.2 |
| Carbon dioxide emissions,% | -2 | 1 |
| Employee satisfaction index | 76 | - |
| Customer satisfaction index | 70 | - |
| FINANCIAL TARGETS | Targets 2018 | Outcome Jan-Jun 2018 |
|---|---|---|
| Return on equity1, % | >12 | 16.8 |
| Distribution of profit for the year2,% | ~50 | - |
| Loan-to-value ratio, % | < 60 | 55.8 |
| Equity/assets ratio, % | > 30 | 34.9 |
1 Return on equity has been annualised.
2 Profit after tax, excluding unrealised changes in value and deferred tax.
Diös' share price at the end of the period was SEK 53.8 (46.6), which represents a market capitalisation of SEK 7,230 million (6,268), and the return for the past 12 months was 15.3 per cent (-1.0). If the adopted dividend of SEK 1.45 per share is included, the total return on the shares for the period was 18.3 per cent (3.5). 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 -2.7 per cent (21.1) and the return on the OMX Stockholm Real Estate PI index 3.0 per cent (13.7).
At 31 May, Diös Fastigheter AB had 14,478 shareholders (14,474). The share of foreign-owned shares was 20.7 per cent (20.8) 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 57.4 per cent (56.2) 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.
No new changes of ownership were flagged during the period. 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. On an annualised basis, the return for the period was 17 per cent (22).
Equity at the end of the second quarter was SEK 7,084 million (6,438) and the long-term net asset value, EPRA NAV, was SEK 8,220 million (7,545). On a per share basis, EPRA NAV was SEK 61.1 (56.1), which means that the share price at 30 June represented 88 per cent (83) of long-term NAV. The net asset value per share for the period, expressed as EPRA NNNAV, was SEK 59.5 (54.4).
Earnings per share for the period were SEK 4.34 (4.46) while longterm earnings per share, expressed as EPRA EPS, were SEK 2.80 (2.70). EPRA EPS, which is designed to show an entity's long-term earnings per share, is calculated as property management income after deducting 20.6 per cent corporation tax attributable to property management income less minority share of earnings.
OF DIÖS FASTIGHETER AB AT 31 MAY 2018
| SHAREHOLDER | No. of shares | Capital and votes, % |
|---|---|---|
| AB Persson Invest | 20,699,443 | 15.4 |
| Backahill Inter AB | 14,095,354 | 10.5 |
| Bengtssons Tidnings Aktiebolag | 13,574,748 | 10.1 |
| Pensionskassan SHB Försäkringsförening | 8,096,827 | 6.0 |
| Avanza Pension | 5,168,326 | 3.8 |
| Handelsbankens Fonder | 4,750,000 | 3.5 |
| SEB Fonder | 4,556,714 | 3.4 |
| Fourth Swedish National Pension Fund (AP4) | 2,329,327 | 1.7 |
| Staffan Rasjö | 2,159,656 | 1.6 |
| Transamerica Asset Management, Inc. | 1,933,774 | 1.4 |
| Total, largest shareholders | 77,364,169 | 57.4 |
| Other shareholders | 57,148,269 | 42.6 |
| 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 INTERIM REPORT JANUARY–JUNE 2018 25
Since 2013, the cash flow per share has increased by 67 per cent. This is the result of effective management, energy-saving measures, profitable investments and a tenant-focused organisation.
The Board of Directors and Chief Executive Officer declare that the interim report gives a true and fair view of the company's and Group's operations, financial position and income, and describes the principal risks and uncertainties faced by the company and the companies in the Group. This interim report 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, 6 July 2018
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
Q3 Interim Report January–September 2018 25 October 2018
There have been no significant events since the reporting date.
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.
Equity at the end of the period divided by the number of shares outstanding at the end of the period.
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.
Rent at the end of the period plus a supplement for the estimated market rent for unoccupied floor space.
Profit before tax, adjusted for unrealised changes in value plus depreciation/amortisation less current tax, divided by the average number of shares.
Net annual rent, excluding discounts and supplements, for newly signed, terminated and renegotiated contracts. The length of contracts is not taken into account.
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.
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 the rental income for the period.
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 and the Swedish Securities Market Act. The information was submitted for publication through the above contact person on 6 July 2018, at 07:00 CEST.
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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