Interim / Quarterly Report • Jul 8, 2010
Interim / Quarterly Report
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| Results, SEKm N |
2010 Apr–Jun |
Ä 2009 Apr–Jun |
2010 Jan–Jun |
2009 Jan–Jun |
|---|---|---|---|---|
| Rental income | 507 | 548 | 1,025 | 1,096 |
| Running costs and central costs | –166 | –188 | –382 | –404 |
| Net financial items (excl. changes in value) |
–131 | –129 | –252 | –313 |
| Profit from property management activities |
210 | 231 | 391 | 379 |
| Changes in value | 169 | 49 | 207 | –68 |
| Tax | –39 | –68 | –97 | –180 |
| Profit/loss after tax | 340 | 212 | 501 | 131 |
| Surplus ratio, % | 71 | 68 | 66 | 66 |
| Equity/assets ratio, % | – | – | 34 | 32 |
| Occupancy rate, % | – | – | 89 | 92 |
We experienced a strong second quarter. Efficiency-enhancement measures continue to be carried out in Property Management with low energy consumption and high cost-consciousness. This has had a positive impact on running costs and the surplus ratio amounted to a full 71 per cent. Despite the harsh winter and high snow-clearance costs in the first quarter, we have now recaptured our position compared with the year-earlier period thanks to the outstanding efforts of our employees.
We also continued to devote considerable focus to our customers through such measures as increasing the frequency of our contacts and listening to customer needs in order to boost customer satisfaction and loyalty.
The rental market continued to display a positive trend and we received more and clearer signals from our customers that the need for floor area is growing. Activity in the transaction market is increasing at an even faster rate, largely due to greater international interest.
As the transaction market normalises, we expect to further boost the rate at which we achieve our goal of creating value in the property portfolio by divesting lowyield properties with minimal potential and starting up new, profitable projects that make a stronger contribution to the creation of value.
All in all, we continued to deliver stable profit from Property Management, with stronger earnings from Transaction and Property Development activities. Overall, all three operating areas contributed to a significant improvement in earnings. The increasingly strong property market has also resulted in a positive change in the value of our portfolio. Sweden now have a highly favourable macroeconomic starting position, with a sound economy and forecasts of continued relatively low interest rates and strong growth, which is vital for Fabege's continued positive performance.
Christian Hermelin
Fabege, which is one of Sweden' leading property companies, conducts operations that are primarily focused on letting office premises and property development.
Fabege offers attractive and efficient premises, principally for offices but also for retail and other operations. The company's portfolio is highly concentrated to a number of sub-markets offering robust growth in the Stockholm area, primarily Stockholm's inner city, Solna and Hammarby sjöstad.
Fabege manages a well-located property portfolio, which is developed continuously through improvements, sales and acquisitions. By collecting properties in clusters, increased customer proximity is achieved which, combined with comprehensive market knowledge, creates conditions for efficient management and a high occupancy rate. At 30 June 2010, Fabege owned 122 properties with a combined market value of SEK
27.8bn. The rental income amounted to SEK 2.2bn.
Fabege's vision is to be the most proactive, innovative and competent property company for commercial premises in Stockholm, and a significant partner for customers and society at large.
During the second quarter, the very strong performance of the operations continued. The performance of the operations remained very strong during the second quarter. While earnings from Property Management activities were stable, the contribution from Property Development and Business Development/Transactions increased.
Activity in the lettings market was favourable and rents in Fabege's submarkets remained stable. New lettings in the quarter totalled SEK 37m, while net lettings amounted to SEK 6m. Renegotiations were limited but continued to have a marginally positive impact on the rental value.
The company's rental income and occupancy rate decreased as a result of net sales of properties. The occupancy rate declined to 89 per cent (92) and rental income fell to SEK 507m (548). The surplus ratio increased to 71 per cent (68), an increase attributable to continued successful efforts to reduce energy consumption and enhance efficiency in Property Management.
Realised changes in the value of properties amounted to SEK 65m (9). Five properties were divested during the period for a combined price of SEK 927m.
Unrealised changes in property value amounted to SEK 205m (–81). The value increase in the project portfolio totalled SEK 82m, which comfortably surpassed Fabege's return requirement of 20 per cent on invested capital. The SEK 123m increase in the value of the portfolio of investment properties was attributable to individual new lettings and declining yield requirements for good buildings in good locations. The more positive outlook of the property market was supported by the transactions executed during the period.
The negative fair value adjustment of the derivatives portfolio increased by SEK –99m as a result of lower long-term interest rates.
Earnings after tax rose to SEK 340 (212).
1) The comparison figures for income and expense items relate to values for the period April-June 2009 and for balance sheet items as at 31 December 2009.
The results for the period were strong. While the rental market was stable, the property market strengthened. Development gains in the project portfolio and transaction profit contributed positively to Fabege's results.
Profit for the period improved by SEK 370m from SEK 131m to SEK 501m. A lower net financial expense had a positive impact of SEK +66m and higher positive value changes contributed SEK +275m, while the tax charge decreased by SEK 83m. Before tax, Property Management generated earnings of SEK 492m (279) and Property Development earnings of SEK 106m (33), making a total of SEK 598m (311). Earnings per share after tax amounted to SEK 3.05 (0.80).
Rental income totalled SEK 1,025m (1,096) and net operating income SEK 676m (723). The decline in rental income was due to net sales of properties and to a decrease in rental guarantees and a negative index. The adverse impact of relocations was offset by an increase in rental
income from completed project properties. Continued efficiency enhancements in the Property Management operations enabled the surplus ratio to remain at 66 per cent (66), despite increased snowclearance costs during the first quarter. In a comparable portfolio, rental income decreased approximately 1 per cent and net operating income about 2 per cent.
Realised changes in the value of properties amounted to SEK 96m (12). Unrealised changes in value totalled 270m (–200). The SEK 151m increase in the value of the portfolio of investment properties was attributable to properties for which the risk of vacancies and declining rent levels decreased and to declining yield requirements. The project portfolio contributed to a value increase of SEK 119m, which comfortably surpassed Fabege's return requirement of
20 per cent on invested capital. Changes in the value of interest-rate derivatives and equities amounted to SEK –159m (120), and net interest expense declined to –245m (–311) as a result of lower market interest rates and a reduction in borrowing (refer to the Financing section).
The tax expense (deferred) for the period amounted to SEK –97m (–180), corresponding to 26.3 per cent tax on continuous taxable earnings. Sales of properties resulted in a total reversal of deferred tax of SEK 44m.
Profit contributed SEK 460m (287) to liquidity. After an increase of SEK 171m (–61) in working capital, which varies primarily as a result of the impact of occupancy/final settlement for acquired and divested properties, operating activities increased liquidity by SEK 289m (348). Sales exceeded acquisitions of and investments in properties by SEK 1,553m (–163).
1) The comparison figures for income and expense items relate to values for the period January–June 2009 and for balance sheet items as at 31 December 2009.
Acquisitions Fabege aims to acquire properties offering potential surpassing that of the existing investment properties in the portfolio. As a major player in a limited number of selected sub-markets, Fabege has accumulated in-depth experience and knowledge of the markets, development plans, other players and properties. The company continuously monitors and analyses developments to be able to capitalise on opportunities to upgrade the property portfolio.
Sales Fabege aims to divest properties that are located outside the company's concentrated property management units, as well as properties offering limited growth prospects. The location, condition and vacancy rate of the property are key factors determining growth potential. Accordingly, a fully let property with modern and efficient premises, which is considered to offer limited potential for rent increases and value growth, could be a sales candidate.
Development Development of properties offering growth potential is a key feature of the business model aimed at value creation. In addition to developing acquired properties, the portfolio also contains certain existing development and project properties whose potential the company endeavours to improve as market conditions permit. The project volume is adapted to market demand. New builds and comprehensive project development are always performed in accordance with the Green-Building principles.
Property management Property management is Fabege's largest line of business. The company manages its properties on the basis of an efficient management organisation, organisationally divided into management areas, each with a major responsibility for ensuring high involvement and close proximity to the custo-
mer. Management is located close to customers in order to achieve a high occupancy rate and to ensure that the customer remains loyal. Satisfied customers contribute to increases in net operating income.
| Amount SEKm |
Average interest rate % |
Share % |
|
|---|---|---|---|
| < 1 year | 10,108 | 2.02 | 58 |
| 1–2 years | 0 | 0.00 | 0 |
| 2–3 years | 2,700 | 3.93 | 15 |
| 3–4 years | 1,850 | 3.70 | 10 |
| 4–5 years | 0 | 0.00 | 0 |
| > 5 years | 3,000 | 3.97 | 17 |
| Total | 17,658 | 2.82 | 100 |
| Credit agreements SEKm |
Drawn SEKm |
|
|---|---|---|
| Certificate programme | 5,000 | 3,311 |
| < 1 year | 6,020 | 4,000 |
| 1–2 years | 210 | 0 |
| 2–3 years | 4,875 | 3,817 |
| 3–4 years | 2,000 | 0 |
| 4–5 years | 4,000 | 2,550 |
| > 5 years | 4,980 | 3,980 |
| Total | 27,085 | 17,658 |
Jan–Jun 2010
| Properties | Area | Category | Lettable area, sqm |
|---|---|---|---|
| Quarter 1 | |||
| Stads | Office/ | ||
| Paradiset 29 (50%) | hagen | Retail | 17,749 |
| Öster | Office/Resi | ||
| Harpan 51 | malm | dential | 4,661 |
| Gjutaren 27 | Vasastan | Residential | 1,616 |
| Fotkvarnen 1 | Rinkeby | Residential | 9,312 |
| Fotkvarnen 2 | Rinkeby | Land | 0 |
| Handkvarnen 3 | Rinkeby | Residential | 10,463 |
| Hjulkvarnen 1 | Rinkeby | Residential | 5,818 |
| Hjulkvarnen 2 | Rinkeby | Residential | 6,039 |
| Hjulkvarnen 3 | Rinkeby | Land | 0 |
| Rinkeby 2:1 | Rinkeby | Land | 0 |
| Rinkeby 2:13 | Rinkeby | Land | 0 |
| Rinkeby 2:14 | Rinkeby | Land | 0 |
| Skvaltkvarnen 1 | Rinkeby | Residential | 8,804 |
| Skvaltkvarnen 2 | Rinkeby | Residential | 4,542 |
| Skvaltkvarnen 3 | Rinkeby | Land | 0 |
| Hyppinge 1 | Tensta | Land | 0 |
| Kullinge 1 | Tensta | Residential | 13,724 |
| Risinge 1 | Tensta | Residential | 13,938 |
| Vättinge 1 | Tensta | Residential | 7,223 |
| Vättinge 2 | Tensta | Residential | 5,358 |
| Vättinge 3 | Tensta | Residential | 9,490 |
| Öninge 1 | Tensta | Land | 0 |
| Quarter 2 | |||
|---|---|---|---|
| Induktorn 28 | Bromma | Office/Re tail/Industry |
5,388 |
| Hallen 6 | Solna | Hotel | 4,600 |
| Orgelpipan 4 | Norrmalm Office/Retail | 6,858 | |
| Päronet 8 | Solna | Office | 20,216 |
| Vallentuna-Rickeby | |||
| 1:480 | Vallentuna Land | 0 | |
| Total property sales | 155,799 |
Accordingly, the total change in liquidity resulting from operating activities was SEK 1,842m (185). Share buybacks amounted to SEK 61m (0). After the reduction in debt, consolidated cash and cash equivalents totalled SEK 174m (39).
Fabege employs long-term credit lines with fixed terms and conditions. At 30 June 2010, these had an average maturity of 5.9 years. The company's lenders are the major Nordic banks. Interest-bearing liabilities at the end of the period totalled SEK 17,658m (19,109) and the average interest rate was 2.82 per cent excluding and 2.93 per cent including commitment fees on the undrawn portion of committed credit facilities.
Interest rates on 40 per cent of Fabege's loan portfolio were fixed using fixedincome derivatives. The average fixed-rate period was 24 months, taking the effect of derivative instruments into account, while the average fixed-rate period for variablerate loans was 44 days.
Fabege has callable swaps totalling SEK 7,550m with interest rates ranging from 3.33 to 3.98 per cent. In addition, the company holds performance swaps amounting to SEK 300m with maturities up to May 2011.
In compliance with the accounting rules contained in IAS 39, the derivatives portfolio has been measured at market value and the change in value is recognised in the profit and loss account. At 30 June 2010, the recognised negative fair
value adjustment of the portfolio amounted to SEK 507m. The derivatives portfolio has been measured at the present value of future cash flows. The change in value is of an accounting nature and has no impact on the company's cash flow.
During the second quarter, Fabege extended a loan agreement totalling SEK 3.3bn that would have matured in 2012 for an additional three years until 2015. At the same time, the same loan agreement was increased to SEK 4bn. At 30 June 2010, the company had unused committed lines of credit of SEK 4,427m.
Fabege has a commercial paper programme in an amount of SEK 5bn. Demand for Fabege's commercial paper remained favourable during the second quarter and at 30 June commercial paper worth SEK 3,311m was outstanding, compared with SEK 2,855m at the beginning of the year and SEK 3,096m at 31 March. Fabege has available long-term credit facilities covering all outstanding commercial paper at any given time.
The total loan volume includes SEK 394m in loans for projects, on which interest of SEK 4m has been capitalised.
Shareholders' equity amounted to SEK 10,080m (9,969) at the end of the period and the equity/assets ratio was 34 per cent (32). Shareholders' equity per share totalled SEK 62 (61). Excluding deferred tax on fair value adjustments of properties, net asset value per share was SEK 69 (67).
The first six months of the year were characterised by a stable rental market and an increasingly active and strong transaction market.
Fabege's activities in Property Management and Property Development are concentrated to a few selected submarkets in and around Stockholm. Stockholm's inner city, Solna och Hammarby sjöstad are the company's principal markets. At 30 June 2010, Fabege owned 122 properties with a total rental value of SEK 2.2bn, a lettable floor area of 1.3m sqm and a carrying amount of SEK 27.8bn, including development and project properties totalling SEK 4.5bn.
The financial occupancy rate for the entire property portfolio, including project properties, declined to 89 per cent (92). The vacancy rate in the portfolio of investment properties was 8 per cent (8).
New lettings during the period totalled SEK 105m (224), while net lettings amounted to SEK 2m (99). The letting to Vattenfall Nordic had a significant impact on net lettings in the year-earlier period. Rents in negotiated contracts increased an average of 3 per cent.
During the period, 27 properties (of which 20 pertained to the property portfolio sold to part-owned Fastighets AB Tornet) were sold for a total of SEK 2,167m. The sales generated after-tax profit of SEK 139m.
A total of 24 per cent of Fabege's properties were externally valued at 30 June 2010 and the remaining properties were internally valued based on the latest valuations. The total market value at 30 June was SEK 27.8bn (29.2).
Unrealised changes in the value of properties amounted to SEK 270m (–200). The yield requirement decreased somewhat during the second quarter and the yield requirement for the portfolio averaged 6.0 per cent (6.0). The SEK 151m increase in the value of the portfolio of investment properties was attributable to properties for which the risk of vacancies and declining rent levels has decreased and to lower yield requirements. The project portfolio contributed to a value increase of SEK 119m, which comfortably surpassed Fabege's return requirement of 20 per cent on invested capital.
Fabege's project investments are designed to reduce vacancy rates and raise rents in the property portfolio, thereby improving cash flows and adding value. The development of properties is a key feature of Fabege's business model and should make a significant contribution to consolidated profit. The aim is to achieve a return of at least 20 per cent on invested capital.
Investments in existing properties and projects during the period totalled SEK 339m (687). The investments involved new builds, extensions and conversions.
The projects in the properties Päronet 8, Solna Strand (let to the Swedish Tax Agency), and Tygeln 3, Arenastaden (let to Adidas), were completed during the first quarter. The properties have been transferred to the portfolio of investment properties.
The project in the Uarda 5 property, Solna, pertaining to the construction of Vattenfall Nordic's new offices, is now fully under way. The old building on the property has been demolished and work on the foundation is in progress. The project is proceeding according to plan.
In the Fräsaren 10 property, Solna Business Park, the premises for Axfood Cash & Carry have been completed and the tenant has moved in. Facade renovation and tenant adaptations for Vectura have commenced and are expected to be completed in the first quarter of 2011.
The project in the Bocken 39 property, Lästmakargatan, is proceeding as planned. Demolition of part of the existing main body of the building is under way. Construction of two new main bodies for office and residential spaces will commence in the autumn.
During the period, a decision was made concerning an investment in the Farao 20 property, Arenastaden. A floor in the property has been adapted to serve as Fabege's new offices. Continued investments in adaptations for Egmont have commenced and are scheduled for completion at year-end. The property is fully let. The investment will total SEK 110m.
During the first period, two major project properties (Päronet 8 and Tygeln 3) were transferred from Property Development to Property Management. During the second quarter, seven former development properties where renovations and lettings are now creating the conditions for a stable cash flow were reclassified as investment properties. One property was transferred from Property Management to Property Development.
Property Management generated net operating income of SEK 619m (649), corresponding to a surplus ratio of 67 per cent (69). The occupancy rate was 92 per cent. Profit from Property Management amounted to SEK 382m (378). Unrealised changes in value totalled SEK 151m (–197).
The portfolio of development properties generated net operating income of SEK 57m (74), corresponding to a surplus ratio of 53 per cent (46). Profit from Property Management totalled SEK 9m (1). Unrealised changes in value amounted to SEK 119m (–3).
The arena project is emerging and proceeding according to plan.
30 June 2010
| Property name | Property type | Area | Completed | Lettable area, sqm |
Occu pancy rate, area, % 1) |
Estimated rental value,SEKm 2) |
Carrying amount, SEKm |
Estimated investment SEKm |
Of which, accrued SEKm |
|---|---|---|---|---|---|---|---|---|---|
| Fräsaren 10 | Office | Solna | Q1-2011 | 11,470 | 88 | 21 | 137 | 155 | 46 |
| Uarda 5 (former Uarda 2) | Office | Arenastaden | Q3-2012 | 44,500 | 97 | 103 | 213 | 1,050 | 78 |
| Farao 20 | Office | Arenastaden | Q1-2011 | 8,400 | 100 | 16 | 113 | 110 | 37 |
| Office/ | |||||||||
| Bocken 393) | Residential | Östermalm | Q4-2011 | 24,000 | 65 | 77 | 1,073 | 238 | 49 |
| Total | 88,370 | 87 | 217 | 1,536 | 1,553 | 210 | |||
| Other Project and Land properties | 1,166 | ||||||||
| Other Development properties | 1,810 | ||||||||
| Total Project, Land and | |||||||||
| Development properties | 4,512 |
1) Operational occupancy rate at 30 June 2010.
2) The annual rent for the largest projects in progress could increase to SEK 217m (fully let) from SEK 68m in annualised current rent as of 30 June 2010.
3) Information regarding area, rental value and carrying amount pertains to the entire property. The investment amount pertains to only a portion of the property. The aim is to divest the residential portion of the project as tenant-owned apartments.
30 June 2010
| 30 Jun 2010 | 1 Jan–30 Jun 2010 | |||||||
|---|---|---|---|---|---|---|---|---|
| No. of properties |
Lettable area, '000 sqm |
Market value, SEKm |
Rental value, SEKm |
Financial occupancy rate, % |
Rental income, SEKm |
Property expenses, SEKm |
Net operating income, SEKm |
|
| Property holdings | ||||||||
| Investment properties1) | 87 | 1,047 | 23,283 | 1,946 | 92 | 882 | –229 | 653 |
| Development properties1) | 8 | 137 | 2,883 | 210 | 71 | 75 | –31 | 44 |
| Land and Project properties1) | 27 | 76 | 1,630 | 77 | 74 | 22 | –14 | 8 |
| Total | 122 | 1,260 | 27,796 | 2,233 | 89 | 979 | –274 | 705 |
| of which, inner city | 41 | 510 | 15,984 | 1,169 | 92 | 537 | –145 | 392 |
| of which, Solna | 35 | 464 | 8,121 | 710 | 88 | 298 | –73 | 225 |
| of which, Hammarby sjöstad | 13 | 144 | 2,046 | 188 | 80 | 74 | –31 | 43 |
| of which, South Stockholm | 8 | 43 | 598 | 52 | 65 | 17 | –6 | 11 |
| of which, North Stockholm | 24 | 99 | 1,024 | 114 | 94 | 53 | –19 | 34 |
| of which, outside Stockholm | 1 | 0 | 23 | 0 | 0 | 0 | 0 | 0 |
| Total | 122 | 1,260 | 27,796 | 2,233 | 89 | 979 | –274 | 705 |
| Expenses for lettings, project development and property administration. | –49 | |||||||
| Total net operating income after expenses for lettings, project development and property administration. | 6562) |
1) See definitions on page 9.
2) The table refers to Fabege's property portfolio at 30 June 2010. Income and expenses are recognised as if the properties had been held during the entire period. The difference between recognised net operating income, SEK 656m, and net operating income in the profit and loss account, SEK 676m, is attributable to net operating income from divested properties being excluded and acquired/completed properties being adjusted upwards as if they had been owned/completed throughout the January-June 2010 period.
| SEKm | Investment properties Jan–Jun 2010 |
Development properties Jan–Jun 2010 |
Total Jan–Jun 2010 |
Investment properties Jan–Jun 2009 |
Development properties Jan–Jun 2009 |
Total Jan–Jun 2009 |
|---|---|---|---|---|---|---|
| Rental income | 918 | 107 | 1,025 | 936 | 160 | 1,096 |
| Property expenses | –299 | –50 | –349 | –287 | –86 | –373 |
| Net operating income | 619 | 57 | 676 | 649 | 74 | 723 |
| Surplus ratio, % | 67 | 53 | 66 | 69 | 46 | 66 |
| Central administration and marketing | –27 | –6 | –33 | –25 | –6 | –31 |
| Net interest expense | –204 | –41 | –245 | –247 | –64 | –311 |
| Share in profit/loss of associated companies | –6 | –1 | –7 | – | –2 | –2 |
| Operating profit/loss | 382 | 9 | 391 | 378 | 1 | 379 |
| Realised changes in value, properties | 92 | 4 | 96 | 4 | 8 | 12 |
| Unrealised changes in value, properties | 151 | 119 | 270 | –197 | –3 | –200 |
| Change in value, fixed income derivatives | –112 | –22 | –134 | 89 | 25 | 114 |
| Change in value, equities | –21 | –4 | –25 | 5 | 1 | 6 |
| Profit/loss before tax | 492 | 106 | 598 | 279 | 33 | 311 |
| Current tax | –98 | – | –98 | |||
| Deferred tax | –69 | –28 | –97 | –66 | –16 | –82 |
| Profit/loss for period/year | 423 | 78 | 501 | 114 | 17 | 131 |
| Total assets | 24,577 | 4,762 | 29,339 | 23,795 | 6,526 | 30,321 |
| of which, properties | 23,284 | 4,512 | 27,796 | 23,125 | 6,343 | 29,468 |
| Total liabilities and equity | 24, 577 | 4,762 | 29,339 | 23,795 | 6,526 | 30,321 |
1) See definitions on page 9.
At the end of the period, the Fabege Group had 120 employees (135).
The decrease mainly resulted from the transfer of employees to Fastighets AB Tornet in connection with the divestment of the residential portfolio.
Sales during the period amounted to SEK 64m (48) and the result before appropriations and tax was SEK –266m (–7). Net investments in property, equipment and shares totalled SEK 29m (761).
The parent company applies Recommendation RFR 2.3, Accounting for Legal Entities, and the Swedish Annual Accounts Act (see also the profit and loss account and the balance sheet on page 11).
The 2010 AGM passed a resolution authorising the Board, not longer than up to the next AGM, to buy back and transfer shares in the company. Share buybacks are subject to a limit of 10 per cent of the total number of outstanding shares at any time. During the period, 1,411,488 shares were bought back (average price: SEK 43.04 per share). At 30 June 2010, the company held 2,411,488 treasury shares, representing 1.5 per cent of the total number of registered shares.
As announced previously, the Swedish Tax Agency has decided to increase the Fabege Group's taxable income in respect of a number of property sales made through limited partnerships (see also the press release from 7 December 2006 and page 45 of Fabege's 2009 Annual Report). As at 30 June 2010, the total increase in taxable income amounts to SEK 5,301m. The decisions have resulted in total tax demands of SEK 1,371m plus a tax penalty of SEK 164m, making a total demand of SEK 1,535m excluding interest payments.
Fabege strongly contests the tax demands resulting from the Tax Agency's decisions and has appealed the decisions
to the Administrative Court. Since the end of 2009, the Swedish Tax Agency has also been submitting opinions demanding that the case be tried under the Swedish Tax Evasion Act.
On 20 April 2010, the Administrative Court issued verdicts concerning several of Fabege's tax cases, whereby the Administrative Court approved the Tax Agency's decisions to increase Fabege's taxable income. The decisions have been appealed to the Administrative Court of Appeal and Fabege has been granted a respite for paying the tax until the Administrative Court of Appeal has issued its verdict. Fabege considers that the Administrative Court has disregarded a number of important aspects and that the verdicts are therefore incorrect – an assessment shared by Fabege's advisors on the matters. In the opinion of Fabege, there are good reasons to believe that the Administrative Court of Appeal will amend the Administrative Court's rulings to the benefit of Fabege.
The Administrative Court's verdicts pertain to cases for which the matter of reallocation of earnings has been tried. They do no encompass other cases in which only the matter of tax evasion is to be tried. For the cases remaining to be considered by the Administrative Court, correspondence pertaining to the parties' submissions is continuing.
Fabege is adhering to its view that the sales were accounted for and declared in compliance with applicable rules. This assessment is shared by external legal experts and tax advisors that have analysed the sales and the Tax Agency's reasoning.
No provision has been made in Fabege's balance sheet. However, until further notice, the amount is instead being recognised as a contingent liability, as in previous financial statements.
Risks and uncertainties relating to cash flow from operating activities are primarily attributable to changes in rents, vacancies and interest rates. A detailed
description of the effect of these changes on consolidated earnings is presented in the sensitivity analysis in the 2009 Annual Report (pages 43–44).
Properties are recognised at fair value and changes in value are recognised in profit and loss. The effects of changes in value on consolidated earnings, the equity/assets ratio and the loan-to-value ratio are shown in the sensitivity analysis in the 2009 Annual Report (pages 43–44).
A description of financial risk, which is the risk that the company will have insufficient access to long-term loan funding, and Fabege's management of this risk is presented in the 2009 Annual Report (page 56).
No material changes in the company's assessment of risks have been made after publication of the 2009 Annual Report. Under its adopted targets for capital structure, Fabege aims to have an equity/assets ratio of at least 30 per cent and an interest coverage ratio of at least 2 (including realised changes in value).
Effective 1 July, the Rovan 1 property, Huvudsta centrum, was sold to Peab for a purchase consideration of SEK 97m. The sale encompassed approximately 18,000 sqm of residential development rights.
On the same date, the Vallentuna Rickeby 1:477 property and part of the Vallentuna Rickeby 1:327 property, including a building comprising 1,000 sqm and about 20,000 sqm of land, were sold to Stockholm Public Transport. The purchase consideration amounted to SEK 49.5m. These transactions will generate a combined after-tax gain of SEK 28m, which will be recognised in the third quarter.
Following the completion of transactions and settlement of purchase considerations outstanding at the end of the quarter, the equity/assets ratio increased to 35 per cent and the loan-to-value ratio declined to 61 per cent.
Fabege prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS). This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. As of 1 January 2010, the revised IFRS 3 affects business combinations occurring on or after
1 January 2010. In the revised standard, the definition of a business combination has been amended, which could affect the classification. Acquisition-related costs may no longer be included in the cost of a business combination but must instead be recognised as a cost in profit and loss. In other respects, the Group has applied the same accounting policies and valuation
methods as in the most recent annual report.
The parent company prepares its accounts in accordance with RFR 2.3 Accounting for Legal Entities and the Swedish Annual Accounts Act and has applied the same accounting policies and valuation methods as in the most recent annual report.
The Board of Directors and Chief Executive Officer hereby certify that the half-yearly report gives a true and fair overview of the business, financial position and earnings of the parent company and the Group and describes material risks and uncertainties faced by the company and the companies included in the Group.
Stockholm, 8 July 2010.
Erik Paulsson Göte Dahlin Oscar Engelbert Märtha Josefsson Chairman of the Board Board Director Board Director Board Director
Pär Nuder Svante Paulsson Mats Qviberg Christian Hermelin Board Director Board Director Board Director Chief Executive Officer
This interim report has not been examined by the company's auditors.
You are welcome to visit Fabege's new website. The Internet is one of our main information channels. Accordingly, we have carried out a thorough upgrade of the content and functionality of our website to further improve usability and accessibility. The aim is to continuously provide our priority stakeholders with relevant, up-to-date information.
The website provides information on the company and its operations and strategies. You can also find financial information, share data, details about our properties and ongoing projects and much more. Visitors to the website can also search for vacant premises, and our tenants are able to easily find contact details or other information related to the property in which they are located.
Interim report January–September:..................................................................... 26 October 2010 Year-end report for 2010: ....................................................................................... 2 February 2011 Annual report for 2010:........................................................................................... March 2011
Please note that Fabege has a new visiting address as of 14 June 2010: Pyramidvägen 7, Arenastaden in Solna.
| Share of capital and |
||
|---|---|---|
| Shareholder | No. of shares | votes, % |
| Brinova AB | 23,291,092 | 14.2 |
| Investment AB Öresund | 13,246,597 | 8.1 |
| BlackRock funds | 8,924,247 | 5.4 |
| Cohen & Steers funds | 8,577,555 | 5.2 |
| Nordea funds | 5,122,788 | 3.1 |
| HQ funds | 4,660,000 | 2.8 |
| SEB funds | 4,385,200 | 2.7 |
| Länsförsäkringar funds | 3,878,498 | 2.4 |
| Swedbank Robur funds | 3,655,318 | 2.2 |
| Mats Qviberg and family | 2,888,636 | 1.8 |
| State of Norway | 2,128,980 | 1.3 |
| ENA City AB | 1,700,000 | 1.0 |
| Skandia Liv | 1,401,959 | 0.9 |
| Second AP-fund | 1,248,268 | 0.8 |
| ING funds | 1,211,130 | 0.7 |
| Other Swedish owners | 43,774,043 | 26.8 |
| Other foreign owners | 33,817,261 | 20.6 |
| Total no. of outstanding shares |
163,911,572 | 100.0 |
| Treasury shares | 1,480,000 | |
| Total no. of shares | 165,391,572 |
An updated owner list as per 30 June 2010, will be published on Fabege's website in mid-July.
Profit for the period/year divided by average shareholders' equity. In interim reports the return is converted to its annualised value without taking account of seasonal variations.
Profit before tax plus interest expenses-, divided by average capital employed. In interim reports, the return is converted to its annualised value without taking account of seasonal variations.
Interest-bearing liabilities divided by the carrying amount of the properties at the end of the period.
Dividend for the year divided by the share price at year-end.
Parent company shareholders' share of equity according to the balance sheet divided by the number of shares at the end of the period.
Contract value divided by rental value at the end of the period.
Properties that are being actively managed on an ongoing basis.
Properties in which a conversion or extension is in progress or planned that has a significant impact on the property's net operating income. Net operating income is affected either directly by the project or by limitations on lettings prior to impending development work. Recently acquired properties (last twelve months) in which work is
in progress aimed at significantly improving the property's net operating income compared with the time of acquisition.
Contract value plus estimated annual rent for vacant premises after a reasonable general renovation.
Profit before tax plus depreciation-, plus/minus unrealised changes in value less current tax, divided by average number of shares.
Stated as an annual value. Index-adjusted basic rent under the rental agreement plus rent supplements.
Land and developable properties and properties in which a new build/complete redevelopment is in progress.
New lettings during the period less terminations to vacate during the period.
Parent company shareholders' share of profit after tax for the period divided by average number of outstanding shares during the period.
Profit after financial items plus financial expenses and plus/minus unrealised changes in value, divided by financial expenses.
In accordance with IFRS 8, segments are reported as viewed by management, i.e. broken down
into two segments: Investment Properties and Development Properties.
Rental income and property expenses as well as realised and unrealised changes in value including tax are directly attributable to properties in each segment (direct income and expenses). In cases where a property changes character during the year, earnings attributable to the property will be allocated to either segment based on the period of time that the property belonged to the segment. Central administration and items in net financial items have been allocated to the segments in a standardised manner based on each segment's share of the total property value (indirect income and expenses). This applies also to tax that is not directly attributable to earnings from property management activities or sales.
Assets and liabilities are stated as at the balance sheet date. Property assets are attributed directly to the respective segments according to the classification at the balance sheet date. Other assets and liabilities are allocated in a standardised manner based on their share of the property value.
Interest-bearing liabilities divided by shareholders' equity.
Shareholders' equity (including minority share) divided by total assets.
Total assets less non-interest bearing liabilities and provisions.
Net operating income divided by rental income.
| SEKm | 2010 Apr–Jun |
2009 Apr–Jun |
2010 Jan–Jun |
2009 Jan–Jun |
2009 Jan–Dec |
Rolling 12 months Jul 09–Jun 10 |
|---|---|---|---|---|---|---|
| Rental income | 507 | 548 | 1,025 | 1,096 | 2,194 | 2,123 |
| Property expenses | –149 | –173 | –349 | –373 | –729 | –705 |
| Net operating income | 358 | 375 | 676 | 723 | 1,465 | 1,418 |
| Surplus ratio, % | 71 | 68 | 66 | 66 | 67 | 67 |
| Central administration and marketing | –17 | –15 | –33 | –31 | –62 | –64 |
| Net interest expense | –129 | –128 | –245 | –311 | –560 | –494 |
| Share in profit/loss of associated companies | –2 | –1 | –7 | –2 | –5 | –10 |
| Profit from property management activities | 210 | 231 | 391 | 379 | 838 | 850 |
| Realised changes in value of properties | 65 | 9 | 96 | 12 | 57 | 141 |
| Unrealised changes in value of properties | 205 | –81 | 270 | –200 | –310 | 160 |
| Change in value of fixed income derivatives | –99 | 121 | –134 | 114 | 98 | –150 |
| Change in value of equities | –2 | 0 | –25 | 6 | –3 | –34 |
| Profit/loss before tax | 379 | 280 | 598 | 311 | 680 | 967 |
| Current tax | 0 | 0 | 0 | –98 | –100 | –2 |
| Deferred tax | –39 | –68 | –97 | –82 | –155 | –170 |
| Profit/loss for period/year | 340 | 212 | 501 | 131 | 425 | 795 |
| Comprehensive income attributable to parent company shareholders |
340 | 212 | 501 | 131 | 425 | 795 |
| Earnings per share before dilution, SEK | 2.08 | 1.30 | 3.05 | 0.80 | 2.59 | 4.84 |
| Earnings per share after dilution, SEK | 2.08 | 1.29 | 3.05 | 0.80 | 2.59 | 4.84 |
| No. of shares at end of period before dilution, millions |
163.0 | 164.4 | 163.0 | 164.4 | 164.4 | 163.0 |
| No. of shares at end of period after dilution, millions |
163.0 | 165.4 | 163.0 | 165.4 | 164.4 | 163.0 |
| Average no. of shares before dilution, millions | 163.7 | 164.4 | 164.0 | 164.4 | 164.4 | 164.2 |
| Average no. of shares after dilution, millions | 163.7 | 165.4 | 164.0 | 165.4 | 165.1 | 164.7 |
| 30 Jun 2010 | 30 Jun 2009 31 Dec 2009 | |
|---|---|---|
| 27,796 | 29,468 | 29,193 |
| 1 | 2 | 2 |
| 613 | 448 | 620 |
| 755 | 364 | 704 |
| 174 | 39 | 173 |
| 29,339 | 30,321 | 30,692 |
| 10,080 | 9,675 | 9,969 |
| 430 | 581 | 439 |
| 17,658 | 19,031 | 19,109 |
| 507 | 357 | 373 |
| 664 | 677 | 802 |
| 29,339 | 30,321 | 30,692 |
| 34 | 32 | 32 |
| 1,907 | 1,760 | 2,172 |
| SEKm | Equity | Of which, attributable to parent company shareholders |
Of which, attributable to minority |
|---|---|---|---|
| Shareholders' equity, 1 Jan 2009 | 9,873 | 9,873 | – |
| New shares, conversion of debt instruments |
0 | 0 | – |
| Cash dividend | –329 | –329 | – |
| Profit/loss for the year | 131 | 131 | – |
| Shareholders' equity, 30 Jun 2009 |
9,675 | 9,675 | – |
| Profit/loss for the year | 294 | 294 | |
| Shareholders' equity, 31 Dec 2009 |
9,969 | 9,969 | |
| Share buybacks | –61 | –61 | – |
| Cash dividend | –329 | –329 | – |
| Profit/loss for the period | 501 | 501 | – |
| Shareholders' equity, 30 Jun 2010 |
10,080 | 10,080 | – |
| SEKm | 2010 Jan–Jun |
2009 Jan–Jun |
2009 Jan–Dec |
|---|---|---|---|
| Net operating income and realised changes in the value of existing proper |
|||
| ty portfolio excluding depreciation Central administration |
763 –33 |
735 –31 |
1,510 –62 |
| Net financial items paid | –270 | –319 | –559 |
| Income tax paid | 0 | –98 | –100 |
| Change in other working capital | –171 | 61 | –288 |
| Cash flow from operations | 289 | 348 | 501 |
| Investments and acquisition of properties | –350 | –743 | –1,138 |
| Sale of properties, carrying amount of divested properties |
2,012 | 586 | 1,160 |
| Other investments (net) | –109 | –6 | –281 |
| Cash flow from investing activities | 1,553 | –163 | –259 |
| Dividend to shareholders | –329 | –329 | –329 |
| Share buybacks | –61 | – | – |
| Change in interest-bearing liabilities | –1,451 | 129 | 206 |
| Cash flow from financing activities | –1,841 | –200 | –123 |
| Change in cash and cash equivalents | 1 | –15 | 119 |
| Cash and cash equivalents at beginning of period |
173 | 54 | 54 |
| Cash and cash equivalents at end of period |
174 | 39 | 173 |
| SEKm | 2010 Jan–Jun |
2009 Jan–Jun |
2009 Jan–Dec |
|---|---|---|---|
| Financial | |||
| Return on capital employed, % | 6.0 | 4.2 | 4.2 |
| Return on equity, % | 10.0 | 2.7 | 4.3 |
| Interest coverage ratio, times | 3.0 | 2.3 | 2.6 |
| Equity/assets ratio, % | 34 | 32 | 32 |
| Loan-to-value ratio, properties, % | 64 | 65 | 65 |
| Debt/equity ratio, times | 1.8 | 2.0 | 1.9 |
| Share-related 1) | |||
| Earnings per share for the period, SEK |
3.05 | 0.80 | 2.59 |
| Equity per share, SEK | 62 | 59 | 61 |
| Cash flow per share, SEK | 3.02 | 1.81 | 4.87 |
| No. of outstanding shares at end of period before dilution, '000 |
162,980 | 164,382 | 164,392 |
| No. of outstanding shares at end of period after dilution, '000 |
162,980 | 165,449 | 164,392 |
| Average no. of shares before dilution, '000 |
164,029 | 164,382 | 164,386 |
| Average no. of shares after dilution, '000 |
164,029 | 165,449 | 165,052 |
| Property-related | |||
| No. of properties | 122 | 153 | 148 |
| Carrying amount, properties, SEKm | 27,796 | 29,468 | 29,193 |
| Lettable area, sqm | 1,260,000 | 1,441,000 | 1,429,000 |
| Financial occupancy rate, % | 89 | 92 | 90 |
| Surplus ratio, % | 66 | 66 | 67 |
1) Dilution of potential ordinary shares has been taken into account in calculating key figures per share. Since the bonds were fully redeemed on 1 October 2009, there will be no further dilution.
| 2010 | 2009 | 2009 | |
|---|---|---|---|
| SEKm | Jan–Jun | Jan–Jun | Jan–Dec |
| Income | 64 | 48 | 89 |
| Expenses | –105 | –84 | –174 |
| Net financial items | –66 | –91 | –447 |
| Change in value, fixed income derivatives | –134 | 114 | 98 |
| Change in value, equities | –25 | 6 | –3 |
| Profit/loss before tax | –266 | –7 | –437 |
| Tax | 139 | 1 | 28 |
| Profit/loss for period/year | –127 | –6 | –409 |
| SEKm | 30 Jun 2010 | 30 Jun 09 | 31 Dec 09 |
|---|---|---|---|
| Interests in Group companies | 13,328 | 14,240 | 13,328 |
| Other fixed assets | 44,599 | 39,028 | 45,929 |
| of which, receivables from Group companies |
44,280 | 38,584 | 45,571 |
| Other current assets | 8 | 18 | 63 |
| Cash and cash equivalents | 166 | 28 | 161 |
| Total assets | 58,101 | 53,314 | 59,481 |
| Equity | 9,200 | 9,947 | 9,714 |
| Provisions | 64 | 62 | 63 |
| Long-term liabilities | 42,227 | 42,365 | 46,774 |
| of which, liabilities to Group companies | 30,373 | 24,113 | 30,403 |
| Short-term liabilities | 6,610 | 940 | 2,930 |
| Total equity and liabilities | 58,101 | 53,314 | 59,481 |
Questions concerning the report will be answered by:
Chief Executive Officer Phone: +46 (0)8-555 148 25,
Deputy CEO and Chief Financial Officer Phone:+46 (0)8-555 148 29, +46 (0)706-66 13 80
Annette Kaunitz Director of Corporate Communications Phone:+46 (0)8-555 148 20, +46 (0)708-39 03 37
More information about Fabege and its operations is available on the Group's website. The website also includes a webcast presentation from 8 July 2010, in which Christian Hermelin and Åsa Bergström present earnings for the quarter.
The information contained in this report is such that Fabege is legally obliged to dis close under the Securities Market Act and/ or the Financial Instruments Trading Act. The information was released for publica tion at 7:30 am CET on 8 July 2010.
Box 730, SE-169 27 Solna, Visiting address: Pyramidvägen 7, SE-169 56 Solna, Sweden Phone: +46 (0)8-555 148 00 Fax: +46 (0)8-555 148 01 E-mail: [email protected] Internet: www.fabege.se Corporate identity no: 556049-1523 Registered office of the Board: Stockholm
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