Annual Report • Apr 23, 2020
Annual Report
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Report for the period 1 January – 31 December 2019
Total revenue in 2019 from continued operations were MNOK 1.5 and with a pre-tax profit from continued operations of a negative MNOK 3.9. Profit for the period for total operations were MNOK 842.4.
PPG entered into a purchase agreement with Odin Bidco AS regarding the purchase of 100% of the shares in Pi oneer Public Properties AS and Pioneer Management AS from PPG on 9 October 2019 with a total purchase price for the shares of MNOK 2,734. Closing of the Transaction took place on 24 October 2019. A gain on sale of MNOK 694 was recorded over the quarter and were included as part of profit from discontinued operations.
The Group had total assets of MNOK 2,469 where MNOK 468 were related to investment properties and shares in the associated company, Odin Bidco AS, and with a cash balance of MNOK 1,86 1. Total equity amounted to MNOK 2,412 and there was no long-term debt in the group.
In 2019 PPG paid out quarterly dividend payments to its preference shareholders equivalent to NOK 1.875 p er preference share per quarter. Further the PPG paid an extraordinary dividend to the holders of ordinary shares of NOK 27.74 per ordinary share charged to the company's share premium reserves.
During the past years, the Board of Directors has experienced interest both from institutional investors providing long term debt financing, and from other third parties, with respect to a potential refinancing of, or sale of the assets or shares in, PPG's subsidiaries. Based on this, in 2019 the Board of Directors initiated a process to evaluate different strategic alternatives for the group. The alternatives included a broad range of options including, but not limited to, a recapitalization of the group including a refinancing of Pioneer Public Properties AS' outstanding bond loan, a continuation of the group's current strategy and/or a sale of all or parts of the shares in PPG's subsidiaries. Based on the interest from potential buyers, the board decided to proceed with a sale of the shares in Pioneer Public Properties AS and Pioneer Management AS.
On 9 October 2019, PPG entered into the Purchase Agreement with Odin Bidco AS regarding the purchase of 100% of the shares in Pioneer Public Properties AS (PPP) and Pioneer Management AS (PM) from PPG with a total purchase price for the shares of MNOK 2,734. PPG was also entitled to an earn-out of up to MNOK 100 conditional upon the future development of the PPP group. A portion of the purchase price was also used to reinvest in Odin Bidco AS, resulting in a 10% equity stake in the company with a value of MNOK 256. Closing of the transaction took place on 24 October 2019. Odin Bidco is owned by a consortium consisting of Australian pension funds managed by Whitehelm Capital and the Whitehelm European Infrastructure Fund I incorporated company.
The sale marks the completion of the strategic process that was initiated in the first quarter of 2019. The preference shares issued by PPG was not be affected by the transaction and the company is still listed on the Oslo Stock Exchange.
Pioneer Property Group ASA (PPG) is an investment company with a real estate focus. The current real estate portfolio consists of a total of 13 preschool properties located in Norway, Sweden, Netherlands and Poland. The properties are leased out at long-term triple-net contracts to Norlandia. Further, PPG holds a 10% stake in Odin Bidco AS which owns a real estate portfolio of ~200 preschools at long-term triple-net contracts in the Nordics.
The focus area for PPG will be to continue to invest in real properties and enter into long-term leases with government-backed tenants in Europe. Further PPG may establish a new division within the Group with focus on investments within commercial real estate, such as office buildings and hotels in addition to development projects.
Based on the cash balance in PPG following the sale of PPP and PM, the general meeting changed the company's objective in the articles of association in 2019 to include investments in securities and other assets in order to allow for more flexible capital management. PPG's main business will continue to be investments in real property and related activities, but PPG now has greater flexibility for capital management. When managing the capital, PPG will take into account the need for sufficient liquidity reserves to meet PPG's financial obligations.
Over the fourth quarter, Pioneer Public Properties AS entered into a share purchase agreement to acquire a property portfolio. A completion of said transaction would trigger a payout of the entire earn-out consideration of MNOK 100 to PPG. PPG subscribed in December 2019 in a share capital increase in Odin Bidco AS in order for the company to be capitalized to close the transaction, increasing its investment with MNOK 23 in Odin Bidco AS and maintaining a 10% economic ownership. The transaction closed subsequent the balance sheet date, and PPG has received the full earnout consideration of MNOK 100.
PPG's subsidiary Pioneer Property Group International AS acquired in the fourth quarter 8 properties in Poland , 3 properties in Netherlands and 1 property in Sweden from Care Properties Finance AS, a wholly owned subsidiary of Norlandia Health & Care Group AS. All of the properties are preschools with triple-net contracts, with an average length to expiry of 15 years and Norlandia as the operator. The total purchase price was EUR 18.2m which will increase annual revenue with EUR 1.1m.
In the fourth quarter, PPG purchased bonds in Norlandia Health & Care Group AS (NHC02) with a par value of MSEK 29.5.
PPG purchased 1,631,447 preference shares in PPG at a price of NOK 102.00 per preference share, representing approx. 10% of the share capital. The share capital was decreased subsequent to the balance sheet date and the preference shares were redeemed.
In 2019 PPG paid out quarterly dividend payments to its preference shareholders equivalent to NOK 1.875 per preference share per quarter, and the Group's ambitions is to continue to pay these dividends going forward as outlined in PPG's articles of Association. Further the PPG paid an extraordinary dividend to the holders of ordinary shares of NOK 27.74 per ordinary share charged to the company's share premium reserves.
COVID-19 represents an extraordinary situation that has materialised post the balance sheet date, and it is uncertain how the pandemic will impact society as a whole and thus how it may affect the group going forward. The material risk factors for the group is estimated to be a potential reduction of rent income and change in interest rate affecting potential borrowing costs, interest rate income as well as it may change the yield levels affecting real estate valuations. PPGs lease agreement are triple-net and not linked to preschool utilisation. The company has at present not received any COVID -19 related tenant inquiries and does not expect a reduction in rental income due to the pandemic. Further it is difficult to estimate the current financial impact at present with regards to interest rate effects as both the macro economic consequences and the duration of COVID-19 are uncertain. The situation is closely being monitored by the management and the board of directors.
PPG acquired bonds in Norlandia Health & Care Care Group ASA (NHC01 and NHC02) and Hospitality Invest AS (HOIN02) with a par values of NOK 196.0m (NHC01), SEK 163.5 (NHC02) and NOK 50.0m (HOIN02). Further PPG subscribed for a total of MNOK 100 divided between two separate reputable Nordic high yield funds.
The general meeting in PPG passed a resolution to decrease the share capital of NOK 1,631,447 in order to redeem 1,631,447 of PPGs own preference shares.
PPG purchased 987,966 preference shares in PPG at a price of NOK 102 per preference share. Following the transaction, PPG holds no ordinary s hares and 987,966 preference shares in PPG (approximately 6.73% of the share capital), which represents 0.96% of the votes.
PPG received the full earn-out consideration of MNOK 100 related to the sale of PPP and PM.
The financial statements have been drawn up in accordance with International Standards for Financial Reporting (IFRS).
In accordance with the Accounting Act § 3-3, we confirm that the financial statements have been prepared under the assumption of going concern.
During 2019 total revenues from continued operations were MNOK 1.5. Revenues consist of rental income from investment properties, which are all long-term triple-net lease contracts towards Norlandia, with income from Norway, Sweden Poland and Netherlands. The properties were acquired in the fourth quarter of 2019.
Operating profit from continuing operations (EBIT) for 2019 amounted to a negative MNOK 12.0. The operating profit was negatively affected by non-recurring payroll expenses related to the sale of PM and PPP, and negative fair value adjustments related to transaction costs of the new international acquisition from Care Properties Finance AS (Norlandia).
Net financial income for continuing operations for the year was MNOK 8.1, with the majority stemming from interest income and a gain on a EUR hedging position of MNOK 5.2m related to the acquisition of the real estate portfolio from NHC.
The sold entities were classified as discontinued operations and held for sale prior to completion of the sale in October 2019. The net profit from discontinued operations for 2019 amounted to MNOK 846.1, of which MNOK 111.8 amounted to net profit from operating activities, MNOK 694.3 related to gain on sale and MNOK 40 related to a remeasurement of the earnout per 31/12/19.
Net profit for the group in 2019 was MNOK 842.4.
The Group had total assets of MNOK 2,468.6 where MNOK 468.3 were related to investment property and shares in the associated company, Odin Bidco AS, and with a cash balance of MNOK 1,860.8. Total equity amounted to MNOK 2,411.8 and there was no long-term debt in the group.
Total cash balance of MNOK 1,860.8 in the Group was up from MNOK 283.3 as of 31 December 2018 mainly due to the proceeds from the sale of Pioneer Public Properties AS and Pioneer Management AS.
Net profit for PPG ASA was MNOK 1,353.1 up from MNOK 42.0 in 2018, explained by the sale of Pioneer Public Properties AS and Pioneer Management AS. Net financial income amounted to MNOK 1,364.3 where income from subsidiaries represented MNOK 1,351.1 related to the sale. Total assets were MNOK 2,454.0 versus year end 2018 of MNOK 1,582.9. Equity in PPG ASA was MNOK 2,213.8 versus MNOK 1,548.9 by the end of 2018.
The annual report gives an accurate overview of the Group's financial development throughout the year. There have been no events after the end of the fiscal year 2019 which have had any material impact on the financial status of the Group.
The group is not involved in any R&D activities.
There was at year end 2 employees in Pioneer Property Group ASA. There are no employees in any other Groupcompanies. The Board of Directors consists of two women and three men.
The board of directors has prepared a declaration on salary and other remuneration for the Company's executive management pursuant to Section 6-16a of the Norwegian Public Limited Liability Companies Act. The declaration includes the policies which the Company will use for the determination of salary and other remuneration to its executive management in the calendar year 2020. The policies shall be subject to an advisory vote by the annual general meeting. The declaration is made available at the Group's webpage www.pioneerproperty.no
The Group's operation consists of investing in and providing high-quality properties and is considered to have limited environmental impact. The company focuses on making investment and operational decisions that are in line with sustainable environmental practices.
Pioneer Property Group AS has prepared a report on Corporate Governance in accordance with the Norwegian Accounting Act Section 3-3b and the Norwegian Code of Practice for Corporate Governance dated 17 October 2018, and a report on Corporate Social Responsibility in accordance with the Norwegian Accounting Act Section 3 -3c, both of which are made available at the Group's webpage www.pioneerproperty.no.
The Company is exposed towards various financial risks , yet the Board of Directors view the total exposure to be at a manageable level. Some of the most important risk factors are:
The Board of Directors and management performs continuous assessments of the most important financial risk factors, and evaluates the necessity of implementing specific measures. Specific measures are evaluated considering the Company's total financing risk exposure.
23 April 2020
The Board of Directors
| Roger Adolfsen | Sandra Henriette Riise | Geir Hjorth |
|---|---|---|
| Chairman of the Board | Board Member | Board Member |
Even Carlsen Nina Hjørdis Torp Høisæter Board Member Board Member
The Articles of Association provide that the Board of Directors shall consist of 3 to 7 boa rd members elected by the general meeting.
| Name | Position | Served since | Term expires |
|---|---|---|---|
| Roger Adolfsen | Chairperson | 2015 | 2021 |
| Sandra Henriette Riise | Board member | 2015 | 2021 |
| Geir Hjorth | Board member | 2015 | 2021 |
| Even Carlsen | Board member | 2015 | 2021 |
| Nina Torp Høisæther | Board member | 2015 | 2021 |
The directors Sandra Henriette Riise and Geir Hjorth are independent of the majority shareholder of the Company, Hospitality Invest AS, and all board members are independent of the Management. All board members attended all board meetings, with the exception of Even Carlsen who did not attend one bard meeting. The composition of the Board of Directors is in compliance with the independence requirements of the Corporate Governance Code.
Roger Adolfsen has broad experience from serving on various boards. Currently he holds various board positions and has more than 30 years of experience from business and real estate development. Adolfsen is a business graduate from BI Norwegian Business School. He also holds a Master in Business and Administration (MBA) from the University of Wisconsin.
Sandra H. Riise serves as chair on the Norwegian Better Regulation Council. She is a former Chief Executive Officer of Accounting Norway, the Norwegian Association of Authorized Accountants, and has held the position of Chief Municipal Executive (Nw. Rådmann) of Andøya municipality. Riise is educated from BI Norwegian School of Management, and was a registered certified public accountant in 1980.
Geir Hjorth currently serves on the board of directors of 27 different companies (including several chairperson positions). He has extensive experience from the hotel industry and has participated in several courses pertaining to marketing and human resource management.
Even Carlsen has served on the board of directors of Private Barnehagers Landsforbund (En. the Private Kindergartens National Association), which he also participated in the start-up of. He has held various board positions in private companies. Carlsen is the co-founder of Tromsø Barnehagedrift AS, which was later merged into Acea AS, and he served as the Chief Executive Officer of the company from 2003 until 2008.
Nina H. T. Høisæther has held various board positions within NHO (En. the Confederation of Norwegian Enterprise) and she is currently a member of the board of directors of NHO Oslo/Akershus and has held various CEO roles within the Norlandia sphere. Høisæther is educated within nursing from the University of Stavanger, and she holds a major in Psychology and Sociology from South Dakota School of Mines and Technology.
We confirm to the best of our knowledge, that the set of Financial statements for the financial y ear ending 31. December 2019 have been prepared in accordance with IFRS and gives a fair view of the Group's assets, liabilities, financial position and profit or loss.
We also confirm to the best of our knowledge, that the management report includes a fair review of important events that have occurred during the financial period and their impact on the set of financial statements, a description of the principal risks and uncertainties, and major related parties' transactions.
Oslo 23 April 2020
Board of Directors and Chief Executive Officer of Pioneer Property Group ASA.
Roger Adolfsen Sandra Henriette Riise Geir Hjorth Chairman of the Board Board Member Board Member
Even Carlsen Nina Hjørdis Torp Høisæter John Ivar busklein Board Member Board Member CEO
| NOK thousand | Note | 2019 | 2018 restated* |
|---|---|---|---|
| Contractual rental income | 13 | 1,184 | 347 |
| Other income | 319 | - | |
| Total Income | 1,503 | 347 | |
| Employee expenses | 14 | 5,765 | 559 |
| Other operating expenses | 15 | 5,141 | 2,232 |
| Total Operating expenses | 10,907 | 2,791 | |
| Fair value adjustment on investment properties | 7 | -2,632 | 1,500 |
| Operating loss (EBIT) | -12,036 | -943 | |
| Loss from associated company | 8 | 2,647 | - |
| Interest income | 10 | 8,476 | 44 |
| Interest expense | 261 | 34 | |
| Other finance expenses | -342 | 30 | |
| Changes in fair value | 9 | 5,473 | - |
| Currency gain (-)/loss | 3,239 | - | |
| Net Finance income (+) /expenses (-) | 8,144 | -20 | |
| Profit/(loss) before tax | -3,892 | -963 | |
| Income taxes | 16 | -158 | 2,658 |
| Profit/(loss) for the period | -3,734 | -3,621 | |
| Profit/(loss) discontinued operations, net of tax | 4 | 846,100 | 198,730 |
| Profit/(loss) for the period, total operations | 842,366 | 195,109 | |
| Profit/(Loss) attributable to | |||
| Shareholders of the parent | 842,366 | 194,374 | |
| Non-controlling interests | - | 735 | |
| Profit/(loss) for the period | 842,366 | 195,109 | |
| Other comprehensive income | |||
| Items to be reclassified to P&L in subsequent periods: | |||
| Exchange differences, from translation of foreign operations | 1,437 | -424 | |
| Exchange differences, from translation of foreign | |||
| operations from associated comanies | -17 | ||
| Items reclassified to P&L in the period: | |||
| Exchange differences, from translation of foreign operations | -1,089 | - | |
| Other Comprehensive Income | 331 | -424 | |
| Total comprehensive income | 842,697 | 194,685 | |
| Comprehensive income attributable to | |||
| Shareholders of the parent | 842,697 | 193,928 | |
| Non-controlling interests | - | 756 | |
| Comprehensive income | 842,697 | 194,685 | |
| Earnings per share (NOK) for profit from continuing operations: | |||
| Basic earnings per ordinary share | 17 | -5,35 | -5.34 |
| Weighted average ordinary shares | 17 | 9,814,470 | 9,814,470 |
*2018 are restated due to discontinued operations, see note 4
| NOK thousands | Note | 31.12.2019 | 31.12.2018 |
|---|---|---|---|
| Assets | |||
| Investment properties | 7 | 191 453 | 5 269 296 |
| Associated company | 8 | 276 865 | - |
| Other non-current assets | - | 1 000 | |
| Total non-current assets | 468 318 | 5 270 296 | |
| Trade and other receivables | 9 | 116 198 | 6 269 |
| Other short-term investments | 9 | 23 258 | - |
| Cash and cash equivalents | 10 | 1 860 813 | 283 271 |
| Total current assets | 2 000 269 | 289 541 | |
| Total assets | 2 468 587 | 5 559 837 | |
| Equity and liabilities | |||
| Share capital | 20 | 16 314 | 16 314 |
| Treasury shares | 20 | -1 631 | - |
| Share premium | 20 | 1 202 885 | 1 487 326 |
| Retained earnings | 1 194 215 | 553 652 | |
| Total equity | 2 411 782 | 2 057 292 | |
| Non-current borrowings | 11 | - | 2 911 291 |
| Deferred tax | 16 | 756 | 188 269 |
| Other non-current liabilities | - | 575 | |
| Total non-current liabilites | 756 | 3 100 135 | |
| Current borrowings | 11 | - | 330 044 |
| Current tax payable | 16 | 143 | 24 323 |
| Other current liabilities | 12 | 55 906 | 48 042 |
| Total current liabilities | 56 049 | 402 409 | |
| Total liabilities | 56 804 | 3 502 544 | |
| Total equity and liabilities | 2 468 587 | 5 559 837 |
Board of Directors and Chief Executive Officer of Pioneer Property Group ASA
| Roger Adolfsen | Sandra Henriette Riise | Geir Hjorth |
|---|---|---|
| Chairman of the Board | Board Member | Board Member |
| Even Carlsen | Nina Hjørdis Torp Høisæter | John Ivar Busklein |
| Board Member | Board Member | CEO |
| Attributable to owners of the parent | ||||||||
|---|---|---|---|---|---|---|---|---|
| NOK thousands | Notes | Share capital | Treasury shares |
Share premium |
Retained earnings |
Total | Non-controlling interests |
Total Equity |
| Balance at 1 January 2018 | 16 314 | - | 1 487 326 | 431 717 | 1 935 358 | - | 1 935 358 | |
| Profit/(loss) for the period | - - | - | 194 374 | 194 374 | 735 | 195 109 | ||
| Exchange differences from translation of foreign operations | - | - | - | -446 | -446 | 21 | -424 | |
| Total comprehensive income for the period | - - | - | 193 928 | 193 928 | 756 | 194 685 | ||
| Sale of shares to non-controlling interests | 18 | - - | - | 124 | 124 | 2 467 | 2 591 | |
| Purchase of shares from non-controlling interests | - | - | - | -23 367 | -23 367 | -3 223 | -26 590 | |
| Dividends | 17 | - - | - | -48 750 | -48 750 | - | -48 750 | |
| Transactions with owners | - - | - | -71 993 | -71 993 | -756 | -72 749 | ||
| Balance at 31 December 2018 | 16 314 | 1 487 326 | 553 653 | 2 057 294 | - | 2 057 294 | ||
| Profit/(loss) for the period | - - | - | 842 366 | 842 366 | - | 842 366 | ||
| Exchange differences from foreign operations | 1 437 | 1 437 | - | 1 437 | ||||
| Exchange differences fraom associated company | -17 | -17 | -17 | |||||
| Exchane differences reclassified to Income statement on disposal | 4 | - | - | - | -1 089 | -1 089 | - | -1 089 |
| Total comprehensive income for the period | - - | - | 842 697 | 842 697 | - | 842 697 | ||
| Acquisition of treasury shares | 20 | - | -1 631 | - | -165 573 | -167 204 | - | -167 204 |
| Dividends on ordinary shares | 20 | - - | -272 253 | - | -272 253 | - | -272 253 | |
| Dividends on preference shares | 17 | - - | -12 187 | -36 562 | -48 750 | - | -48 750 | |
| Transactions with owners | - | -1 631 | -284 441 | -202 135 | -488 207 | - | -488 207 | |
| Balance at 31 December 2019 | 16 314 | -1 631 | 1 202 886 | 1 194 214 | 2 411 782 | - | 2 411 782 |
| NOK thousands | Note | 2019 | 2018 |
|---|---|---|---|
| Cash flows from operating activities: | |||
| Profit before income tax total opertaion (including discontinued operations) | 4 | 872 658 | 246 834 |
| Adjustments for: | |||
| Fair value adjustments on investment property | 7 | -46 064 | -120 397 |
| Other adjustments | 9 | -5 473 | - |
| Profit from associated companies | 8 | 2 647 | - |
| Interest net | -8 654 | 137 993 | |
| Borrowing cost | 118 083 | - | |
| Taxes paid | -16 971 | -20 781 | |
| Exchange gains/(losses) | 10 413 | -4 571 | |
| Profit/loss on sale of discontinued operations | 4 | -733 508 | - |
| Changes in working capital: | |||
| Trade receivables | -23 978 | -3 326 | |
| Trade payables | 45 583 | -4 656 | |
| Other accruals | -30 468 | -8 282 | |
| Generated from operations | 184 269 | 222 813 | |
| Interest received | 8 654 | 651 | |
| Interest paid | -115 064 | -134 137 | |
| Cash generated from operating activities | 77 859 | 89 327 | |
| Cash flows from investing activities: | |||
| Proceeds from sale of properties | 4,7 | 2 173 467 | - |
| Purchase of subsidiaries / properties | 7 | -52 793 | -346 367 |
| Purchase of bond | -23 491 | - | |
| Purchase of receivables | -135 315 | - | |
| Other long term receivables | 82 054 | - | |
| Cash from investing activities | 2 043 922 | -346 367 | |
| Cash flows from financing activities: | |||
| Proceeds from debt to financial institutions | - | 955 021 | |
| Repayments of debt to financial institutions | 11 | -56 068 | -487 756 |
| Purchase of own shares | 20 | -167 204 | - |
| Dividends on ordinary shares | 20 | -272 253 | - |
| Dividends on preference shares | 17 | -48 750 | -48 750 |
| Transactions with non-controlling interests | - | -15 787 | |
| Cash from financing activities | -544 276 | 402 729 | |
| Change in cash and cash equivalents | 1 577 505 | 145 689 | |
| Cash and cash equivalents at beginning of period | 283 271 | 138 815 | |
| Exchange gains/(losses) on cash and cash equivalents | 37 | -1 233 | |
| Cash and cash equivalents at period end | 1 860 813 | 283 271 |
See note 4 for cash flow in discontinued operations.
Pioneer Property Group ASA (the 'Company') and its subsidiaries (together, the 'Group') invests in real estate and other investments. The Group currently holds properties in Norway, Sweden, Poland and Netherlands.
Pioneer Property Group ASA is a public limited company incorporated and domiciled in Norway. The address of the Company's registered office is Rådhusgata 23, 0158 Oslo.
The consolidated annual financial statements cover the period from 1 January 2019 to 31 December 2019. The fourth quarter report was released 19 February 2020. Compared to this report the financial statements have been changed in these Annual Statements. The profit from the associated company Odin Bidco AS have been included with MNOK -2.6 and there was also a reduction in tax expense with MNOK 4.9. Further, a gain (MNOK 40) on an earnout have been reclassified from financial income to profit from discontinued operations and MNOK 0.6 reclassified from fair value adjustment on investment properties to profit from discontinued operations .
These consolidated financial statements are approved by the Board of Directors 23. April 2020.
On 9 October 2019, the Group entered into the Purchase Agreement with Odin Bidco AS regarding the sale of 100% of the shares in Pioneer Public Properties AS and Pioneer Management from the Group with a total sale price for the shares of NOK 2,734 million. The Group was also entitled to an earn-out of up to MNOK 100 conditional upon the future development of the PPP Group. A portion of the sale price was also used to reinvest in Odin Bidco AS, resulting in a 10% equity stake in the company with a value of MNOK 256. Closing of the Transaction took place on 24 October 2019. After the sale, the Group had one property left.
The Group's subsidiary Pioneer Property Group International AS acquired 21 November 2019 8 properties in Poland, 3 properties in Netherlands and 1 property in Sweden from Care Properties Finance AS, a wholly owned subsidiary of Norlandia Health & Care Group AS. All of the properties are preschools at triple-net contracts, with an average length to expiry of 15 years and Norlandia as the operator. The total purchase price was EUR 18.2m.
The consolidated financial statements of the Group have been prepared in accordance with Internation al Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements have been prepared under the historical cost convention, except for fair value adjustments of earnout, derivatives, bonds and investment properties.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and esti mates are significant to the consolidated financial statements are related to valuation of investment properties as described in note 7 and valuation of earn-out as described in note 4 and note 9.
The statement of cash flow has been prepared using the indirect method.
All financial numbers are presented in NOK thousand, unless otherwise stated.
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet, respectively.
Transactions with non-controlling interests in subsidiaries are treated as equity transactions. If shares are acquired from a non-controlling interest, the difference between the payment and the proportion of the carrying amount of the subsidiary's net assets attributable to the shares is recognized in the equity of the parent company's owners. Gains and losses arising from the sale of shares to non-controlling interests are similarly r recognized in equity.
The Group's presentation currency is NOK, which is also the parent company's functional currency.
Transactions in foreign currencies are initially recognis ed in the functional currency at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the exchange rate at the reporting date. All exchange differences are recognised in the consolidated income statement.
The Group has foreign entities with functional currency other than NOK. At the reporting date, the assets and liabilities of foreign entities with functional currencies other than NOK are transl ated into NOK at the rate of exchange at the reporting date and their income statements are translated at the average exchange rates for the year. The translation differences arising from the translation are recognized in other comprehensive income until disposal, at which time they are recognized in the consolidated income statement.
Pioneer Property Group ASA has two classes of shares, ordinary shares and preference shares. The preference shares are entitled to annual dividend payments amounting to NOK 7.50 per preference share, if the board of directors approves payment of dividends through an authorisation from the General Meeting. If payable, the dividend payments will be made quarterly with NOK 1.875 per preference share. The Preference shares are currently redeemable at a price of NOK 130 per share. From 1 July 2020 the shares can be redeemed at a price of NOK 100 per share. At the same time the coupon for the preference share will be increased annually with NOK 1 per annum. Maximum coupon is set to NOK 10 per share.
The quarterly dividend distribution to the preference shares is recognised as equity in the Group's financial statements in the period in which the dividends are approved by the General Assembly.
Dividend distribution to Ordinary shares is recognised as a liability in the Group's financial statement in the period in which the dividend is approved by the Company's shareholders in the General Assembly to payment.
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group (the commencement date). Each lease payment is allocated between the liability and finance cost. The right-of-use asset is depreciated over the shorter of the asset's us eful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determi ned, or the lessee's incremental borrowing rate. Right-of-use assets are measured. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. The Group has only short-term leases.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co -ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss.
On 9 October 2019, the Group entered into a sale agreement with Odin Bidco AS regarding the sale of 100% of the shares in Pioneer Public Properties AS (PPP Group) and Pioneer Management from the Group to a total consideration of MNOK 2.784, including a fair value estimate of the earn-out consideration, of which MNOK 2.478 were paid in cash. The Group was also entitled to an earn-out of up to MNOK 100 conditional upon the future development (increased rental income by purchases) in the PPP Group a 2-year period. At the transaction date, the earnout was valued to MNOK 50 based on historical experience and management best judgements ( see note 9 for further information about measurement after the transaction). Included in the consideration was also an 10% equity stake in Odin Bidco AS with a value of MNOK 256.
Closing of the Transaction took place on 24 October 2019. A gain on sale of Pioneer Public Property AS and Pioneer Management AS of MNOK 694 was recognized, including transaction cost of MNOK 60 recognized as a reduction of the gain. Per 31 December 2019, the earnout was remeasured at fair value according to level 3 in the fair value hierarchy. The fair value is estimated based on the management's expectations. In December 2019 management was made aware of that Odin Bidco AS had signed a SPA for purchase of properties, with planned closing in January 2020, making it more likely that the earnout will be settled. This resulted in a gain of MNOK 40.
After the described transaction the Group had one property left, situated in Norway, in addition to the indirect exposure from Odin Bidco AS.
The following table shows the consolidated income statement for discontinuing operations and the gain resulting from the transaction:
| NOK thousand | 2019 | 2018 |
|---|---|---|
| Income from rent | 250,549 | 287,842 |
| Other income | 186 | 386 |
| Total Income | 250,735 | 288,227 |
| Payroll expenses | 4,079 | 952 |
| Other operating expenses | 15,515 | 24,974 |
| Total Expenses | 19,594 | 25,926 |
| Fair value adjustment on investment properties | 48,697 | 118,897 |
| Operating profit (EBIT) | 279,837 | 381,199 |
| Interest income | 178 | 632 |
| Interest expenses | 117,822 | 138,635 |
| Currency gain (-) / loss | 7,174 | -4,601 |
| Other financial expenses | 12,721 | - |
| Net Finance | -137,539 | -133,402 |
| Profit/(loss) before tax | 142,299 | 247,797 |
| Income taxes | 30,450 | 49,067 |
| Profit/(loss) for the period | 111,848 | 198,730 |
| Gain of sale from discontinuing operations | 694,252 | - |
| Remeasurement of earnout at 31 December 2019 | 40,000 | - |
| Profit/(loss) discontinued operations, net of tax | 846,100 | 198,730 |
| Other comprehensive income | ||
| Items to be reclassified to P&L in subsequent periods: | ||
| Exchange differences, from translation of foreign operations | 1,089 | -424 |
| Total comprehensive income from discontinued operations | 847,189 | 198,306 |
| Basic earnings per ordinary share | 86,21 | 20,25 |
|---|---|---|
| Weighted avd ord shares | 9,814,470 | 9,814,470 |
The following table shows the cash flow from the discontinued operations:
| NOK thousands | 2019 | 2018 |
|---|---|---|
| Cash generated from operating activities | 91 901 | 110 414 |
| Cash from investing activities | 10 762 | -522 498 |
| Cash from financing activities | -124 237 | 561 425 |
| - | - | |
| Change in cash and cash equivalents | -21 574 | 149 341 |
| Cash and cash equivalents at beginning of period | 265 7 44 |
117 636 |
| Exchange gains/(losses) on cash and cash equivalents | 37 | -1 233 |
| Cash and cash equivalents at period end | 244 208 | 265 744 |
The Group's activities expose it to a variety of financial risks: market risk (including fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance.
Risk management is carried out by management under guidance by the Board of Directors. Management identifies, evaluates and act upon financial risks.
Market risk for the Group is the risk that future cash flows in the form of interest payments change as a result of changes in market interest rates. Management and the Board of Directors agree on an acceptable level of interest rate exposures, which are monitored continuously by the management. The level of interest rate exposure is determined based on an assessment of existing cash flows, general assessment of financial condition and available liquidity.
The Group holds interest bearing assets in terms for cash deposits and bonds. Fluctuations in interest would yield a higher or lower interest income. At the current level of cash deposits, a change in interest rate of +/- 1 % would be material for the financial statements, with an effect of MNOK 18.6. Further, a change in interest levels may yield changes in the fair value of the real estate portfolio.
The Group has currently no borrowings.
Exposure to cash flow interest rate risk is assessed when necessary. The need for a fixed rate is under review in relation to the Group to withstand adverse fluctuations in interest payment cash flows due to higher interest rates. Management's assessment is that the Group's current financial position does not indicate a further need for fixed interest rates.
Currency risk is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. Currency risk also exists when the foreign subsidiary of a firm maintains
financial statements in a currency other than the reporting currency of the consolidated entity. The risk is that there may be an adverse movement in the exchange rate of the denomination currency in relation to the base currency before the date when the transaction is completed.
Monetary assets and liabilities are sensitive to movements in foreign exchange rates. This sensitivity can be analysed in comparison to year end rates (assuming all other variables remain constant) as follo ws:
| 31/12/2019 | 31/12/2018 | ||||
|---|---|---|---|---|---|
| Increase/- decrease in |
Effect on profit before tax in NOK |
Effect on decrease in profit |
|||
| Currency | NOK | million | NOK | before tax | |
| EUR | +/-10% | 6.2 +/-10% | 64.5 | ||
| SEK | +/-10% | 0.3 +/-10% | 0.6 |
Credit risk is the loss that the Group would suffer if a counterparty fails to perform its financial obligations. Credit risk is managed on Group basis. Credit risk arises from cash and cash equivalents and trade receivables, including committed transactions. Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The customers operate preschools based on agreements with municipalities.
The Group has one large customer with prepaid rent. No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by this counterparty.
Liquidity risk is the risk that the Group will not be able to meet its obligations at maturity without incurring a significant increase in finance cost or not being able to meet its obligations at all. The risk also includes that the Group must forfeit investment opportunities. Cash flow forecasting is performed at Group level. Group management monitors the Group's liquidity requirements to ensure that it has sufficient cash to meet operational needs while maintaining sufficient headroom to pay out quarterly dividends to holders of preference shares. The monitoring takes into account the possibility to raise external debt.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
For the year ended 31. December 2019 the maturities were limited to other current liabilities which will be settled in less than one year.
| 31.12.2018 | |||||
|---|---|---|---|---|---|
| NOK thousand | <1y | 1y-2y | 2y-5y | >5y | Total |
| Borrowings (bank) | 329 119 | 68 141 | 589 090 | 1 273 053 | 2 259 402 |
| Interest on borrowings (bank) | 65 305 | 60 491 | 148 251 | 215 062 | 489 108 |
| Bond loans | - | - | 1 000 000 | - | 1 000 000 |
| Interest on bond loans | 65 670 | 65 720 | 24 645 | - | 156 035 |
| Total | 460 095 | 194 351 | 1 761 985 | 1 488 114 | 3 904 546 |
The group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital.
The Group has a large liquidity surplus at 31.12.19 and the Group will continue to monitor the optimal capital structure going forward, depending on operational needs. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to repay debt.
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses. Furthermore, the entity's component's operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and thus separate financial information is available. The company has determined that the Board of Directors is collectively the chief operating decision maker.
The Group's primary business is to own and manage investment properties . In 2019 most of the properties held were sold and this impacted the segment structure. By the end of 2019 the Group holds investment properties in Norway, Sweden, Poland and the Netherlands and rent them out to operators of preschool s. There is no material difference with respect to risk and margins in the different investment properties.
Operating segments are reported in the same manner as the internal reporting to the Company's chief operating decision maker. The Company's chief operating decision maker, who is responsible for allocation of resources to and evaluating profitability within the operating segments is defined as the Board of Directors.
The Group has determined the operating segments based on the information reviewed by the Chief Executive Officer, to be the following: Norway, Sweden, Poland and the Netherlands. The Board of Directors monitors the operating results of these geographical regions separately for the purposes of making decisions about resource allocation and performance assessment. Regional performance is evaluated based on the operating results generated from rental of owned properties.
| NOK thousand | Norway | Sweden | Poland | Netherland | Group |
|---|---|---|---|---|---|
| Total Income | 358 | 85 | 319 | 741 | 1 503 |
| Fair value adjustment on investment properties | -46 | -189 | -1 686 | -711 | -2 632 |
| Operating profit/loss (EBIT) | -10 595 | -104 | -1 367 | 29 | -12 036 |
| Investment properties | 10 800 | 13 187 | 118 858 | 48 608 | 191 453 |
| Cash and cash equivalents | 1 858 979 | 897 | 807 | 130 | 1 860 813 |
Overview of segments 2018 (not restated, see also note 4)
| NOK thousand | Norway | Sweden | Finland | Group |
|---|---|---|---|---|
| Total Income | 232 265 | 3 416 | 52 894 | 288 575 |
| Fair value adjustment on investment property | 85 741 | 2 441 | 32 216 | 120 398 |
| Operating profit (EBIT) | 298 083 | 5 177 | 76 995 | 380 255 |
| Investment properties | 4 183 000 | 95 943 | 990 353 | 5 269 296 |
| Cash and cash equivalents | 254 967 | 2 659 | 25 645 | 283 271 |
| The identified segments equal the geographical areas. | ||||
| The Group have one tenant, NHC through different SPVs, which are located in the countries corresponding to the Group's segments revenues origination. |
Penneo Dokumentnøkkel: SK4QL-KFPE5-G0AD8-DW5GY-72LJY-1JDET | |||
| 7 Investment properties |
||||
| Accounting principles | ||||
| Property held with the purpose of achieving rental income, increase in value or both are classified as investment property. Investment property also include property under development for future use as investment property. |
Property held with the purpose of achieving rental income, increase in value or both are classified as investment property. Investment property also include property under development for future use as investment property. Investment property is initially recognised at cost including transaction costs.
Transaction costs include stamp duty, lawyer's fees and commission to bri ng the property to the condition that is necessary to put the property into operation. Recognised value also includes replacement cost for parts of the existing investment property at the time when the cost is incurred and the terms for recognition has been met.
After initial recognition the investment property is subsequently recognised at fair value. Changes in fair value are presented in the income statement in the reporting period when change occurs.
Subsequent costs relating to investment property are included in the carrying amount if it is probable that they will result in future economic benefits for the investment property and the costs can be measured reliably. Expenses relating to operations and maintenance of the investment property are charged to the income statement during the financial period in which they are incurred.
Investment properties are derecognised when they are sold or are permanently out of operations and have no expected future economic benefit. All gains or losses relating to sa les or disposal are presented in the income statement the same year as disposal. Gains or losses from disposal of investment property is the difference between net selling price and the carrying amount of the asset.
The investment properties are valued in accordance with the fair value method and all have been valued in accordance with valuation Level 3 in the fair value hierarchy (Level 3 - where inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)), see also note 9.
The yield level of the property has been determined on the basis of the unique risk and transactions made at the respective location according to the location price method.
At the end of the year, the Group commissioned an external cash-flow valuation for one individual property, carried forward from previous years, from the independent valuer. The independent valuer has in this report valuated the property on an individual basis using a combination of discounted cash-flow analysis and property yield level. Individual factors for the property were applied to assess the yield for the respective property/location. Factors, such as relevant country, the property's location in relation to a maj or city, net-population change, size of the property/per child, year of build and whether or not the property is on a leased land (Norwegian: festetomt) .
The Group acquired a portfolio of properties from Norlandia (see note 18) in November 2019. The transaction is entered into by armlength distance and by willingly parties, thus it is assumed that the transaction is an evidence of the fair value of the properties. Due to the short time frame, the transaction value is considered to be representative for the fair value at year end. As a consequence of recognised transaction costs as part of the investment, there were a fair value reduction related to these properties in 2019.
The average gross yield for the investment property portfolio is 6 %.
As of 31 December 2019, the Group's property portfolio comprised of 13 properties (171 properties in 2018), whereof the all the properties are preschools. In November 2019 the Group acquired one property in Sweden, three properties in Netherlands and eight properties in Poland. After the sale of Pioneer Public Properties AS the group had left one property in Norway bringing the current total, as of December 2019, to 13 properties.
The Group rents out the investment properties on long term triple-net contracts to one main operator: Norlandia. All the lease agreements are 100% CPI-adjusted annually and are on a triple-net basis where the operator has the main responsibility for annual maintenance, insurance, and other directly rela ted property costs including tax. Excluding Kidsa Ospeli, which have 6 months notice, all other agreements have 15 years remaining lease terms.
In summary the total Group's portfolio as of 31 December 2019 was valued to MNOK 191, a decrease from MNOK 5,269 as of year-end 2018. The change is explained by the sale of most of the Group's operations as described in note 4 discontinued operations and the acquisition of new properties (see note 18)
| NOK thousand | Norway | Sweden | Finland | Poland | Netherlands | Group |
|---|---|---|---|---|---|---|
| Fair value in the beginning of the year | 4 183 000 | 95 943 | 990 354 | - | - | 5 269 296 |
| Investment in subsidiaries /properties | - | 13 429 | - | 122 297 | 50 509 | 186 234 |
| Effect of currency exchange differences in foreign operations | - | -4 485 | -5 156 | -1 753 | -1 190 | -12 584 |
| Sale of operations | -4 214 107 | -92 463 | -990 988 | - | - | -5 297 558 |
| Fair value adjustments - discontinued operations | 41 95 4 | 953 | 5 790 | - | - | 48 697 |
| Fair value adjustments on investment properies | -46 | -189 | - | -1 686 | -711 | -2 632 |
| Fair value in the end of the year | 10 800 | 13 187 | - | 118 858 | 48 608 | 191 453 |
| Net change in unrealized gain | -46 | -189 | - | -1 686 | -711 | -2 632 |
| NOK thousand | Norway | Sweden | Finland | Group |
|---|---|---|---|---|
| Fair value in the beginning of the year | 4 079 000 | 47 000 | 605 780 | 4 731 779 |
| Addition: | ||||
| -Investment in subsidiaries /properties | 18 453 | 47 864 | 335 778 | 402 095 |
| Effect of currency exchange differences in foreign operations | - | -1 362 | 16 387 | 15 024 |
| Fair value adjustments on investment properies | 85 547 | 2 441 | 32 409 | 120 397 |
| Fair value in the end of the year | 4 183 000 | 95 943 | 990 353 | 5 269 295 |
| Net change in unrealized gain | 85 547 | 2 441 | 32 409 | 120 397 |
A property analysis is an estimate of the value that an investor is willing to pay for the property at a given time. The valuation is made on the basis of generally accepted models and certain assumptions on different parameters. The market value of the properties can only reliably be established in a transaction between two independent parties.
The table below gives an indication of the effects on the value of the property portfolio if yield levels or rental income change.
| NOK million | Yield sensitivity | |||
|---|---|---|---|---|
| -0,5% | 0,0% | 0,5% | ||
| 5 % | 184 | 182 | 178 | |
| NOI sensitivity | 0 % | 194 | 192 | 187 |
| -5 % | 204 | 201 | 196 |
NOI is defined as net operating income, meaning all revenue from properties minus all reasonable operating expenses.
Associated companies are all entities over which the company has significant influence, but not control or joint control. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but without the ability to have control over those policies. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognized at cost.
Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the group's share of the post-acquisition profits or losses of the investee in profit or loss, and the group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognized as a reduction in the carrying amount of the investment. When the group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealized gains on transactions between the group and its associates are eliminated to the extent of the group's interest in these entities. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred.
In October 2019 the Group sold most of its subsidiaries to the Odin Bidco AS as described in note 4. A part of the settlement was a share of ownership in Odin Bidco AS. The Group received a 10% equity stake with a value of MNOK 256, which represents the Group's value in Odin Bidco AS at transaction date. The shares received were 10,000,000
B-shares and the shares entitled the Group to 20% voting rights at the transaction. The Group has currently one member in the Board. Each of the original shareholders are entitled to have one board member as long as the shareholder interest is not reduced below 5% or in case of dilutive shareholder interests, below 2%. The investment is measured according to the equity method. In December 2019 additional contribution were called upon and MNOK 23 were paid in January, giving the Group 904,887 C-shares.
Odin Bidco AS invests in properties and consisted, by the end of 2019, of mainly the portfolio previously owned by the Group. Odin Bidco AS has it's headquarter in Oslo, Norway. Odin Bidco AS have three shareholder classes; A, B and C. Dividends are distributed unevenly between the share classes. A-shares are guaranteed a total annual return of 6%. C-shares shall receive a portion of ordinary dividend equal to i ts share of total share capital and B-shares receives any surplus of ordinary dividends after allocation to A and C-shares.
| NOK thousand | 31.12.2019 | |
|---|---|---|
| Goodwill | 1 256 032 | |
| Investment properties | 5 397 791 | |
| Other non-current assets | 1 000 | |
| Cash | 305 285 | |
| Other current assets | 235 419 | |
| Borrowings (current and non-current) | -3 484 895 | |
| Other non-current liabilities | -792 203 | |
| Other current liabilities | -146 934 | |
| Net assets | 2 771 495 | |
| Share of ownership | 10 % | 277 150 |
| Distribution of loss uneavenly between share classes | -285 | |
| Carrying amount | 276 865 | |
Changes in carrying amount in the period:
| NOK thousand | 2 019 |
|---|---|
| A-shares received in sale of PPG (note 4) | 256 333 |
| Additional contribution C-shares | 23 196 |
| Share of loss in Odin Bidco AS | -2 647 |
| Share of other comprehensive income | -17 |
| Carrying amount at 31.12 | 276 865 |
Share of loss in the period is calculated as:
| NOK thousand | A - shares | B-Shares | C-shares | Total |
|---|---|---|---|---|
| Net income allocated to share classes in Odin Bidco AS | 230 137 | -2 618 999 | -21 402 152 | -23 791 014 |
| The Group' share of different share classes per 31.12 | 0 % | 100 % | 1 % | |
| Share of loss in the owner period | - | -2 618 999 | -43 609 | -2 662 608 |
The share of loss related to c-shares is calculated as the share of loss after the contribution in December 2019.
A financial instrument is a contract that gives rise to both a financial asset for one entity and a financial liability or equity instrument for another entity. Financial instruments are generally recognized as soon as the group becomes a party to the terms of the financial instrument.
Financial assets include, in particular, cash and cash equivalents, trade receivables and other loans and receivables. Financial instrument classification is based on the business model in which the instruments are held as well as the structure of the contractual cash flows.
Financial assets measured at amortized cost are non-derivative financial assets with contractual payments that consist exclusively of payments of interest and principal on the outstanding nominal amount and are held with the objective of collecting the contractually agreed cash flows, such as loans and receivables, trade receivables or cash and cash equivalents (the "hold" business model).
After initial recognition, these financial assets are measured at amortized cost using the effective interest method less impairment. Gains and losses are recognized in profit or loss when the loans and receivables are impaired or derecognized. Interest effects from the application of the effective interest method and effects from currency translation are also recognised through profit or loss.
Financial assets measured at fair value through profit or loss comprise financial assets whose cash flows do not relate solely to payments of interest and repayments of principal on the outstanding nominal amount. Gains or losses on these financial assets are recognized through profit or loss.
Financial liabilities regularly give rise to a redemption obligation in cash or another financial asset. These include in particular bonds and other securitized liabilities, trade payables, liabilities to banks, liabilities to affiliated companies and derivatives designated as hedges. Financial liabilities are classified into the following categories:
Upon initial recognition, financial liabilities are measured at fair value. The transaction costs directly attributable to the acquisition are also recognized for all financial liabilities that are subsequently measured at fair value not through profit or loss. Trade payables and other non-derivative financial liabilities are generally measured at amortized cost using the effective interest method. A fi nancial liability is derecognized when the obligation underlying the liability is discharged, cancelled or expires.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This applies regardless of whether the price is directly observable or estimated using a valuation method.
The fair value is not always available as a market price but must be calculated on the basis of a range of valuation parameters. For this purpose, various categories are established in which, depending on the availability of observable parameters and the significance of these parameters for determining the fair value as a whole, the following levels apply:
Financial instruments and investment properties that are measured at fair value in the financial statements require disclosure of fair value measurements by level based on the following fair value measurement hierarchy:
Valuation of investment properties is categorised as level 3 in the fair value hierarchy as the valuation requires the use of significant unobservable inputs. An explanation of the valuation methodologies and the inputs to the valuation model is provided in note 7.
The Group holds the following financial assets and liabilities:
| NOK thousand | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Financial assets at amoritsed cost | ||
| Other non-current assets | - | 1,000 |
| Cash and cash equivalents | 1,860,813 | 283,271 |
| Trade and other receivables | 20,994 | 6,269 |
| Financial assets at fair value through profit or loss | ||
| Earn Out 1) | 90,000 | - |
| Currency swap 2) | 5,204 | - |
| Other investments 3) | 23,258 | - |
| 2,000,269 | 289,540 | |
| Financial liabilities at amortised cost | ||
| Borrowings | - | 3,241,335 |
| Other current liabilities | 55,906 | 48,042 |
| 55,906 | 3,289,377 |
Changes in fair value of financial assets recognised in profit or loss
| NOK in thousand | 2019 | 2018 |
|---|---|---|
| Currency swap | 5,204 | - |
| Other items | 269 | - |
| Total | 5,473 | - |
Trade and other receivables includes the following items:
| NOK thousand | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Earn out | 90 000 | - |
| Currency swap | 5 205 | - |
| Accounts receivable | 2 643 | 1 098 |
| Tax receivables from 2018 | 5 737 | - |
| Other receivables | 12 614 | 5 171 |
| Total | 116 198 | 6 269 |
Cash and cash equivalents include bank deposits.
| NOK in thousand | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Bank deposits | 1 860 813 | 283 271 |
| Total | 1 860 813 | 283 271 |
All interest income relates to interest on bank deposits.
The bank deposits include restricted cash related to tax withholding account of TNOK 2 242 per 31 December 2019 (TNOK 206 per 31 December 2018).
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the duration of the borrowings.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Interest-bearing liabilities and available cash and cash equivalents constitute the capital of the Group. The Group's main source of financing are bank loans, bond loans in the Norwegian bond market and shareholder loans.
The Group had no borrowings as of 31 December 2019, 2018 are summarized per tranche:
| NOK thousand | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Non-current | ||
| Commercial bank loans | - | 1 189 672 |
| Husbank loans (state bank) | - | 728 470 |
| Bonds in Pioneer Public Properties | - | 993 149 |
| Total | - | 2 911 291 |
| NOK thousand | 31.12.2019 | 31.12.2018 |
| Current | ||
| Commercial bank loans | - | 292 318 |
| Husbank loans (state bank) | - | 37 726 |
| Bonds in Pioneer Public Properties | - | |
| Total | - | 330 044 |
| NOK thousand | 31.12.2019 | 31.12.2018 |
| Total non-current and current | ||
| Commercial bank loans | - | 1 481 990 |
| Husbank loans (state bank) | - | 766 196 |
| Bonds in Pioneer Public Properties | - | 993 149 |
| Total | - | 3 241 335 |
See note 5 for the maturity of financial liabilities at the end of the period.
There were no pledged assets as of 31 December 2019:
| NOK thousand | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Investment property | - | 5 269 296 |
| Total pledged assets | - | 5 147 932 |
Changes in borrowings from financing activities:
| Non-current | Current | ||
|---|---|---|---|
| NOK thousand | borrowings | borrowings | Total |
| At 1 January 2019 | 2 911 291 | 330 044 | 3 241 335 |
| Cash flows | |||
| Repayments | - | -56 068 | -56 068 |
| Non-cash: | - | ||
| Sale of operations | -2 911 291 | -273 976 | -3 185 267 |
| At 31 December 2019 | - | - | - |
| At 1 January 2018 | 2 637 759 | 69 490 | 2 707 249 |
| Cash flows | |||
| Cash flow received | 1 024 511 | -69 490 | 955 021 |
| Repayments | -515 556 | - | -515 556 |
| Acquisitions | 75 047 | - | 75 047 |
| Non-cash: | - | ||
| Effects of foreign exchange | 14 962 | - | 14 962 |
| Amortization | 4 612 | - | 4 612 |
| Borrowing classified as non | |||
| current at 31 December 2017 | |||
| becoming current during 2018 | -330 044 | 330 044 | - |
| At 31 December 2018 | 2 911 291 | 330 044 | 3 241 335 |
| NOK in thousand | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Trade payable | 1,975 | 835 |
| Government taxes | 45 | 1,181 |
| Accrued interest | - | 20,328 |
| Dividend | 12,188 | 12,188 |
| Accrued cost, Prepaid revenues | 3,189 | 3,449 |
| Other current liabilities | 38,509 | 10,062 |
| Total other current liabilities | 55,906 | 48,042 |
Revenue is recognised when it is probable that transactions will generate future economic benefits that will flow to the company and the amount can be reliably estimated. Revenues are presented net of value added tax and discounts.
Revenue consists of rental income. Revenues are presented net of VAT, discounts and rebates. Service charge expenses are charged to tenants and recognised in the balance sheet together with payments on account of tenants, and therefore does not affect the result beyond an administrative premium recognised under revenue.
Properties are leased out on long term triple-net contracts to solid preschool operators as Norlandia and Kidsa Drift. After the sale of the total portfolio, except for one property (see also note 4) the new Group is mainly formed by the acquisition from Norlandia in November 2019, see note 18.
The group is the lessor of investment properties. The group's contractual rental income is distributed as follows, where the numbers are adjusted annually to reflect CPI or an equivalent index in the relevant country. The rent in the table below are adjusted with an annual increase of 2% yields. The 2018 figures include discontinued operations as sold in 2019, see note 4.
| NOK in thousand | 31/12/2019 31/12/2018 | |
|---|---|---|
| Within 1 year | 10,930 | 307,025 |
| Between 1 and 5 years | 45,198 | 1,315,904 |
| After 5 years | 117,348 | 3,628,785 |
| Total | 173,476 | 5,251,714 |
The Group rents out the investment properties to tenants on long term triple-net contracts where the operator has the main responsibility for annual maintenance, insurance, and other directly related property costs including tax . On average there are 15 years remaining of the lease agreements. All agreements are fully adjusted annually to reflect CPI, or an equivalent index in the relevant country. There is no variable rent.
| NOK in thousand | 2019 2018 restated | |
|---|---|---|
| Salary | 4,964,000 | 490,000 |
| Payroll tax | 699,924 | 69,090 |
| Pension benefits | - | - |
| Other benefits | 101,383 | - |
| Total salary and pension costs | 5,765,307 | 559,090 |
| Average Employees | 3 | 0.2 |
The remuneration to the management for the full year 2019:
| Other | Pension | Total | ||
|---|---|---|---|---|
| NOK | Salary | benefits | benefits | compensation |
| Anders Løken | 4 521 030 | 5 110 | 136 821 | 4 662 961 |
| Ole-Kristofer Bragnes (CFO) | 825 000 | - | - | 825 000 |
| Total management remuneration | 5 346 030 | 5 110 | 136 821 | 5 487 961 |
Anders Løken was the CEO of Pioneer Property Group ASA until 29th October 2019, then John Ivar Busklein became the CEO of Pioneer Property Group ASA in a part time position at 28,4%. No salary has been paid to John Ivar Busklein in 2019, but TNOK 100 has been allocated for his salary in 2019. Ole-Kristofer Bragnes held the position as CFO from 24 October 2019.
Ole-Kristofer Bragnes (CFO) will receive a bonus of NOK 450 000 in December 2020 if he is still employed. No member of the management has in their agreement that they will get any right to compensation after termination of employment. No loans or guarantees have been given to any members of the management, the Board of directors or other corporate bodies.
The board of directors of PPG has prepared a determination of salary and other remuneration to the executive management, in accordance with applicable law. The declaration includes the policies which PPG will use for the determination of salary and other remuneration to its executive management in the calendar year 2020 as published on the company's web page pioneerproperty.no. These policies shall be subject to an advisory vote by the general meeting.
The remuneration to the management in 2018:
| NOK | Salary | Other benefits |
Pension benefits |
Total compensation |
|---|---|---|---|---|
| Anders Løken | 150 000 | 366 | 13 942 | 164 308 |
The management was insourced in 2018 through the acquisition of Pioneer Management AS in November 2018, to secure direct control of business-critical management services and systems for the Group. Following the acquisition, the administration of Pioneer Property Group ASA was employed in a fully owned subsidiary of Pioneer Property Group ASA. Prior to December 2018 the administration was based on a management and did not receive compensation directly from the Group.
The remuneration to the Board of Directors:
| NOK | 2019 | 2018 |
|---|---|---|
| Roger Adolfsen (Charirman of the board) | 100 000 | 100 000 |
| Geir Hjorth (board member) | 90 000 | 100 000 |
| Sandra Riise (board member) | 100 000 | 100 000 |
| Even Carlsen (board member) | 90 000 | 90 000 |
| Nina Høisæter (board member) | 100 000 | 100 000 |
| Total salary and pension costs | 480 000 | 490 000 |
| NOK in thousand | 2019 | 2018 |
|---|---|---|
| Management fee | 58 | 84 |
| Other operating expenses | 3 869 | 1 477 |
| Auditing fees | 161 | 473 |
| Other fees from the auditor | 1 054 | 197 |
| Total other operating expenses | 5 141 | 2 232 |
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except when related to items recognised in other comprehensive income or directly in equity. In such cases, the tax amount is also recognised in other comprehensive income or directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authoriti es.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Changes in deferred tax liabilities:
| NOK in thousand | Investment property | Other items | Total |
|---|---|---|---|
| 01/01/2018 | 157,899 | 2,565 | 160,464 |
| Recognized deferred tax | 28,407 | -602 | 27,805 |
| 31/12/2018 | 186,306 | 1,963 | 188,269 |
| Recognized deferred tax | -899 | 598 | -301 |
| Sale of operations | -185,250 | -1,963 | -187,213 |
| 31/12/2019 | 157 | 598 | 756 |
| Income tax expense: NOK in thousand |
2019 | 2018 | |
| Tax payable | 143 | 24,323 | |
| Change in deferred tax | -301 | 27,805 | |
| Other changes | - | -403 | |
| Income tax expense | -158 | 51,725 | |
| of which related to discontinued operations | 49,067 |
Reconciliation of tax expense:
| NOK in thousand | 2019 | 2018 |
|---|---|---|
| Profit before income tax | -3 892 | 246 834 |
| Tax expense based on standard rate of | ||
| Norwegian (22%/23%) | -856 | 56 772 |
| Adjustments for: | ||
| Changes in tax rate (from 23% to 22%/from 24% to 23%) | 4 | -8 558 |
| Effect of tax rates outside Norway | -8 | -1 207 |
| Changes in temporary differences not included in the calculation of deferred tax | - | 2 863 |
| Changes related to currency translation | - | 98 |
| Permanent differences | 703 | - |
| Purchase of business | - | 1 941 |
| Other differences | - | -183 |
| Income tax expense for the period | -158 | 51 725 |
| of which related to discontinued operations | 49 067 | |
| Estimated effective tax rate for the period | 4,1% | 21,0% |
The Group has applied the main rule for recognition of deferred tax in connection with the purchase of shares in property companies that are not acquired through a business combination. This means that deferred tax is recognised as the difference between the tax value and accounting value of inves tment property in the subsidiary, and value changes of the investment property. Not recognised deferred tax linked to initial recognition exemption for investment properties per 31 December 2019 is MNOK 19 (MNOK 570 in 2018).
The Group's preference shares are entitled to a fixed dividend of NOK 7.50 per annum, if the General Assembly approves payment of dividends. To calculate the earnings per share the entitled dividend to the preference shares is deducted from comprehensive income for the period. The earnings per ordinary share is the remaining comprehensive income deducted the preference share dividend divided by the weighted average number of shares in issue during the period.
Earnings per share from continuing operations.
| NOK | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Net profit continuing operation | -3 733 986 | -3 621 357 |
| Less pref share dividends | -48 750 000 | -48 750 000 |
| Profit attributable to ord shares | -52 483 986 | -52 371 357 |
| Weighted avg ord shares | 9 814 470 | 9 814 470 |
| EPS to ord shares | -5,35 | -5,34 |
Earnings per share from discontinued operations:
| NOK | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Net profit discontinuing operations | 846 100 104 | 0 |
| Less pref share dividends | - | 0 |
| Profit attributable to ord shares | 846 100 104 | 0 |
| Weighted avg ord shares | 9 814 470 | 9 814 470 |
| EPS to ord shares | 86,21 | 0,00 |
Diluted
As per 31 December 2019 no rights are issued which cause diluted earnings per share to be different to basic earnings per share. Refer to note 20 for information related to the classes of shares.
The acquisition method of accounting is used to account for business combinations by the group. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, liabilities incurred to the former owners of the acquired business, equity interests issued by the Group, fair value of any asset or liability resulting from a contingent consideration arrangement and fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognizes any noncontrolling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value, or at the noncontrolling interest's proportionate share of the acquired entity's net identifia ble assets.
Acquisition-related costs are expensed as incurred.
An acquisition of entities not comprising any business activities is viewed as a purchase of assets. The acquisition cost is allocated to the acquired assets and no deferred tax is calculated for temporary differences that arise at their initial recognition. Acquisition related costs are capitalized with the asset.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies
Upon purchase of property management assess whether the purchase constitute purchase of a business or purchase of an asset in accordance with IFRS 3.
In November 2019 the Group acquired one property in Sweden, three properties in the Netherlands and eight properties in Poland from Norlandia.
| NOK in thousand | 2019 |
|---|---|
| Purchase of subsidiaries/Properties -cash | 52 792 |
| Cash acquired companies | 1 834 |
| Debt acquired companies | 148 034 |
| Company | Location | Share of |
|---|---|---|
| Name | ownership | |
| Pioneer Property Group International AS | Norway | 100 % |
| Bonomen AB | Sweden | 100 % |
| PPG OG B.V | Netherlands | 100 % |
| PPG Netherlands B.V | Netherlands | 100 % |
| PPG Poland Holding Sp.Z.o.o | Poland | 100 % |
| CPP Lezno Sp. Z.o.o | Poland | 100 % |
| CPP Sulechow Sp Z.o.o | Poland | 100 % |
| CPP Strakowa Sp. Z.o.o | Poland | 100 % |
| PPG Netherlands Holding B.V | Netherlands | 100 % |
| Company Name |
Location | Share of ownership |
|---|---|---|
| Pioneer Property Group International AS | Norway | 100 % |
| Pioneer Preschools AS | Norway | 100 % |
| Kidsa Ospeli Eiendom AS | Norway | 100 % |
| Bonomen AB | Sweden | 100 % |
| PPG OG B.V | Netherlands | 100 % |
| PPG Netherlands B.V | Netherlands | 100 % |
| PPG Poland Holding Sp.Z.o.o | Poland | 100 % |
| CPP Lezno Sp. Z.o.o | Poland | 100 % |
| CPP Sulechow Sp Z.o.o | Poland | 100 % |
| CPP Strakowa Sp. Z.o.o | Poland | 100 % |
| PPG Netherlands Holding B.V | Netherlands | 100 % |
The Group entered into an agreement in November 2018 to acquire 100% of the shares in Pioneer Management AS (Pioneer Management) from Pioneer Capital Partners AS (PCP).
Pioneer Management has a management agreement with the Group and has provided management services, including staffing the executive management positions including CEO and CFO.
The underlying objective of the transaction was to insource the management services provided for under the management agreement as the Company has reached a size that makes it natural to secure direct control of business-critical management services and systems. As part of the transaction the company also bought the minority interest held by the previous owners of Pioneer Management.
Total consideration was NOK 29,153 thousand which wa s settled in cash. All values in the transaction were identified:
| NOK in thousand | |
|---|---|
| Purchase consideration | 29 153 |
| Net assets acquired: | |
| Current assets | 1 578 |
| Cash and cash equivalents | 13 127 |
| Current liabilities | -12 143 |
| Shares in Pioneer Public Property AS | 26 591 |
| Net assets acquired | 29 153 |
All excess values are allocated to the investment in shares in Pioneer Public Property V, of which Pioneer Management AS is a minority shareholder. As Pioneer Public Property V is a company held by the Group this is regarded as transaction with own shares and the allocated value is recognised as a reduction in equity. The reduction is presented as purchase of shares from non-controlling interests.
Balances and transactions between the company and its subsidiaries, which are related parties to the company, have been eliminated on consolidation and are not disclosed in this note.
| Related party | Relation to the Group |
|---|---|
| Roger Adolfsen | Chairman of the Board and owner of Mecca Invest AS |
| Sandra Henriette Riise | Board member |
| Geir Hjort | Board member |
| Even Carlsen | Board member and owner of Grafo AS |
| Nina Hjørdis Torp Høisæter | Board member |
| Hospitality Invest AS | Substantial shareholder |
| Grafo AS | Substantial shareholder |
| Klevenstern AS | Substantial shareholder |
| Mecca Invest AS | Substantial shareholder |
| Oslo Corporate Holding AS | Controlled by substantial shareholders, refer to note 20 |
| Norlandia Care Group AS | Controlled by substantial shareholders, refer to note 20 |
| Kidsa Drift AS | Controlled by substantial shareholders, refer to note 20 |
| Kidsa Barnehager AS | Controlled by substantial shareholders, refer to note 20 |
| Acea Properties AS | Controlled by substantial shareholders, refer to note 20 |
The Group has the following related parties as of 31.12.2019:
Indirect ownership of shares by board member per the balance sheet date:
| 2019 | 2018 | |||
|---|---|---|---|---|
| Ord. Shares | Pref. shares | Ord. Shares Pref. shares | ||
| Roger Adolfsen | 3 002 747 | 11 190 | 2 994 510 | 136 864 |
| Even Carlsen | 1 773 386 | 176 389 | 1 773 386 | 340 424 |
The Group had the following material transactions with related parties:
| NOK in thousand | 2019 | 2018 |
|---|---|---|
| Rent revenue from Norlandia Care Group AS including subsidiaries | 74,347 | 70,661 |
| Rent revenue from Kidsa Drift including subsidiaries | 36,646 | 42,191 |
| Success fee M&A services and Managemnet fee to Hospitality Invest AS | 15,459 | - |
| Success fee to Oslo Corporate Holding AS | 5,000 | - |
| Sale of shares and properties to related parties | 39,375 | - |
| Purchase of receivables from related parties | 150,007 | |
| Purchase of shares and properties from related parties (refer to note 18) | 49,322 | 163,502 |
Transactions made between the related parties are made on terms equivalent to those that prevail in the market at arm length.
| Receivables from related parties | ||
|---|---|---|
| NOK in thousand | 31.12.2019 | 31.12.2018 |
| Norlandia companies | 2 643 | 522 |
| Liabilities to related parties | ||
| NOK in thousand | 31.12.2019 | 31.12.2018 |
| Norlandia companies | 15 681 | - |
For compensation to key management personnel, see note14.
Preference share buy-back program (see also note 20)
As part of the preference share buy-back program, the Group has acquired treasury shares to a price of NOK 102 per share from the following related parties:
Roger Adolfsen (chairman of the board of directors) has through his wholly owned company Mecca Invest AS sold 110,187 preference shares and will, following the transaction hold 5,628 preference shares in the Group. In addition, Roger Adolfsen holds 25% of the shares in Acea Properties AS, which directly and indirectly sold 34,903 preference shares and after the transaction directly and indirectly owns 20,857 preference shares in PPG and approximately 46% of the shares in Hospitality Invest AS, which directly and indirectly sold 14,723 preference shares and after the transaction directly and indirectly owns 752 preference shares in the Group
Even Carlsen (member of the board of directors) has through his wholly owned company Grafo AS sold 155,309 preference shares and will, following the transaction hold 171,175 preference shares in the Group. In addition, Even Carlsen holds 25% of the shares in Acea Properties AS, which directly and indirectly sold 34,903 p reference shares and after the transaction directly and indirectly owns 20,857 preference shares in the Group.
The Company have two classes of shares, ordinary shares and preference shares. As of 31 December 2019, Pioneer Property Group ASA had a share capital of NOK 16,314,470, divided into 9,814,470 ordinary shares and 6,500,000 preference shares with a nominal value of NOK 1 per share for both categories. There were no changes in the share capital during 2019.
The differences between the share classes are differing voting rights and differing rights to the Company's profit. The regulations on voting rights and dividends are decided upon by the Shareholders' Meeting and can be found in the Articles of Association.
The Company's ordinary share confers one vote unlike the preference shares that confer one-tenth of a vote.
The Company's preference shares confer a preferential right over ordinary shares to an annual divi dend of NOK 7.50 per preference share. Dividend payments are made quarterly with NOK 1.875 per preference share, if approved by the General Assembly. The preference share does not otherwise confer a right to dividend. If the general meeting decided not to pay dividends or to pay dividends that fall below NOK 1.875 per preference share during a quarter, the difference between paid dividends and NOK 1.875 per preference share shall be accumulated and adjusted upwards with an annual interest rate of 5 per cent until full dividends have been distributed. No dividends may be distributed to the ordinary shareholders until the preference shareholders have received full dividends including the withheld amount.
| Share value in NOK | ||||||
|---|---|---|---|---|---|---|
| Number of | Ordinary | Preference | Treasury | Total | ||
| shares | shares | shares | Share premium | shares | ||
| At 1 January 2018 | 16 314 470 | 9 814 470 | 6 500 000 | 1 487 325 615 | - | 1 503 640 085 |
| At 31 December 2018 | 16 314 470 | 9 814 470 | 6 500 000 | 1 487 325 615 | - | 1 503 640 085 |
| Payment premiums 2019 | - | - | - | -284 440 898 | - | -284 440 898 |
| Acquisition of treasury shares | - | - | - | -1 631 000 | -1 631 000 | |
| At 31 December 2019 | 16 314 470 | 9 814 470 | 6 500 000 | 1 202 884 717 | -1 631 000 | 1 217 568 187 |
Of the payment of premiums in 2019, TNOK 272,253 was paid out to holders of ordinary shares, while TNOK 12,187 were paid out to holders of preference shares. The distribution to holders of the ordinary shares were NOK 27.74 per ordinary share.
As part of the Group's buy back of own preference shares program, the Group acquired in November 2019 1,631,447 own preference shares in PPG at a price of NOK 102.00 per preference share. This equals approximately 10% of the share capital, which represents 1.56% of the votes. Detailed information regarding dividends, issues and redemption can be found in the Company's Articles of Association, available in the prospectus at the Company's website.
| Ordinary | Preference | Voting | |
|---|---|---|---|
| shares | shares | share | |
| Hospitality Invest AS | 32,62% | 0,00% | 30,60% |
| Eidissen Consult AS | 18,07% | 7,90% | 17,44% |
| Grafo AS | 18,07% | 2,63% | 17,11% |
| Mecca Invest AS | 14,45% | 0,09% | 13,55% |
| Klevenstern AS | 14,45% | 0,08% | 13,55% |
| HI Capital AS | 2,34% | 0,00% | 2,20% |
| Pioneer Property Group ASA | 0,00% | 25,10% | 1,56% |
| Avanza Bank AB | 0,00% | 7,56% | 0,47% |
| Nordnet Bank AB | 0,00% | 4,54% | 0,28% |
| Timbercreek Fourquadglreal est par | 0,00% | 4,50% | 0,28% |
| Other Shareholders | 0,00% | 48,00% | 2,96% |
| Total | 100 % | 100 % | 100% |
| Related party: | |||
| Norlandia Care Group AS | 0,00 % | 0,01 % | 0,01% |
| Acea Properties AS | 0,00 % | 0,03 % | 0,02% |
| Northstar Properties AS | 0,00 % | 0,29 % | 0,18% |
| Ordinary | Preference | Voting | |
|---|---|---|---|
| shares | shares | share | |
| Hospitality Invest AS | 32,62 % | 0,00 % | 30,60% |
| Eidissen Consult AS | 18,07 % | 11,98 % | 17,69% |
| Grafo AS | 18,07 % | 5,02 % | 17,26% |
| Mecca Invest AS | 14,45 % | 1,78 % | 13,66% |
| Klevenstern AS | 14,45 % | 1,63 % | 13,65% |
| Avanza Bank AB | 0,00 % | 8,15 % | 0,51% |
| Norron Sicav - Target | 0,00 % | 6,22 % | 0,39% |
| The Bank of New York Mellon | 0,00 % | 5,76 % | 0,36% |
| Skandinaviska Enskilda bank AB | 0,00 % | 5,01 % | 0,31% |
| HI Capital AS | 2,34 % | 0,00 % | 2,20% |
| Other shareholders | 0,00 % | 54,45 % | 3,38% |
| Total | 100 % | 100 % | 100% |
| Related party: | |||
| Norlandia Care Group AS | 0,00 % | 0,24 % | 0,01% |
| Acea Properties AS | 0,00 % | 0,56 % | 0,04% |
| Northstar Properties AS | 0,00 % | 0,29 % | 0,02% |
The group has not been involved in any legal or financial disputes in the period covered by these consolidated financial statements, where an adverse outcome is considered more likely than remote.
As Odin Bidco AS finalised the acquisition of Gnist Eiendom in 2020, the earn-out related to the sale of PPP and PM was released and the Group received the earn out consideration of MNOK 100 (see also note 4 and 9 for more information).
PPG acquired bonds in Norlandia Health & Care Care Group ASA (NHC01 and NHC02) and Hospitality Invest AS (HOIN02) with a par values of NOK 196.0m (NHC01), SEK 163.5 (NHC02) and NOK 50.0m (HOIN02). After year end, the Group subscribed for MNOK 100, divided between two separate reputable Nordic high yield funds.
As approved by the Board Meeting at 18 February the first quarter dividend to preference shareholders was paid by NOK 1.875 per preference share at 8 April 2020.
On 18 November 2019, the Group purchased 1,631,447 preference shares in the Group at a price of NOK 102.00 per preference share pursuant to the above-mentioned Board Authorisation (the "November 2019 Buy-Back"). Following the November 2019 Buy-Back, the general meeting of the Group resolved to reduce the Group's share capital with NOK 1,631,447 by redemption of the 1,631,447 preference shares purchased by the Group in connection with the November 2019 Buy-Back. The share capital reduction was registered with the Norwegian Register of Business Enterprises on 26 February 2020. The Group's new share capital is NOK 14,683,023 divided into 9,814,470 ordinary shares and 4,868,553 preference shares, each with a nominal value of NOK 1.00. After this the Group held no preference shares.
PPG purchased further 987,966 preference shares in PPG at a price of NOK 102 per preference share. Following the transaction, PPG holds no ordinary shares and 987,966 preference shares in PPG (approximately 6.73% of the share capital), which represents 0.96% of the votes.
COVID-19 represents an extraordinary situation, and it is uncertain how the pandemic will impact society as a whole and thus how it may affect the group going forward. The material risk factors for the group i s estimated to be a potential reduction of rent income and change in interest rate affecting potential borrowing costs, interest rate income as well as it may change the yield levels affecting real estate valuations. PPGs lease agreement are triple-net and not linked to preschool utilisation. The company has at present not received any covid-19 related tenant inquiries and does not expect a reduction in rental income due to the pandemic. Further it is difficult to estimate the current financial impact at present with regards to interest rate effects as both the macro economic consequences and the duration of COVID-19 are uncertain. The situation is closely being monitored by the management and the board of directors.
The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2019:
The Group has adopted IFRS 16 Leases from 1 January 2019 using the simplified transition approach in accordance with IFRS 16.C5(b) and has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The Group has only one leasing contrac t at 1 January 2019, the lease of the head office. The lease term was 12 months with no minimum rental period. In applying IFRS 16 for the first time, the Group has used the following practical expedients as permitted by IFRS 16: The accounting for operati ng leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases. As a consequence of applying the practical expedient there were no implementation effects of IFRS 16 in the opening balance as of 1 January 2019.
The group has elected not to early adopt any standards or interpretations that have an adoption date after the balance sheet date. The most relevant is described below:
The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term 'outputs' is amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. The amendments will likely result in more acquisitions being accounted for as asset acquisitions, however as the acquisitions of properties in the Group already is regarded as asset acquisition no changes are expected when it comes to future acquisitions of same types of properties
Organization number. 914839327
| Note | 2019 | 2018 | |
|---|---|---|---|
| OPERATING REVENUE AND EXPENCES Operating revenue Total operating revenue |
0 | 0 | |
| Operating expenses Employee benefits expense |
1 | 5 765 307 | 559 090 |
| Other operating expenses | 1 | 4 952 120 | 2 054 472 |
| Total operating expenses | 10 717 427 | 2 613 562 | |
| OPERATING PROFIT OR LOSS | (10 717 427) | (2 613 562) | |
| FINANCIAL INCOME AND EXPENSES Financial income |
|||
| Changes in market value of fin. cur. assets | 269 097 | 0 | |
| Income from subsidiaries | 10,11 | 1 351 091 804 | 51 534 000 |
| Interest recieved from group companies | 4 | 1 185 081 | 5 687 433 |
| Other interests | 12 719 557 | 44 284 | |
| Other financial income | 0 | 27 | |
| Total financial income | 1 365 265 540 | 57 265 744 | |
| Financial expenses Interest paid to group companies |
4 | 234 711 | 0 |
| Other interests | 261 348 | 34 152 | |
| Other financial expense | 505 942 | 0 | |
| Total financial expenses | 1 002 001 | 34 152 | |
| NET FINANCIAL INCOME AND EXPENCES | 1 364 263 539 | 57 231 592 | |
| ORDINARY RESULT BEFORE TAXES | 1 353 546 112 | 54 618 030 | |
| Tax on ordinary result | 2 | 484 338 | 12 570 002 |
| ORDINARY RESULT | 1 353 061 774 | 42 048 028 | |
| TO MAJORITY INTERESTS | 1 353 061 774 | 42 048 028 | |
| APPLICATION AND ALLOC. | |||
| To ordinary dividends payable | 200 018 899 | 12 187 500 | |
| To additional dividends payable | 36 562 498 | 36 562 499 | |
| Given intra-group contribution | 0 | 0 | |
| To/from other equity | 1 116 480 377 | (6 701 971) | |
| TOTAL APPLICATION AND ALLOCATION | 1 353 061 774 | 42 048 028 |
| Note | 31.12.2019 | 31.12.2018 | |
|---|---|---|---|
| ASSETS | |||
| FIXED ASSETS | |||
| Financial fixed assets | |||
| Investments in subsidiaries | 3 | 1 884 982 | 1 414 132 085 |
| Loans to group companies | 4 | 195 468 061 | 27 048 732 |
| Investments in associates | 3 | 279 528 573 | 0 |
| Total financial fixed assets | 476 881 616 | 1 441 180 817 | |
| TOTAL FIXED ASSETS | 476 881 616 | 1 441 180 817 | |
| CURRENT ASSETS | |||
| Receivables | |||
| Receivables on group companies | 4 | 0 | 124 254 456 |
| Other short-term receivables | 95 736 681 | 0 | |
| Total receivables | 95 736 681 | 124 254 456 | |
| Investments | |||
| Quoted bonds | 8 | 23 258 007 | 0 |
| Total investments | 23 258 007 | 0 | |
| Bank deposits, cash in hand, etc. | 7 | 1 858 087 024 | 17 429 929 |
| TOTAL CURRENT ASSETS | 1 977 081 712 | 141 684 385 | |
| TOTAL ASSETS | 2 453 963 329 | 1 582 865 201 |
| Note | 31.12.2019 | 31.12.2018 | ||
|---|---|---|---|---|
| EQUITY AND LIABILITIES | ||||
| EQUITY | ||||
| Paid-in equity | ||||
| Share capital | 5,6,9 | 16 314 470 | 16 314 470 | |
| Own shares Share premium reserve |
5 5 |
(1 631 447) 1 002 865 819 |
0 1 487 325 615 |
|
| Total paid-in equity | 1 017 548 842 | 1 503 640 085 | ||
| Retained earnings Other equity |
5 | 1 196 235 079 | 45 308 341 | |
| Total retained earnings | 1 196 235 079 | 45 308 341 | ||
| TOTAL EQUITY | 2 213 783 921 | 1 548 948 426 | ||
| LIABILITIES | ||||
| CURRENT LIABILITIES | ||||
| Accounts payable | 1 948 922 | 0 | ||
| Income tax payable | 2 | 0 | 12 571 782 | |
| Public duties payable Dividends payable |
44 887 212 206 399 |
0 12 187 500 |
||
| Liabilities to group companies | 4 | 2 201 536 | 4 554 149 | |
| Other currents liabilities | 23 777 663 | 4 603 344 | ||
| TOTAL CURRENT LIABILITIES | 240 179 407 | 33 916 775 | ||
| TOTAL LIABILITIES | 240 179 407 | 33 916 775 | ||
| TOTAL EQUITY AND LIABILITIES | 2 453 963 329 | 1 582 865 201 | ||
| Oslo 23.04.2020 | ||||
| Roger Adolfsen | Sandra H Riise | Geir Hjorth |
Even Carlsen Nina H. T. Høisæter John Ivar Busklein Board member Board member CEO
Chairman Board member Board member
The financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway.
Current assets and short term liabilities consist of receivables and payables due within one year, and items related to the inventory cycle. Other balance sheet items are classified as fixed assets / long term liabilities.
Current assets are valued at the lower of cost and fair value. Short term liabilities are recognized at nominal value.
Fixed assets are valued at cost, less depreciation and impairment losses. Long term liabilities are recognized at nominal value.
Subsidiaries and investments in associates are valued at cost in the company accounts. The investment is valued as cost of the shares in the subsidiary, less any impairment losses An impairment loss is recognised if the impairment is not considered temporary, in accordance with generally accepted accounting principles. Impairment losses are reversed if the reason for the impairment loss disappears in a lather period.
Dividends, group contributions and other distributions from subsidiaries are recognised in the same year as they are recognised in the financial statement of the provider. If dividends / group contribution exceed withheld profits after the acquisition date, the excess amount represents repayment of invested capital, and the distribution will be deducted from the recorded value of the acquisition in the balance sheet for the parent company.
Accounts receivable and other current receivables are recorded in the balance sheet at nominal value less provisions for doubtful accounts. Provisions for doubtful accounts are based on an individual assessment of the different receivables. For the remaining receivables, a general provision is estimated based on expected loss.
The tax expense consists of the tax payable and changes to deferred tax. Deferred tax/tax assets are calculated on all differences between the book value and tax value of assets and liabilities. Deferred tax is calculated as 22 percent of temporary differences and the tax effect of tax losses carried forward. Deferred tax assets are recorded in the balance sheet when it is more likely than not that the tax assets will be utilized. Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions
Transactions in foreign currency are translated at the rate applicable on the transaction date. Monetary items in a foreign currency are translated into NOK using the exchange rate applicable on the balance sheet date. Non-monetary items that are measured at their historical price expressed in a foreign currency are translated into NOK using the exchange rate applicable on the transaction date. Non-monetary items that are measured at their fair value expressed in a foreign currency are translated at the exchange rate applicable on the balance sheet date. Changes to exchange rates are recognised in the income statement as they occur during the accounting period.
The cash flow statement is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term, highly liquid investments with maturities of three months or less.
The company's auditor expenses (VAT included) :
| 2019 | 2018 | |
|---|---|---|
| Staturory audit | 118 750 | 450 000 |
| Other services | 290 535 | 182 459 |
| Total | 409 285 | 632 459 |
| 2019 | 2018 | |
| Payroll | 4 964 000 | 490 000 |
| Payroll expenses (employer tax) | 699 924 | 69 090 |
| Other payments | 101 383 | 0 |
| Total | 5 765 307 | 559 090 |
It's been paid remuneration for directors with NOK 480 000.
| Roger Adolfsen (Chairman of the board) | 100 000 |
|---|---|
| Geir Hjorth (board member) | 90 000 |
| Sandra Riise (board member) | 100 000 |
| Even Carlsen (board member) | 90 000 |
| Nina Høisæter (board member) | 100 000 |
The company has two employees in 50% position and do not fall under the Act on Mandatory occupational pensions act.
Anders Løken was the CEO of Pioneer Property Group ASA until 29th October 2019, then John Ivar Busklein became the CEO of Pioneer Property Group ASA in a part time position at 28,4%. No salary has been paid to the new CEO, but there has been allocated NOK 100 000 for his salary this year.
| NOK | Bonus | Salary | Total Compensation |
|---|---|---|---|
| Ole-kristofer Bragnes (CFO) |
750 000 | 75 000 | 825 000 |
| Anders Løken (former CEO) |
2 900 000 | 0 | 2 900 000 |
| Total | 3 650 000 | 75 000 | 3 725 000 |
Ole-Krisofter Bragnes (CFO) will receive a bonus of NOK 450 000 in Desember 2020 if he is still employed.
No member of the management have in their agreement that they will get any right to compensation after termination of employment.
No loans or guarantees have been given to any members of the management, the Board of directors or other corporate bodies.
The board of directors of PPG has prepared a determination of salary and other remuneration to the executive management, in accordance with applicable law. The declaration includes the policies which PPG will use for the determination of salary and other remuneration to its executive management in the calendar year 2020 as published on the company 's web page pioneerproperty.no. These policies shall be subject to an advisory vote by the general meeting.
| Calculation of this years tax basis: | |
|---|---|
| Net profit/loss before tax expense | 1 353 546 112 |
| + Permanent differences | -1 351 344 576 |
| + Changes in temporary differences | 0 |
| - Paid group contributions | 2 201 536 |
| = Income | 0 |
| This years income tax expense consist of: | |
| Estimated tax of net profit | 484 338 |
| = Tax payable | 484 338 |
| +/- Change in deferred tax | 0 |
| = Total tax expense | 484 338 |
| Tax rate | 22 |
| current tax liability: | |
| Tax payable | 484 338 |
| +/- Effect on tax of group contributions | -484 338 |
| = Tax Payable | 0 |
Subsidiaries are valued at cost in the company accounts.
| Subsidiary, office location: | Owner- ship % |
voting rights % |
Net profit last year |
equity last year |
|---|---|---|---|---|
| Pioneer Preschools AS, Oslo | 100,00 % | 100,00 % | -212 936 | 93 332 |
| Pioneer Property Group International AS, Oslo 100,00 % | 100,00 % | -3 476 459 | - 1 907 281 |
| Associated company, office location: | Owner- | voting- | Net profit | equity |
|---|---|---|---|---|
| ship% | rights % | last year | last year | |
| Odin Bidco AS, Oslo | 10,00 % | 19,17 % | -1 986 373 | 2 793 299 713 |
Interest recieved from group companies NOK 1 185 081 and interest paid to group companies NOK 234 711.
| Pr 31.12. | pr 01.01. | |
|---|---|---|
| Receivables | ||
| Group contributions Other short term receivables Loans to group companies Total receivables |
0 0 195 468 061 195 468 061 |
51 534 000 72 720 456 27 048 732 151 303 188 |
| Liabilities | ||
| Group contributions Other short term liabilities Total Liabilities |
2 201 536 0 2 201 536 |
0 4 554 149 4 554 149 |
| Share capital | Own Shares | Share premium reserve |
Other equity | Total equity | |
|---|---|---|---|---|---|
| Pr 1.1 Ordinary result |
16 314 470 | 0 | 1 487 325 615 | 45 308 341 1 353 061 774 |
1 548 948 426 1 353 061 774 |
| Dividends | -200 018 899 | -200 018 899 | |||
| Dividends paid | -284 440 898 | -36 562 498 | -321 003 396 | ||
| Other Changes Pr 31.1.2 |
16 314 470 | -1 631 447 -1 631 447 |
1 002 865 819 | -165 572 537 1 196 235 079 |
-167 203 984 2 213 783 921 |
Other Changes:
Own Shares in other equity -165 572 537
Due to the liquidity situation in PPG after the sale of PPP and PM, the board of directors wished to have the opportunity to optimize the capital structure of the Company. This was accepted by the general meeting which gave the board an authorisation to acquire treasury shares of a total nominal value of NOK 3,262,894, provided however that the Company's holding of treasury shares at any given time shall not exceed 10% of the Company's share capital. In November 2019 PPG acquired through a book building process 1,631,447 preference shares in PPG at a price of NOK 102.00 per preference share. Following the transaction, PPG held no ordinary shares and 1,631,447 preference shares in PPG (approximately 10% of the share capital), which represented 1.56% of the votes. The general meeting later passed in January 2020 a resolution to decrease the share capital in PPG with NOK 1,631,447 by redemption of 1,631,447 of PPGs own preference shares.
The company have 16 314 470 shares with a book value NOK 1 per share , and total share capital is NOK 16 314 470.
The company have two classes of shares, ordinary shares and preference shares :
| Class of shares | shares | Total value |
Voting rights |
|---|---|---|---|
| Ordinary shares | 9 814 470 | 9 814 470 | Each share has 1 vote |
| Preference shares | 6 500 000 | 6 500 000 | Each share has 0,1 vote |
The company's shareholders ordinary shares:
| Shareholders | Ord. shares |
|---|---|
| Hospitality Invest AS | 3 201 926 |
| Eidissen Consult AS | 1 773 386 |
| Grafo AS | 1 773 386 |
| Klevenstern AS | 1 417 852 |
| Mecca Invest AS | 1 417 852 |
| Hi Capital AS | 230 068 |
The company's 4 biggest shareholders pref.shares :
| Shareholders: | Pref.Shares | |
|---|---|---|
| Pioneer Property Group ASA | -1 631 447 | |
| Eidissen Consult AS | 513 558 | |
| Avanza Bank AB | 491 578 | |
| Nordnet Bank AB | 295 100 | |
Indirectly owned shares of executives in the company :
| Ordinary shares | Pref. shares | |
|---|---|---|
| Roger Adolfsen (Chairman) | 3 002 747 | 11 190 |
| Even Carlsen (Board member) | 1 773 386 | 176 389 |
Employees tax deduction, deposited in a separate bank account with total amount 31.12.19 NOK 2 241 697
Financial instruments has been assessed at fair value. The fair value has been set in accordance with the value observable in the market at the balance sheet date.
| Quoted bonds | Acquisition cost | Change in value |
Marked Value |
|---|---|---|---|
| NHC02 | 22 988 909 | 269 097 | 23 258 007 |
The Group has various transactions with associated companies. All the transactions have been carried out as part of the ordinary operations and at arms -length prices. The most significant transactions are as follows:
Hospitality Invest AS, success fee M&A servises NOK 10 200 000 Hospitality Invest AS, management fee NOK 5 258 575 Oslo Corporate Holding AS, Success fee M&A servises NOK 5 000 000
On 9 October 2019, PPG entered into the sales Agreement with Odin Bidco AS regarding the purchase of 100% of the shares in Pioneer Public Properties AS and Pioneer Management from PPG with a total purchase price for the shares of NOK 2 734 million. Closing of the Transaction took place on 24 October 2019.
A portion of the purchase price was also used to reinvest in Odin Bidco AS, resulting in a 10% equity stake in the company with a preliminary value of NOK 256 million. Further PPG is also entitled to an earn-out of up to NOK 100 million conditional upon the future development of the PPP group.
Odin Bidco is further owned by a consortium consisting of Australian pension funds managed by Whitehelm Capital and the Whitehelm European Infrastructure Fund I incorporated company.
As per 31.12.19 PPG had entered into a share purchase agreement, with a close of said transaction triggering payout of the entire earn-out consideration. A risk adjusted payout of the earn out per 31.12.19 was estimated by management to be NOK 90m. The transaction closed in January 2020, and the earn-out consideration was paid in full subsequent to the balance sheet date.
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