Kungsleden presents first quarter 2012

Welcome to Kungsleden

First quarter 2012

Thomas Erséus, Chief Executive

Johan Risberg, CFO

Owning and managing properties with satisfied customers

Always open to new opportunities

—regardless of property type or geography

High and stable returns for the long term with

risk diversification as a key ingredient

A quality portfolio with good returns

317 wholly owned

properties,

SEK 15,533 m

Industrial/war

ehouse

SEK 6,236 m

Retail

SEK 2,113 m

Modules for schools,

pre-schools, offices

and portable units

Nordic Modular SEK

1,535 m.

Office

SEK 4,172 m

Other

SEK 1,477 m

Strong gross profit for the first quarter 2012

■ Net sales increased by 36% to SEK 556 (407) m

■ Gross profit increased by 47% to SEK 335 (228) m

■ Profit before tax was SEK 458 (492) m and after tax SEK 113 (406) m. The

profit decrease is largely due to provisioning for tax rulings and lower profits

from Hemsö

■ Profit for calculating dividends was SEK 121 (78) m, or SEK 0.90 (0.60) per

share

■ Seven properties sold for SEK 230 (5) m with a profit of SEK 20 (3) m

■ Syndicated loan replaced by a new SEK 4,500 m facility

■ Kungsleden secured a 2nd place in the Great Place to Work survey

Post-balance sheet events

■ In April, Kungsleden received two tax rulings from the Administrative

Court of Appeal, where the Court found against Kungsleden. Profit

for calculating dividends was charged with SEK 80 m, and the

Income Statement was charged with a tax cost of SEK 260 m

■ Remaining refinancing requirement for 2012 largely secured in April.

Profit for calculating dividends

2012 2011

SEK m Jan-Mar Jan-Mar

Gross profit 335 228

Sales and administration costs -68 -56

Net financial position -140 -124

Sub-total 127 48

Realised items

Trading net on sale 20 3

Realised value changes, properties 27 -

Deduction for deferred tax on sale -8 -

Realised value changes, financial instruments -4 -8

Realised items 35 -5

Profit for calculating dividends from Hemsö 44 41

Taxes payable -85 -6

Profit for calculating dividends 121 78

Unchanged net letting

■ New contracts with annual rental value of SEK 37 m

■ Economic occupancy levels of 89.1 (89.2)%

■ Average remaining lease term 4.8 years

■ Partnering with tenants to reduce environmental impact through

lower energy consumption

Potential for to keep growing

■ Since 2009, Hemsö has been owned 50:50 by Kungsleden and

AP3.

■ Hemsö owns, manages and develops premises for social services,

with property value of over SEK 21 bn.

■ The market for public properties is an estimated 90,000,000 sq.m. in

Sweden; Hemsö’s market share is about 1.7%.

■ The largest tenants are Västra Götaland County Council, education

company Academedia and healthcare provider Attendo.

Income Statement, Hemsö

SEK m

2012

Jan-Mar

2011

Jan-Mar

Rental revenues 452 387

Property costs -139 -136


Trading net - -



Unrealised value changes 134 328

Profit before tax 229 416

Tax -61 -186

Net profit 168 230

First quarter

2012 in figures

Transfer to new accounting method

■ On 1 January 2012 the way Hemsö is consolidated changed from

the proportional method to the equity method

■ Half of Hemsö’s profit or loss is recognised on a line in the Income

Statement as profit/loss from participations in joint ventures

■ Half of the value of Hemsö’s equity is recognised as an asset on a

separate line in the Statement of Financial Position

■ This change does not affect equity, net profit or profit for calculating

dividends

■ Property values and loans become lower, reducing total assets and

increasing the equity ratio

Income Statement SEK m

2012

Jan-Mar

2011

Jan-Mar


Sales revenues, modular buildings 81 68

Net sales 556 407


Production costs, modules -69 -60


Trading net 20 3


Profit/loss from participations in Hemsö 84 150


Unrealised value changes, properties 1 27

Unrealised value changes, financial instruments 226 264


Tax -345 -86

Profit after tax for the period 113 406

• Increase mainly

sourced from

properties

purchased in the

past year


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Up 19% due to

good order book at

the Gråbo plant


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Net sales

increased by 36%


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• 47% increase due

to purchases in

2011


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Comparing sales

proceeds to

acquisition cost gives

the effect of sales on

profit for calculating

dividends, which is

SEK 39 m

• Value changes of

SEK 27 m and

deductions for

deferred tax of SEK -

8 m are additional to

the trading net of

SEK 20 m


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• The increase is

mainly a

consequence of a

larger property

portfolio


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Corresponds to

50% of Hemsö’s

profit after tax. The

lower figure is

mainly due to lower

unrealised value

changes on

properties


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Negative change

mainly explained

by higher loan

volumes and higher

interest margins

than the loan

portfolio


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Positive impact in

the year from rising

long interest rates.


2012

Jan-Mar

2011

Jan-Mar



Net sales 556 407




Trading net 20 3







Tax -345 -86


• Lower profit mainly

because of a

provision for tax

costs and reduced

profits from Hemsö

New accounting method means reduced total assets

SEK m 2012 2011

ASSETS 31 Mar 31 Dec

Goodwill 201 201

Properties 14,627 14,788

Machinery and equipment 15 15

Participations in Hemsö 1,167 1,084

Long-term receivables from Hemsö 1,500 1,500

Deferred tax asset 766 1,020

Other long-term receivables 439 443

Non-current assets 18,715 19,051

Inventories 16 17

Current receivables 410 240

Assets held for sale—properties 906 905

Assets held for sale—other assets 117 14

Cash and bank balances 434 684

Current assets 1,883 1,860

TOTAL ASSETS 20,598 20,911

New accounting method means reduced total assets

SEK m 2012 2011

EQUITY AND LIABILITIES 31 Mar 31 Dec

Equity 7,828 7,719

Liabilities to credit institutions 8,037 8,154

Bond loans (unsecured) 1,599 1,599

Liabilities related to assets held for sale 901 901

Interest-bearing liabilities 10,537 10,654

Provisions 432 431

Derivatives 915 1,156

Other non interest-bearing liabilities 814 891

Liabilities related to assets held for sale 72 60

Non interest-bearing liabilities 2,233 2,538

TOTAL EQUITY AND LIABILITIES 20,598 20,911

Changed game plan for funding

■ High turbulence on the financial markets driven by government

finance turmoil mainly in Europe and the resulting low interest rates

historically.

■ Higher funding costs combined with more stringent capital adequacy

requirements for banks resulted in rapid expansion of interest

margins and poorer access to credit in the second half-year, in terms

of volumes and maturities.

■ 2012 started with somewhat improved market sentiment and

generally rising stock markets and yields.

■ Markedly increased interest in alternative funding sources,

especially bonds.

This year’s refinancing requirement largely secured

■ Syndicated loan rearranged with a new SEK 4,500 m facility in

January

■ The remaining refinancing requirement for 2012 has largely been

secured

■ Loans of SEK 1.6 bn extended, of which SEK 1.0 bn to 2015 and

SEK 0.5 bn to 2013

■ In addition, definitive tenders secured on SEK 1,3 bn

■ In total, Kungsleden has refinanced and secured definitive tenders

for borrowings of SEK 7.4 bn

Maturity structure, fixed-interest periods

As of 31 March 2012

Loan, SEK

m

Interest

derivativ

es,

SEK m

Ave.

interest, %

Ave. interest,

loans and

derivatives, years

Average fixed

interest term,

years

2012 10,541

2013 600 4.1

2014 1,800 4.1

2015 2,400 4.2

2016 500 3.9

2017 500 4.1

2018 3,650 4.2

2019 800 3,5

2020 800 3.7

2021 400 3.8

Total derivatives 10,541 11,450 6.3 5.4

Market value of loans and

derivatives 904

Total 11,445

Maturity structure, credits

As of 31 Mar 2012

Utilised

credits,

SEK m

Un-utilised

credits, SEK

m

Total credits,

SEK m

2012 3,769 260 4,029

2013 39 - 39

2014 600 - 600

2015 4,099 1,400 5,499

2016 2,034 - 2,034

2017 - - -

2018 - - -

2019 - - -

Total 10,541 1,660 12,201

Average conversion term, years 2.2 2.2

Equity ratio

31 Mar 12

38%

31 Dec 11

37%

31 Mar 11

34%

LTV ratio 68% 68% 75%

Tax—part of a company’s costs

The Swedish Tax Agency’s new opinion has retroactive consequences

■ The current taxation climate is different, and the Swedish Tax

Agency has changed its view of past transactions.

■ Last week, Kungsleden received two rulings from the Administrative

Court of Appeal for the fiscal year 2005 which imply a negative

liquidity effect of SEK 80 m and a tax cost of SEK 260 m that has

been charged to profits for the first quarter

■ Kungsleden will communicate potential tax rulings through press

releases and make continuous updates on its tax position in the

company’s quarterly reports

■ Kungsleden’s view is that the company has fully complied with the

laws and practice in place when submitting each tax return

■ The company verifies its position with experts continuously

18 outstanding tax cases

Kungsleden’s tax position

■ Kungsleden has provisioned SEK 325 m as a tax cost

■ A total of 18 tax proceedings are ongoing, of which 17 have not

been taken up as income

■ Given negative outcomes of all proceedings, the estimated:

– effect on equity would be approx. SEK 1,400 m (in addition to the

SEK 325 m provisioned)

– liquidity effect would be approx. SEK 780 m

■ Final outcome may be higher or lower

Total yield until the end of April 2012

10 largest shareholders represent 25% of votes & capital

■ Nordea fonder 5.9

■ Länsförsäkringar fonder 3.0

■ Olle Florén and companies 2.5

■ Norwegian Government 2.4

■ SHB fonder 2.1

■ Pensioenfonds PGGM (NL) 2.1

■ Danske Invest fonder 2.0

■ AP4 1.8

■ SEB fonder 1.4

■ AP2 1.4

24.6

Source: SIS Ägarservice, 31 Mar 2012

Stable lettings market, more active tenants

■ Kungsleden’s lettings market

– Higher activity with more terminations and more new contract

signings

– Unchanged net lettings

■ Financial markets

– Market driven by shorter credits

– Higher capital adequacy requirements for banks

– Higher borrowing costs

■ Transaction market

– The number of transactions fell by 40% in the first quarter despite

high volumes

– Property market still liquid and transparent

Focus on management and portfolio enhancement in 2012

■ Quality portfolio with good geographical risk-spread ensures stable

cash flow

■ As always, focus on customer care, portfolio enhancement and

reducing vacancies

■ Extending the base of alternative types of funding and continued

search for good transaction opportunities

■ High employee commitment offers good prospects for good profits

from property management and business development

■ The Board’s estimate of profit for calculating dividends for 2012 is

SEK 550 m

Any questions?

Date post:	05-Dec-2014
Category:	Business
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Kungsleden presents first quarter 2012

Business