Klövern AB (publ) : Interim Report January – September 2014
Income increased by 14 per cent to SEK 1,863 million (1,630).
The operating surplus increased by 20 per cent to SEK 1,238 million (1,033).
Profit from property management increased by 25 per cent to SEK 594 million (476).
Changes in value of properties amounted to SEK 880 million (-96), of derivatives to SEK -424 million (345) and share of profits in associated companies amounted to SEK -79 million (3).
Net profit amounted to SEK 892 million (632), corresponding to SEK 4.46 (2.96) per common share.
Taking possession of 14 properties for SEK 4,183 million and sale of 10 properties for SEK 389 million.
The Board of directors of Klövern has called for an extraordinary general meeting on 22 October 2014 at which the agenda will include resolutions regarding the introduction of class B common shares through a bonus issue and authorization for the board to decide on new issues of preference shares.
Statement by the CEO
Continued good profit development
“Traditionally the third quarter is the strongest quarter of the year and this year was no exception. Klövern can once again show good profitability with the highest earnings from property management and the highest operating margin ever for a single quarter.
Klövern’s income for the third quarter rose 17 per cent, primarily driven by acquisitions. Even more gratifying is that the operating margin of 69 per cent was a record high. Falling interest rates also contribute through lower financing costs and declining yield requirements, which has a positive effect on valuation of the property portfolio.
At the global level we are still seeing a diverging development. The global economy is continuing its recovery but there is negative impact from geopolitical conflicts and deflationary tendencies in the Eurozone. One ray of light is that the USA is increasingly beginning to function as a motor for growth for the world around it. Unfortunately prospects for the Eurozone are not as bright, not least for its largest economies. Germany has lost some of its momentum, the French economy has stagnated and faces considerable structural problems, while at the same time Italy is in recession. Finland’s economic growth is slow and is now also affected by sanctions against Russia. There is an impending threat of deflation in the Eurozone, where the ECB has lowered its benchmark interest rate to a record low of 0.05 per cent. But in Sweden, the picture is a bit brighter.
So far this year the market for office premises in Stockholm and Göteborg has shown signs of a positive development with lower vacancy rates and rising rental levels. The vacancy rate in the office market in Stockholm is just over 9 per cent, the lowest level since 2001. Relatively few properties coming on to the market have been built speculatively, which is a sign of health.
As the supply of historically cheap finance is good, yield requirements are declining for most kinds of assets, and property is no exception. That is the case also for well-situated office properties outside CBD, where there is often a great demand for newly built offices. A higher degree of institutional buyers, who will often accept lower required yields than other potential buyers, contribute to pushing yields down.
During the first six months of the year, about 70 property transactions took place in the Stockholm market to a value of SEK 22 billion. Klövern’s acquisition of Globen City for a price of SEK 3.8 billion was the largest single transaction. In addition to acquisitions, Klövern focuses on developing its project portfolio. At the moment construction is in full spate at Kista, where Tele2’s new head office will be ready by the summer of 2016. Another example is the old post office in Uppsala, situated close to the central station, where we are undertaking a major refurbishing and extension project.
At an extraordinary general meeting on 22 October, the board directors of Klövern intends to seek shareholder approval for an authorization to issue more preference shares as well to introduce Class B common shares. Those two steps would provide Klövern with improved conditions to continue to develop both its current project portfolio and also make further acquisitions.
Downward pressure in the interest rate market continues to have a positive impact on Klövern’s financial costs. The average interest charge has now declined to 3.7 per cent compared to 4.3 per cent a year ago and this development is expected to continue. Because of interest rate reductions there is a natural inertia in shifts in interest charges because of market movements.
In a world that is otherwise fairly full of challenges, I can note that Klövern continues to deliver good results and I view developments in the final quarter of this year positively.”, says Klöverns CEO Rutger Arnhult.
For further information, please contact:
Rutger Arnhult, CEO, +46 70-458 24 70, email@example.com
Lars Norrby, IR, +46 76-777 38 00, firstname.lastname@example.org
Klövern is a real estate company committed to working closely with customers to offer them efficient premises in Swedish growth regions. As of 30 September 2014, the value of the properties totalled SEK 29 billion and the rental value on an annual basis was SEK 2.9 billion. Klövern is listed on Nasdaq OMX Stockholm Mid Cap. For further information, see kelly.corem.se.
Klövern AB (publ), Box 1024, SE-611 29 Nyköping, Sweden. Phone: +46 155-44 33 00, fax: +46 155-44 33 22,
This information is such that Klövern AB (publ) is obliged to disclose under the Securities Market Act and/or the Financial Instruments Trading Act. The information was made available for publication on 22 October 2014.