Summary of six-month result (comparison period January-June 2004): total revenue increased to 51.9 (50.1) million, operating profit improved to 29.1 (16.5) million due to growth in the values of Sponda's investment properties, operating cash flow per share was 0.29 (0.23), the market value of Sponda's property portfolio was 1,245.9 (1,210.8) million, net income in the period was 12.2 (13.1) million. Net income in 2004 was boosted by a change in deferred taxes, 7 million, after the corporate tax rate was reduced from 29% to 26%. Earnings per share were 0.15 (0.17).
Sponda adopted the IFRS reporting standards on 1 January 2005. This interim report has been prepared in accordance with the recognition and valuation principles of IFRS. All the figures presented in the report have been calculated according to IFRS.
The economic occupancy rate of Sponda's investment properties is expected to remain unchanged or to improve slightly by the end of 2005 and rent levels to stay stable. The value of the properties is expected to remain stable during 2005. Cash flow from operating activities is forecast to stay at the 2004 level.
President and CEO Kari Inkinen: "Sponda's short-term target is to icrease business volume and profitability. The property portfolio will be activated by exploiting Sponda's own land sites and building rights. Sponda's current development projects cover 360,000 m² of office, retail and logistics space. Development investments are currently estimated to total 530 million, of which 190 million is targeted to span the next three years.
Sponda will also seek growth and higher profitability by focusing efforts on active leasing with the aim of reducing vacant premises. Profitability will also be raised by making property management more efficient and by improving maintenance quality.
Sponda is actively seeking growth in new business areas in Russia and the Baltic states. The aim is to start investments on this front in 2006."
Business environment
Growth in Finland's GDP is forecast to remain at slightly over 2% during 2005, based on the weaker than expected economic growth in the EU area and the paper industry dispute in Finland. Inflation in 2005 is estimated to be around 1.5%.
The vacancy rates of office, retail and logistics properties are estimated not to have changed during the first six months of the year. Rent levels likewise are estimated to have remained stable except in Espoo, where rent bids have fallen somewhat. Demand for retail and logistics premises is still good but growth in demand for office premises is yet to emerge.
Competition continues to be intense in the property investment market. Foreign investors are prepared to accept lower yields than has been usual in Finland. Property deals have been made in particular in properties with exceptionally long lease contracts for the Finnish market and therefore the yield requirements of these sales cannot be applied to all business premises.
The Ministry of Finance has extended by half a year the time allocated to the working group set up at the beginning of 2004 to consider alternatives for developing Finland's law on real estate mutual funds. The group is now scheduled to submit its final report on 30 November 2005.
Leasing activities
Net operating income from Sponda's properties totalled 38.8 million (30 June 2004: 37.6 million), of which 67% was derived from office properties, 3% from retail premises and 30% from logistics facilities. Net operating income was divided by region as follows: Helsinki Business District 50%, Helsinki Metropolitan Area 19%, logistics properties in Helsinki Metropolitan Area 22% and rest of Finland 9%.
The occupancy rate of Sponda's properties remained stable in all sectors, amounting to 87.2% (31 March 2005: 87.8%). In office premises, the economic occupancy rate was at the same level as in the first quarter but declined slightly in retail and logistics premises. In retail premises the decrease was due to the sale of the fully leased Karjala shopping
