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Interim Report Q1/2014 May 7, 2014

Technopolis Interim Report Q1 2014 Presentation

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In the first quarter of 2014 EPRA-based (European Public Real Estate Association) the direct result rose by 56.0% from 8.0 million euros to 12.8 million euros compared to 2013. The direct result per share rose from 0.10 euros to 0.12 euros. Net sales rose 33.5% from 29.7 million euros to 39.7 million euros and EBITDA by 47% from 14.0 million euros to 20.6 million euros.

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Page 1: Technopolis Interim Report Q1 2014 Presentation

Interim Report Q1/2014

May 7, 2014

Page 2: Technopolis Interim Report Q1 2014 Presentation

Q1 Highlights

• Net sales grew 33.5% and EBITDA 47.2%

• EPRA Operating result rose 56%

• Occupancy solid at 94%

• Scale advantages as revenue growth outstripping costs:

− Real estate maintenance costs up 28.2 %

− Admin costs up 27.6 %

• Solid balance sheet: Equity ratio 40.1% and LTV 58.5%

• St. Pete: 4.5% of net sales, 2.9% of EBITDA, 5% of fair values

• Focus on consolidation and costs

Page 3: Technopolis Interim Report Q1 2014 Presentation

Key Figures

Financials Q1/2014 Q1/2013 Δ, % 2013

Net sales, EUR million 39.7 29.7 33.5 126,3

EBITDA, EUR million 20.6 14.0 47.2 64,1

Unrealized foreign exchange losses, EUR million -3.2 0.4 - -5.7

Direct result (EPRA), EUR million 12.8 8.0 56.0 40.5

Operating profit, EUR million 20.7 16.7 24.3 43,9

Real Estate Operations

Financial occupancy rate, % 94.0 92.2 +1.8 93.6

Net rental yield, % 7.2 7.2 - 7.3

Rentable space, 1 000 m² 738,000 601,300 22.7 746,800

Page 4: Technopolis Interim Report Q1 2014 Presentation

Financial Occupancy

75%

80%

85%

90%

95%

100%

Q1-2

00

4Q

2-2

00

4Q

3-2

00

4Q

4-2

00

4

Q1-2

00

5Q

2-2

00

5Q

3-2

00

5

Q4-2

00

5Q

1-2

00

6

Q2-2

00

6Q

3-2

00

6Q

4-2

00

6

Q1-2

00

7Q

2-2

00

7

Q3-2

00

7Q

4-2

00

7Q

1-2

00

8

Q2-2

00

8Q

3-2

00

8

Q4-2

00

8Q

1-2

00

9Q

2-2

00

9Q

3-2

00

9

Q4-2

00

9Q

1-2

01

0

Q2-2

01

0Q

3-2

01

0Q

4-2

01

0

Q1-2

01

1Q

2-2

01

1

Q3-2

01

1Q

4-2

01

1Q

1-2

01

2

Q2-2

01

2Q

3-2

01

2

Q4-2

01

2Q

1-2

01

3Q

2-2

01

3

Q3-2

01

3Q

4-2

01

3

Q1-2

01

4

Quarterly Financial Occupancy, % and 10 Year Average

10 Yr. Avg.

95.1%

Page 5: Technopolis Interim Report Q1 2014 Presentation

Market Segments by Fair Value

35%

22%

12%

11%

11%

4% 5%

18%

19%

13% 8%

8% 2%

6%

7%

4%

15%

Oulu HMA Tampere

Kuopio Jyväskylä Lappeenranta

St. Petersburg Tallinn Vilnius

Oslo

March 31, 2010 March 31, 2014

Page 6: Technopolis Interim Report Q1 2014 Presentation

Market Segments by Net Sales

March 31, 2010 March 31, 2014

37%

23%

8%

12%

12%

6% 2%

22%

16%

14% 10%

9%

3%

4%

6%

5%

11%

Oulu HMATampere KuopioJyväskylä LappeenrantaSt. Petersburg TallinnVilnius Oslo

Page 7: Technopolis Interim Report Q1 2014 Presentation

Customer Segments

March 31, 2010 March 31, 2014

18%

24%

5%

25%

15%

13%

Electronics ICT

Life science Other

Services Public Sector

14%

21%

3% 7% 7%

3%

6%

8%

10%

21%

Professional Services ICT

Public Sector Real Estate

Education Food Services

Financial Services Manufacturing

Wholesale and Retail Other

Page 8: Technopolis Interim Report Q1 2014 Presentation

Equity and Debt - Ratios

• Solid balance sheet with equity ratio of 40.1%

• Average interest rate 2.52% (2.12%)

1,95

2,07 2,08

2,46

2,52

5

5,5 5,6

5,3

4,6

4

5

6

1,5

2,0

2,5

3,0

Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014

Average interest rate Interest cover ratio

40,1

39,3 39,4

40,2

40,1

57,5 57,8

57,2

59,5

58,5

56

57

58

59

60

61

62

63

64

35

37

39

41

Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014

Equity ratio Loan to value

Loan to Value and Equity Ratio Interest Rate and Interest Coverage Ratio

Page 9: Technopolis Interim Report Q1 2014 Presentation

Focus on Hedging

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Floating-rate loans (0-12 months) Fixed-rate loans (> 12 months) Hedging ratio

Page 10: Technopolis Interim Report Q1 2014 Presentation

Looking Ahead

• 2014 growth guidance y/y unchanged:

− Net sales 27%-32%

− EBITDA 35%-40%

• International investments in 2013 will bring international revenues close to our strategic target

• Focus on integration and business basics

• Occupancy challenges in a couple of campuses

• The company’s solvency and liquidity are solid

Page 11: Technopolis Interim Report Q1 2014 Presentation

Appendices: Additional Data

Page 12: Technopolis Interim Report Q1 2014 Presentation

Foreign Exchange Impact

Impact in EUR millions

FX change

against euro, %

Income

Statement

Translation

difference

Total effect on

equity

RUB +10 5,4 4,5 9,9

RUB -10 -4,4 -3,7 -8,1

NOK +10 - 4,4 4,4

NOK -10 - -3,6 -3,6

The rate of Lithuanian litas is currently fixed against the euro

Page 13: Technopolis Interim Report Q1 2014 Presentation

Strategic Financial Targets 2014 - 2016

• Net sales and EBITDA growth 15% on average per annum

• Net sales outside Finland over EUR 50 million by 2016

• At least 6% return on capital employed* per annum

• Equity ratio over 35% over the cycle

* Excluding fair value changes (formula specified)

Page 14: Technopolis Interim Report Q1 2014 Presentation

Technopolis Markets

Source: Federation of Finnish Financial Services, Bloomberg and Baltic countries Nordea

Finland 2014E

GDP growth 0.8%

Unemployment 8.4%

Credit rating AAA

Sweden 2014E

GDP growth (%) 2.5%

Unemployment 8.0%

Credit rating AAA

Denmark 2014E

GDP growth (%) 1.3%

Unemployment 5.7%

Credit rating AAA

Estonia 2014E

GDP growth (%) 2.8%

Unemployment 8.4%

Credit rating AA-

Russia 2014E

GDP growth (%) 1.1%

Unemployment 5.7%

Credit rating BBB-

Latvia 2014E

GDP growth (%) 5.0%

Unemployment 9.5%

Credit rating BBB+

Lithuania 2014E

GDP growth (%) 3.2%

Unemployment 9.8%

Credit rating BBB

Norway 2014E

GDP growth (%) 2.2%

Unemployment 3.7%

Credit rating AAA

Page 15: Technopolis Interim Report Q1 2014 Presentation

Finland

Q1/2014 Q1/2013 Δ, % 2013

Rentable space, m² 547,900 533,500 2,7 555,900

Rent, €/m²/mo avg. 16.49 15.88 3.8 16.21

Financial occupancy rate, % 93.0 91.5 1.5 92.9

Net rental revenue, EUR million 25.6 23.2 10.4 94.9

Net sales, EUR million 29.2 26.8 9.1 109.4

EBITDA, EUR million 15,0 13,1 14,7 56,1

Market yield requirement, % 7.9 7.9 - 7.9

Fair value of investment

properties, EUR million 978.9 888.0 10.2 981.0

• Growth through acquisitions and organic investments

• Portfolio change drove higher rents

Page 16: Technopolis Interim Report Q1 2014 Presentation

Baltic Rim

• Growth through Vilnius acquisitions and organic investments

• Sanctions towards Russia might have an effect in 2014

• Yields came down in Tallinn

Q1/2014 Q1/2013 Δ, % 2013

Rentable space, m² 127,400 67,800 87.9 119,500

Rent, €/m²/mo avg. 14.57 13.90 4.8 15.04

Financial occupancy rate, % 97.7 97.7 - 99.1

Net rental revenue, EUR million 5.7 2.8 103.4 15.3

Net sales, EUR million 5.9 2.9 101.5 15.9

EBITDA, EUR million 3.0 1.1 183.5 7.6

Market yield requirement, % 8.9 9.4 -0.5 9.0

Fair value of investment

properties, EUR million 230.2 122.2 88.4 212.4

Page 17: Technopolis Interim Report Q1 2014 Presentation

Scandinavia

• Rentable space down due to space under renovation and unallocated

space

• Consolidation is well on track

Q1/2014 Q1/2013 Δ, % 2013 *)

Rentable space, m² 62,700 - - 71,400

Rent, €/m²/mo avg. 24.43 - - 21.16

Financial occupancy rate, % 95.8 - - 89.5

Net rental revenue, EUR million 4.4 - - 0.9

Net sales, EUR million 4.6 - - 1.0

EBITDA, EUR million 3.0 - - 0.6

Market yield requirement, % 6.5 - - 6.5

Fair value of investment

properties, EUR million 218.6 - - 217.0

*) December 11-31, 2013

Page 18: Technopolis Interim Report Q1 2014 Presentation

Smart Business Environment

Technopolis’ business idea is to combine premises and services into a carefully

thought-out offering that supports the growth and success of customers.

Service Portfolio

BUSINESS

SPACE

EMPLOYEES

Cleaning

Reception

ICT

Conference

Matchmaking

Visibility

Events

Resources

Restaurants

Car wash

Gym

Massage

Page 19: Technopolis Interim Report Q1 2014 Presentation

Technopolis Investment Criteria

19

CUSTOMERS FINANCE

• Location

• Connections

• Scale

• Attractive

• Growth potential

• Good condition and

quality

• Flexibility

REAL

ESTATE

• Knowledge incentive

customer base

• Growth companies,

anchors and services

• Different sectors, same

challenges

• Cluster effects

• Local and international

customers

• EPS – positive

• Good yield

• Potential for profitable

growth

• Occupancy growth

potential

• Potential in service

revenue

• Excellent local team

Page 20: Technopolis Interim Report Q1 2014 Presentation

Lease Portfolio

• Open-ended increased by 11.4%-points since year end:

− Unterminated fixed term contracts which ended at the year-end

were automatically changed to open-ended leases

− Lease stock was EUR 646.6 million

% of lease stock Lease length in months

0

5

10

15

20

25

30

35

40

45

50

0%

5%

10%

15%

20%

25%

30%

<1 yr 1-3 yrs 3-5 yrs >5 yrs Open-ended

31 Dec 2013 31 March 2014 Lease Length

Page 21: Technopolis Interim Report Q1 2014 Presentation

Investments

Area Name m² EUR million

Stabilized

yield, % *) Completion

Acquired

Oulu Peltola 37,600 31.7 11.2 02/2013

Vilnius Ozas 42,200 62.6 9.3 05/2013

HMA Falcon 26,300 77.5 7.8 11-12/2013

Oslo Fornebu 70,500 217.0 ***) 7.7 12/2013

Completed

Kuopio Viestikatu 7B&C 9,300 18.2 9.2 02/2013

Tallinn Löötsa 8C 6,400 8.1 9.1 03/2013

Tallinn Löötsa 8B 8,500 13.0 9.1 03/2013

Jyväskylä Innova 4 8,900 23.7 8.1 10/2013

Under construction Prelet rate,%

May 6,2014

Tallinn Löötsa 8A 84.8 7,500 11.8 9.1 09/2014 ****)

St. Petersburg Pulkovo 2 51.0 18,700 42.0 12.6 10/2014 ****)

Tallinn Löötsa 5 - 9,200 17.0 ***) 8.8 09/2015

HMA G-building 30 5,300 18,3 8,0 09/2015

Total 250,400 540.9

*) stabilized yield = estimated net operating income / acquisition cost

**) Including three-year rental guarantee from sellers

***) Technopolis share 51%

****) Commissioning in phases

Page 22: Technopolis Interim Report Q1 2014 Presentation

Breakdown of Debts and Covenants

21%

22%

21%

2%

34%

Loans without Covenants or Bank Guarantees

Loans with Covenants (equity ratio)

Loans Requiring Bank Guarantees with Covenants

Loans Requiring Bank Guarantees without Covenants

Loans with Covenants

90,5%

3,9%

5,6%

Bank Loan Leasing Debt Commercial Paper

Page 23: Technopolis Interim Report Q1 2014 Presentation

Loan Maturities

0

20

40

60

80

100

120

140

160

180

200

220

< 1 year 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years over 5 years

EUR million

Repayments of interest bearing debt Maturity of credit facilities

• Capital-weighted loan period on average was 6.8 years

• Within 12 months EUR 166.4 million of loans are coming to due

• EUR 112.1 million untapped credit facilities

Page 24: Technopolis Interim Report Q1 2014 Presentation

Shareholders

Major shareholders April 30, 2014 # of shares % of shares

Varma Mutual Pension Insurance Company 25,448,192 23.9

Ilmarinen Mutual Pension Insurance Company 11,089,647 10.4

City of Oulu 3,511,211 3.3

OP-Pohjola Group 1,798,733 1.3

Laakkonen Mikko 1,226,184 1.2

The Finnish Cultural Foundation 1,188,042 1.1

City of Tampere 1,160,577 1.1

Odin Finland 1,119,944 1.1

Jyrki Hallikainen 998,236 0.9

Mutual Fund Evli Finnish Equity 932,294 0.9

10 largest shareholders, total 48,049,910 45.2

Foreign shareholders, total 35 037 449 32.9

Others, total 23,320,382 21.9

Total amount of shares 106,407,741 100

Page 25: Technopolis Interim Report Q1 2014 Presentation

Thank you