Welcome to Kungsleden’s Financial Statement and strategy presentation 15 February 2013 Thomas Erséus, Chief Executive Anders Kvist, Deputy Chief Executive
Today’s agenda 1. The lettings and property market 2. The fourth quarter, operations and figures 3. Results for the full year 2012 4. Financial position 5. An update on tax 6. Strategic review and new strategy 7. Value creation in property management 8. Growth and concentration 9. Financial targets 10.Summary Contents| 2
Q4 — a turning-point, strategically and financially ■ Kungsleden has been obstructed by an impending tax threat for some time ■ The effects of a fixed interest rate have impelled a defensive attitude ■ The Hemsö transaction takes care of a worst-case scenario for tax, and the company is well positioned with financial flexibility ■ This transaction is part of implementing Kungsleden’s new strategy ■ The management of wholly owned properties has been a strong value creator for Kungsleden over time ■ After seven years as Chief Executive, this is a good time to leave ■ Cost savings program initiated ■ The Board is proposing a dividend of SEK 1.00 per share ■ Very good prospects for future value creation Q4 — a turning-point| 3
1. The lettings and property market
Lettings market remains stable ■ Employment continues to grow in major city regions ■ A segmented office market, with strong demand in good locations ■ Rent levels for commercial properties in major city regions outside CBDs are stable ■ Big spread in required yields in major city regions outside CBDs ■ Unchanged vacancy levels and variations between sub-markets Source: Newsec | 5 The lettings and property market
Continued good lettings for Kungsleden in the quarter ■ Some new lease contracts with annual rent exceeding SEK 9 m: – The Port of Gävle – Västmanland County Council – Cap Gemini, Västerås – RB Glas & Plast, Partille | 6 The lettings and property market
Increased new lettings for 2012 and continued stability ■ New lettings of SEK 80 m* for the full year ■ Västerås is one of our expansive markets. SEK 17 m of new lettings ■ Net lettings of SEK 15 m** for the full year ■ Full-year economic occupancy level 89.3 (89.2)% ■ Remaining average contract term of 4.9 years * New lettings are annual rents for contracts signed in Jan-Dec 2012 ** Net lettings are signed contracts less signed terminations | 7 The lettings and property market
Transaction volume up from SEK 85 bn to 106 bn* Transaction volume per segment - Sweden Transactions ≥ 100 MSEK BSEK Nr of transactions 160 280 140 245 120 210 100 175 80 140 60 105 40 70 20 35 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Office Residential Retail Logistics, warehouses and industrial Nursery homes Others (for example hotel, soil, health care and school) Source: Newsec Nr of transactions | 8 The lettings and property market
Strong closing quarter for transactions in Sweden ■ Transaction volumes in Q4 were SEK 42 bn — the highest volume since Q3 2008 ■ Total transaction volumes for December were SEK 30 bn ■ Highly capitalised institutions and pension funds behind most transactions on the buy and sell sides ■ Office market represented 40% of total volumes in 2012 ■ Kungsleden was the biggest single seller in 2012 with its sale of 50:50 joint owned Hemsö | 9 The lettings and property market
2. The fourth quarter, operations and figures
Kungsleden’s portfolio optimisation in the quarter ■ 15 properties were sold for SEK 552 m ■ These sales were at a property yield of 6.6% ■ The sold properties were located in Greater Stockholm, central and southern Sweden. ■ A portfolio of 9 properties, sold for SEK 380 m, was the single largest property sale ■ All sales were made at around book value ■ 11 properties were purchased for approx. SEK 1,549 m from Hemsö – Total rental value of SEK 163 m, 143,000 sq.m. leasable area – Remaining contract term 8 years ■ Earnings capacity of the remaining portfolio: 8% | 11 The fourth quarter, operations and figures
Better positioning after the sale of Hemsö ■ Kungsleden sold its holdings in Hemsö after 11 years’ positive progress, which has created substantial shareholder value over time ■ Total purchase price of SEK 3,320 m – Price of the shares was SEK 1,820 m – Repayment of shareholder loan was SEK 1,500 m ■ After the share sale, loan repayment and purchase of 11 properties – liquidity strengthened by SEK 1,750 m – Increased borrowing capacity, utilised by arranging a new SEK 1 bn loan over three years ■ The sale is part of the implementation of Kungsleden’s new strategy, on wholly owned properties, and will contribute to increased returns by reallocating funds | 12 The fourth quarter, operations and figures
The quarter in brief ■ Net sales and gross profit decreased by 10% and 8% to SEK 494 m and SEK 309 m respectively compared to Q4 2011, due to a smaller property portfolio ■ Profit before tax was SEK 677 (348) m ■ Profit after tax was SEK 923 (303) m, or SEK 6.80 (2.20) per share. The profit increase is sourced from the sale of Hemsö ■ Cash flow from operating activities was SEK 66 (136) m ■ Profit for calculating dividends for the fourth quarter was SEK 1,732 (241) m, or SEK 12.70 (1.70) per share | 13 The fourth quarter, operations and figures
Kungsleden has a new principal owner ■ Welandson Gösta and companies 13.1 ■ Länsförsäkringar fonder 3.2 ■ Norges Bank Investment Management 2.9 ■ Olle Florén and companies 2.5 ■ Danske Invest fonder (Sweden) 2.0 ■ BlackRock fonder (USA) 1.6 ■ AP4 1.4 ■ AP2 1.2 ■ Swedbank Robur fonder 1.2 ■ Avanza Pension Försäkring AB 1.0 30.1 Source: SIS Ägarservice, 31 December 2012 | 14 The fourth quarter, operations and figures
3. Results for the full year 2012
Income Statement 2012 2011 Δ, % SEK m Jan-Dec Jan-Dec Rental revenues 1,840 1,759 Sales revenues, modular buildings 270 288 Sales and gross profit increased by 3 and 4% Net sales 2,110 2,047 3 respectively due to a Property costs -533 -512 larger property portfolio and milder start to the Production costs, modules -249 -258 winter Gross profit 1,328 1,277 4 Trading net 16 56 Sales and administration costs -257 -244 Profit/loss from participations in Hemsö 794 413 92 The large positive item Net financial items -586 -559 is from the sale of Unrealised value changes, properties -60 241 Hemsö Unrealised value changes, financial instruments -70 -491 Profit before tax 1,165 693 68 Tax -813 -55 Net profit for the year 352 638 -45 | 16 Results for the full year 2012
Substantial values realised through the sale of Hemsö 2012 2011 Jan-Dec Jan-Dec SEK m Gross profit 1,328 1,277 Sales and administration costs -257 -244 Net financial items -586 -559 Profit from property management 485 474 Realised items Trading net on sale 16 56 Realised value changes, properties 129 65 Deduction for deferred tax on sale -20 -7 Sale of Hemsö 1,507 - Realised value changes, financial instruments -81 -66 Realised items 1,551 48 Profit for calculating dividends from Hemsö 223 207 Taxes payable -342 -26 Profit for calculating dividends 1,917 703 Results for the full year 2012 | 17
Income Statement, wholly owned properties 2012 2011 Δ, % SEK m Jan-Dec Jan-Dec Rental revenues 1,583 1,515 4 Property costs -489 -463 Gross profit 1,094 1,052 4 Trading net 16 56 Sales and administration costs -194 -184 Net financial items -528 -507 Unrealised value changes, properties 0 301 Unrealised value changes, financial instruments -55 -380 Profit before tax 333 338 -1 Tax 182 -70 Net profit for the year 515 268 92 | 18 Results for the full year 2012
Income Statement, Nordic Modular 2012 2011 Δ, % SEK m Jan-Dec Jan-Dec Rental revenue, modules 257 244 Sales revenue, modules 270 288 Net sales 527 532 -1 Property costs -44 -49 Production costs, modules -249 -258 Gross profit 234 225 4 Trading net 0 0 Sales and administration costs -63 -60 Net financial items -58 -58 Unrealised value changes, properties -60 -60 Unrealised value changes, financial instruments -5 -42 Profit before tax 48 5 860 Tax -13 -1 Net profit for the year 35 4 775 | 19 Results for the full year 2012
Income Statement, Hemsö 2012 2011 Δ, % SEK m Jan-Dec Jan-Dec Profit/loss from participations, Hemsö 794 413 92 Net financial items 0 6 Unrealised value changes, financial instruments -10 -69 Profit before tax 784 350 124 Tax 3 16 Net profit for the year 787 366 115 Results for the full year 2012 | 20
4. Financial position
Financial position — pro forma after Hemsö transaction 2012 2011 SEK m 31 Dec 31 Dec According to Interim Pro forma after ASSETS Report Hemsö transaction Properties 15,777 15,777 Other fixed assets 666 666 Receivable from AP3 3,363 - Other current assets 373 373 Cash and bank balances 721 3,549 Total assets 20,900 20,365 EQUITY AND LIABILITIES Equity 7,726 7,726 Interest-bearing liabilities 9,704 10,720 Derivatives 1,125 1,125 Other non interest-bearing liabilities 2,345 794 Total equity and liabilities 20,900 20,365 | 22 Financial position
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