Fastighetsbeståndet Och Intjäningskapaciteten Annual Report 2004 Kungsleden
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Fastighetsbeståndet och intjäningskapaciteten Annual Report 2004 Kungsleden 57 Kungsleden is a Swedish property company that prioritises yield above property type or geographical location. At the end of 2004, Kungsleden’s holdings comprised 371 properties with a book value of approximately SEK 12.5 bn. The holding is dis- tributed over a total of 91 municipalities nationwide, although focused on the southern and central provinces of Götaland and Svealand. At year-end 2004, the property yield was 7.9 per cent. Kungsleden has been quoted on the Stockholm Stock Exchange O-list since 14 April 1999. Vision Kungsleden’s vision is that by means of skilled entrepreneur- ship and a high level of expertise, Kungsleden will become Sweden’s most profitable and successful property company. Business concept Kungsleden owns and manages properties, generating high and stable long-term returns. Strategy We intend to achieve our objectives by: • Enhancing our skilled and businesslike organisation; • Pursuing customer satisfaction through the active manage- ment and enhancement of our property holding; • Proceeding from our existing holding, and through acqui- sitions and disposals, assuring high long-term returns. Financial targets Our objectives are to achieve: • A minimum return on equity of 15 per cent; • A minimum property yield net of property administration in our portfolio of 8.5 per cent. Risk limits We limit risk by: • Sourcing a maximum of 30 per cent of rental revenue from industrial and warehouse properties; • Sourcing a maximum of 30 per cent of rental revenue from properties located in municipalities with populations of less than 25,000; • Maintaining a minimum long-term equity ratio of 25 per cent, with a minimum short-term level of 20 per cent. 2 Contents 2004 in summary 5 32 Financial reporting Report of the Directors 1999—2004 6 Income Statement Balance Sheet Chief Executive’s statement 8 Change in shareholders’ equity Eager for new challenges Cash Flow Statement Supplementary disclosures Questions about Kungsleden 10 Proposed appropriation of profits Organisational and human resources 14 Organisational resources 43 Audit Report Human resources Senior executives 45 Staff Board of Directors and Auditors 46 Assets: Properties The share and shareholders 18 50 Acquired properties 2004 Environmental audit 20 52 Divested properties 2004 The property holding and 21 earnings capacity 54 Definitions The property holding Earnings capacity 55 Invitation to Kungsleden’s Annual General Meeting Financial overview 25 The past year 55 Addresses Property values Funding Forecast 2005 Five-year overview 3 Ingrid Ljungqvist, 59, Management Assistant, West region. Why do you work at Kungsleden? What was the most enjoyable part Kungsleden is a very nice place to work and I’ve been of your work in 2004? here since the company started in 1991. That’s a hard one because day-to-day property manage- ment is always enjoyable, and because we work in What’s the most important part of your job? teams, we have a greater sense of participation in the Customer contact is the most important, and the most fun. properties themselves. It also means my job’s varied—no two days are alike. What changed most in your job in 2004? What do you think distinguishes Kungsleden’s The manager I’ve worked with over the last five years is working methods? moving on at the beginning of 2005, which will be a big We know our properties so well, both financially and change because we’ve worked together so closely and technically, which I think is unusual. We work as if they know each other so well. were our own little property company. We make sure we get all the right information, adding to our know-how What’s your favourite property? and overview of properties. Our town square properties in Gothenburg; there’s always something going on there. 4 2004 in summary • Profit before tax amounted to SEK 571 (485) m; profit after tax was SEK 928 (745) m, or SEK 49.00 (39.30) per share. • Proposed dividends are SEK 15.00 (13.00) per share. The Board of Directors will be proposing a 2:1 share split at the AGM. • Rental revenues and operating surplus grew by 10 (7) and 10 (4) per cent respectively to SEK 1,508 (1,376) m and SEK 934 (850) m respectively. • Forecast for the financial year 2005 of profits for calculating dividends of SEK 600 (595) m. Kungsleden has a dual focus: property trading and manage- ment. At year-end, its property yield calculated from earnings capacity was 7.9 (8.3) per cent, net of property administra- tion. Property disposals in the year contributed to increasing the property portfolio’s yield by 0.1 percentage points, while acquisitions exerted a negative 0.1 percentage point contri- bution. Property administration exerted a negative contribu- tion of 0.4 percentage points. Acquisitions Disposals Property trading 64 properties 116 properties Disposals SEK 2,490 m SEK 2,723 m profitable 83 properties SEK 254 m loss-making 7.7% property 6.8% property 33 properties SEK –51 m yield yield Sales administration SEK –33 m Profit SEK 170 m Earnings capacity 2003 2004 Operating net SEK 1,092 m SEK 1,054 m Property yield 8.3% 7.9% –Acquisitions and disposals 0.0% –Management of properties owned for the full year –0.4% Fewer municipalities 110 91 Higher value per property SEK 29 m SEK 34 m 5 Kungsleden 1999–2004 At its initial public offering (IPO) in 1999, Kungsleden owned SEK 5 bn-worth of property and generated an operating surplus of SEK 403 m. Five years later, the property portfolio value had more than doubled to SEK 12.5 bn and the operating surplus was up to SEK 934 m. Gross profit increased by 16 per cent annually since 1999, and was SEK 1,104 m in 2004. This progress occurred in an era when the Swedish property market was transforming. But Kungsleden maintained a consistent focus throughout— generating sustainable high and stable returns by continually enhancing its property portfolio. Kungsleden has maintained a high transaction rate, acquiring a total of 366 properties for SEK 13.9 bn and disposing of 610 for SEK 7.4 bn since the beginning of 1999. SHARE PRICE PERFORMANCE Share price and total return Share price and total return SEK % 300SEK %50 Kungsleden’s market capitalization was SEK 4.8 bn at year- 300 50 250 45 end 2004, against SEK 1.1 bn at its IPO in April 1999. Accord- 250 45 200 40 ingly, market capitalization increased by an annual average of 200 40 150 35 27 per cent in this period. Including dividends, returns in the 150 35 100 30 period averaged 34 per cent per annum. 100 30 50 25 Total dividends for 1999–2004 (the Board’s proposed divi- 50 25 0 20 dend is assumed for 2004) amount to a total of SEK 67.50 per 0 1999 2000 2001 2002 2003 2004 20 share, which is higher than the share price at the IPO of SEK 1999 2000 2001 2002 2003 2004 Closing price Total return 66.00. Closing price Total return PROFIT PERFORMANCE Gross profit Property yield Gross profit Property yield SEK m % 1,100SEK m 9.0% 1,1001,000 9.0 1,000900 90800 8.5 80700 8.5 70600 8.0 60500 8.0 50400 40300 7.5 30200 7.5 20100 100 7.0 0 1999 2000 2001 2002 2003 2004 7.0 1999 2000 2001 2002 2003 2004 1999Operating2000 surplus 2001Profit from2002 property2003 trading 2004 1999 2000 2001 2002 2003 2004 Operating surplus Profit from property trading Kungsleden’s gross profit, partly comprising its operating The yield from the property portfolio, i.e. operating surplus in surplus from property management and the profit from prop- relation to average property book values, was an average of erty trading, nearly doubled in 1999–2004, with the average 7.9 per cent in 1999–2004. Through its property trading and annual growth rate being 16 per cent. Kungsleden’s operat- active management, Kungsleden’s ambition is to continuously ing surplus grew by nearly 20 per cent annually in the period, enhance the relationship between risk and return. while the profit from property trading increased less. Total property values and value per property Total floor-space SEKTotal bnproperty values and value per property SEK m T000otal sq. floor m.-space SEK13 bn SEK 35m 2,000000 sq. m. 13 3035 2,000 11 1,800 2530 11 1,800 9 2025 1,600 9 1520 1,600 7 1,400 1015 76 1,400 5 510 1,200 5 1999 2000 2001 2002 2003 2004 5 1,200 1999 2000 2001 2002 2003 2004 1999Property valu2000e 2001 2002 Value2003 per property2004 1999 2000 2001 2002 2003 2004 Property value Value per property Number of municipalities and major cities NoNumber. of municipalities and major cities % No200. 75% 180200 75 65 160180 65 140160 55 120140 55 45 100120 45 10080 35 80 1999 2000 2001 2002 2003 2004 35 1999 2000 2001 2002 2003 2004 Municipalities Share in Stockholm, Gothenburg, Öresund Municipalities Share in Stockholm, Gothenburg, Öresund Number of acquisitions and disposals Property disposals, profitable and loss making No.Number of acquisitions and disposals SEKProperty m disposals, profitable and loss making 150No. 270SEK m 150 270240 120 240210 83 120 210180 83 90 60 180150 60 90 operties 150120 50 60 59 96 90 operties 120 50 60 59 30 9060 96 No. of pr 30 6030 55 No. of pr 0 300 55 1999 2000 2001 2002 2003 2004 –30 0 0 39 57 44 17 17 33 1999 2000 2001 2002 2003 2004 –6–300 Acquisitions Disposals 199939 200057 200144 200217 200317 200433 –60 Acquisitions Disposals 1999 2000 2001 2002 2003 2004 Property categories 1999 Other 11% PrTotaloperty book value categories SEK 5,229 1999 m Offices RetailOther 12%11% Total book value SEK 5,229 m Of58%fices Retail 12% 58% Industrial/ Industrial/warehouse war19%ehouse 19% Property categories 2004 Other 2% PrTotaloperty