ANNUAL REPORT 2015 AB Sagax Is a Property Company Whose
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ANNUAL REPORT 2015 AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment At the Bulten 1 property in Danderyd, Sagax has built a car showroom compris- ing 7,200 square meters of lettable area on behalf of the tenant Bavaria Stock- holm. The tenant is part of Bavaria Nordic, one of the largest BMW dealerships in the Nordic region. Sagax’s total investment amounted to SEK 113 M and SEK 17 M was invested in 2015. Occupancy took place in the first quarter of 2015, refer also to page 25 on investments in 2015. The car showroom will enhance Danderyd’s position as one of Stockholm’s strongest areas for sales of cars in the premium segment. The area, in which Sagax owns five other properties of the same type, has a strategic location along the E18 expressway, by the approach to Djursholm. Contents The year in brief 1 Current earnings capacity 54 Consolidated statement of financial position 88 Sagax in brief 2 Risks and risk management 56 Comments on the consolidated statement Sagax’s performance 3 The Sagax share and shareholders 60 of financial position 89 Chief Executive Officer’s comments 4 Parent Company 65 Consolidated statement of cash flows 90 Environmental work 66 Consolidated changes in shareholders’ equity 91 Directors’ Report Organization and employees 70 Parent Company income statement 92 Business concept, goals and strategies 6 Corporate Governance Report 72 Parent Company balance sheet 93 Market overview 8 Board of Directors 78 Parent Company statement of cash flows 94 Summary of the Sagax property portfolio 18 Company management 80 Parent Company changes in shareholders’ equity 95 Changes in the property portfolio 22 Auditors 81 Accounting policies and notes 96 Market area Stockholm 26 Multi-year summary 82 Proposed appropriation of profits 126 Market area Helsinki 30 Events after the end of the year 85 Auditor’s Report 128 Market area Rest of Sweden 34 Market area Rest of Finland 38 Financial reports Articles of Association 130 Market area Other 40 Consolidated statement of Notice of the Annual General Meeting 132 Market value of property portfolio 42 comprehensive income 86 Definitions 136 Financing 44 Comments on the consolidated statement Press releases 137 Joint ventures and associated companies 51 of comprehensive income 87 Calendar 137 In the event of any discrepancies between the Swedish and the English Annual Report, the former should have precedence. AB SAGAX ANNUAL REPORT 2015 THE YEAR IN BRIEF The year in brief Profit from property management increased 27% to SEK 895 M (703). Cash flow from operating activities before changes in working capital rose 25% to SEK 750 M (600). REVENUE INCREASED 18% PROFIT AFTER TAX FOR THE YEAR WAS SEK 1,681 M Rental revenue increased 18% to SEK 1,291 M (1,093 for Profit after tax for the period amounted to SEK 2014). Rental revenue was positively impacted primarily by 1,681 M (753), corresponding to SEK 9.85 (4.05) per property acquisitions, as well as revenue-increasing invest- common share. ments in the existing property portfolio. SAGAX’S NET INVESTMENTS AMOUNTED TO SEK 2,364 M PROFIT FROM PROPERTY MANAGEMENT INCREASED 27% Sagax’s net investments in properties during the year amount- Profit from property management rose 27% to SEK 895 M ed to SEK 2,364 M (1,863). 43 properties were acquired and (703), of which joint ventures and associated companies two properties divested. accounted for SEK 233 M (178). The increase in profit from property management was primarily attributable to property CASH FLOW INCREASED 25% investments and profit participation in joint ventures. Profit Cash flow from operating activities before changes in working from property management per common share after dilution capital rose 25% to SEK 750 M (600), corresponding to SEK rose 31% to SEK 4.90 (3.73). 3.99 (2.99) per common share. PROPERTY REVALUATIONS AMOUNTED TO SEK 946 M PROPOSED DIVIDEND 2015 The properties were revalued by SEK 946 M (687), of which The Board of Directors proposes a dividend per common the revaluation of properties in joint ventures accounted for share of SEK 1.15 (0.80). The Board also proposes a dividend SEK 269 M (246). The value performance for Sagax’s proper- of SEK 2.00 (2.00) per preference share through a quarterly ties in Sweden amounted to SEK 675 M and for properties payment of SEK 0.50. abroad to SEK 2 M. The market value of Sagax’s properties amounted to SEK 16,189 M (13,428) at year-end. The yield in 2015 was 7.4% (7.6). FIXED-INCOME DERIVATIVES WERE REVALUED TO SEK 106 M The revaluation of fixed-income derivatives had a positive impact of SEK 106 M (neg: 485) on earnings, of which revalu- ation of fixed-income derivatives in joint ventures accounted for a positive SEK 52 M (neg: 226). The reason for the revaluation was the time factor and that market interest rates increased during the year. Selected key performance indicators 2015 2014 2013 2012 2011 Profit from property management per common share, SEK 4.90 3.73 2.73 2.15 2.06 Change from the preceding year, % 31 37 27 4 14 Earnings per common share, SEK 9.85 4.05 4.44 1.82 0.31 Dividend per common share, SEK (2015 proposed) 1.15 0.80 0.55 0.43 0.36 Dividend per preference share, SEK (2015 proposed) 2.00 2.00 2.00 2.00 2.00 Market value of properties, SEK M 16,189 13,428 10,825 9,396 8,961 Lettable area, 000s of square meters 1,860 1,634 1,336 1,159 1,144 Property yield, % 7.4 7.6 7.7 7.8 7.7 Lease term, years 7.4 8.2 8.0 8.4 7.9 Debt ratio, % 59 59 60 62 68 Multi-year summary, see page 82. «READ MORE Proposed appropriation of retained earnings, see page 126. AB SAGAX ANNUAL REPORT 2015 1 SAGAX IN BRIEF Sagax in brief AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment. Sagax’s property holdings at December 31, 2015 amounted to SEK 16.2 billion, distributed over 225 properties. AB Sagax (publ) is listed on Nasdaq Stockholm, Mid Cap. PROPERTY PORTFOLIO Sagax’s financial expenses in 2015 amounted to SEK 390 At December 31, 2015, the property portfolio comprised 225 M (366), corresponding to 61% (64) of the company’s total (184) properties with a lettable area of 1,860,000 square expenses before changes in value and tax. Sagax’s interest- meters (1,634,000). The main focus of the portfolio is in the rate sensitivity is low. At the end of the year, a change in the Stockholm region where 39% (40) of the rental value and general interest rate of +/– 1 percentage point would have 43% (42) of the market value is concentrated (see diagram changed Sagax’s borrowing costs by SEK –33 M/SEK –20 M below). At year-end, the rental value and contractual annual in the year ahead, corresponding to –3%/–2% of forecast rent totaled SEK 1,453 M (1,267) and SEK 1,394 M (1,193), profit from property management for 2016. respectively. This corresponds to an economic occupancy rate of 96% (94). THE SAGAX SHARE Sagax has three classes of shares: Class A and Class B com- CUSTOMERS mon shares, and preference shares. All three classes of shares Sagax had 698 leases at the end of the year. The average are listed on Nasdaq Stockholm, Mid Cap. At the end of the remaining lease term was 7.4 years (8.2). The total annual year, the company had 7,616 (7,545) shareholders. Sagax’s rent from the ten largest customers corresponds to approxi- market capitalization amounted to SEK 13,255 M (8,965) at mately 36% of Sagax’s annual contractual rent, represented year-end. by 57 separate leases. The average remaining term for these In 2015, profit from property management per common leases was 9.9 years. Sagax has many major reputable com- share after dilution amounted to SEK 4.90 (3.73) which, panies as tenants. 87% of the rental revenue derives from the compared with the year-end share price of the Class B com- government, municipalities or companies with sales exceeding mon share, corresponded to a multiple of 14.6 (11.8). SEK 100 M per year. Equity per common share after dilution amounted to SEK 25.93 (17.44) at year-end. EPRA NAV per common share FINANCING amounted to SEK 35.52 (27.23). For definitions of key ratios, Interest-bearing liabilities amounted to SEK 10,568 M see page 136. The share price for the Class B share at the end (8,525) with an average interest rate of 3.3% (4.1) at year- of the period was 277% (252) of equity per common share end. The debt ratio amounted to 59% (59) and the interest and 202% (162) of EPRA NAV per common share. coverage ratio to 285% (260); refer to the trend diagram below. The fixed interest and loan maturity period amounted to 3.0 years (3.0) and 4.2 years (3.2), respectively. Market value of properties Debt ratio and interest coverage ratio Other 6% (SEK 957 M) Interest coverage ratio, % Debt ratio, % 300 100 Other Finland 14% (SEK 2,266 M) 240 80 Stockholm 43% 180 60 Other Sweden 17% (SEK 6,906 M) (SEK 2,854 M) 120 40 Helsinki 20% 60 20 (SEK 3,206 M) 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Interest coverage ratio Debt ratio READ MORE» Business concept, goals and strategies, see page 6.