Continued high refurbishment pace and strong growth in profit in second quarter
D. Carnegie & Co AB (publ) reports for the second quarter of 2017 a sharp increase in income from property management, SEK 100 million, compared with SEK 72 million for the second quarter of the previous year. Profit before tax is up to SEK 616 million compared to SEK 504 million for the second quarter of the previous year. For the first half year, income from property management amounted to SEK 160 million, compared with SEK 109 million for the corresponding period previous year. Profit before tax for January-June amounted to SEK 704 million compared with SEK 634 million corresponding period previous year.
Earnings per share after tax were SEK 6.14 (5.02). The adjusted equity (EPRA NAV) increased 33 percent compared to the corresponding quarter 2016 and amounted to SEK 113.12 per share (85.05) as of 30 June 2017.
- Rental income increased to SEK 702 million (630)
- Net operating income increased to SEK 352 million (287)
- Income from property management increased to SEK 160 million (109)
- Changes in the value of investment properties of SEK 695 million (845), corresponding to 3.7 percent
- Changes in the value of derivatives of SEK 30 million (-121)
- Profit before tax amounted to SEK 913 million (766)
- Profit after tax amounted to SEK 704 million (634)
- Earnings per share amounted to SEK 9.10 (8.20) before dilution and amounted to
SEK 9.06 (8.12) after dilution
Q2, April-June 2017
- Rental income increased to SEK 365 million (321)
- Net operating income increased to SEK 205 million (169)
- Income from property management increased to SEK 100 million (72)
- Changes in the value of investment properties of SEK 457 million (488), corresponding to 2.4 percent
- Changes in the value of derivatives of SEK 16 million (-45)
- Profit before tax amounted to SEK 616 million (504)
- Profit after tax amounted to SEK 475 million (388)
- Earnings per share amounted to SEK 6.14 (5.02) before dilution and amounted to SEK 6.11 (4.98) after dilution
Significant events during the second quarter
- The Annual General Meeting of D. Carnegie & Co on 10 May 2017, resolved on re-election of the board members James Seppala and Svein Erik Lilleland and election of the board members Karolina Keyzer, Rolf Buch, Jean-Christophe Dubois, Melissa Pianko and Fredrik Brodin
- In May, D. Carnegie & Co completed its acquisition of 1,681 apartments in Arboga, Köping and Tranås
- D. Carnegie & Co has divested a site-leasehold with a grocery store in Akalla with a property value of SEK 80 million
Statement from the CEO
In the second quarter of 2017 we have continued our business as usual, and have managed to further increase the rate of completely refurbished apartments to 428 compared to 338 for the same period last year. This, other investments in our properties and our work to realise building rights on our existing land have resulted in improved values in our portfolio of SEK 867 million. Subsequently the profit before tax is up to SEK 616 million compared to SEK 504 million the same quarter last year. For the first half year the profit before tax was SEK 913 million and SEK 704 million after tax.
We have spent a lot of time progressing our potential new building rights towards acceptance by the relevant municipalities and formal new zoning. During the quarter we have agreed with City of Stockholm to start the zoning process for almost 30,000 sq.m. in Husby. We had around 50,000 sq.m. in formal process before and we are discussing with Stockholm and other municipalities about starting process for the more than 400,000 sq.m., identified potential building rights on our own land. Our efforts has been rewarded by an uplift in values by SEK 297 million for the last quarter.
The rental increase, 14 percent up from second quarter last year, and cost savings, as a result of investments and more efficient operations, have accomplished a better net operating profit, up 22 percent from second quarter 2016 to SEK 205 million. Stronger net operating profit also generates a higher income from property management, up 40 percent compared to same period last year to SEK 100 million for the second quarter 2017.
The net profit is reflected in an increase in the equity (EPRA NAV) from SEK 106.04 to SEK 113.12 per share during the quarter. The increased revenues and lower costs also improved the earnings capacity which is up SEK 36 million or 9 percent to SEK 409 million on a 12-month basis compared to 30 June, 2016. For the complete property portfolio the earnings capacity has not reached SEK 463 million.
We have also continued our work on the soft values when we formally opened the Ester Foundation program in May for training immigrant women in entrepreneurship in order for them to be able to be self-employed. We have also entered into a partnership with AIK, one of Sweden’s leading soccer clubs, to arrange soccer schools and similar activities for kids in our neighbourhoods.
In May the company acquired 1,681 apartments in Arboga, Köping and Tranås. The properties are very well located in their respective municipalities and are valuable additions to our portfolio. We are in the process of integrating them into the D. Carnegie & Co business model and start refurbishments. The company has also decided in July to start its first new construction of a residential property. The building will hold 45 new apartments and be erected north west of Stockholm in Upplands Bro in the midst of our existing buildings.
There are expectations that the Swedish government will propose certain changes to the tax regime affecting real estate, potentially including restrictions on interest deduction, which may negatively impact the net earnings of certain real estate owners. However, due to significant deductible maintenance costs within its portfolio, driven by the extensive ongoing refurbishments, D. Carnegie & Co does not currently expect to be impacted by such legislation for many years to come.
Stockholm, 14 July 2017
CEO, D. Carnegie & Co
This information is information that D. Carnegie & Co AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 7 a.m. CEST on 14 July 2017.
About D. Carnegie & Co
D. Carnegie & Co is a property company focusing on residential properties in the Greater Stockholm region and other growth areas. The company’s business concept is to own property portfolios slated for a gradual renovation of apartments in conjunction with the natural turnover of tenants. This can take place quickly and cost-efficiently thanks to extensive experience from the company's renovation method which, among other things, means that no evacuation needs to take place. In addition to this, the company creates value through the development of building rights in existing portfolios. The market value of the company’s properties amounted to SEK19,726 million on 30 June 2017. The total rental value amounted to SEK 1,536 million annually on 30 June 2017. The economic occupancy rate is high – vacancies are virtually non-existent. D. Carnegie & Co is listed on Nasdaq Stockholm.