Continued strong growth in profit and equity in the third quarter
D. Carnegie & Co AB (publ) reports for the third quarter of 2016 a sharp increase in profit before tax up SEK 434 million - up 115 percent compared with the same quarter last year. Also income from property management was considerably higher, SEK 176 million, compared with SEK 91 million for the third quarter of the previous year. This is a direct sign of improved financial results from the intensive investment activities performed by D. Carnegie & Co.
Earnings per share after tax were SEK 4.71 (2.71). The adjusted equity (EPRA NAV) increased 51 percent compared to the same quarter 2015 and amounted to SEK 91.26 per share (60.53) as of September 30, 2016.
1 January – 30 September 2016
- Rental income increased to SEK 963 m (901)
- Net operating income of SEK 477 m (421)
- Income from property management increased to SEK 284 m (138)
- Changes in the value of investment properties of SEK 1,137 m (440), an increase of 7.7 percent
- Changes in the value of financial instruments of SEK -153 m (-50)
- Profit before tax increased to SEK 1,200 m (469)
- Profit after tax increased to SEK 999 m (405)
- Earnings per share increased to SEK 12.92 (5.72) before dilution and increased to SEK 12.76 (4.52) after dilution
Third quarter 2016
- Rental income increased to SEK 333 m (309)
- Net operating income of SEK 190 m (164)
- Income from property management increased to SEK 176 m (91)
- Changes in the value of investment properties of SEK 291 m (180), an increase of 1.9 percent
- Changes in the value of financial instruments of SEK -32 m (-51)
- Profit before tax increased to SEK 434 m (202)
- Profit after tax increased to SEK 364 m (192)
- Earnings per share increased to SEK 4.71 (2.71) before dilution and increased to SEK 4.64 (2.14) after dilution
Significant events during the third quarter
- D. Carnegie & Co has completed the acquisition of the property portfolio in Eskilstuna, amounting to SEK 116m
- Blackstone Real Estate Partners Europe IV and Blackstone Real Estate Partners VIII (jointly ”Blackstone”), through its entity Vega Holdco Sarl, entered into agreements with Kvalitena AB, Svensk Bolig Holding AB and Frasdale Int. BV regarding an acquisition of shares at a price of SEK 100 per share and a transfer of Kvalitena AB’s and Frasdale Int. BV’s remaining voting rights. Following the completion of the agreement, Blackstone will own 40 percent of the voting rights and 32 percent of the shares and control 53 percent of the voting rights in D. Carnegie & Co
Significant events after the third quarter
- Vega Holdco Sarl has completed the share acquisitions and owns 40 percent of the voting rights and 32 percent of the shares and controls 53 percent of the voting rights in D. Carnegie & Co
- An extraordinary general meeting on October 14 2016 has resolved to replace the board members Ranny Davidoff and Terje Nesbakken with James Seppala and Svein Erik Lilleland and to replace Knut Pousette with James Seppala as chairman of the board
- Vega Holdco Sarl has on 17 October announced a mandatory tender offer in cash amounting to SEK 100 per share to the shareholders and warrant holders in D. Carnegie & Co
Statement from the CEO
We have been able to sustain the pace in our upgrading of properties despite of the holiday season and during the third quarter 289 apartments have been refurbished, which means 1,173 for the last 12 months. Several buildings have also been fitted with new facades, windows and roofs. The upgrading of properties provides improved net operating income, contributing significantly to the period’s value increase. The profit before tax more than doubled compared to the corresponding period the previous year.
The significant uplift in value have been achieved through investments amounting to SEK 686 million during the first nine month of the year. In addition, improved quality in the properties together with a strong market has further enhanced values through lower yield requirements. We have also launched a massive energy savings programme which will further improve the net operating income and values.
The increases in value are reflected in a 7 percent increase in the equity (EPRA NAV) to SEK 91.26 per share during the last quarter. In addition the earnings capacity for the comparable portfolio has increased – up SEK 52 million or 17 percent to SEK 351 million on a 12-month basis compared to September 30 2015. For the complete property portfolio the earnings capacity has now reached SEK 384 million.
The rental income for the third quarter has increased by 8 percent compared to the same period the previous year, primarily as a result of refurbishments and in spite of high refurbishment vacancy. We are also under way to reduce vacancy losses by making the refurbishment process more efficient, which will add up to 2 percent to revenue. Maintenance and repairs costs have decreased during the quarter by 40 percent compared to last year.
Overall, the improvements have resulted in a strong increase in reported net profit. The profit before tax for the quarter amounts to SEK 434 million, compared to SEK 202 million the same quarter the previous year, an increase by 115 percent. Broken down to earnings per share, after taxes, the figure is SEK 4.71, compared to SEK 2.71 for the same period in 2015.
We have also continued our work on the soft values in our areas and have increased the number of D. Carnegie & Co employed tenant hosts and organized more local events for young people. We have also expanded the number of summer associates in our areas.
In July, the global fund manager Blackstone announced that they have agreed with three large shareholders to acquire a substantial part of the shares in the company, and have since closed the deal and is now our major owner. Through Blackstone the company is backed by a financially very strong main owner and will be able to sustain its investments in existing and new properties.
Stockholm October 28, 2016
CEO of 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. The information was submitted for publication, through the agency of the contact person set out above, at 7 a.m. CEST on 28 October 2016.
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 Bosystem 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 SEK15,887 million on 30 September 2016. The total rental value amounted to SEK 1,366 million annually on 30 September 2016. The economic occupancy rate is high – vacancies are virtually non-existent. D. Carnegie & Co is listed on Nasdaq Stockholm.