YEAR-END REPORT JANUARY–DECEMBER 2016
Another strong year
THE QUARTER OCTOBER–DECEMBER 2016
• Rental income amounted to MSEK 684 (624)
• Profit from property management totaled MSEK 537 (405), corresponding to SEK 3.23 per ordinary share (2.78)
• Profit after tax amounted to MSEK 837 (573), corresponding to SEK 5.02 per ordinary share (3.99)
• Cash flow from operating activities before changes in working capital was MSEK 321 (290), corresponding to SEK 1.86 per ordinary share (1.92)
• Rental income amounted to MSEK 2,642 (2,443)
• Profit from property management totaled MSEK 1,812 (1,363), corresponding to SEK 11.49 per ordinary share (9.22)
• Profit after tax amounted to MSEK 3,583 (2,339), corresponding to SEK 23.25 per ordinary share (16.28)
• Recognized property value of SEK 34.7 billion (29.6) pertains to 432 (411) directly owned properties
• Net asset value (EPRA NAV) per ordinary share was SEK 93.87 (73.98)
• Cash flow from operating activities before changes in working capital was MSEK 1,260 (1,100), corresponding to SEK 7.76 per ordinary share (7.27)
• The Board proposes a dividend of SEK 4,40 per ordinary share with a quarterly payment of SEK 1,10, as well as a dividend of SEK 10.00 per preference share with a quarterly payment of SEK 2.50 per preference share.
SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER
• During the quarter, Hemfosa acquired and took possession of two properties in Finland, with the police authority and the office of the public prosecutor as the largest tenants. The underlying property value was approximately MSEK 420.
• Hemfosa acquired and took possession of properties in Sweden at an underlying property value of MSEK 1 017.
• Hemfosa has decided to acquire, develop and invest in three Internationella Engelska Skolan (IES) school properties in Sweden at a total value of approximately MSEK 450.
• In Sweden, three properties were divested to the partowned company Söderport Holding AB and subsequently vacated.
• Hemfosa additionally diversified the company’s sources of financing by establishing a commercial paper program with a limit of MSEK 2,000 and issuing bond loans of MSEK 750.
• In January 2017, trading in the shares of Hemfosa Fastigheter was moved to Stockholm Nasdaq Large Cap.
COMMENTS FROM THE CEO
2016 was another strong year for Hemfosa. We acquired a large volume of solid community service properties in a competitive Nordic market, implemented investments aimed at streamlining the existing portfolio and broadened the financing base to ensure continued growth. In total, our performance during the year led to a 32-percent increase in equity per ordinary share.
Hemfosa continued to streamline the portfolio and to grow in community service properties. During the year, the share of the property value accounted for by community service properties rose from 59 percent to 65 percent following continued acquisitions totaling some SEK 3.6 billion, predominantly properties for schools, health and care services, public authorities and judicial institutions. At the same time, non-priority properties were divested for approximately SEK 1.3 billion. I am satisfied that we succeeded in achieving so much during the year in the challenging market conditions that prevail, particularly in our niche, community service properties. We have looked for and found ways to close good deals, in part through a sizeable number of individual acquisitions, since in many cases the price of portfolio acquisitions has been far too high in our estimation.
BOTH ACQUISITIONS AND INVESTMENTS
We still managed to seal a few major acquisitions, notable among which was one implemented in the fourth quarter – a mixed Swedish portfolio that we acquired for SEKM 875 from Kaupthing ehf., mainly comprising community service properties. This was a typical Hemfosa deal, whereby we could leverage our extensive knowledge and experience of complex transactions. The acquired properties also offer opportunities for additional value generation via increased leasing and development or through the sale of properties that are not compatible with our portfolio in the long term.
Hemfosa is also growing through investments in the existing property portfolio and by developing new properties together with tenants who want to expand. We see a need for new community service properties in many parts of our markets, due to the general increase in the population and in the proportion of elderly people. As a result, municipalities and other operators of community service operations look for stable partners for developing such activities as preschools, schools and retirement homes, often close to new residential areas. In view of the high price level in the market, we consider this an effective, profitable and sustainable way to continue our growth.
BROADENED CAPITAL BASE
In 2016, we took a number of key steps towards broadening our financing base, in part through a new issue of ordinary shares and in part through a bond and a commercial paper program late in the year. We are doing this to secure opportunities for long-term growth and to increase flexibility in an environment where conditions in the credit market may become even tougher. Meanwhile, the growing earnings from the property portfolio’s stable cash flows represent security – our earnings capacity increased 15 percent during the year.
POTENTIAL IN AN UNPREDICTABLE MARKET
During its eight years in operation, Hemfosa has shaped an organization characterized by incredible resources and know-how, a sound corporate culture and unprecedented commitment. It is with both pride and joy that I will continue to lead Hemfosa to further advances. We have a platform in place, with the right people and financial strength, to continue our journey of success. The challenge in 2017, like in prior years, is to find objects at a price we consider to be reasonable. But we are used to navigating regardless of terrain and I believe that a somewhat more unpredictable property and credit market in the future could create interesting opportunities for Hemfosa.
Jens Engwall, CEO