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2017-02-02

Bulletin of the annual financial statement 2016: SATO made record-high investments in housing

SATO Corporation, Financial Statement Release, 2nd Feb 2017 at 9:00 am

SATO Corporation, Bulletin of the annual financial statement 2016

Highlights January-December 2016 (January-December 2015)

* Housing investments stood at EUR 572.6 (250.5) million.
* A total of 3,381 (1,184) apartments were acquired or completed. A total of
1,232 (1,278) new apartments were under construction. After divestments,
the number of apartments increased by 1,793 apartments.
* Customer driven strategy focus resulted in the occupancy rate that improved
during every quarter, rising from 94.8 percent in the first quarter to 96.3
percent in the last quarter. The full-year occupancy rate in Finland was
95.6 (96.4) %.
* Invested capital stood at EUR 3,196 (2,669) million.
* When evaluating business profitability, one of the key indicators is return
on investment, which was 9.1 (7.6) %.
* Profit before taxes stood at EUR 219.4 (159.4) million. The improvement in
profit is largely attributable to the positive change in the value of
apartments, amounting to EUR 124.3 (62.4) million. The change in value is
based on placing focus on smaller apartments in growing urban centres.
* The equity ratio strengthened supported by an increase in value and a
capital investment made by our shareholders and the equity ratio was 35.2
(33.3) %.
* Net sales stood at EUR 318.0 (323.4) million, of which rental income
comprised EUR 262.7 (249.4) million.
* Earnings per share was EUR 3.22 (2.49).

Highlights October-December 2016 (October-December 2015)

* Profit before taxes stood at EUR 46.5 (57.0) million.
* Profit and losses from changes of fair value were EUR 22.7 (36.1) million.
* Gross rental income was EUR 67.9 (61.6) million.
* Gross investments were EUR 63.8 (55.5) million.

* The rental occupancy rate in Finland was 96.3 (96.0) %.

* Annualised return on invested capital (ROI) was 7.4 (9.8) %.

Events after the review period
In it's meeting held on February 1st, 2017, SATO Corporation's Board of
Directors has updated the financial targets to the group. The updated
financial targets are:

* equity ratio over 35 percent (previous target over 30 percent)
* solvency ratio below 70 percent
* interest cover ratio over 1,8x
* unencumbered assets ratio 60 percent or more (previous approximately 50
percent by the end of 2020)

Saku Sipola, President and CEO:

"Year 2016 has been a successful and positively revolutionary one for SATO.
Customer driven strategy focus at the centre of our sustainable success
accelerated us towards better customer service, which can be seen in most
results. By making record-high investments, we are helping to build an
urbanising Finland and increase the number and quality of rental apartments.

Our entire personnel were engaged in the preparation of SATO's new strategy.
We looked for inspiration and understanding in major societal trends and
examined other factors affecting our operating environment. Urbanisation is a
key factor in Finland's international success. We believe that in the Finland
of the future, thriving cities will be home to people enjoying a high level
of wellbeing. According to our strategy, we are targeting our investments at
the most rapidly growing urban areas.

The current record-high construction of apartments strengthens the urban and,
therefore, internationally successful Finland. This positive development is
based on sufficient zoning in major cities and successful decisions on future
rail transport solutions.

In Finland, we are making good progress but we still have some catching up to
do, even at the current pace of construction, if we intend to fulfil the
estimated lack of 20,000 apartments in the Helsinki Metropolitan Area and
3,000 apartments in Tampere (VTT). In addition, at least 25,000 apartments
should be built in Finland every year to respond to the population
development (VTT). All regulations and activities that disturb this positive
development in construction and in increase in housing capacity should be
avoided.

It has been a true pleasure to see how our personnel have been eager to
develop our customer-driven service. Our performance improved in many areas
from the year before. As a result, the Net Promoter Score (NPS) among our
tenants improved, and our occupancy rate increased during every quarter.

We renewed our range of apartments through record-high investments and
divestments. Our apartment stock increased by roughly 1,800 apartments.
Through the active development of our apartment portfolio, we have divested
apartments in towns with a smaller population and focused on smaller
apartments in growing cities to support urbanisation. This speeds up the
value development of our housing assets, which in turn enables our future
investments.

Investment financing was strengthened by SATO's shareholders who invested EUR
113 million in the company and by finding new sources of financing.
Significant steps in our changed financing structure included the second
issuance of a bond of EUR 300 million in March and the loan arrangements of
EUR 200 million, without using properties as securities, completed in autumn
with Aktia and the European Investment Bank (EIB).

I wish to thank SATO's shareholders who made a significant investment in our
company and urbanisation in Finland in 2017, and all members of our Board of
Directors, our partners, personnel and our other stakeholders for their
productive cooperation. Above all, I wish to thank our customers who fill
SATO homes with life."

Key figures, the Group

--------------------------------------------------------------------------------------------------------------------
| Key financial indicators Q4 2016 Q4 2015 2016 2015 |
| Net sales, MEUR 87.2 78.6 318.0 323.4 |
| of which rental income 67.9 61.6 262.7 249.4 |
| Operating profit, MEUR 59.3 65.9 267.2 196.5 |
| Profit and losses from changes of fair value, MEUR 22.7 36.1 124.3 62.4 |
| Net financing expences, MEUR -12.7 -9.0 -47.8 -37.0 |
| Profit before taxes, MEUR 46.5 57.0 219.4 159.4 |
| Earnings per share, EUR 0.66 0.90 3.22 2.49 |
| Equity per share, EUR **** 22.12 19.53 |
| Number of shares, million * 56.6 50.8 54.3 50.8 |
| Equity ratio, % 35.2 % 33.3 % |
| Gross investments, MEUR 63.8 55.5 572.6 250.5 |
| as percentage of net sales 73.2 % 70.5 % 180.1 % 77.4 % |
| Divestments, MEUR 35.5 43.4 67.7 95.9 |
| Apartments divested 605 665 1267 1743 |
| Economic occupancy rate, % 96.3 % 96.0 % 95.6 % 96.4 % |
| Tenant turnover, % 35.8 % 42.6 % 40.5 % 41.1 % |
| Plots acquired, MEUR 1.4 5.7 13.5 13.2 |
| Apartments completed 338 291 759 861 |
| of which rental apartments 281 237 702 708 |
| of which apartments to be sold 57 54 57 153 |
| Apartments sold 6 33 93 130 |
| Net rental income, MEUR 40.7 33.5 166.2 151.8 |
| Net rental income, % 5.1 % 5.1 % 5.6 % 6.0 % |
| Return on invested capital, % (ROI) 7.4 % 9.8 % 9.1 % 7.6 % |
| Return on equity, % (ROE) 12.0 % 18.8 % 15.6 % 13.5 % |
| Balance sheet total, MEUR 3,562.2 2,979.6 |
| Shareholders' equity, MEUR 1,252.6 993.2 |
| Liabilities, MEUR 2,309.6 1,986.5 |
| Interest bearing liabilities, MEUR 1,943.0 1,676.2 |
| Investment property, MEUR 3,383.2 2,752.9 |
| Personnel, average*** 171 171 170 172 |
| Personnel at the end of period 175 170 |
| |
| Key figures according to EPRA recommendations |
| |
|and operational cash earnings |
| EPRA Earnings, MEUR 16.3 14.7 69.5 64.5 |
| EPRA Earnings per share, EUR 0.29 0.29 1.28 1.27 |
| EPRA Net Asset Value, MEUR***** 1,517.46 1,227.85 |
| EPRA Net Asset Value per share, EUR***** 26.80 24.15 |
| Cash earnings, MEUR 27.7 23.3 86.2 78.1 |
| Cash earnings per share, EUR 0.49 0.46 1.59 1.54 |
| |
| The 160,000 shares held by the Group have been deducted from the number of |
|shares. ...

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