From the CEO

Investment Case

Q2/2018: Healthy Operational Performance

“I am pleased with how our business developed in the first half of the year. Our net sales and EBITDA were slightly lower than the year before, but if you remove the effect of the Jyväskylä divestiture in November 2017, you can see healthy operational growth. Occupancy rates rose year-on-year, which boosted net sales and improved relative profitability.

Group net sales in the first half decreased by 3.2% from the previous year, but our like-for-like sales rose 3.4%. The main drivers behind the positive development were the rising occupancy and service growth. Rental growth also had a positive effect on Group net sales. Our financial occupancy rate at the end of June reached 95.9% (94.4%), with the greatest improvement in Kuopio and Oulu, Finland.

At the end of June, we had five organic growth projects in progress. The value of these projects, together with the already completed ones, amount to EUR 165 million, against our target of EUR 200–250 million for the 2017–2020 strategy period. We are particularly pleased with the pace of organic growth projects because they are strongly accretive, they support internal campus growth, and they bring efficiencies. Strong macroeconomic performance in our markets is enabling this organic expansion, but we are looking at each case rigorously.

Services form an increasingly important share of our business, and they continue to grow steadily. In January–June, service income reached EUR 13.8 million (8.0% y-o-y growth), and represented 15.9% of the Group net sales. In the second quarter, the share was 17.0%. The EBITDA margin for services was 12.3% (12.6 %) in the first half, and it was below 10% in the second quarter. This is due to UMA network ramp-up costs. The UMA related costs in the first half of the year were approximately EUR 1 million. Excluding those, the service EBITDA margin was over 18%.

Group EBITDA in the first six months was 5.3% lower than in the corresponding period a year earlier, at EUR 46.5 (49.1) million, due to the Jyväskylä divestiture, non-recurring items, a change in real estate tax  accounting, and UMA network ramp-up costs. The non-recurring items related to an acquisition case that we ultimately decided to terminate. Like-for-like EBITDA growth was 4.4%.

Yield compression was the primary driver behind positive fair value changes, which brought EUR 19.7 (9.6) million in the first half and were a significant contributor at the 0perating profit level.

We now have two flagship UMA coworking spaces in operation, one in Helsinki and one in Stockholm. Three more are set to open this year. We will continue to expand our UMA footprint in the other major cities and hubs of the Nordic–Baltic Sea area.”

Last updated 23.8.2018