TECHNOPOLIS PLC STOCK EXCHANGE RELEASE 21.4.2006 at 8.15 a.m.
TECHNOPOLIS GROUP INTERIM REPORT 1.1. - 31.3.2006
The main figures for January-March 2006 compared with the
corresponding period in 2005:
- The Group’s net sales rose to EUR 9.2 million, an increase of 21.7
- The Group’s EBITDA (Earnings before interest, taxes, depreciation
and amortization) rose to EUR 4.9 million, an increase of 15.5 %.
- Profit before taxes was EUR 17.4 million, an increase of 242.5 %
- The effect of the change in the fair value of investment property
on profit was EUR 13.5 million (EUR 1.9 million), and was mainly due
to a reduction in the return requirements of the market.
The Group’s net sales for the review period were EUR 9.2 million (EUR
7.6 million in January-March 2005), representing growth of 21.7 %.
EBITDA (Earnings before interest, taxes, depreciation and
amortization) for the review period was EUR 4.9 million (EUR 4.3
million), an increase of 15.5 %. Operating profit for the review
period was EUR 18.4 million (EUR 6.1 million). Profit before taxes
for the review period was EUR 17.4 million (EUR 5.1 million).
The balance sheet total was EUR 287.3 million (EUR 222.3 million), an
increase of 29.2 %. The company's equity-to-assets ratio at the end
of the review period was 47.0 % (42.6 %).
The fair value of the Group’s investment property at the end of the
review period was EUR 262.9 million (EUR 211.4 million). The change
in the fair value of investment property was due to a reduction in
the return requirements of the market, a change in the value of
property owned throughout the review period, and increases in
acquisition cost recognized in separate companies during the review
period. The effect on profit of the change in the fair value of
investment property was EUR 13.5 million (EUR 1.9 million).
The Group's total rentable floor area was 241,000 floor square meters
at the end of the review period (205,359 floor square meters at March
31, 2005). At the end of the review period, the Group's average
financial occupancy ratio was 96.5 % (95.7 %). The financial
occupancy ratio describes the rental revenue from the properties as a
percentage of the combined total of the rent for the leased space and
the estimated market rent for the vacant space. The Group’s leases at
the end of the review period amounted to EUR 67.8 million (EUR 59.1
The Technopolis Group includes the parent company, Technopolis Plc,
which has operations in Oulu and Vantaa, and its subsidiaries
Innopoli Ltd in Espoo (100 % owned), Technopolis Kareltek Oy in
Lappeenranta (99.8 % owned), Medipolis Ltd in Oulu (55.7 % owned),
and other subsidiaries. The parent company also has a minority
holding in the affiliated companies Technocenter Kempele Oy (48.5 %),
Iin Micropolis Ltd (25.7 %), Oulu Innovation Ltd (24 %) and
Lappeenranta Innovation Oy (20 %).
The Group also includes Innopoli Ltd’s wholly-owned subsidiary,
Technopolis Ventures Ltd, in Espoo. Technopolis Ventures Ltd has a
wholly-owned subsidiary, Technopolis Ventures Kareltek Oy. Following
a transaction executed in March, Oulutech Ltd became a 70 % owned
subsidiary of Technopolis Ventures Ltd. Technopolis Ventures Ltd also
has a 25 % holding in Otaniemen kehitys Oy.
At January 27, 2006 Technopolis signed the articles of incorporation
of two Russian companies, Technopolis Neudorf and Technopolis St.
Petersburg, in St. Petersburg. Technopolis is the sole owner of both
Investments and development projects
The two stages of the Oulu city center Technopolis to be completed
this August comprise 12,509 floor square meters and the cost estimate
is approx. EUR 22.5 million, which includes the investment costs of
the building’s approx. 120 parking spaces for public parking to be
owned by Technopolis.
The fourth stage of the Helsinki-Vantaa technology center to be
completed in September is 2,789 floor square meters in size, and the
investment will amount to about EUR 5.5 million.
The marketing of the Ruoholahti technology center was commenced in
February. An area containing the building rights to 24,900 square
meters has been reserved for Technopolis, and the reservation is
valid until August 31, 2006. The zoning plan for the area was
approved and became legally valid in 2005.
Negotiations regarding cooperation with Tehnopol, a Tallinn-based
technology center organization, have ended. Technopolis is continuing
to determine the possibilities of establishing technology centers in
line with its concept elsewhere in the Baltic countries.
Technopolis has negotiated with the City of St. Petersburg and the
the SEZ bureau of the Russian Federation regarding the Neudorf
special economic zone. In addition, in the first months of the year
Technopolis negotiated about several other land areas suitable for
the company’s technology center operations in St. Petersburg. The
negotiations held so far have not resulted in any agreements, and
their final outcomes and timetables are difficult to predict.
Events related to the Technopolis share
During the review period, Technopolis’ share capital was increased on
two occasions. In November and December 2005, a total of 26,133
Technopolis shares were subscribed with year 2001 options, and the
resulting increase in share capital of EUR 44,164.77 was entered in
the Trade Register at February 15, 2006. In March, a total of 660,008
Technopolis shares were subscribed with year 2001 options, and the
resulting increase in share capital of EUR 1,115,413.52 was entered
in the Trade Register at March 9, 2006.
After the above-mentioned two share capital increases, Technopolis'
share capital at March 31, 2006 is EUR 61,749,536.03 divided into
36,538,187 shares each with a counter book value of EUR 1.69.
No convertible bonds were launched. The company has not acquired its
The Group's net financial expenses were EUR 0.9 million (EUR 1,0
million). The Group's balance sheet total was EUR 287.3 million (EUR
222.3 million), of which liabilities accounted for EUR 152.7 million
(EUR 128.1 million). The Group's equity to assets ratio was 47.0 %
(42.6 %). The Group's equity per share was EUR 3.58 (EUR 3.07).
The Group's long-term liabilities at the end of the review period
amounted to EUR 119.8 million (EUR 96.1 million). The average
interest rate for loans at March 31, 2006 was 3.37 % (3,38 %).
Technopolis has supplemented its funding with a EUR 30 million
domestic commercial paper program which allows the company to issue
commercial papers with a maturity of less than a year. At March 31,
2006, the issued commercial papers totaled EUR 9.0 million.
Organization and personnel
Technopolis renewed the structure of its Executive Board to promote
the near-term growth and development of its business in Finland and
the neighboring regions. The Company established an Executive Board,
an Extended Executive Board and two Development Teams, one to promote
the Russian business and the other to promote the development
services provided by the company.
The company’s Executive Board comprises the following: Pertti
Huuskonen, President and CEO, Heikki Kallio, Chief Development
Officer, Mervi Käki, Director, Seppo Selmgren, Director, Reijo
Tauriainen, CFO, and Marjut Hannelin, CEO, Technopolis Kareltek Oy.
The Extended Executive Board comprises the following members, in
addition to the above: Satu Barsk, Director, Martti Launonen,
Director, Marko Lind, Director, Leena Marmila, Assistant to the CEO,
Kari Mikkonen, Director, and Keith Silverang, CEO, Technopolis
The Executive Board is responsible for developing the Group’s core
business. The extended Executive Board is responsible for developing
the Group strategy and supporting the core business. The Development
Teams for the Russian business and development services comprise the
above-mentioned persons and other key personnel of the company.
The Group employed an average of 89 (69) people during the review
period. 29 (24) persons were employed in jobs related to premises
activities, 19 (21) persons in business services and 41 (24) persons
in development services. As a result of the acquisition of Oulutech
Ltd into the Group, the number of staff increased by six people.
Decisions of the Annual General Meeting
The Annual General Meeting held on March 24, 2006 confirmed the
consolidated and parent company income statements and balance sheets
for the 2005 financial year, released those responsible for the
accounts from further liability and decided on the distribution of a
dividend of EUR 0.13 per share for the financial year that ended on
December 31, 2005. The Annual General Meeting also authorized the
Board of Directors to decide on a rights offering and issue of
The Board of Directors elected by the Annual General Meeting
comprises Pertti Voutilainen, Chairman, Matti Pennanen, Vice
Chairman, and Juhani Paajanen, Timo Parmasuo and Erkki Veikkolainen.
Pertti Huuskonen is the President and CEO of Technopolis. KPMG Oy Ab,
Authorized Public Accountants, is the company’s auditor with Tapio
Raappana, APA, as the responsible auditor.
Evaluation of operational risks and uncertainty factors
The most significant risks related to Technopolis’s business
operations are mainly financial risks and customer risks.
Technopolis’ main financial risk is the interest rate risk related to
the loan portfolio. The objective of interest rate risk management is
to reduce or remove the negative impact of market interest rate
fluctuations on the company’s result, balance sheet and cash flow.
The company’s financing policy aims to diversify the interest rate
risk of loan contracts over various maturities on the basis of the
market situation prevailing at any particular time and the interest
rate prognosis created in the company. If necessary, the company
employs forward rate agreements, interest rate swaps and interest
In order to manage financial risk, Technopolis uses a wide range of
finance providers and maintains a high equity to assets level.
Technopolis uses derivative instruments only to reduce or eliminate
financial risks in the balance sheet.
The structure of Technopolis’ loan portfolio at the end of the review
period is shown by the fact that a one percentage unit rise in money
market rates would increase annual interest rate costs by EUR 0.3
million. Correspondingly, a one percentage unit decrease in money
market interest rates would reduce annualized interest rate costs by
EUR 0.3 million.
Due to the interest rate risk related to credits, a policy of
interest rate diversification has been followed. At March 31, 2006,
52.2 % of the loan portfolio was bound to either the 3-12 month
Euribor rate or to the Bank of Finland's rate. 47.8 % of the loans
were fixed-interest loans of 13-60 months. The loan period, weighted
by the remaining capital of the loans, was 10.5 years. Technopolis
supplements its funding with a EUR 30.0 million domestic commercial
paper program which allows the company to issue commercial papers
with a maturity of less than a year. At March 31, 2006, the issued
commercial papers totaled EUR 9.0 million.
Customer risk management aims to minimize the negative impact of any
changes in customers’ financial position on the business and the
company’s profit. In customer risk management, emphasis is on
familiarity with the customer’s business and active monitoring of
customer information. As part of customer risk management,
Technopolis’ leases include rent collateral arrangements. Properties
are insured with full value insurance.
The Group's property portfolio is divided geographically between the
Helsinki metropolitan area, Lappeenranta and the Oulu region. The
Group’s strategic goal is that no single customer will account for
more than 20 % of the Group’s net sales. The Group has arranged the
leases of its biggest customers to end at different times. The Group
has over 700 customers that operate in many different sectors.
The Group is protected against fluctuations in the business cycle by
fixed-term leases which totaled EUR 67.8 million at March 31, 2006.
Of the leases, 6 % will expire in 2006, 35 % will expire in 2007-
2009, 28 % in 2010-2012, 10 % in 2013-2015, and 21 % in 2016 or
In new building projects, Technopolis focuses on quality definition
and the manageability of the property’s entire lifecycle. In the
design phase, all the building’s maintenance and service requirements
are taken into account, with the aim of implementing environmentally
friendly solutions in terms of energy consumption, the adaptability
of office facilities, and recycling possibilities. In connection with
property purchases, Technopolis carries out the normal property and
environmental assessments before committing to the transaction.
Changes in the return requirements of the market may have a
significant effect on profit performance.
The management of the Technopolis Group estimates that in 2006 the
demand for high tech operating environments will be at a satisfactory
level, and that the occupancy ratio of the Group's leasing facilities
and the demand for the Group's services will both remain good. The
Group estimates that net sales will increase by 17-22 % and EBITDA by
12-17 % on the previous year.
As part of its strategy for growth to 2009, Technopolis has decided
to study the potential for expansion both within its present
operating locations and in other growth centers in Finland. There are
estimated to be 1-3 potential areas. Technopolis will continue its
work to launch technology center operations in line with its concept
in Russia and the Baltic countries. Technopolis seeks to grow
organically as well as through acquisitions.
The Group’s financial performance is dependent on trends in the
general operating environment, in customer business and in the
financial markets. Factors in these areas may affect the Group’s
result through changes in occupancy ratios, the use of services, the
development of the return requirements of the market, financing costs
and office rent levels.
The figures are unaudited.
Oulu, April 21, 2006
Board of Directors
President and CEO
For further information, please contact:
Pertti Huuskonen, tel. +358 400 680 816 or +358 8 551 3213
A PDF version of this interim report can be found at
www.technopolis.fi. Requests for a printed version can be made to
Teija Koskela, tel. +358 8 551 3242.
Technopolis Plc has an information bulletin service, which can be
ordered on the Internet. Those ordering the service will receive the
company's information bulletins by email.
INCOME STATEMENT 1.1.2006- 1.1.2005- 1.1.2005-
EUR MILLION 31.3.2006 31.3.2005 31.12.2005
Net sales 9.23 7.58 31.73
Other operating income 1) 0.55 0.89 2.42
Operating expenses -4.83 -4.17 -16.66
Revaluation of investment property 13.53 1.92 1.22
Depreciation according to plan -0.09 -0.09 -0.45
Recognition of consolidation difference 0.28
Operating profit 18.38 6.13 18.53
Financial income and expenses -0.93 -1.04 -3.42
Profit before taxes 17.44 5.09 15.11
Income taxes -4.21 -0.83 -2.28
Net profit for the year 13.23 4.26 12.83
Distribution of profit for the year
To parent company’s shareholders 12.87 4.17 12.68
To minority shareholders 0.36 0.10 0.15
BALANCE SHEET, ASSETS
Intangible assets 0.21 0.13 0.22
Tangible assets 13.53 2.41 8.61
Investment property 262.85 211.43 249.32
Investments 1.28 1.27 1.43
Deferred tax assets 2.34 2.66 3.66
Total non-current assets 280.21 217.91 263.25
Current assets 7.12 4.40 6.91
Total assets 287.34 222.32 270.16
BALANCE SHEET, SHAREHOLDERS' EQUITY AND LIABILITIES
Share capital 61.75 50.60 60.59
Premium fund 12.70 0.90 12.73
Other funds 0.02 0.02 0.03
Retained earnings 43.47 35.27 35.39
Net profit for the review period 12.87 4.17 12.68
Parent company’s shareholders’
interests 130.81 90.96 121.42
Minority interests 3.83 3.27 3.39
Total shareholders' equity 134.64 94.23 124.81
Interest-bearing liabilities 104.86 84.04 107.02
Non-interest-bearing liabilities 0.94 0.94 0.94
Deferred tax liabilities 14.00 11.13 11.62
Interest-bearing liabilities 19.94 22.59 18.15
Non-interest-bearing liabilities 12.96 9.40 7.62
Total liabilities 152.70 128.09 145.35
Total shareholders' equity and
liabilities 287.34 222.32 270.16
CONSOLIDATED CASH FLOW STATEMENT
Cash flows from operating activities
Operating profit 18.38 6.13 18.53
Revaluation of investment properties -13.53 -1.92 -1.22
Depreciation 0.09 0.09 0.45
Recognition of consolidation difference -0.28
Other adjustments for
non-cash transactions 0.06 0.15 0.03
Increase/decrease in working capital 0.67 0.11 -0.17
Interests received 0.01 0.01 0.07
Interests paid and fees -0.97 -1.09 -3.62
Income from other investments of
non-current assets 0.01 0.01 0.01
Taxes paid -0.51 -0.37 -1.64
Net cash provided by operating
activities 4.20 3.11 12.18
Cash flows from investing activities
Investments in other securities -0.05
Investments in investment properties -4.94 -1.42 -24.07
Investments in tangible and
intangible assets -0.04 -0.05 -0.47
Loans issued -0.04
Disposal of subsidiaries -0.05 -0.05
Acquisition of subsidiaries -0.24 -0.15 -8.38
Net cash used in investing activities -5.21 -1.72 -33.03
Cash flows from financing activities
Increase in long-term loans 20.57
Decrease in long-term loans -2.18 -1.91 -9.77
Dividends paid -3.54
Paid share issue 1.12 0.77 20.21
Change in short-term loans 1.77 -5.88
Net cash provided by
financing activities 0.71 -1.13 21.59
Net increase/decrease in cash assets -0.30 0.26 0.74
Cash assets at beginning of period 2.40 1.66 1.66
Cash assets at end of period 2.10 1.92 2.40
STATEMENT OF CHANGES IN EQUITY
Share Share Fund Accum- Minor- Share-
capital premium ulated ity holders’
fund retain.inter. equity
December 31, 2004 49.80 0.90 0.02 38.81 3.58 93.11
Share issue 10.79 10.79
Issue premium 11.83 11.83
Dividend distribution -3.54 -3.54
Net profit for the period 12.68 0.15 12.83
Other changes 0.13 -0.34 -0.21
December 31, 2005 60.59 12.73 0.02 48.07 3.39 124.81
Increase of share capital 1.16 1.16
Dividend distribution -4.66 -4.66
Net profit for the period 12.87 0.36 13.23
Other changes -0.03 0.06 0.08 0.10
March 31, 2006 61.75 12.70 0.02 56.34 3.83 134.64
KEY INDICATORS 1.1.2006- 1.1.2005- 1.1.2005-
31.3.2006 31.3.2005 31.12.2005
Change in net sales, % 21.7 6.8 10.0
Operating profit/net sales, % 199.1 80.8 58.4
Equity to assets ratio, % 47.0 42.6 46.4
Employees in Group companies 89 69 74
Gross investments in non-current
assets in balance sheet, EUR 1 000 5,220 1,626 35,262
Net rental income of property
portfolio, % 2) 7.9 8.7 8.6
Financial occupancy ratio, % 96.5 95.7 95.7
Earnings/share, EUR, 3)
Undiluted, EUR 0.36 0.14 0.38
Diluted, EUR 0.36 0.14 0.38
Average (issue-adjusted) no.
Undiluted 36,026,157 29,591,242 33,358,468
Diluted 36,158,075 29,746,527 33,526,874
Pledges and guarantees on own debt
Mortgages 147.39 136.87 147.39
Land lease liabilities 0.49 0.47 0.49
Pledged investment properties 9.21 8.77 8.53
Nominal values of interest rate swaps 8.00 9.23 9.17
Fair values of interest rate swaps -0.19 -0.38 -0.23
Liability for return of VAT, which is realized if properties are sold
or their intended use is changed in the situations referred to in
section 33 of the VAT Act. 13.37 16.24 13.37
Project liabilities 2.03 6.66 2.04
Collateral given on behalf of
Guarantee 0.50 0.50 0.50
1) Other operating income comprises operating subsidies received for
development services, for which the same amount of development
service expenses have been recorded as operating expenses.
2) The figure for 2005 does not take into account the effect of
Kareltek and the Kemira Research Centre property.
3) The comparison figure at the year 2005 balance sheet date includes
the effect of the recognition of consolidation difference arising in
connection with acquisition of the stock of Kareltek Oy.
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