TECHNOPOLIS PLC STOCK EXCHANGE RELEASE 20.10.2005 at 8.15 a.m.
TECHNOPOLIS GROUP INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2005
The main figures for January-September 2005 compared with the
corresponding period in 2004:
- net sales EUR 22.9 million, representing growth of 7.4 %.
- EBITDA (Earnings before interest, taxes, depreciation and
amortization) EUR 13.5 million, representing growth of 11.4 %.
- comparable net profit EUR 5.1 million, representing growth of 13.4
The net profit for the period decreased to EUR 5.1 million compared
with the previous year's EUR 6.0 million (decrease of 14.6 %). The
decrease was due to the fact that the comparison period’s net profit
had been improved by recognition of nonrecurring consolidation
difference totaling EUR 1.5 million.
The profit of EUR 5.1 million for January-September 2005 was
burdened by nonrecurring share issue expenses of EUR 0.5 million.
The equity to assets ratio at the end of the period was 46.8 % (37.1
Technopolis' net sales for the period totaled EUR 22.9 million (EUR
21.3 million in 1-9/2004). Operating profit for the period was EUR
9.9 million (EUR 10.2 million, including an income item of EUR 1.5
million from the consolidation difference), a decline of 2.4 %. The
profit before extraordinary items was EUR 6.8 million (EUR 7.2
million), a decrease of 5.2 %.
Rent income accounted for EUR 19.1 million (EUR 18.1 million) of net
sales, while service income accounted for EUR 3.8 million (EUR 3.2
million). Depreciation according to plan totaled EUR 3.6 million
(EUR 3.4 million). The balance sheet total was EUR 200.2 million
(EUR 189.4 million), an increase of 5.7 %.
On 30 September 2005, the Group's property for leasing comprised 45
(44) properties with a total rentable area of 205,359 floor square
meters (202,000 floor square meters on September 30, 2004). The
Group's average occupancy ratio on September 30, 2005 was 96.5 %
Investments and development projects
In January, Technopolis decided to commence implementation of the
second stage of Technopolis Kontinkangas in close proximity to the
Oulu city center. The building's size is 2,436 floor square meters
and the cost estimate is EUR 3.8 million. The building, which has
been fully rented, will be brought into use in November 2005.
Technopolis decided to commence implementation of the first stage of
the Oulu city center Technopolis in April. The size of the stage is
6,995 floor square meters and the cost estimate is EUR 14.5 million,
which includes the investment costs of the building’s approx. 120
parking spaces for public parking to be owned by Technopolis. The
first stage should be completed by May 2006.
Due to favorable demand, the Technopolis Board of Directors has
decided to begin the second stage of the Oulu city center
Technopolis, with implementation to begin immediately. The second
stage comprises 5,281 floor square meters and the cost estimate is
approx. EUR 8 million. The second stage is estimated to be completed
in August 2006.
The third stage of Technopolis Helsinki-Vantaa, 3,383 floor square
meters, was brought into use in February. The investment was EUR 6.2
million. The fourth stage of Technopolis Helsinki-Vantaa, 2,792
floor square meters, is in the planning and marketing phase.
Implementation of the fourth stage is expected to commence at the
end of 2005.
By a decision of the Real Estate Committee of the City of Helsinki,
an area containing the building rights to 24,900 square meters has
been reserved for Technopolis until the end of 2005 for the planning
of the Ruoholahti technology center. The area’s zoning plan has been
approved and the City of Helsinki is currently planning the general
and municipal engineering solutions for the area.
Since February of last year, Technopolis has been making
preparations with the City of Espoo to build a new technology center
in the Suurpelto area of Espoo. The land reservation is valid until
June 30, 2006. In addition to high tech companies, the center will
also house units of educational institutes.
Technopolis has signed a co-operation agreement with Tehnopol, a
technology center organization in Tallinn, Estonia. The two parties
have started to study the possibilities for cooperation in the
technology center concept, the acquisition of customer companies and
joint investments. The aim of this co-operation is to develop the
Tallinn technology center into an operating environment for Finnish
and international companies.
In September, Technopolis signed a preliminary agreement with
Lappeenrannan Kaupunkiyhtiöt Oy on the acquisition of a majority
holding in Technology Centre Kareltek Inc. The preliminary agreement
concerned 79 % of Kareltek’s shares. The acquisition price is 79 %
of EUR 21.7 million, less Kareltek's net liabilities at the
transaction date. The debt-free acquisition price is estimated to be
EUR 8.0-8.5 million.
In April 2005 Technopolis began to investigate the potential for
commencing technology center activities in St. Petersburg.
Technopolis signed a memorandum of understanding on October 7, 2005
with the City of St. Petersburg on the establishment of a technology
center in St. Petersburg. Under the memorandum of understanding,
which is valid until June 30, 2006, the City of St. Petersburg will,
among other things, look into the possibilities to provide
Technopolis with land suitable for technology center operations.
Technopolis will undertake a feasibility study immediately. The
parties next intend to draw up an investment contract on the
project. Technopolis has decided to establish a company in Russia
for the St. Petersburg operation.
The Group’s long-term liabilities at the end of the review period
amounted to EUR 82.8 million (EUR 92.7 million). The average
interest rate for loans at September 30, 2005 was 3.26 % (3.59 %).
Due to the interest rate risk related to the loans, a policy of
interest rate diversification has been followed. At September 30,
2005, 46.1 % of the loan portfolio was bound to either the 3-12
month Euribor rate or to the Bank of Finland rate. 53.9 % of the
loans were fixed-interest loans of 13-60 months. The average capital-
weighted outstanding loan period was 9.2 years.
Technopolis supplements its finance 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. On September
30, 2005, the issued commercial papers totaled EUR 9.0 million.
The Group's equity to assets ratio on September 30, 2005 was 46.8 %
Adoption of IAS and IFRS
The Technopolis Group will publish its first annual financial
statements prepared in compliance with IAS (International Accounting
Standards) and IFRS (International Financial Reporting Standards)
for 2005 and its first interim report compliant with the said
standards for January 1 - March 31, 2006.
Adoption of IFRS will have the most significant impact on the book
value of the Group's property portfolio, which will rise materially
when the fair value model of IAS 40 Investment Property is applied
instead of the acquisition cost model applied in earlier financial
statements. According to preliminary IFRS calculations, the
consolidated balance sheet total will also be increased by the
deferred taxes determined in accordance with IAS 12. According to
preliminary calculations, other standards complying with IFRS are
not expected to have a material impact on the overall value of the
consolidated balance sheet.
According to preliminary IFRS calculations, the shareholders' equity
in the consolidated balance sheet will increase by around one-third
compared with the beginning and ending equity for 2004 calculated
according to Finnish Accounting Standards (FAS). More accurate
figures will become available during 2005 in the later stages of the
transition to IFRS.
According to preliminary IFRS calculations, the major impacts on
profit and loss will apply to the income statement items of
depreciation, impairment and income taxes. Income taxes will be
affected by an increase in deferred taxes as a result of IAS 12.
In measuring the fair value of investment property, the consolidated
financial statements will no longer include depreciation of the
investment property. In 2004, the planned depreciation of buildings
amounted to EUR 4.2 million in the consolidated financial statements
compiled in compliance with FAS. On the other hand, as a result of
IAS 40, changes in the fair value of investment property are
recognized through profit or loss in the income statement, which is
likely to increase the fluctuation of Group profits compared with
the accounting practice followed earlier. Changes in the fair value
of investment property do not affect the Group's cash flow.
The Group has decided to adopt the fair value model for its
investment property under IAS. In the opening IFRS balance sheet,
the fair value of the Group's investment property at January 1, 2004
was EUR 192 million, which exceeded the book value of EUR 162
million recorded at the same date for this property by EUR 30
million. The fair value of the Group's investment property at
December 31, 2004 was EUR 203 million, which exceeded the book value
of EUR 174 million recorded at the same date for this property by
EUR 29 million.
In the consolidated financial statements for 2004 compiled in
compliance with FAS, the result was improved by a decrease in
consolidation difference of EUR 2.0 million. Of this consolidation
difference, EUR 1.8 million is recognized under IFRS 1 in the
opening IFRS balance sheet at January 1, 2004, which reduces the
operating profit for 2004 calculated under IFRS, compared with the
Group's operating profit calculated in compliance with FAS.
Increases in share capital
During the review period, Technopolis' share capital was increased
on three occasions. In December 2004, 15,999 Technopolis shares were
subscribed with 2001 A/B options, and the resulting increase in
share capital of EUR 27,038.31 was entered in the Trade Register at
January 31, 2005. In February, 455,205 shares were subscribed with
2001 A/B/C options, and the resulting increase in share capital of
EUR 769,296.45 was entered in the Trade Register at March 9, 2005.
The company's Board of Directors decided at April 21 on the
marketing of a directed share issue, to start at April 26, 2005 and
end at May 6, 2005. A total of 5,400,000 new shares were offered for
subscription. At the same time, the City of Oulu offered for sale a
maximum of 2,500,000 shares. In the share issue and sale, 6,700,000
shares were offered to international and domestic investors in an
institutional issue and sale, while 1,200,000 shares were offered to
Finnish retail investors in a retail issue and sale.
The whole share issue and sale was over-subscribed approximately 1.6
times and the institutional issue and sale approximately 1.8 times.
The company's Board of Directors decided on an allocation of shares
to investors by which 5,099,600 shares were allocated to
international investors and 2,546,000 shares to domestic investors
and on a share subscription and sales price of EUR 3.69 per share. A
total of 5,400,000 new shares were subscribed in the directed share
issue, as a result of which a share capital increase of EUR
9,126,000 was entered in the Trade Register at May 11, 2005.
After the above-mentioned three share capital increases,
Technopolis' share capital at September 30, 2005 is EUR
59,725,757.25 divided into 35,340,685 shares each with a counter
book value of EUR 1.69.
Of the company’s owners, international and nominee-registered
shareholders held 41 % of the company's shares on September 30, 2005
(8.9 % on September 30, 2004). The company's market capitalization
was EUR 163 million on September 30, 2005 (EUR 76 million on
September 30, 2004). The company's market capitalization has risen
by 115.8 % in one year due, among others, to the share issue
implemented in May.
Distribution of options
In June 2005 the Board of Directors decided to distribute a total of
336,000 2005A options to key personnel. A total of 436,000 2005B
options and 436,000 2005C options will be distributed later to
current and future key personnel of the Group.
Decisions of the Annual General Meeting
The Annual General Meeting held on March 22, 2005 confirmed the
consolidated and parent company income statements and balance sheets
for the 2004 financial year, released those responsible for accounts
from further liability and decided on the distribution of a dividend
of EUR 0.12 per share for the year ended December 31, 2004. The
Annual General Meeting also decided to amend the Articles of
Association with respect to the share capital, grant the Board of
Directors an authorization concerning a rights offering and
convertible bonds issue, and issue options to key personnel.
The Board of Directors elected by the Annual General Meeting
includes Pertti Voutilainen, Chairman, and Matti Pennanen, Vice
Chairman. The other members of the Board are Juhani Paajanen, Timo
Parmasuo and Erkki Veikkolainen. The firm of Ernst & Young Oy,
Authorized Public Accountants, will act as the company's auditor
with Rauno Sipilä, APA, as the principally responsible auditor.
Administration, organization and personnel
The Group employed an average of 69 (94) people. 25 (24) persons
were employed in jobs related to premises activities, 16 (19)
persons in business services and 28 (51) persons in project
services. The number of people working in project services decreased
as a result of the establishment of a new company that started
operating at January 1, 2005, in which connection 14 persons were
transferred from the employment of the Group to Oulu Innovation Ltd.
In March, Medipolis Ltd. sold 75 % of its holding in Medipolis GMP
Ltd., and as a result of the transaction, the number of employees in
the Group fell by 15.
The Technopolis Group includes Technopolis Plc (the parent company),
which has operations in Oulu and Vantaa, and its subsidiaries
Medipolis Ltd. in Oulu (55.7 % held by Technopolis), Kiinteistö Oy
Oulun Ydinkeskusta (98.8 % holding) and Oulun Ydinkeskustan Parkki
Oy (62.3 % holding), Innopoli Ltd. in Espoo (whose holding rose from
97.5 % to 100 % in February), Kiinteistö Oy Oulun Teknologiatalot in
Oulu (100 %) and other smaller subsidiaries. The Group also includes
Technopolis Ventures Ltd. in Espoo (fully owned by Innopoli Ltd).
The parent company also has a minority holding in the affiliated
companies Technocenter Kempele Oy (48.5 %), Iin Micropolis Ltd.
(25.7 %), Oulutech Ltd. (30 %) and Oulu Innovation Ltd. (24 %).
Medipolis Ltd. surrendered its 75 % holding in Medipolis GMP Ltd. in
a transaction concluded in March.
The management of the Technopolis Group estimates that in 2005 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 4-7
% and EBITDA by 7-10 % on the previous year.
The Group's property portfolio is divided geographically between the
Oulu region and the Helsinki metropolitan area. The Group's
strategic goal is that no single customer will account for more than
20 % of net sales. The Group has arranged the leases of its biggest
customers to end at different times. The Group has altogether about
600 customers operating in many different sectors.
The company's business is protected against business cycle
fluctuations by the Group's fixed-term lease portfolio which totaled
EUR 56.4 million at September 30, 2005. Of the leases, 1 % are valid
until further notice or will expire in 2005, 45 % will expire in
2006-2008, 20 % in 2009-2011, 19 % in 2012-2014, and 15 % in 2015 or
As part of its growth strategy until 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. In addition, the company
will examine the conditions for launching its business concept in
Russia and the Baltic region. Technopolis seeks to grow organically
as well as through acquisitions.
The company'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 company's
result through changes in occupancy ratios, the use of services,
financing costs and office rent levels.
The figures in this interim report are unaudited.
Oulu, October 20, 2005
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 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.
CONSOLIDATED INCOME STATEMENT 1.1.2005- 1.1.2004- 1.1.2004-
30.9.2005 30.9.2004 31.12.2004
EUR mill. EUR mill. EUR mill.
Net sales 22.89 21.31 28.84
Other operating income 1) 1.89 4.15 6.02
Depreciation and write-downs 2) -3.57 -3.44 -4.83
Decrease in consolidation difference 1.48 1.99
Operating expenses -11.27 -13.33 -18.93
Operating profit 9.93 10.17 13.09
Financial income and expenses -3.11 -2.97 -3.74
Profit before extraordinary items 6.82 7.19 9.35
Profit before appropriations
and taxes 6.82 7.19 9.35
Net profit for the year 5.13 6.01 7.64
CONSOLIDATED BALANCE SHEET
Intangible assets 0.63 0.79 0.62
Tangible assets 194.25 182.83 183.00
Holdings in Group companies
and affiliated companies 1.10 0.97 1.01
Other shareholdings 0.22 0.24 0.21
Total short-term receivables 2.89 2.64 3.26
Cash and bank 1.15 1.97 1.66
Total current assets 200.24 189.44 189.76
Share capital 59.73 31.13 49.80
Other shareholders' equity 29.24 33.85 16.84
Minority interests 4.24 4.60 4.53
Consolidation difference 0.51
Long-term liabilities 82.77 92.71 89.70
Short-term liabilities 24.26 26.64 28.89
Total liabilities 200.24 189.44 189.76
STATEMENT OF CASH FLOWS
Net cash provided by operating activities
Operating profit 9.93 10.17 13.09
Depreciation and decrease
in consolidation difference 3.57 1.95 2.84
Other adjustments to operating profit-0.13 -0.04 0.01
Increase/decrease in working capital -0.23 1.88 1.59
Interests received 0.04 0.03 0.04
Interests paid and payments -3.26 -3.05 -4.00
Income from other investments
of non-current assets 0.01 -0.11 0.01
Taxes paid -1.26 -1.04 -1.72
Net cash provided by
operating activities 8.68 9.80 11.86
Net cash used in investing activities
Investments in other securities -0.04 -0.03 -0.03
Investments in tangible and
intangible assets -14.43 -5.72 -7.09
Loans issued -0.07
Disposal of subsidiaries -0.05
Acquisition of subsidiaries -0.50 -7.94 -7.94
Net cash used in investing activities -15.10 -13.68 -15.06
Net cash provided by financing activities
Increase in long-term loans 17.50 17.50
Decrease in long-term loans -7.28 -6.75 -9.66
Dividends paid -3.54 -4.16 -4.16
Paid share issue 20.72 6.54 6.54
Change in short-term loans -4.00 -8.90 -6.98
Net cash provided by financing
activities 5.90 4.24 3.24
Net increase/decrease in cash assets -0.52 0.35 0.04
Cash assets at beginning of period 1.66 1.62 1.62
Cash assets at end of period 1.15 1.97 1.66
KEY INDICATORS AND FINANCIAL RATIOS
Change in net sales, % 7.4 -0.2 1.3
Operating profit/net sales, % 43.4 47.7 45.4
Equity to assets ratio, % 46.8 37.1 37.7
Employees in Group companies 69 96 95
Earnings/share, EUR 3) 0.16 0.22 5) 0.27
Equity/share 3) 2.52 2.37 5) 2.26
of shares, average 32,654,055 27,603,414 28,075,286
Book value of property portfolio,
EUR 1,000 4) 178,836 172,363 171,923
Net investments in property
portfolio, EUR 1,000 8,334 16,062 16,963
Net investments in property portfolio,
incl. unfinished buildings and
their land areas, EUR 1,000 7,673 14,109 14,866
Net yield % of book
value of properties 10.5 10.4 10.4
Floor area occupancy ratio, % 96.0 97.7 97.5
Pledges and guarantees on own debt
Mortgages 136.1 127.2 135.9
Rent liabilities 0.5 0.5 0.5
Pledged rent income 0.8 0.8
Interest rate swaps in 2001 (fixed interest rate 5 years)
nominal value of underlying 4.0 4.0 4.0
Interest rate swaps in 2002 (fixed interest rate 5 years)
nominal value of underlying 4.0 4.0 4.0
Interest rate swaps in 2002 (fixed interest rate 3 years)
nominal value of underlying 4.0 4.0 4.0
Interest rate swaps in 2003 (fixed interest rate 3 years)
nominal value of underlying 1.2 1.3 1.3
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. 16.2 17.1 17.1
Rent payment liabilities 0.6 0.6
Collateral given on behalf of affiliated companies
Guarantee 0.5 0.5 0.5
1) Other operating income comprises operating subsidies received for
project services, for which the same amount of project service
expenses have been recorded as operating expenses.
2) Depreciation and write-downs include EUR 3.4 million in planned
depreciation on buildings on September 30, 2005.
3) The indicator includes the impact of the consolidation difference
arising from the Innopoli arrangements in 2004.
4) Does not include unfinished buildings and their related land
5) Adjusted for the bonus issue on December 27, 2004.
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