We continued to invest in rental apartmets and new housing services
Summary of Janyary-September 2015 (comparison period 1 Jan.-30 Sept. 2014)
- Turnover totalled EUR 276.3 (266.6) million. Turnover grew by EUR 9.7 million, thanks to increased profit from rental operations.
- Profit before taxes amounted to EUR 167.3 (96.4) million, showing an increase of EUR 70.9 million. The profit was increased especially by changes in the fair value of investment properties, higher net rental income and lower financial costs.
- Net rental income was EUR 170.5 (163.1) million, representing 61.7 (61.2) per cent of turnover.
- The financial occupancy rate remained high, standing at 97.5 (98.1) per cent.
- Tenant turnover stayed at the same level as in the comparison period, that is, 20.4 (19.8) per cent.
- There were 1,199 (964) rental apartments under construction at the end of the review period.
- The Group owned 40,899 (40,668) rental apartments on 30 September 2015.
- The fair value of investment properties was EUR 3.9 (3.6) billion. Their fair value amounted to EUR 3.7 billion at the end of 2014. The change in fair value totalled EUR 199.2 (107.1) million, which includes EUR 52.5 (-6.9) million in net valuation gain on the fair value assessment.
- The Group´s gross investments during the period totalled EUR 159.2 (132.4) million.
Summary of July-September 2015 (comparison period 1 July-30 Sept. 2014)
- Turnover totalled EUR 91.1 (89.4) million. This growth was generated by increased profit from rental operations.
- Profit before taxes amounted to EUR 42.9 (31.0) million, showing an increase of EUR 11.9 million. The profit was increased especially by changes in the fair value of investment properties, higher net rental income and lower financial costs. The profit includes EUR 5.3 (-4.1) million in net valuation gains on the fair value assessment.
- Net rental income was EUR 57.3 (55.9) million, representing 61.5 (62.6) per cent of turnover.
- The financial occupancy rate remained high, standing at 97.8 (98.0) per cent.
- The Group´s gross investments during the period totalled EUR 44.2 (30.7) million.
Since 1 January 2015, VVO Group prepares its consolidated financial statements, including the Interim Reports, in accordance with International Financial Reporting Standards (IFRSs).
VVO Group´s financial development continued to be good during the review period. We are continuing to make investments and are increasing the number of apartments we can offer in Finland´s growth centres. We are also innovating new housing services.
During the review period, we carried out development activities to make the renting of an apartment easier for the customer. In early October, we launched an online apartment rental service at www.lumo.fi/kotinyt. The first couple of days already showed that the new apartment rental service is a great success among new customers.
Outlook for 2015
Uncertainty in the Finnish economy persists. The outlook for employment is weak. No significant turn for the better is on the horizon.
The European Central Bank´s monthly EUR 60 billion security purchases are supporting the euro zone´s economy, although the outlook towards the end of 2015 has weakened from the first months of the year. As a result of the ECB´s policy, general interest rates are forecast to remain low.
Demand for rental housing is expected to remain at the current good level. At the moment, no considerable changes are foreseeable in the overall supply of rental apartments. New development will continue to focus on privately financed rental apartments. Due to the general market situation, construction firms are actively offering sites for rental housing.
Continuing urbanisation can be seen in the growing number of apartment blocks being built in major growth centres. The increase in the number of asylum seekers may result in the growing demand for rental apartments in growth centres and the need to increase production.
Price trends in owner-occupied apartments are expected to continue to be moderate. A slight rise is expected in the prices of small, centrally located apartments, while the prices of large apartments on the outskirts may fall slightly.
New start-ups by construction firms are at a low level. The volume of renovation construction will continue to rise.
Outlook for VVO Group
VVO Group´s financial occupancy rate is expected to remain at a good level throughout the remainder of the year due to continuing stable demand for rental apartments. Net rental income is expected to increase, and VVO Group´s investments will continue. A total of 736 Lumo apartments are planned to be completed during the rest of the year.
VVO Group Plc is Finland´s largest real estate investor and largest market-based, private-sector landlord, offering versatile and effortless rental solutions coupled with an extensive range of housing services.
At the end of the review period, the fair value of VVO´s investment properties was EUR 3.9 (3.6) billion. The VVO Group owns 40,899 (40,668) apartments, of which 27,233 (26,493) are Lumo apartments (market-based rent) and 13,666 (14,175) VVO apartments (cost principle rent).
The rental housing business is characterised by stability and predictability, which provide a good foundation for development. The nature of our business, our solid financial position, and our good financial performance enable us to make investments in different kinds of economic situations.
VVO Group had a turnover of EUR 276.3 (266.6) million for the period 1 January-30 September 2015.
The VVO Non-subsidised segment recorded a turnover of EUR 141.4 (131.5) million, and the VVO State-subsidised segment EUR 138.0 (138.6) million. Turnover is entirely generated by rental income.
Result and profitability
The Group´s net rental income totalled EUR 170.5 (163.1) million, representing 61.7 (61.2) per cent of turnover. The VVO Non-subsidised segment recorded a net rental income of EUR 93.2 (85.6) million, and the VVO State-subsidised segment EUR 79.1 (79.4) million.
The Group´s profit before taxes amounted to EUR 167.3 (96.4) million. The result includes a EUR 52.5 (-6.9) million change in the fair value of investment properties, and capital gains and losses of EUR 1.4 (0.9) million. The good result is based on changes in the fair value of investment properties, a good financial occupancy rate, the successful management of maintenance costs and low financial costs. Financial income and expenses totalled EUR -27.9 (-34.6) million.
Balance sheet, cash flow and financing
At the end of the review period, the Group´s balance sheet total was EUR 4,109.4 (3,879.3) million. Equity totalled EUR 1,692.5 (1,545.0) million. The equity ratio stood at 41.2 (39.9) per cent. Equity per share was EUR 228.57 (208.64). The VVO Non-subsidised segment´s equity ratio stood at 45.2 (46.4) per cent. The Group´s return on equity was 10.9 (6.4) per cent and its return on investment 7.7 (5.3) per cent.
At the end of the review period, the Group´s liquid assets totalled EUR 74.2 (130.3) million. The Group maintained good liquidity throughout the period. EUR 67.9 (47.9) million of the EUR 200 million commercial paper programme had been issued by the end of the review period.
At period end, interest-bearing liabilities stood at EUR 1,888.4 (1,827) million, of which EUR 1 054.1 (888.9) million was accounted for by market-based loans. At the end of the review period, the Group´s loan to value was 47.9 (50.0) per cent.
The average interest rate of VVO´s loan portfolio was 2.3 (2.6) per cent, and the average maturity of its loans was 13.6 (15.4) years at period end.
Real estate property and fair value
VVO Group owned a total of 40,899 (40,668) rental apartments at period end. The VVO Non-subsidised segment accounted for 24,481 (19,880)
of these homes and the VVO State-subsidised segment for 16,418 (20,788). At the end of the review period, VVO owned apartments in 41 (42) municipalities.
At the end of the review period, the fair value of VVO Group´s investment properties stood at EUR 3.9 (3.6) billion, with an increase in fair value of EUR 199.2 (107.1) million during the period. The change includes EUR 52.5 million in net valuation gains on the fair value assessment of investment properties. The fair value of the Group´s investment properties is determined quarterly on the basis of the company´s own evaluation. An external expert gives a statement on the valuation of the Group´s investment properties. The last valuation statement was issued on the situation as on 30 September 2015. The criteria for determining fair value are presented in the Notes to the Interim Report.
At period end, the plot reserve held by the Group totalled about 110,000 floor sq m (110,000 floor sq m) and its fair value was approximately EUR 44.2 (37.7) million.
Demand for rental housing remained high in all municipalities where VVO Group has a presence. As in previous years, the strongest demand centred on smaller apartments, that is, studios and one-bedroom apartments.
The financial occupancy rate remained at a good level, standing at 97.5 (98.1) per cent for the review period. At the end of the review period, 472 (462) apartments were vacant due to renovations. The tenant turnover rate, which includes internal transfers, increased slightly from the corresponding period of the financial year 2014, that is, 20.4 (19.8) per cent.
The average rent for the Group´s 27,233 (26,493) market-based rental apartments (Lumo) was 13.74 (13.12) per sq m per month during the review period, and EUR 13.92 (13.27) at period end. The corresponding figures for the 13,666 (14,175) apartments rented at cost price (VVO) was EUR 12.72 (12.37) during the review period and EUR 12.80 (12.45) at period end.
At the end of the review period, there were 18,733 (22,133) active applications. (Applications are active for three months.) The average number of active applications per rental agreement termination was 19.7 (23.7). A total of 48,422 (54,752) new rental housing applications were received during the review period.
During the review period, we carried out development activities to make the renting of an apartment even easier for the customer. Immediately after the review period, at the beginning of October, we launched an online apartment rental service at www.lumo.fi/kotinyt. The Kotinyt.fi service is a new way to rent an apartment immediately: the customer chooses a suitable Lumo rental apartment, pays the rent for the first month and can move in on the next weekday, for instance. The first couple of days already showed that the new apartment rental service is a great success among new customers.
The average period of tenancy remained at an excellent level, 5.9 (5.9) years. Thanks to successful rental control and our housing advisory service, the proportion of annual turnover from rental operations accounted for by rent receivables remained low and stood at 1.2 (1.2) per cent at the end of the review period.
The results of the annual customer satisfaction survey were finalised and, according to them, tenant satisfaction in both Lumo and VVO apartments has remained high. Tenants are satisfied with customer service, the location of apartments, improved property maintenance, online services and the small rental deposit. Renovation opportunities and the Internet connection included in the rent were also commended.
Investments, divestments and real estate development
VVO Group launched construction of 382 (493) apartments during the review period. There were a total of 1,199 (964) apartments under construction at the end of the period, all of them privately financed. Of the apartments under construction, 820 (651) are located in the Helsinki region and 379 (313) in other Finnish growth centres.
During the review period, VVO Group acquired 40 (74) apartments in Espoo and sold 244 (156) apartments. Towards the end of the review period, VVO Group signed an agreement with Rakennusosakeyhtiö Hartela on the development of rental apartments in Helsinki, Espoo, Tuusula and Lahti, with a total value of approximately EUR 41 million. This agreement involves the construction of 205 apartments and is continuation to the more than EUR 100 million agreement published in autumn 2014. In addition, the City of Espoo decided to sell a specified parcel of an apartment block plot to VVO Group in an open competitive tendering. The plot is located in the Jousenpuisto city plan zone in the Tapiola district of Espoo. The purchase price of the plot is EUR 9 million.
310 (550) new apartments were completed during the period. An estimated 736 (750) apartments are scheduled for completion by the end of the year.
The Group´s gross investments totalled EUR 159.2 (132.4) million. Total repair costs and modernisation investments during the review period amounted to EUR 61.6 (53.0) million, of which modernisation investments accounted for EUR 27.2 (19.7) million. The VVO Non-subsidised segment accounted for EUR 152.6 (120.9) million of gross investments, and the VVO State-subsidised segment for EUR 6.6 (11.7) million.
At period end, there were binding acquisition agreements worth a total of 268.7 (243.9) million. The acquisition agreements are used for building approximately 1,900 new apartments, 1,199 of which were under construction at the period end.
During the review period, properties´ consumption of heating energy was 251 (256) GWh.
- Interim Report January-September 2015
- Adoben sivuilta. ” href=”https://www.vvo.fi/attachements/2015-10-29T10-03-5742.pdf” target=”_blank”>Interim Report January-September 2015 info (PDF)
CEO Jani Nieminen, VVO Group Plc, tel. +358 50 373 4847, jani.nieminen(at)vvo.fi
CFO Erik Hjelt, VVO Group Plc, tel. +358 400 472 313, erik.hjelt(at)vvo.fi