Eik fasteignafélag hf.: Quarterly results for the first six months of 2020
- Income from operations amounted to ISK 4,184 million.
- Impairment of trade receivables amounted to ISK 181 million.
- Operating profit before changes in value and depreciation amounted to ISK 2,494 million.
- Total loss amounted to ISK 592 million.
- Net cash from operations was ISK 1,191 million.
- The book value of investment properties amounted to ISK 95,933 million.
- The book value of assets for own use amounted to ISK 3,793 million at end of period.
- Changes in value of investment properties were negative by ISK 815 million.
- Cash and cash equivalents amounted to ISK 2,599 million.
- Interest-bearing debt amounted to ISK 61,157 million at end of period.
- Equity ratio was 30.9%.
- Loss per share was ISK 0.13.
- Weighted indexed interest was 3.52% at end of period.
The Condensed Consolidated Interim Financial Statements of Eik fasteignafélag hf. for the period 1 January to 30 June 2020 were approved by the Company’s Board of Directors and CEO on 27 August 2020. The Condensed Consolidated Interim Financial Statements were reviewed by the Company’s auditor, KPMG ehf.
Attached is an interim financial report which contains Condensed Consolidated Interim Financial Statements for the first six months of the year together with further information on the Company’s operations than are included in the announcement. Auditor’s confirmation regarding calculations of the issuer of EIK 15 1 on the bond class covenants are also attached to this announcement. According to the auditor’s confirmation, all of the covenants of the bond class EIK 15 1 were met as at 30 June 2020. PwC, the security agent of the bond classes EIK 100346, EIK 161047, EIK 050726 and EIK 050749 has confirmed that the bond classes meet all financial and security covenants of the bond classes as at 30 June 2020 and the confirmations, in Icelandic, are attached to this announcement.
The Company performed well in the first six months of 2020 relative to the circumstances and the results were in line with management’s updated forecasts. Operating income for the first six months amounted to ISK 4,184 million. Of this amount, rental income was ISK 3,743 million. Operating profit before changes in value and depreciation amounted to ISK 2,494 million. Loss before income tax amounted to ISK 549 million and total loss of the Group for the first six months of 2020 amounted to ISK 439 million. The Group’s total loss amounted to ISK 592 million according to the statement of comprehensive income.
On 25 March 2020 the Company published an announcement to Nasdaq Iceland that the earnings forecast for the year 2020 no longer applied due to uncertainties regarding economic effects of the COVID-19 pandemic but published updated forecast on 5 June 2020.
The Net Operating Income (NOI) ratio (i.e. operating profit before revaluation and depreciation as a ratio of lease income) was 67.7% for the first six months of 2020, compared to 72.8% for the same period in 2019.
The Company's investment properties are valued at fair value in accordance with International Financial Reporting Standards (IFRS), based in part on the discounted future cash flows of individual assets. Changes in fair value are recognised in changes in value of investment properties, which were negative by ISK 815 million in the first six months of the year.
The Company's total assets amounted to ISK 103,376 million as at 30 June 2020. Of this, investment properties valued at ISK 95,933 million, consist of real estate leased to tenants amounting to ISK 93,305 million, leased assets (property utilisation rights) of ISK 2,092 million, real estate in development of ISK 75 million, building rights and lots of ISK 448 million and pre-paid street construction fees in the amount of ISK 13 million. Assets for own use amounted to ISK 3,793 million. The Company's equity amounted to ISK 31,915 million at the end of June 2020 and its equity ratio was 30.9%. Total liabilities amounted to ISK 71,460 million as at 30 June 2020, of which interest-bearing debt was ISK 61,157 million and deferred tax liabilities ISK 7,105 million.
Economic occupancy rate
The Company's economic occupancy rate was 93.4% at the end of the quarter and decreased by 1.5% from year-end 2019.
Decrease in Share Capital
The buyback plan which was enacted on 12 March 2020 ended on 25 March 2020. The plan had assumed purchase for up to ISK 500 million, but the Company only purchased own shares of ISK 7.5 million nominal value in the first quarter for a total of ISK 46.2 million.
At the Company’s Annual General Meeting held on 10 June 2020 it was resolved to decrease the Company’s share capital by the number of shares the Company had purchased in accordance with buyback plans, ISK 41,317,000 of nominal value, and currently the share capital is ISK 3,423,863,435. The Company currently holds own shares amounting to ISK 8,800,000 of nominal value. Outstanding share thus amount to ISK 3,415,063,485.
Outlook and effects due to COVID-19
The effects of COVID-19 on the Company’s operations have been extensive. The balance of trade receivables has increased by ISK 132 million since year end 2019 and write-down of trade receivables amounted to ISK 182 million in the same period. Final depreciation amounted to ISK 21 million and precautionary depreciation of trade receivables amounted to ISK 160 million. The balance of trade receivables and amounts of depreciation are in line with the Company’s expectations when updated forecast was published.
It is still unclear what economic effect the pandemic will have on the Company’s operations. The Company continues to work with tenants on resolving their issues which mainly consist of deferrals of lease payments and operating expenses. The results for the year will thus mainly depend on how the Company’s tenants will come through the pandemic and how quickly daily life will return to normal. The Company’s management do not see any reason to reevaluate the updated forecast.
Strong cash position
The Company has taken several measures in order to ensure further a strong cash position. The Company drew down an ISK 1,400 million bank facility which was secured at the beginning of the pandemic, the buyback plan was shortened, and the Board of Directors proposed that no dividend would be paid due to the year 2019. Shareholders approved this proposal at the Annual General Meeting on 10 June 2020.
In addition to this the Company has an undrawn line of credit amounting to ISK 800 million and unpledged assets amounting to over ISK 4,400 million. Furthermore, the Company has postponed some of the planned projects which were not subject to agreements with tenants. The Company’s position with regards to loan agreement covenants continues to be strong.
The Company’s cash position is strong and at the end of June the Company’s cash and cash equivalents amounted to ISK 2,599 million. Net cash from operations amounted to ISK 1,191 million in the period.
Increases of bond classes
The Company increased the bond class EIK 050726 in July by an amount of ISK 2,000 million nominal value with a 2.25% rate of return and the proceeds of the issuance were used to repay unfavourable bank loans.
The bond classes EIK 050726 and EIK 050749 were listed for trading on 25 June 2020 on the basis of prospectuses approved by the Financial Supervisory Authority of the Central Bank of Iceland.
The Company always strives to have the most advantageous interest terms available and the Company’s interests have continued to decrease. Weighted indexed interest was 3.54% at end of June and weighted unindexed interest was 2.9% in the same period.
Merger of subsidiaries
The merging of the subsidiary EF1 hf. with the Company is currently being worked on. A merger of two subsidiaries of Landfestar ehf. is also being prepared. The mergers have not been finalised but are expected to be finalised in the next weeks. Legal effects of the mergers will be as of 1 January 2020.
Grjótháls 1-3 expanded by 3,200 sqm.
A new long-term lease agreement was signed with Össur in August regarding Grjótháls 1-3. A part of this agreement relates to the expansion of the building by about 3,200 square meters. Estimated construction costs is around ISK 1,100 million which will be fully financed with loans and will thus not have significant effect on the Company’s cash position. It is expected that construction will start during the year and that it will be finalised in 18-24 months. Expected return of the project is in line with the Company’s objectives.
Properties owned by the Group number just over 100 and total almost 310,000 m2 in 600 units. Total number of tenants is over 400. The Company's principal properties in the capital region are Borgartún 21 and 21a; Borgartún 26; Suðurlandsbraut 8 and 10; Mýrargata 2-16; Pósthússtræti 2 (Hótel 1919); Smáratorg 3 (Turninn); Smáratorg 1; Álfheimar 74 (Nýi Glæsibær); Grjótháls 1-3 and Austurstræti 5, 6, 7 and 17. The Company’s principal property outside the capital region is Glerártorg. The Company’s largest tenants are Húsasmiðjan, Icelandair Hotels, Ríkiseignir, Rúmfatalagerinn, Landsbankinn, Sýn, Síminn, Össur, Míla and Deloitte.
The largest share of Eik's real estate portfolio is office space, or 45%, followed by commercial premises (24%), warehouses (13%), hotel (9%), health related operations (4%) and restaurants (4%). Around 91% of the Company's real estate are located in the capital region, of which 37% is in financial and business districts of Reykjavík (mainly in postal codes 105 and 108), 18% in downtown Reykjavik and 19% in the Smárinn-Mjódd shopping centres. Of the remaining, 9% is located outside the capital region, whereof almost 8% is in Akureyri.
An electronic presentation will be held on Friday 28 August 2020 at 8:30 am. Garðar Hannes Friðjónsson CEO and Lýður H. Gunnarsson CFO will present the results and respond to questions following the presentation.
Registration to the meeting:
2020 Financial Calendar
- Quarterly results Q3 2020 28 October 2020
- Management accounts 2020 and 2021 budget 11 February 2021
- 2020 Annual Results 4 March 2021
For further information contact:
- 30.06.2020 Staðfesting á fjárhagslegum skilmálum EIK 050749
- 30.06.2020 Staðfesting á fjárhagslegum skilmálum EIK 161047
- 30.06.2020 Staðfesting á fjárhagslegum skilmálum EIK100346
- 30.06.2020 Staðfesting á fjárhagslegum skilmálum EIK 15 1
- 30.06.2020 Staðfesting á fjárhagslegum skilmálum EIK 050726
- Q2 2020 Condensed Consolidated Interim Financial Statement