Nordic Land Limited
11 December 2007
Nordic Land Limited
Interim Report
For the period from 3 April to 30 September 2007
CORPORATE STATEMENT
Nordic Land Limited ('Nordic Land' or the 'Company') is a Jersey registered,
property investment company established in April 2007 to invest principally in
retail real estate in the Nordic region including Sweden, Norway and Finland.
The Manager is Lathe Investments (Nordic) LLP.
The Company's investment objective is to provide shareholders with attractive
total returns over the medium to long term through dividends and increases in
net asset value.
The Company's shares are traded on the AIM market of the London Stock Exchange.
HIGHLIGHTS
• Increase in the value of property assets of £4.5 million over purchase prices
(net of costs), from £54.4 million to £58.9 million, as at 30 September 2007
• Adjusted NAV per share * of £1.01
• Raised initial capital of £13.4 million in April 2007
• Acquired an initial property portfolio in Sweden for £49.9 million (net of
costs) in May 2007
• Admitted to AIM on 3 August 2007, raising £4.9 million (gross of costs)
• Acquired further retail property in Greater Stockholm for £4.5 million (net
of costs) in September 2007
(* Adjusted NAV per share is the Net Asset Value per share of the Company
adjusted to exclude the effect of deferred tax relating to the revaluation of
investment properties and the fair value of derivative financial instruments net
of attributable taxation).
For further information please contact:
Nordic Land Limited
Ian Knight +44 (0) 1892 752005
SP Angel Corporate Finance LLP
John Mackay +44 (0) 20 7647 9642
Matrix Corporate Capital LLP
Stephen Mischler +44 (0) 20 7925 3393
Bankside Consultants
Simon Rothschild/Oliver Winters +44 (0) 20 7367 8888
CHAIRMAN AND MANAGING DIRECTOR'S STATEMENT
OPERATING REVIEW
We are pleased to deliver the first interim results for Nordic Land since its
successful admission to AIM in August 2007.
The Company has completed two capital raisings: the first in April before
Admission to AIM and the second in August, at the time of Admission to AIM, in
what proved to be very challenging capital-market conditions.
The first capital raising funded the acquisition of the Group's initial property
portfolio in Sweden, comprising the properties in Helsingborg and Borlange, at a
price of £49.9 million (net of costs).
Following Admission to AIM, a further retail and development property in Greater
Stockholm was acquired in September 2007 for £4.5 million (net of costs),
bringing the total cost of properties (net of costs) to £54.4 million.
RESULTS
Net rental income for the period was £1.0 million and administrative expenses
were £0.4 million.
After including £0.1 million relating to expenses on an abortive property
acquisition and a gain of £1.8 million relating to the revaluation of the
investment properties, operating profit for the period was £2.3 million.
At the period end, the Group had cash and short-term deposits of £6.8 million
which are available for working capital, development activity and property
acquisitions.
REVALUATION AND NET ASSET VALUE
The Property Portfolio was revalued by DTZ Sweden at £58.9 million as at 30
September 2007, an increase of £4.5 million over purchase prices (net of costs).
Adjusted net asset value per share as at 30 September 2007 was £1.01, an
increase of 11p per share (12%) over the 90p per share at the date of the
Admission Document of 26 July 2007.
Adjusted net asset value per share is an accepted property industry measure
which excludes deferred tax relating to the revaluation of investment properties
and the fair value of derivative financial instruments net of attributable
taxation.
DIVIDEND
When and if the Group reaches a gross asset value of £200 million, the Directors
are targeting a dividend yield of 5% per annum calculated by reference to the
placing price of £1 per share.
No dividend is being proposed for the period to 30 September 2007.
REAL ESTATE OPERATIONS
Portfolio analysis
Property Category Area (m2) 30 Sept 2007 % of Net valuation
Valuation portfolio yield %
Terminalen 1,
Helsingborg Mixed-use 19,500 £41.7m 71% 5.8%
Lackeraren 3,
Borlange Retail park 10,000 £12.0m 20% 5.5%
Sicklaon 117,
Stockholm Retail 3,400 £5.2m 9% 5.5%
32,900 £58.9m 100% 5.7%
All the properties are located in Sweden.
Property Portfolio
Terminalen 1, Helsingborg
This long-leasehold property was acquired in May 2007 for £39.6 million (net of
costs) to reflect an initial yield of 5.7% at purchase.
Helsingborg is a major port city in south-west Sweden, opposite Denmark.
Terminalen 1 is in central Helsingborg; the property is in one of the very best
office locations and unique for the area's transportation systems.
The building was constructed in 1991 and is the region's central transport
terminal.
It comprises the terminal area, which provides ticket sales, waiting halls and a
passenger link to the main Sweden to Denmark ferry terminal, a shopping centre
with a number of restaurants above, and offices in a further 5-6 levels above.
The total lettable area is 19,500m(2). In total there are some 93 tenants.
Underneath the building is the main west-coast line railway station and the main
bus terminal.
The property has a multi-storey roof-top car park (303 spaces) and surface
roof-top parking (399 spaces) which benefit from being directly adjacent to the
ferry and train terminals and together provide a strong income stream.
Asset management activities now in hand include creating new retail space at
ground floor by reconfiguring existing units and improving the usage of vacant
space, developing a new, vibrant restaurant area for multiple, national
operators at first floor level, letting empty office space and implementing an
extensive property-cost reduction and recovery programme so as to increase net
operating income.
The South Harbour area directly to the south of our property is to be
redeveloped into a major 'docklands-style' development including residential
apartments, offices and a conference centre. This project, which we understand
is being planned for 4-5 years time, would further improve the location around
our building and benefit the property.
Our land ownership gives us the opportunity to become involved in the
development of this area.
Lackeraren 3, Borlange
This freehold property was acquired in May 2007 for £10.3 million (net of costs)
to reflect an initial yield of 5.8% at purchase.
Borlange is a major regional town 120 km to the north west of Stockholm with
large corporate employers and a strong local economy.
The property is located next to the regionally-dominant Kupolen Shopping Centre
and comprises a retail warehouse park and two small free-standing office
buildings, all of some 10,000m(2), a 327-space surface car park and extensive
servicing areas.
The income is well secured by major national retailers including Willy:s and
Rusta.
Asset management activities in hand include developing a new retail warehouse
unit on vacant land, extending an existing unit to create new accommodation,
letting empty office space, introducing new advertising to generate new revenues
and improving net operating income by cost reduction and cost recovery.
Sicklaon 117, Nacka, Stockholm
This freehold property was acquired in September 2007 for £4.5 million (net of
costs) to reflect an initial yield of 5.9% at purchase.
The property is located in the Sickla shopping quarter which, as the main retail
location for the Nacka community, generates some of the highest sales per square
metre in Sweden. This area is amongst the most affluent regions in Sweden,
featuring high per capita income and strong population growth.
The location benefits from recent and substantial improvements to local
infrastructure. New retail developments and car parking facilities have recently
been completed adjacent to the building, and a new road connection is being
planned.
The property comprises 3,400m(2) of retail, storage and office accommodation in
one building, predominantly let to national multiple retailers, plus a villa and
land for re-development.
Asset management initiatives now being pursued include the possible improvement
of the retail elements so as to increase substantially the overall lettable
areas, obtaining planning consent for redevelopment of the villa and land to
apartments, obtaining planning consent for building new apartments over the
existing retail building and implementing a property-cost reduction and recovery
programme so as to increase net operating income.
REAL ESTATE FINANCING
As at 30 September 2007 the Group's borrowings totalled £44.5 million, all
secured on the Group's properties.
The loans are on a fixed-interest basis, with a weighted-average all-in interest
rate of 5.45% per annum and are repayable in 2012.
MANAGER
The Board is pleased with the substantial progress made by your Manager during
the Company's first six months since incorporation, in particular building its
local team in Sweden and acquiring the initial portfolio, completing the capital
raisings, leading the Admission to AIM and generating good valuation increases.
OUTLOOK
Our portfolio is very well located and contains significant asset-enhancement
opportunities which should generate additional rental income and further
increases in capital value.
The Swedish and other Nordic markets remain amongst the best in Europe in terms
of current low retail rents and high consumer-spend forecasts, the good
availability of investment stock and trading liquidity.
The pipeline of further acquisition opportunities is strong and your Company
remains committed to building a substantial retail portfolio in Sweden and the
rest of the Nordic region.
RAY HORNEY IAN KNIGHT
CHAIRMAN MANAGING DIRECTOR
The report is available on the Company's website: www.nordicland.com
Consolidated Financial Statements
Consolidated Income Statement for the period ended 30 September 2007
(unaudited)
3 April 2007 to
30 September 2007
Note £000
Gross rental income 1,445
Property operating expenses (441)
Net rental income 4 1,004
Administrative expenses (390)
Loss on abortive transaction (100)
Gain on revaluation of investment 1,763
properties
Operating profit 2,277
Net interest payable and other 5 (707)
finance costs
Change in fair value of derivative 163
financial instruments
Profit before tax 1,733
Income tax 6 (511)
Profit for the period attributable 1,222
to equity shareholders
Earnings per share - basic and 7 7.9p
diluted
Adjusted earnings per share 7 (0.7)p
The notes form part of these consolidated financial statements.
Consolidated Balance Sheet as at 30 September 2007
(unaudited)
30 September
2007
Note £000
ASSETS
Non-current assets
Investment properties 8 58,954
58,954
Current assets
Trade and other receivables 9 464
Derivative financial instruments 163
Cash and cash equivalents 6,841
7,468
Total assets 66,422
LIABILITIES
Current liabilities
Trade and other payables 10 2,319
Income tax provision 112
2,431
Non-current liabilities
Borrowings 11 44,537
Deferred tax liability 632
45,169
Total liabilities 47,600
Net assets 18,822
EQUITY
Ordinary share capital 12 192
Share premium 17,070
Retained earnings 1,560
Total shareholders' equity 18,822
Net asset value per share 13 £0.98
Adjusted net asset value per share 13 £1.01
The notes form part of these consolidated financial statements.
Consolidated Cash Flow Statement for the period ended 30 September 2007
(unaudited)
3 April 2007 to
30 September 2007
£000
Cash flows from operating activities
Operating profit 2,277
Adjustments for non-cash items:
Gain on revaluation of investment properties (1,763)
Other movements arising from operations:
Increase in trade and other receivables (449)
Increase in trade and other payables 1,764
Net cash generated from operations 1,829
Interest received 134
Interest paid (330)
Net cash flows from operating activities 1,633
Cash flows from investing activities
Acquisition of investment properties (55,091)
Cash flows from investing activities (55,091)
Cash flows from financing activities
Net proceeds from the issue of share capital 17,262
Net drawdown of borrowings 43,037
Cash flows from financing activities 60,299
Net increase in cash and cash equivalents 6,841
Opening cash and cash equivalents -
Closing cash and cash equivalents 6,841
The notes form part of these consolidated financial statements.
Consolidated Statement of Changes in Equity for the period ended
30 September 2007
(unaudited)
Ordinary
Share Share Retained Total
Capital Premium Earnings Equity
£000 £000 £000 £000
Balance at 3 April 2007 - - - -
Profit for the period - - 1,222 1,222
Foreign exchange - - 338 338
differences
Total recognised income and - 1,560 1,560
expense -
Issue of share capital 192 17,070 - 17,262
Balance at 30 September 2007 192 17,070 1,560 18,822
The notes form part of these consolidated financial statements.
Notes to the accounts
Note 1 General Information
Nordic Land Limited (the 'Company') is a Jersey incorporated company which
invests principally in retail property in the Nordic region. The Company was
incorporated on 3 April 2007. The unaudited interim consolidated financial
statements have been prepared for the period from incorporation and ending as at
30 September 2007.
The unaudited interim consolidated financial statements were authorised for
issuance on 10 December 2007.
Note 2 Basis of preparation
The financial information has been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union and is presented
in Sterling.
This is the first interim report presented by the Company. Consequently, no
comparative figures are presented.
The consolidated financial statements have been prepared on the historical cost
basis modified for the revaluation of investment properties and derivative
financial instruments which are both measured at fair value.
Note 3 Significant Accounting Policies
The principal accounting policies adopted in the preparation of the unaudited
interim financial statements are set out below. The accounting policies have
been consistently applied by the Company and its subsidiaries (together the
'Group').
Basis of consolidation
The financial statements incorporate the net assets and liabilities of the Group
at the balance sheet date and its results for the period then ended. Results of
subsidiaries acquired or disposed during a period are included from the
effective date of acquisition or up to the effective date of disposal as
appropriate. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences up to the
date that control ceases. Control exists when the Company has the power,
directly or indirectly, to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
Functional and presentational currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the 'functional currency'). The consolidated financial
statements are presented in Sterling, which is the Company's and Group's
functional and presentational currency.
Share capital
Shares are classified as equity to the extent that they meet the following two
conditions:
(a) they include no contractual obligations upon the Company to deliver cash
or other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially
unfavourable to the Company; and
(b) where the instrument will or may be settled in the Company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company's own equity instruments or is a
derivative that will be settled by the Company exchanging a fixed amount of cash
or other financial assets for a fixed number of its own equity instruments.
Share issue expenses
The costs incurred by the Company in connection with the issue of shares are
written off against the share premium account.
Share-based payments
The fair value of share-based payments is determined at the date of grant and
expensed, with a corresponding increase in equity, on a straight-line basis over
the vesting period, if any.
Revenue
Revenue represents amounts receivable calculated on an accruals basis in respect
of property rental income earned in the normal course of business, net of
sales-related taxes.
Investment property
Investment properties are properties owned or leased by the Group which are held
for long-term rental income and for capital appreciation. Investment property is
initially recognised at cost and re-valued at the balance sheet date to fair
value, as determined by professionally qualified external valuers.
The surplus or deficit on revaluation is reported in the Income Statement. No
depreciation is provided in respect of investment property.
Borrowing costs associated with direct expenditure on investment properties
under development or undergoing refurbishment are capitalised using the average
rate of interest paid on the relevant debt outstanding until the date of
practical completion.
Sales of investment property are recognised when contracts have been
unconditionally exchanged during the period and the significant risks and
rewards of ownership have been transferred.
Acquisitions of corporate interests in investment property are accounted for on
consolidation as if the Group had acquired the underlying property asset
directly. Accordingly, no goodwill arises on such acquisitions as any difference
between the fair values of the assets acquired and the acquisition consideration
are allocated to the investment property asset, which is subject to subsequent
revaluation under IAS 40.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. In order to be classified as cash and
cash equivalents, the maturity of the cash and cash equivalents instruments is
three months or less at the time of acquisition.
Financial instruments
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at their issue proceeds, net
of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any issue costs, and any
discount or premium on settlement. Borrowing costs are recognised on an accruals
basis in the Income Statement using the effective interest rate method.
Gains and losses are recognised in the Income Statement when the liabilities are
derecognised or impaired, as well as through the amortisation process.
Derivative financial instruments
The Group uses derivative financial instruments such as interest rate swaps to
hedge its risks associated with interest rate fluctuations. Such derivative
financial instruments are stated at fair value, based on market prices,
estimated future cash flows and forward rates as appropriate. Any gains or
losses arising from changes in fair value are taken directly to the Income
Statement.
Taxation
The Company is incorporated as an exempt company under Jersey law and is not
subject to any Jersey taxes. Certain subsidiary undertakings are subject to
foreign taxes in respect of foreign source income; provision for such taxes is
made on the basis of taxable profits.
Deferred taxation
Deferred income tax is recognised on all taxable temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in
the financial statements, with the following exceptions:
(a) where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
(b) in respect of temporary differences associated with investments in
subsidiaries, where the timing of the reversal of the temporary difference can
be controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future; and
(c) deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, carry-forward of unused tax assets and unused tax losses
can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis
at the tax rates that are expected to apply when the related asset is realised
or liability is settled, based on tax rates and laws enacted or substantially
enacted at the balance sheet date and are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax is recognised in the Income Statement except when it relates
to items that are credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity.
Segmental analysis
The Group has a single geographical and business segment, being investment in
property in the Nordic region.
Management fees
Under the terms of the Management Agreement, the Manager, Lathe Investments
(Nordic) LLP, is entitled to receive an annual management fee dependent on the
gross assets of the Group. Fees are recorded on an accruals basis.
Performance carry
The Manager is entitled to receive a performance carry equal to 20 per cent. of
the total shareholder return in excess of 8 per cent. per annum for the relevant
period to which a performance carry relates. This cost will be recorded on an
accruals basis. To the extent it is payable by the issue of shares in the
Company, the cost of such share-based payments is recognised in the Income
Statement by reference to the fair value at the date of payment, together with a
corresponding increase in equity.
Foreign currencies
The assets and liabilities of foreign entities are translated into sterling at
the rate of exchange ruling at the balance sheet date and their income
statements and cash flows are translated at the average rate for the period.
Exchange differences arising from the retranslation of the net investment in
foreign entities are dealt with in reserves. Transactions in currencies other
than the Group's functional currency are recorded at the exchange rate
prevailing at the transaction dates. Foreign exchange gains and losses resulting
from settlement of these transactions and from retranslation of monetary assets
and liabilities denominated in foreign currencies are recognised in the income
statement except when qualifying as hedges, in which case they are dealt with in
reserves.
Note 4 Net rental income
The Group engages in only one class of business activity, being investment in
retail property. All operations are continuing and are based in the Nordic
region.
Note 5 Net interest payable and other finance costs
For the period
from 3 April 2007 to
30 September 2007
(unaudited)
£000
Interest on bank loans 832
Interest receivable (134)
Exchange losses 9
Net interest payable and other finance costs 707
Note 6 Income tax
For the period
from 3 April 2007 to
30 September 2007
(unaudited)
£000
Current income tax charge 21
Deferred tax on revaluation of investment 490
properties
511
Note 7 Earnings per share
Earnings per share and adjusted earnings per share have been calculated, using
the weighted average number of shares in issue during the period of 15,515,709,
as follows:
For the period For the period
from 3 April 2007 from 3 April 2007
to to
30 September 2007 30 September 2007
(unaudited) (unaudited)
Profit after tax Earnings
per share
£000 pence
Basic and diluted 1,222 7.9p
Gain on revaluation of (11.3)p
investment properties (1,763)
Change in fair value of
derivative financial
instruments (163) (1.1)p
Deferred tax on revaluation 3.2p
of investment properties 490
Loss on abortive transaction 100 0.6p
Adjusted (114) (0.7)p
Adjusted earnings per share, excluding the gain on revaluation of investment
properties, the change in fair value of derivative financial instruments and
exceptional items, all net of attributable taxation, is an accepted property
industry measure for reporting recurring profits.
Note 8 Investment properties
As at
30 September 2007
(unaudited)
£000
Opening balance -
Additions 57,191
Gain on revaluation 1,763
58,954
The fair value of investment properties is based on a valuation at 30 September
2007 by DTZ Sweden AB performed in accordance with the Appraisal and Valuation
Standards of RICS, on the basis of market value.
Note 9 Trade and other receivables
As at
30 September 2007
(unaudited)
£000
Rental debtors 189
Prepayments and accrued income 104
Other debtors 171
464
Note 10 Trade and other payables
As at
30 September 2007
(unaudited)
£000
Accounts payable - trade 301
Deferred income 861
Accruals 1,090
Other creditors 67
2,319
Note 11 Borrowings
As at
30 September 2007
(unaudited)
£000
Amounts falling due after more than one
year:
Bank loans 44,537
The weighted average interest rate is 5.45% per annum. The interest rates on all
loans are fixed using derivative financial instruments until maturity in April
2012.
Note 12 Ordinary share capital
As at
30 September 2007
(unaudited)
£000
Authorised
250,000,000 ordinary shares of £0.01 each 2,500
Issued and fully paid
19,172,588 ordinary shares of £0.01 each 192
During the period from incorporation to 30 September 2007, 19,172,588 ordinary
shares have been issued at a price of £1 per share.
Note 13 Net asset value per share
Net asset value per share has been calculated by dividing the net assets
attributable to the equity holders of the Company by the number of ordinary
shares in issue at the period end of 19,172,588.
As at
30 September 2007
(unaudited)
£000
Net assets 18,822
Adjust for:
Change in fair value of derivative financial (163)
instruments
Deferred tax on revaluation of investment 632
properties
Adjusted net assets 19,291
Net asset value per share £0.98
Adjusted net asset value per share £1.01
Note 14. The interim report for the period from 3 April to 30 September 2007
will be sent to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange