TECHNOPOLIS PLC               STOCK EXCHANGE RELEASE                October 25, 2018 at 1:00 p.m. EEST

New Era for Technopolis

JanuarySeptember 2018

IFRS

  • Net sales down 2.1% to EUR 131.4 (134.2) million
  • Earnings per share were EUR 0.33 (0.33)
  • Equity per share was EUR 4.16 (3.95), up 5.3% y-o-y

Alternative Performance Measures

  • EPRA NAV per share EUR 4.72 (4.46), up 5.8% y-o-y
  • Financial occupancy rate rose to 94.9% (94.4%)
  • EBITDA was EUR 71.1 (74.5) million, down 4.5% y-o-y
  • EPRA earnings EUR 42.9 (46.4) million, down 7.6% y-o-y
  • EPRA earnings per share were EUR 0.27 (0.30)
  • Fair value of investment properties at the end of the period was EUR 1,616.5 million (1,635.9 and 1,537.9 million on Dec 31, 2017)

Q3/2018

IFRS

  • Net sales EUR 44.2 (44.1) million

Alternative Performance Measures

  • EBITDA was EUR 24.6 (25.4) million, down 3.1% y-o-y
  • EPRA earnings EUR 15.5 (16.3) million, down 4.9% y-o-y
  • EPRA earnings per share were EUR 0.10 (0.10)

The numbers in brackets refer to the value in the corresponding period a year earlier unless otherwise stated.

Key Indicators

  Q3/
2018
Q3/
2017
Change
%
Jan-Sep/
2018
Jan-Sep/
2017
Change
%
2017
IFRS        
Net salesEURm44.244.10.2131.4134.2-2.1179.7
Equity ratio%---41.142.9-44.8
         
Alternative Performance Measures      
EBITDAEURm24.625.4-3.171.174.5-4.597.1
EPRA earningsEURm15.516.3-4.942.946.4-7.660.6
         
Loan-to-value (LTV)%---53.652.4-50.1
EPRA Return on equity (rolling 12m)%---8.79.0-9.1
         
EPRA earnings / shareEUR0.100.10-4.90.270.30-7.70.39
EPRA NAV / shareEUR---4.724.465.84.58
EPRA NNNAV / shareEUR---4.133.808.74.05
         
Financial occupancy rate%---94.994.4-96.1
EPRA net rental yield%---7.27.2-7.2

EPRA (European Public Real Estate Association) earnings do not include unrealized exchange rate gains and losses, fair value changes or any non-recurring items, such as gains and losses on disposals.

Near-Term Outlook Unchanged from October 12, 2018

Technopolis estimates that the Group net sales in 2018 will be at the same level as it was in 2017. The company expects the Group EBITDA to be below the 2017 EBITDA.

The estimates take into account the divestiture of operations in Jyväskylä, Finland in late 2017, as well as the costs related to the voluntary public tender offer by Kildare Nordic Acquisitions S.à r.l. The negative effects of the Jyväskylä divestitures on Group Net sales and EBITDA, on an annual level, are approximately EUR 14.5 million and EUR 7.2 million, respectively. The costs and fees related to the tender offer are estimated to be approximately EUR 5.9 million euros, in total.

From the CEO

“The single most significant event in the third quarter was the announcement and subsequent completion of the voluntary public cash tender offer on all shares in Technopolis by Kildare Nordic Acquisitions S.à r.l. The offer period started on September 7 and ended on October 10. The final result was announced on October 12, according to which, the shares tendered in the tender offer, together with the shares acquired by Kildare through market purchases, represented approximately 93.12% of all the shares and votes in Technopolis, excluding treasury shares. The change of control took place on October 16. At present, a subsequent offer period is in progress and it will expire at end of the month. Kildare has announced that it will initiate redemption proceedings to redeem the remaining shares in accordance with the Finnish Companies Act and will also initiate, in due course, measures to delist Technopolis’ shares from Nasdaq Helsinki.

Operationally, I am satisfied with our business for the first nine months of the year. Our net sales and EBITDA were slightly lower than last year, but if you remove the effect of the Jyväskylä divestiture in November 2017, we have had healthy growth. Occupancy rates rose year-on-year, which boosted net sales and improved relative profitability.

Group net sales in January–September decreased by 2.1% year-on-year, but our like-for-like sales rose 3.6%. The main drivers behind this development were robust service growth and rising occupancy. Rental growth also had a positive impact on Group net sales. Our financial occupancy rate (FOCR) at the end of September reached 94.9% (94.4%), with the greatest year-on-year improvement in Oslo, Oulu and Kuopio. However, the FOCR declined somewhat from the previous quarter mainly due to the relatively low pre-let rate of the Ruoholahti 3 building in Helsinki. The building was completed on July 1, 2018. Sales initiatives and other measures have been taken to rectify the situation, and the signed agreements today represent occupancy rate of 81.8%.

At the end of June, we had seven organic growth projects in progress. In the third quarter, we initiated three new ones: one in Estonia and two in Finland. The cumulative value of these on-going projects together with already completed ones, amounts to EUR 229 million, against our target of EUR 200–250 million for the 2017–2020 strategy period. Every one of our organic growth projects is strongly accretive, supports internal customer growth, and brings efficiencies.

Services are emerging as an increasingly important and steadily growing part of our business. In January–September, service income reached EUR 20.6 million (11.6% y-o-y growth), and represented 15.7% of the Group net sales. In the third quarter, the share was 15.2%. The lower share compared to the year-to-date number is due to the seasonality of the service business. The third quarter profitability for services was significantly impacted by UMA network ramp-up costs, and third quarter service EBITDA was slightly negative. In January–September, costs related to the UMA-ramp-up amounted to EUR 2.2 million. Excluding those, the service EBITDA margin was 16.9%.  

Group EBITDA in the first nine months was 4.5% lower than in the corresponding period a year earlier, at EUR 71.1 (74.5) million, due to the Jyväskylä divestiture, non-recurring items, a change in real estate tax accounting, and UMA network ramp-up costs. The non-recurring items related to an acquisition case that was terminated in the second quarter. Like-for-like EBITDA growth was 4.5%, year-on-year.

Yield compression was the primary driver behind positive fair value changes, which brought EUR 18.3 (16.4) million in the first nine months, and were a significant contributor at the operating profit level.

We now have three flagship UMA coworking spaces in operation, one in Helsinki, one in Stockholm and one in Copenhagen. Two more are set to open this year and three more UMA leases have been signed for 2019–2020. We are particularly excited about the opening in Warsaw, Poland next year, as it also represents a new market for Technopolis. We will continue to expand our UMA footprint in the other major cities and hubs of the Nordic–Baltic Sea area in accordance with the Group strategy.

Looking ahead, we will have an extraordinary general meeting on November 7, 2018, when a new Board of Directors will be appointed. I’d like to thank our current Board for the fruitful collaboration that has taken us to this turning point in the history of Technopolis.

I would also like to thank our amazing staff, who have performed throughout this process with a passion, dedication and professionalism that leaves me feeling both proud and humbled. An exciting adventure is about to begin.

To our customers I would like to say that in the aftermath of this transaction Technopolis will be better positioned than ever to support your efficiency, agility, and ability to attract talent.

A new era has started, and I have confidence that our new owners will bring the kind of energy, resources and know-how to take this company to a new plateau in its development as a world-class workspace service provider.”

Technopolis Plc

Additional information:

Keith Silverang
CEO
tel. +358 40 566 7785

Technopolis is a shared workspace expert. We provide and flexible offices, coworking spaces and everything that goes with them. Our services run from designing the workspace to reception, meeting solutions, restaurants and cleaning. We are obsessed with customer satisfaction and value creation. Our 17 campuses host 1,600 companies with 50,000 employees in six countries within the Nordic and Baltic Sea region. Technopolis Plc (TPS1V) is listed on Nasdaq Helsinki. www.technopolis.fi/en

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