In Q1-Q3 2009 Nordicom increased its rental income by DKK 12.1 m, from DKK
188.4 m to DKK 200.5 m, which in today's market is very satisfactory. The
current economic climate has, however, been challenging, as an increasing
number of tenants have had difficulties paying their rent on time. Furthermore,
the occupancy rate of the group's completed investment properties has fallen
slightly over the period.
In Q1-Q3 2009 Nordicom's gross profit comprised DKK 147.8 m (Q1-Q3 2008: DKK
160.8 m), which corresponds to a decrease of DKK 13.0 m. The gross profit rate,
however, has increased from 34.3% to 72%, as rental activity has been more
profitable than development activity.
Compared to Q2 2009, the operating cash flow has improved by DKK 9.4 m (excl.
changes in deposited cash), partly due to lower interest costs and partly due
to improvements in the operations of the company's completed investment
properties.
The last couple of months have been characterized by a higher frequency of
transactions in the Danish property market, and it appears that prices are now
stabilizing. However, market conditions are still challenging and Nordicom is
going to continue with its current strategy of increasing properties' value
through improvements to buildings, rental optimization and enhancing
operational efficiency - thereby creating a foundation for future positive fair
value adjustments to the value of our properties.
The management are engaged in ongoing negotiations with the group's banks about
refinancing and improvements to the terms of the company's financing, however
these negotiations have not yet been completed. The capital base and operating
liquidity of the company are therefore tight. However there are ongoing
negotiations regarding the sale of some Danish properties and a German
development project which will secure liquidity for the coming year.
In the month of July, Nordicom refinanced DKK 800 m of mortgage debt from the
current 1-year variable rate to an approx. DKK 600 m two-year variable rate
loan (average interest rate of 2.4% excl. contributions) and approx. DKK 200 m
worth of 3-year variable rate loan (average interest rate of 2.7% excl.
contributions). This refinancing has been carried out in order to reduce the
company's interest rate risk and to take advantage of the low level of interest
rates.
In Q3 2009 Nordicom sold the ongoing development project at Ro's Have
(Københavnsvej 45-47, Roskilde). The property will be delivered in December
2009 after completion of building works and will yield a small profit, as well
as a positive liquidity stream of DKK 5 m.
Net fair value adjustments of DKK -139.0 m (Q1-Q3 2008: DKK 69.4 m) comprise
valuation adjustments of the company's completed investment properties of DKK
-115.4 m, fair value adjustments of debt owed to credit institutions of DKK
-2.5 m and valuation adjustments to the company's holdings of mortgage deeds of
DKK -21.1 m.
The change in strategy for Nordicom, which means that Nordicom will be less
involved in project development activities, has been gradually implemented in
2009. This new focus, combined with difficult conditions in the market for
project development, has meant write-downs on some of the projects amounting to
a total of DKK 144.4 m.
Before tax profits for Q1-Q3 2009 comprise DKK -358.5 m (Q1-Q3 2008: DKK 167.0
m). The decrease in earnings is primarily due to negative fair value
adjustments and higher interest expenses compared to the same period last year.
We continue to increase our income from the rental of investment properties,
but income from development has decreased significantly.
We expect a net profit before tax and valuation adjustments of approximately
DKK -70 m, which is DKK 20 m lower than the previously announced amount of DKK
-50 m. The downward adjustment is primarily due to the fact that the
expectations previously announced were preconditioned by the company entering
into new agreements with the banks starting July 1st 2009 regarding the
company's borrowing terms. These negotiations have been ongoing since the
spring of 2009 but are yet to be completed. We are still working on reaching
some agreements; however, depending on the timing of the new agreements the
impact will be limited for 2009, which is why the previously announced result
is no longer seen to be achievable.
