Fabege (FABG) Q3 2010 earnings summary

Executive summary

• 9M profit after tax rose to SEK 1,091m from SEK 202m; EPS was SEK 6.67 vs SEK 1.23, driven mainly by positive property value changes and stronger development and transaction contributions.

• Stable lettings activity and improved transaction-market conditions supported results, while property sales reduced rental income.

Financial highlights

• 9M rental income was SEK 1,520m vs SEK 1,647m; net operating income was SEK 1,026m vs SEK 1,109m, reflecting net disposals, lower rental guarantees and negative indexation.

• 9M profit from property management activities was SEK 600m vs SEK 624m; net interest expense declined to SEK 383m from SEK 436m.

• 9M realized property gains were SEK 190m vs SEK 18m; unrealized property gains were SEK 677m vs losses of SEK 345m.

• Q3 profit after tax reached SEK 590m vs SEK 71m; Q3 rental income was SEK 495m vs SEK 551m following net property sales.

Outlook and guidance

• Swedish economic forecasts, low interest rates and high growth were viewed as supportive; stronger leasing demand may take several months to flow through to revenue because of occupancy lags.

• Strategy remained to sell low-yield properties with limited potential and reinvest in profitable projects; development projects target returns of at least 20% on invested capital.