VVO in Brief VVO 2007 in Brief

Transcription

1 VVO in Brief 2007 VVO 2007 in Brief

2 2 VVO Housing Expert VVO is a Finnish enterprise that lets, builds and sells apartments. VVO is largest company providing rental housing in Finland. VVO has around 38,000 rental apartments in 50 different locations. The company builds around 1,000 new apartments every year, half of which are sold to private individuals. Amount of rental apartments 2007 Number of apartments 0 2,000 2,000 4,000 4,000 6,000 Rental apartments Pori Rovaniemi Oulu Kuopio Jyväskylä Tampere Lahti Lappeenranta Hämeenlinna Turku Vantaa Järvenpää Espoo Helsinki Vision Mission We offer reliable housing services based on the needs of our clients to selected groups of clients. We are the most significant and valued housing services company in Finland. Values Reliability Customer satisfaction Result orientation Innovation We do what we promise to do. Our operations are based on openness, honesty, justice and treating people equally. Our services are based on the needs of our clients. Our central aims are to create value for our clients and to exceed their expectations. We make it possible for our clients to reach a good standard of living in different phases of life. We provide services effi ciently, expediently, and profi tably, taking into account the expectations and needs of owners and other interest groups. We renovate and maintain buildings according to the principles of sustainable development and ensure that their value continues to grow in the long term as well. We question conventional practices that are taken for granted in the fi eld. We look for better and more effi cient ways of providing services. Success requires constant development.

3 VVO in Brief Managing Director s Review VVO s profit development continued to improve steadily in Profitability was excellent and rose once again from the previous year. The year 2007 was marked by a strong focus on exploring the needs of our customers and developing our service processes to better take customers into account. We did not quite reach the investment targets that we set for ourselves the previous year. This was due to the high prices of land, construction materials and completed property alike. Our goal is to continue to grow and to raise the number of new rental properties that we build to one thousand a year. Thanks to our land stocks and regional property development projects, we are in a good position to achieve this. Towards the end of 2007, a committee established by the Finnish Government filed an action plan regarding Finnish housing policy. The objectives set out in the action plan are to do with subsidising the construction of affordable rental housing, which is good news for VVO. Challenges facing the housing market and rental housing in particular are being tackled head on, and solutions are being actively sought to make new-builds easier to get under way. Our core mission is to offer reasonably priced long-term housing in rapidly growing Finnish towns. Despite the pressure to increase prices as a result of increasing construction and maintenance costs and energy prices, we have managed to hold on to our corporate social responsibility and kept increases in rent prices moderate. In order to be able to continue to do this, however, we need to continue to increase our efficiency. In 2007, we joined Excellence Finland where VVO is now a key corporate member. During 2008, we are due to adopt a process management model and to develop our processes and business by means of quality management systems. In order to meet our customers expectations and our business targets, we must continue to hone our performance on all levels of the organisation. We hope that this will allow us to guarantee reasonably priced, high-quality living for our customers in the future as well, and a steadily growing investment for our current and future shareholders. I would like to take this opportunity to thank our knowledgeable staff as well as our customers and partners. Working with you towards better housing is rewarding and inspiring. Olli Salakka Managing Director PHOTO: PETRI JUNTUNEN Our goal is to continue to grow and to raise the number of new rental apartments that we build to one thousand a year.

4 4 VVO Economic Development Year 2007 was VVO Group s 12 th consecutive year of outperforming the previous year s figures. The utilisation level of the group s rental properties is one of the highest in the industry and the lower exchange of tenants has lead to savings in repair costs. The rental housing business exceeded its revenue targets despite increased interest costs and the fact that the increase in property maintenance costs outpaced the rate of inflation. The focus of housing development and construction was on property for sale. Income from housing development and construction fell short of its target due to increased construction costs and weakened demand. In 2007, the Group s turnover amounted to EUR (328.8) million. Of this, rental housing accounted for 70.9 (74.4) percent, housing development and construction for 26.2 (22.6) percent and other activities for 2.9 (3.0) percent. Profit amounted to EUR 92.0 (86.0) million, which represents 25.8 (26.2) percent of the Group s turnover. Net financing costs increased by 8.1 percent, amounting to EUR 48.8 (45.2) million. Earnings before tax were EUR 42.5 (40.9) million, which represents 11.9 (12.4) percent of turnover. The figure includes EUR 6.4 (3.4) million of sales revenues originating from the sale of old rental properties. Extraordinary items include EUR 0.7 million of extraordinary costs resulting from the winding down of VVO-sähkö Oy. The practice whereby the revenue and costs of construction projects are recognised in proportion to the stage of completion of the build was revised as regards expenditure in the design stage so that costs for drawings have been entered as of 1 January In 2007, these costs amounted to EUR 3 million in total. At the end of 2007, the Group had a total of 37,788 rental properties with a combined book value of EUR 1.5 milliard. Year after year, the company has systematically developed its housing stock by striving to maintain and improve quality and by investing and divesting to better meet demand. In 2007, the Group spent EUR 47.0 (46.2) million on scheduled property maintenance. The acquisition cost of completed new builds was EUR 7.1 (18.0) million. Investments in rental housing amounted to EUR 40.8 (3.0) million and sales of rental properties to EUR 14.7 (8.9) million. The bottom line on the Group s balance sheet on 31 December 2007 read EUR 2,079 (1,902) million. The Group s investments amounted to EUR (80.0) million. The Group took out a total of EUR (41.0) million in loans to fund investments and paid back EUR 54.1 (48.5) million. The Group s parent com- Division of turnover in 2007 % Scheduled annual maintenance in million Earnings before appropriations and taxes million Rental housing 71% Housing development and Construction 26% Other activities 3%

5 VVO in Brief Financial performance improved key indicators for rental housing amongst the best in the industry. pany VVO-yhtymä Oyj paid out EUR 18 million in extraordinary dividends. The Group also issued a subordinate loan of EUR 18 million in the form of a convertible bond, which the current shareholders subscribed in full. Return on equity was 13.4 (14.4) percent and the equity-to-assets ratio 12.8 (13.7) percent. The Board of Directors proposes that the shareholders attending the Annual General Meeting decide to distribute a dividend of 1.10 (1.05) euros per share, 6.6 (6.3) million euros in total. Largest shareholders (share register status on 31 December 2007) VVO Group has approximately 69 shareholders, of whom the 10 largest are: Shareholder % of shares Ilmarinen Mutual Pension Insurance Company Varma Mutual Pension Insurance Company JHL ry The Trade Union for the Public and Welfare Sectors The Finnish Metalworkers Union 9.06 Trade Union of Education in Finland, OAJ ry 7.34 The Finnish Construction Trade Union 7.29 Service Union United PAM 6.85 Union of Salaried Employees TU ry 6.52 The Chemical Workers Union 5.33 Etera Mutual Pension Insurance Company 4.28 Other Total Key figures for the past five years 1, Turnover 264, , , , ,651 Result 71,391 73,611 80,791 86,030 92,033 % of turnover Result before fi nal accounts transfers and taxes 30,079 33,469 38,572 40,858 42,471 % of turnover Balance sheet grand total, million 1,630 1,715 1,831 1,902 2,079 Return on Equity (ROE), % Return on Investment (ROI), % Equity ratio, % Result / share, 1) Dividend / share, 1) 2) Dividend / result, % 2) Housing stock 36,551 37,472 38,101 37,738 37,788 Personnel at the end of the year ) Share-specifi c indicators have not been corrected by the doubling of shares decided in the 2003 AGM, without increasing the equity capital or by the share issue desided in the 2003 AGM. 2) The Board of Directors proposes that dividends be paid in the amount of 1.10/share.

6 6 VVO Strategy VVO s strategy is based on a customerorientated approach. VVO is a service organisation offering innovative and versatile housing solutions. The company s competitive advantage in the renting of housing is a nationwide reach combined with a local approach. The nationwide reach enables economies of scale to be made in the development of operations and management of costs. The local approach is realised through the VVO-kotikeskus home centres and customer service provided by a network of estate managers. Active interaction with inhabitants is characteristic of the operation of VVO. The company constructs rental housing as well as owner-occupied homes and is involved in the development and construction of new, interesting residential areas. Strategic targets Profitable growth The aim is to achieve controlled growth in growing districts. Means for achieving growth are increasing new production of rental housing, purchases of completed building stock and the development of existing building stock. The company aims to ensure a higher than current market share on the renewing markets. Improving the client s service experience VVO aims to provide good customer service in all encounters with its clients. The company is service and customerorientated. The aim is to be number one in the field measured by service image. The aim will be attained through product development tailored to the clients needs, by investing in the development of customer relationships and by finding new, innovative ways of working. Improvement of cost-effectiveness Operations are developed by streamlining processes, by intensifying the use of systems, by taking advantage of economies of scale in purchasing and by reducing the consumption of energy. Entering into partnerships with central service providers in the field is an essential way of improving efficiency and creating value. Ensuring a profitable life cycle and the development of value for building stock Repair activities are comprehensive and planned. This helps VVO ensure that apartments offered to clients are modern and functional. The company bases its property maintenance on the idea of sustainable development. Implementing a change in the company and service image VVO is engaged in continuous efforts to ensure that the company is known as a customer-orientated and efficient provider of versatile housing services. VVO was established to own rented apartments constructed using low-interest-rate loans subsidised by the state. Today, the company has a wide range of various types of rental housing all over Finland and is engaged in the production of owner-occupied housing. The aim is to brighten and clarify the image of the company.

7 VVO in Brief Business in 2007 Rental housing VVO is Finland s largest rental housing provider. Almost half of VVO s rental apartments are located in and around Helsinki and 90 percent in growing towns. The most important rental areas are Vantaa, Helsinki and Tampere. In terms of the number of properties, the company has a 4.5 percent share of the Finnish rental market. In 2007, the utilisation level of rental apartments was percent (98.38%) and the exchange of tenants was percent (24.88%). These figures represent some of the best in the industry. Rents were raised by an average of 2.7 percent in March. Mean rents by product group were EUR /m2/month. The rental housing business area exceeded its revenue targets despite modest rent increases and the fact that the increase in property maintenance costs outpaced the rate of inflation. Investments VVO targets its investments on maintaining and improving the quality of its rental properties and on increasing the number of housing units. The investment department looks after buying and selling rental property and assessing the profitability of renovations and new investments. VVO s strategic objective is to increase its provision of housing in growing towns that enjoy positive net migration. The means to this end include increasing new development and buying residential property. VVO mostly buys property that qualifies for interest subsidy loans. The company also aims to relinquish ownership of property in towns suffering from negative net migration, in a profitable manner. The year 2007 saw the completion of two rental properties for VVO s own use. In total, the properties have 50 (183) rental units. The total acquisition cost of the properties was 7.1 million euros. VVO also bought 318 rental apartements from Kruunuasunnot and a newly built interest-subsidised tower block of 58 units from Tapiola. The number of units sold was 306 (397). The sale prices excluding debts amounted to a total of 14.7 million euros. VVO began construction work on 484 (50) new housing units in 2007, which it intends to keep for its own housing stock. Of these, 130 units were interest-subsidised and 354 privately-funded. The combined acquisition cost of the properties was 67 million euros. The company fell slightly short of the investment targets set during the previous year. This was due to the high prices of land, construction materials and completed property alike. VVO Group new production Number of apartments For own ownership Owner-occupied housing Property development sevice VVO reserved plots on 1 January 2008 % Forecast 2008 Metropolitan area 82% Other municipalities 18%

8 8 VVO Business in 2007 PHOTO: EVA PERSSON PHOTO: EVA PERSSON VVO has 12 VVO-kotikeskus client service centres. In Tampere, another floor was added to an existing building on the Tuomiokirkontie road in connection with a renovation project. Housing development and construction In terms of housing development and construction, VVO builds property to rent and to sell to private individuals, and does contract work for third parties. The housing development and construction department also coordinates VVO s extensive renovation projects. A key goal is to build a solid stock of land comprising both regional development initiatives and individual plots. VVO aims to build 1,000 new rental units every year. The year 2007 saw VVO begin construction work on 1,200 (820) new housing units. Growth primarily originated from rental properties built for VVO s own use. The number of new projects involving property for sale increased slightly from the previous year and amounted to 512 (473). Of the 646 (882) units that were completed during the year, a quarter consisted of rental property. VVO sold a total of 410 residential apartements, i.e. 23 more than in the previous year. The sale target had been set at around 500 units. The target was not met due to the low demand for detached, semi-detached and terraced houses. Sales did, however, pick up towards the end of the year. The number of completed properties that remained unsold at the end of the year was 83 (37). At the start of 2008, VVO had planning permission for a total of 265,000 square metres of property. The company also had around 17,000 square metres worth of land options and partnership agreements that cover the development of 235,000 square metres of property. More than 80 percent of the current planning permissions are for properties located in and around the capital. Personnel At the end of 2007, VVO employed a total of 389 (388) people, of whom 365 (350) had permanent contracts and 24 (38) were temporary staff. On average, the company employed 387 (2006: 386; 2005: 380) people during the year. The average length of employment was 7.8 years (6.9). Staff turnover in 2007 was 5.3 percent (5%). Twenty-three (18) permanent contracts were terminated and five (8) people retired. VVO recruited 21 new people in The average age of staff was 42.6 years (42). Environmental effects The most significant environmental effect of VVO s business activities is energy consumption during the use of the property, and indirectly the greenhouse gas emissions resulting from production. VVO is committed to meeting the energy saving target specified in the energy saving agreement for residential property in Finland. The targets set for 2007 were reached comfortably. In 2007, VVO s total consumption of heating energy was 417 GWh (435), the electricity consumption of the properties was 51 GWh (50) and water consumption was 3.7 million cubic metres (3.9) in total. Specific fuel consumption did not differ notably from the previous year s figures. The properties are mostly heated by means of district heating (97.5% of properties). The indirect carbon dioxide emissions resulting from energy consumption

9 VVO in Brief PHOTO: EVA PERSSON PHOTO: ARKKITEHTITOIMISTO LAHDELMA & MAHLAMÄKI VVO relies on customer feedback compiled from various sources; direct interaction with residents is one of the most important ways in getting information about customer satisfaction. VVO s entry, Nuovo, won the land allocation competition for developing the Cygnaeuspuisto district in Jyväskylä. The look of the proposed buildings and landscaping is in line with Jyväskylä s traditional architecture, which was designed by the celebrated Finnish architect Alvar Aalto, and complements the surrounding townscape and grid plan. amoun ted to 91,760 tco2. VVO aims to counteract the environmental effects of energy consumption by using ecological electricity produced by means of renewable energy sources such as hydropower and wind power. The green electricity employed by VVO during 2007 translated into a 10,200-tonne saving in carbon dioxide emissions. Improving customer satisfaction is one of VVO s key goals. Customer satisfaction Improving customer satisfaction is one of VVO s key goals. VVO relies on customer feedback compiled from various sources, market and consumer surveys and direct interaction with residents to help develop its activities. Every year, VVO conducts an extensive customer satisfaction survey whose findings are then translated into profit targets and reward criteria in the staff s incentive scheme. The 2007 customer satisfaction survey showed that customer satisfaction has crept up steadily from 2006.

10 10 VVO Board of Directors Riku Aalto Chairman of the Board b Master of Administrative Sciences The Finnish Metal workers Union, Director of Finances Erkki Kangasniemi b PE teacher Trade Union of Education in Finland, President Timo Kankuri b Master of Science (Eng.) Pöyry Oyj, Real Estate and Telecommunications Business Area President Markku Koskinen b Business College Graduate Student of Administrative Sciences The Finnish Construction Trade Union, Financial Manager PHOTOS: PETRI JUNTUNEN Juha Majalahti b Diploma in municipal studies JHL ry The Trade Union for the Public and Welfare Sectors, Financial Manager Risto Murto b Ph.D. (Economics) Varma Mutual Pension Insurance Company, Senior Vice President, CIO Antti Rinne b Master of Laws Union of Salaried Employees TU ry, Chairman Ann Selin b Trade Union Offi cer Degree Service Union United PAM, Chairman

11 VVO in Brief Management Team Olli Salakka Managing Director b Master of Science (Eng.) Arto Hiltunen b Master of Science (Eng.), MBA Business Operations Director, Housing Development and Construction Timo Niemi b Bachelor of Laws, Master of Laws (trained on the bench) Administrative Director Urpo Piilo b Master of Science (Eng.) Executive Vice-President Business Operations Director, Rental Housing Eero Saastamoinen b Master of Social Sciences Business Operations Director, Investments Raimo Vehkaluoto b Bachelor of Science (Econ.) Director of Finance Marketta Vehkametsä b Master of Arts, emba Communications and Marketing Director

12 12 The VVO Group Mannerheimintie 168 P.O. Box 40, Helsinki Tel (0) Fax +358 (0)