SATO Corporation's Financial Statements Bulletin 2020: Nearly 800 new rental apartments in the Helsinki Metropolitan area
SATO Corporation, Stock Exchange Release 11 February 2021 at 9:00 am
SATO Corporation’s Financial Statements Bulletin 2020
Highlights January–December 2020 (January–December 2019)
- The economic occupancy rate declined in Finland and was 96.7 (98.1)%.
- Net sales stood at €303.4 (295.6) million.
- Net rental income increased and was €220.3 (207.1) million.
- Profit before taxes decreased and was €129.5 (670.5) million.
- The change in the fair value of investment properties included in the result was €-13.0 (552.2) million.
- Housing investments amounted to €120.6 (185.9) million.
- Invested capital was €4,537.2 (4,154.2) million.
- Return on invested capital was 4.1 (18.9) per cent.
- Earnings per share were €1.80 (9.45).
- The Board of Directors proposes to the Annual General Meeting that €0.50 (0.00) per share is paid in dividends.
Highlights October–December 2020 (October–December 2019)
- The economic occupancy rate in Finland was 95.8 (98.1)%.
- Net sales were €75.0 (75.0) million.
- Profit before taxes was €26.7 (520.6) million.
- The change in the fair value of investment properties included in the result was €-6.0 (488.2) million.
- Investments in rental apartments amounted to €37.1 (75.8) million.
- Earnings per share were €0.36 (7.34).
Events after the review period
There are no significant events following the review period.
"The coronavirus pandemic that emerged in early 2020 was challenging for us and influenced our work especially in the exceptional arrangements we made to try to ensure the safety and well-being of both our employees and our residents. We nevertheless managed to cope well with the exceptional year. The savings measures launched as part of risk management related to the pandemic were reflected in the favourable development of net rental income. We did not have to temporarily lay off personnel due to the pandemic, and we recruited a significant number of new employees during the year.
The uncertainty caused by the coronavirus pandemic during the reporting year was reflected in SATO’s business operations as an increase in tenant turnover and, in turn, as a decline in the economic occupancy rate. The full year occupancy rate was 96.7 per cent. Besides the general uncertainty caused by the pandemic, the lower occupancy rate can be attributed to the increased offering of rental housing in the market, as well as the decline in our customer satisfaction rating.
We did not succeed in improving the Net Promoter Score (NPS) given to us by our residents during the year. Our customer satisfaction weakened because some of the planned repair projects had to be postponed due to the coronavirus pandemic, and our opportunities to serve our customers were limited during the pandemic.
We strongly moved forward with our Customer First development programme and focussed on adapting our organisation and our service processes to respond to our customers’ needs even better. We aim to be closely present in our customers’ daily lives in order to serve them in the best possible way. We reinforced our organisation by increasing our personnel, mainly those who work in our buildings close to residents. We believe that this will show as an increase in customer satisfaction in the medium term.
During the reporting year, we continued our sustainability work, which is guided by SATO’s strategy and our sustainability programme for 2019–2022. The programme emphasises carbon-neutral cities and the well-being of residents and neighbourhoods. In our own sustainability goals, we have committed to the UN sustainable development goals (SDG).
In spring 2020, we launched the Green Finance Framework, which integrates SATO’s sustainability targets with its financing arrangements. In September, we issued the first green bond under our Euro Medium Term Note (EMTN) programme.
In 2020, we initiated city planning projects and signed preliminary agreements and letters of intent subject to zoning conditions covering altogether close to 65,000 floor square metres, and we reinforced our housing portfolio with investments valued at EUR 120.6 million. During the reporting year, 769 new rental apartments, 63 owner-occupied apartments and 36 FlexHome apartments were completed, all in the Helsinki Metropolitan area.
SATO’s first FlexHome was completed in the Tali neighbourhood of Helsinki on 1 June. FlexHome is a new short-term ownership concept that enables home ownership with a small initial capital outlay and a five-year part-ownership period.
SATO had a total of 242 employees at the end of the year. According to the personnel survey, our internal employer image is strong, and interest in SATO as an employer was also reflected in our recruitment.
I wish to thank SATO employees for their commendable work and for doing everything they could to ensure the comfort of our residents, also during this uncertain and challenging time. Thank you also to our partners for their good collaboration and our customers for their patience during this exceptional period."
Report of the Board of Directors 1 January–31 December 2020
SATO’s operating environment was affected during the reporting year by continued urbanisation, growth in the popularity of rental housing and, in particular, the restrictions related to the coronavirus pandemic. In SATO’s operational area in Helsinki Metropolitan Area, Tampere and Turku, nearly half of the permanently occupied apartments are already made up of rental apartments.
The coronavirus pandemic that started in 2020 has had a major impact on the Finnish economy. According to the Bank of Finland’s December forecast, Finland’s economy will contract by just under 4 per cent in 2020. The economy will begin to recover as the uncertainty caused by the pandemic clears in the course of 2021, and the GDP is expected to grow by more than 2 percent in 2021. There is, however, major uncertainty in the economic outlook concerning how fast the pandemic can be brought under control. The support measures introduced by the European Central Bank, the EU and the Finnish Government are being applied in an effort to limit the pandemic’s negative impacts on Finland’s economy.
The uncertainty caused by the coronavirus pandemic during the reporting year has been reflected in SATO’s business operations as an increase in tenant turnover and, in turn, as a decline in the economic occupancy rate.
Despite the coronavirus pandemic that erupted in 2020, there is demand for rental apartments, and the urbanisation trend continues. Dense urban living along good public transport connections is becoming increasingly popular in Finland. The Helsinki metropolitan area, Tampere and Turku continue to enjoy strong growth, while according to Statistics Finland’s population projection, Finland’s population will start declining in 2031. The Helsinki area is expected to grow by over 200,000 new residents by 2040. Close to 80 per cent of the area’s residents already live in one- to two-person homes, and the number of small households continues to rise. As a result of immigration, the proportion of people with foreign background living in the capital area is predicted to grow from the current 17 per cent to 25 per cent by 2030. The aging population typically moves closer to growth centres and the services they offer, and housing-related services are increasingly expected.
The change in the population structure and development in the prices of owner-occupied apartments create a stable foundation for demand for rental housing especially in the capital area and in Tampere and Turku. Outside of growth centres, the real prices of homes are declining, which makes acquiring an owner-occupied apartment in growth centres even more challenging for people coming from those areas.
The rental housing markets in major cities have been characterised in recent years by a sharp growth in supply. The growth largely stems from the brisk production of rental housing. During the 2020 pandemic, previously short-term rental apartments were offered for longer rental periods, which boosted supply in some cities, even to a considerable degree. However, demand for rental apartments was partly negatively affected by upper secondary schools and universities switching to remote teaching due to the pandemic.
The pandemic has slightly shifted the focus of demand for rental apartments to larger apartments and areas with lower rent levels. Behind both of these developments is the increase in teleworking: people need more space when they also use their home for working.
KTI Kiinteistötieto Oy’s rental benchmarking, which provides information on new rental agreements, indicated average annual growth of 0.7 per cent in the capital city region in the third quarter of 2020. Espoo and Vantaa have experienced a somewhat greater increase in rents than Helsinki. In major cities outside the Helsinki metropolitan area, rents increased by an average of 0.5 per cent, but there were considerable differences between cities.
In Statistics Finland’s December report, the year-on-year change in construction permits was -12.4% in October. According to the Confederation of Finnish Construction Industries’ November forecast, housing starts in 2021 will decrease by 11% compared to 2020. There are remarkable regional differences in granted construction permits and projected housing starts.
Thanks to the low interest rate level, housing remains an appealing investment. Investment in rental housing continues to increase in popularity in both Finland and globally, and the coronavirus crisis that hit several other real estate sectors hard further reinforces the status of housing investment. Foreign housing investors that landed on Finland’s shores in recent years continued to strengthen their investment portfolios during the reporting year.
Finland targets carbon neutrality by 2035. Mitigating emissions from the construction sector plays a significant role in achieving both national and international climate targets and in preparing for climate change. Construction and the use of buildings currently account for over a third of Finland’s greenhouse gas emissions. In addition to energy consumption during use, the sector has started taking note of the carbon footprint of buildings throughout their life cycle.
As cities and populations change, we believe that housing also needs to change. SATO’s goal is to build thriving and vibrant cities and neighbourhoods where people enjoy a high level of well-being. We offer our residents homes in cities, along good transport routes, and we develop services to make their daily lives easier.
Our customers are at the heart of our strategy, and we want to develop homes with increasingly better services for them. In addition to services to help them day to day, we look after their well-being and support good neighbourly relations. We pay attention to home health and energy efficiency.
Our sustainability work is guided by SATO’s strategy and our sustainability programme for 2019–2022, which emphasises carbon-neutral cities and the well-being of residents and neighbourhoods. In our own sustainability goals, we have committed to the UN sustainable development goals (SDG).
We operate profitably and with a long-term view. We increase the value of our housing stock by investing in homes that are in central locations and near convenient traffic connections, and through systematic repairs. SATO’s strategy focusses on expanding its housing stock in the Helsinki metropolitan area, Tampere and Turku – all areas where demand for apartments is the highest and the increase in value is expected to be stable over the longer term.
SATO’s operations are guided by its strategic development programmes: Customer First, digital development and diverse housing solutions.
SATO has set as a strategic goal maintaining its investment grade credit rating. Our return on equity target is 8 per cent. In addition, our strategic goal is to achieve a continuously improving Net Promoter Score (NPS) from our residents.
According to SATO’s dividend policy, a maximum of 40 per cent of the cash flow from operations will be paid in annual dividends, depending on the market situation, investment level, the development of the equity ratio and the solvency ratio.
Net sales and profit
In 2020, consolidated net sales were EUR 303.4 (295.6) million.
Operating profit was EUR 179.6 (725.6) million. Operating profit without the change in the fair value of investment properties was EUR 192.6 (173.3) million. The change in fair value was EUR -13.0 (552.2) million. The weakened occupancy rate had a negative impact on the change in fair value. In the comparison period, the change in the fair value was affected by the change of valuation method to income value method in the fair value measurement of investment properties on 31 December 2019.
Financial income and expenses totalled EUR -50.0 (-55.1) million.
Profit before taxes was EUR 129.5 (670.5) million. Cash flow from operations (free cash flow after taxes excluding changes in fair value) amounted to EUR 132.1 (91.2) million.
Earnings per share were EUR 1.80 (9.45).
Financial position and financing
The consolidated balance sheet totalled EUR 5,104.7 (4,718.2) million at the end of December. Equity was EUR 2,155.7 (2,055.8) million. Equity per share was EUR 38.07 (36.31).
The Group’s equity ratio was 42.2 (43.6) per cent at the end of the year. EUR 766.5 million in new long-term financing was withdrawn and the solvency ratio was 43.8 (44.4) per cent at the end of December.
The Group’s return on equity was 4.8 (29.6) per cent. The return on investment was 4.1 (18.9) per cent.
Interest-bearing liabilities at the end of December totalled EUR 2,381.5 (2,098.4) million, of which loans subject to market terms accounted for EUR 2,170.2 (1,830.1) million. The loan itemisation is in note 26 of the financial statements. At the end of the reporting year, the average loan interest rate was 1.8 (1.7) per cent. Net financing costs totalled EUR -50.0 (-55.1) million. The average maturity of loans was 4.2 (4.0) years.
The calculated impact of changes in the market value of interest hedging on equity was EUR -1.9 (-5.3) million.
During the reporting year, SATO increased the proportion of unsecured loans to 82.6 per cent of all loans. At the end of the year, the proportion of unencumbered assets was 84.1 per cent of the balance sheet.
SATO Corporation is the parent company of SATO Group. At the end of the reporting year, the parent company had a total of 24 (25) subsidiaries engaged in business operations. Mergers took place during the year in order to clarify the Group structure.
SATO Corporation’s majority shareholder is Balder Finska Otas AB, whose parent company is Fastighets AB Balder, which is quoted on the Stockholm Stock Exchange.
Our housing business includes rental activities, customer service, lifecycle management and maintenance. Effective rental activities and digital services provide home-seekers with quick access to a home, and the Group with a steadily increasing cash flow. High-quality maintenance operations ensure the comfort of residents and that the apartments stay in good condition and maintain their value. We serve our customers in daily housing issues through our customer-oriented service organisation.
In accordance with our Customer First development programme, we focussed on adapting our organisation and our service processes to respond to our customers’ needs even better. We aim to be closely present in our customers’ daily lives in order to serve them in the best possible way. We expanded our House Experts operating model in the Helsinki metropolitan area. Under the operating model, SATO’s own House Experts handle some of the tasks previously handled by our maintenance partners, for instance technical building work on homes and buildings. We recruited nine new house experts during the year. Twelve new employees started working in our Housing business in a new kind of Service Manager role that combines the tasks of service managers, apartment inspectors and infrastructure managers. Service managers ensure that SATO’s residents are happy and that the rental homes remain in good condition.
SATO had approximately 50,000 customers at the end of the reporting year. The Net Promote Score (NPS) measuring customer satisfaction decreased slightly from the previous years. Our customer satisfaction weakened because some of the planned repair projects had to be postponed due to the coronavirus pandemic and our opportunities to serve our customers were limited during the pandemic.
The economic occupancy rate weakened, particularly on account of the pandemic, and in Finland averaged 96.7 (98.1) per cent. The external tenant turnover rate for rental apartments was 32.6 (29.6) per cent. Rental income increased by 2.6 per cent to EUR 303.4 (295.6) million. The weakened occupancy rate can be attributed largely to the general uncertainty caused by the coronavirus pandemic, the increased offering of rental housing, and the slight decline in customer satisfaction.
The average monthly rent of SATO’s rental apartments in Finland at the end of the review period was EUR 17.51 (17.23) per m2.
Net rental income for apartments was EUR 220.3 (207.1) million.
On 31 December 2020, SATO owned a total of 26,792 (26,074) apartments. Altogether 769 rental apartments were acquired or completed. The total number of divested rental apartments and shared ownership apartments redeemed by the owner-occupants was 113.
The development of the value of rental apartments is a key factor for SATO. Its housing stock is concentrated in areas and apartment sizes which are expected to be the focus, in the long term, of increasing rental apartment demand. The allocation of building repairs is based on life-cycle plans and repair need specifications.
The fair value of investments totalled EUR 4,753.5 (4,657.9) million at the end of December. The change in the value of investment properties, including investments and divestments, was EUR 95.7 (782.7) million.
The external expert JLL Finland Oy (JLL) issues a quarterly statement on the valuation methods applied by SATO, the appropriateness of sources of information used and the quality and credibility of the valuation for Finnish investment properties. JLL’s latest statement was issued on the valuation carried out on 31 December 2020. The criteria for the determination of the fair value are presented in the notes to the consolidated financial statements.
The change in value was also affected by investments and divestments, and by the change in market prices and the value of the rouble.
At the end of the year, the Helsinki metropolitan area accounted for some 85 per cent, Tampere and Turku for approximately 11 per cent, Jyväskylä and Oulu for 2 per cent and St. Petersburg for roughly 2 per cent of the value of apartments.
Investments, divestments and property development
Investment activities are used to manage the housing portfolio and prepare the ground for growth. Since 2000, SATO’s net investments in non-subsidised rental apartments total more than EUR 2.5 billion. SATO acquires and builds entire rental buildings and single rental apartments. Property development allows for new investments in rental apartments in Finland. The rental potential and value of rental apartments owned by SATO are developed through renovation activities.
Investments in rental apartments were EUR 120.6 (185.9) million. Investments in the Helsinki metropolitan area accounted for 93.2 per cent of the investments during the review period. And investments in new apartments represented 48.6 per cent of all investments in the review period. In addition, on 31 December 2020, binding purchase agreements in Finland totalled EUR 55.3 (40.9) million.
During the review period, 68 (29) rental apartments were divested in Finland. Their total value was EUR 5.7 (5.9) million.
The book value of plot reserves totalled EUR 59.0 (63.1) million at the end of December. The value of new plots acquired by the end of December totalled EUR 3.0 (37.0) million.
The permitted building volume for about 2,300 apartments is being developed for the plots in the company’s housing portfolio. This allows SATO to utilise existing infrastructure, create a denser urban structure and thus bring more customers closer to services and public transport connections.
We collaborate with cities when areas are being developed and new housing is planned for them. During the reporting year, we continued to develop the Soukka area of Espoo and the "Myyr York Downtown" Myyrmäki and Hakunila areas of Vantaa. In 2020, we concluded a preliminary contract to acquire three plots located in the Lasihytti area, south of the railway line, in the Kauklahti district of Espoo. Under a local plan revision, an urban residential area for which SATO is planning to build rental apartments is being planned for the current Lasihytti industrial area. We also signed a preliminary contract on a property transaction for a future block of apartment buildings in the Viikki area of Helsinki. Once the city plan is approved, the intention is to build roughly 200 new rental homes and 100 FlexHomes. A proposal called ITIS SITI by SATO’s working group won second prize in the international idea and architecture competition organised by the City of Helsinki, and it was chosen as the basis for continuing the development of Puhos and Puotila.
During the year under review, 769 (321) rental apartments, 63 (32) owner-occupied apartments and 36 FlexHome apartments were completed in Finland. On 31 December 2020, a total of 314 (769) rental apartments and 71 (99) owner-occupied apartments were under construction.
A total of EUR 73.7 (73.9) million was spent on repairing apartments and improving their quality.
SATO had a total of 533 (534) apartments in St. Petersburg at the end of the year. The economic occupancy rate of rental apartments in St. Petersburg was 91.8 (92.8) per cent on average. For the time being, SATO will refrain from making new investment decisions in Russia. The share of investments in Russia is limited to a maximum of 10 per cent of the Group’s housing assets.
Our sustainability work is guided by SATO’s strategy and our sustainability programme for 2019–2022, which emphasises carbon-neutral cities and the well-being of residents and neighbourhoods.
We focussed on improving residents’ living comfort and reducing energy consumption with the help of artificial intelligence. During the reporting year, we installed some 3,000 sensors to measure temperature and humidity in apartments. Our building electricity during the year was generated from wind power and was emission-free.
Our goal is to reduce mixed waste and increase recycling and sorting. We did not fully succeed in this goal during the year under review, as providing residents with guidance in recycling and sorting in the buildings was not possible due to the pandemic. In addition, the increase in online shopping during the pandemic meant higher volumes of, for instance, board waste.
During the reporting year, in our fixed furniture in dry spaces we switched to Finnish furniture that takes the product’s life cycle and the low emissions of the indoor air classification into account. In our product development, we also designed a new set of Finnish furniture for SATO’s club rooms.
During the reporting year, we continued to develop an operating model related to housing health and safety. The operating model focusses particularly on a quick response rate, keeping customers informed, and the flow of information.
During the reporting year, we collaborated on a project with the non-profit organisations No Fixed Abode and the Rehabilitation Foundation to help participants in the project find two of life’s essentials – a home and a job. By the end of the reporting year, 13 people who had participated in the project were living in a SATOhome.
We were again successful in the Global Real Estate Sustainability Benchmark (GRESB) and retained our four out of five stars with 78 points.
SATO reports on its sustainability annually in accordance with the Global Reporting Initiative’s (GRI) reporting guidelines, and the environmental sustainability figures presented in the report have been verified by an independent third party, i.e. KPMG Oy Ab.
In spring 2020, we launched the Green Finance Framework, which integrates SATO’s sustainability targets with its financing arrangements. The framework is based on the company’s strategy and the sustainability programme that was launched in 2019.
In September 2020, SATO issued a EUR 350 million unsecured green bond with a maturity of seven years. This is our first green bond, and we are using the cash proceeds from the bond to finance and/or refinance sites in accordance with our Green Finance Framework.
In addition, in December 2020, we concluded new unsecured committed credit facilities valued at a total of EUR 350 million with five financial institutions; the credit facilities have a three-year maturity with two one-year extension options, and their interest rate margin is tied to the achievement of SATO’s main sustainability objectives.
The Corporate Governance Statement is published separately from the Report of the Board of Directors. SATO’s Corporate Governance Statement, Code of Conduct and sustainability programme are available at sato.fi.
We reduce the load on the environment by regularly taking care of and repairing homes and properties according to the life-cycle principle, and by building properties primarily in existing urban environments and near good transport connections.
Legislation governing the energy efficiency of residential buildings requires an energy efficiency figure of 90 for new buildings. SATO is committed to building markedly more energy-efficient buildings, with our energy efficiency figure target being 81 for new buildings.
We are committed to the Energy Efficiency Agreement targets for the property sector, aiming for a reduction in the total consumption of electricity and heat of 10.5 per cent between 2015 and 2025.
During the reporting year, we continued to invest in energy efficiency and water conservation in SATOhomes. We did not, however, succeed in our water-saving objectives during the reporting year. Because of the pandemic, we were not able to implement all savings measures, in addition to which, water consumption grew as residents spent more time in their homes than usual.
During the year under review, specific energy consumption decreased by 3.8 per cent, specific electricity consumption increased by 8.2 per cent and specific water consumption increased by 1.2 per cent compared to 2019. Rated emissions from SATO’s apartments fell by 12.1 per cent compared to 2019 and were 23.2 (26.4) carbon dioxide equivalent kilograms per square metre. Emissions are calculated according to the absolute consumption of district heating. Electricity was generated from emission-free wind power.
The Group’s environmental programme has been incorporated into the sustainability programme and is available in its entirety at sato.fi.
SATO’s development activities were focussed during the reporting year on further improving our customer-care processes with the goal of serving our customers in the best possible way.
We also developed new housing concepts. We launched a new form of short-term part ownership housing, called FlexHome, which opens the door to home ownership with a small initial capital outlay. The first FlexHome was completed in the Tali neighbourhood of Helsinki in summer 2020.
We continued the planning principle that was introduced last year, according to which studios are no longer bordered with supporting walls. This means that apartment distribution in the building can later be modified by joining studios with two- or three-bedroom apartments if demand shifts to larger apartments.
In digital development, we unified our online services for our customers for even more fluent service. The digital OmaSATO service allows our residents, for example, to check their contract and payment details, read their building’s notices, report defects and send messages to customer service.
A total of EUR 1.4 (1.2) million was spent on development, corresponding to approximately 0.5 per cent of net sales.
Risk management is used to ensure that risks impacting the company’s business are identified, managed and monitored.
The main risks of SATO’s business are risks related to the business environment and financial risks.
A risk affecting the operating environment in the immediate future is the coronavirus pandemic, whose duration and impact on the Finnish economy are difficult to estimate. A prolonged coronavirus pandemic may have a major negative impact on economic growth, business activity and employment in Finland, not to mention work productivity. Such economic or business deterioration, as well as quarantines or other restrictive measures, may have an adverse impact on the financial result or operations of SATO’s properties, not to mention on financing costs or values. In an effort to minimise the negative business impacts of the pandemic, the company has focussed on maintaining a safe work environment, boosting sales and strict cost control.
The most significant risks in the renting of apartments are related to economic cycles and fluctuations in demand. A clear weakening in the housing market could have a negative impact on the market value of SATO’s housing portfolio. In accordance with its strategy, SATO focusses its investments on growth centres, thus ensuring the rental potential of its apartments and the development of their value.
Changes in official regulations and legislation, as well as the uncertainty stemming from them, may have a significant impact on the reliability of the investment environment and thus on SATO’s business. SATO monitors and anticipates these changes and also calls attention to what it considers to be negative impacts of regulation.
The management of financial risks is steered by the Group’s financial policy. Our financial risk management principles have been defined in the financial policy approved by SATO’s Board of Directors. Our most significant financial risks relate to liquidity, refinancing and interest rates. We manage our liquidity and refinancing risks by diversifying the financing sources and maturity of our loan portfolio, and by holding sufficient liquidity reserves in the form of committed credit facilities and other long-term financing commitments. The company established a EUR 1.5 billion Euro Medium Term Note (EMTN) bond programme in 2019.
The means for managing the liquidity risk at SATO include cash assets, a bank account limit, committed credit facilities of EUR 600 million and a commercial paper programme of EUR 400 million. We increase the amount of reserves as the funding requirements grow. Our objective is to keep the liquidity requirements of the next 12 months covered by committed agreements.
Floating rate loans form an interest rate risk which we manage by balancing the share of fixed and floating rate loans either by issuing fixed rate loans or by interest rate hedges. According to our treasury policy, our objective is to keep the ratio of fixed rate loans at over 60 per cent of debt portfolio after interest hedging.
There are risks related to the business environment in our St. Petersburg operations, including currency risk. The consolidation of foreign currency-denominated assets in the consolidated financial statements also involves a translation risk. Possibilities of hedging the translation risk are evaluated in accordance with our financial policy. For the time being, SATO will refrain from making new investments in Russia.
A more detailed description of risks and risk management is available on the Group’s website www.sato.fi.
Pending legal actions
SATO has no official procedures, legal actions or arbitration proceedings pending that would have a significant impact on the company’s financial standing or profitability, and SATO is not aware of any threat of such proceedings.
On 31 December 2020, the share capital of SATO Corporation was EUR 4,442,192.00 and there were 56,783,067 shares. The company has one series of shares. The shares are included in the book-entry system maintained by Euroclear Finland Oy.
SATO Corporation holds 160,000 treasury shares. This represents 0.3 per cent of all shares and the votes they confer.
On 31 December 2020, the Board of Directors did not have authorisation to acquire or issue the company’s own shares.
On 31 December 2020, the Board members or the CEO of SATO Corporation did not hold any shares in the company.
At the end of December, the Group employed 242 (229) people, 226 (212) of whom had a permanent employment contract. The average number of personnel was 229 (223) during the reporting year. The Group’s salaries and remunerations in 2020 totalled EUR 15.3 (15.8) million.
Shareholders’ Nomination Committee
The Shareholders’ Nomination Committee consists of representatives of SATO’s four largest shareholders registered in the book-entry system on 1 October. If a shareholder chooses not to exercise their nomination right, the right will pass on to the next largest shareholder. The State Pension Fund, the company’s fourth largest shareholder, did not exercise its nomination right, and the right was passed to the Finnish Construction Trade Union, the fifth largest shareholder. The Committee consisted of representatives of the following shareholders: Balder Finska Otas AB (Erik Selin), Stichting Depositary APG Strategic Real Estate Pool (Hans Spikker), Elo Mutual Pension Insurance Company (Hanna Hiidenpalo) and the Finnish Construction Trade Union (Matti Harjuniemi).
Board of Directors, CEO and auditors
The Annual General Meeting held on 23 June 2020 confirmed that the Board of Directors consists of six members.
In 2020, the members of SATO’s Board of Directors were chairman Erik Selin, deputy chairman Jukka Hienonen and ordinary members Esa Lager, Tarja Pääkkönen, Johannus (Hans) Spikker and Timo Stenius. In addition, Marcus Hansson was a member of the Board until the Annual General Meeting on 23 June 2020.
The Board of Directors convened 14 times in 2020. The Board’s work is supported by the Nomination and Remuneration Committee.
SATO Corporation’s CEO until 18 December 2020 was Sharam Rahi, and as of 18 December 2020, SATO’s CEO has been Antti Aarnio, M.Sc. (Tech.).
As the company’s auditor, the Annual General Meeting selected the audit firm Deloitte Oy, which appointed APA Eero Lumme as the auditor in charge. The auditor’s term in office is the financial year, and the auditor’s duties end at the closing of the next Annual General Meeting.
Members of the Management Group
During the 2020 reporting year, the members of SATO’s Management Group were CEO Sharam Rahi (until 18 December 2020); EVP, Rental Housing Business and investments, and CEO as of 18 December 2020, Antti Aarnio; Antti Asteljoki (VP Housing business until 4 February 2020); Miia Eloranta (EVP, Marketing and Communications until 3 December 2020); and CFO Markku Honkasalo.
In the operating environment, SATO’s business activities are mainly affected by urbanisation, housing policies, consumer confidence, the development of purchasing power, the rent and price development for apartments, general competition and interest rates.
Finland’s economy will begin to recover once the uncertainty caused by the pandemic subsides, which is expected to take place in the course of 2021. According to the Bank of Finland’s December forecast, Finland’s economy will contract by just under 4 per cent in 2020. Economic recovery is expected to begin in the course of 2021, and the GDP is expected to grow by more than 2 per cent during the year. There is, however, major uncertainty in the economic outlook concerning how fast the pandemic can be brought under control. As a consequence of the uncertainty, SATO’s economic occupancy rate weakened in 2020 compared to 2019. SATO’s investments to develop digital services and increase its customer presence are expected to have a positive impact on the occupancy rate in the medium term. Interest rates are expected to remain low in 2021, which will have a positive impact on SATO’s financing costs.
Continuous urbanisation provides good long-term conditions for sustained investments in SATO’s main operating areas in Finland. Net migration is expected to represent the largest share of the population increase in SATO’s operating areas. Some 80 per cent of SATO’s housing stock is located in the Helsinki metropolitan area, where price development is expected to be more positive than in the rest of Finland.
Record-high housing construction will decrease in the coming years as a consequence of a drop in the number of construction permit applications, however with major regional differences.
In line with its majority shareholder’s operating model, SATO Corporation will not publish guidance on its 2021 earnings. The parent company of Balder Finska Otas AB is Fastighets AB Balder, which is quoted on the Stockholm Stock Exchange.
Proposal of the Board of Directors for the distribution of profit
On 31 December 2020, the parent company’s distributable equity was EUR 370,154,150.83, of which profit for the period was EUR 58,039,315.77. The company had 56,623,067 outstanding shares entitling to dividends for year 2020.
According to our dividend policy, annual dividends are at most 40 per cent of our cash flow from operations, depending on the market situation, investment level, the development of the equity ratio and the solvency ratio.
The Board of Directors proposes to the Annual General Meeting that EUR 0.50 per share is paid in dividends for the 2020 financial period (EUR 0.00/share for 2019), EUR 28,311,533.50 in total, and that EUR 29,727,782.27 be transferred to retained earnings.
No material changes have taken place in the company’s financial position since the end of the financial year. The company’s liquidity is good, and in the Board of Directors’ view, the proposed distribution of profit will not compromise the company’s solvency.
Largest shareholders 31.12.2020
|Number of shares||%|
|Balder Finska Otas Ab (Fastighets Ab Balder) ||31 696 745||55.8 %|
|Stichting Depositary APG Strategic Real Estate Pool ||12 811 647||22.6 %|
|Elo Mutual Pension Insurance Company ||7 233 081||12.7 %|
|The State Pension Fund ||2 796 200||4.9 %|
|Valkila Erkka ||390 000||0.7 %|
|Hengityssairauksien tutkimussäätiö ||227 000||0.4 %|
|SATO Corporation||160 000||0.3 %|
|Entelä Tuula ||159 000||0.3 %|
|Heinonen Erkki||156 684||0.3 %|
|Tradeka Invest Ltd||126 500||0.2 %|
|Others (110 shareholders)||1 020 210||1.8 %|
On 31 December 2020, the Group had 120 shareholders entered in the book-entry register. The turnover of SATO Corporation’s shares was 1.88 per cent during the reporting year.
More information at www.sato.fi.
Annual General Meeting 2021
The Annual General Meeting of SATO Corporation will be held on March 25, 2021.
Financial publications in 2021
Publication dates for interim reports and the half-year financial report:
Interim report January–March: 12 May 2021
Half-year financial report January–June: 16 July 2021
Interim report January–September: 11 November 2021
CEO Antti Aarnio, tel. +358 20 134 4200
CFO Markku Honkasalo, tel. +358 20 134 4226
Chief Executive Officer
Annual Report 2020
Financial Statements presentation 2020
Financial Statements as an XHTML file
NASDAQ Helsinki Ltd., Euronext Dublin, main media, www.sato.fi
SATO is one of Finland's leading rental housing providers. SATO aims to offer a comprehensive choice of rental housing and an excellent customer experience. At year-end 2020, SATO owned nearly 26 800 apartments in Finland's largest growth centres and in St Petersburg.
We promote sustainable development and initiative through our operations and work in open interaction with our stakeholders to generate added value. We operate profitably and with a long-term view. We increase the value of our housing stock through investments, divestments and repairs.
SATO Group's net sales in 2020 were EUR 303,4 million, operating profit EUR 179,6 million and profit before taxes EUR 129,5 million. The value of SATO's investment property is roughly EUR 4,8 billion.
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