Financial Statements Bulletin 2018: All of SATO's key figures improved

27 February 2019

SATO Corporation, Stock Exchange Release 27th Feb 2019 at 9:00 am

SATO Corporation's Financial Statements Bulletin 2018

Highlights January-December 2018 (January-December 2017)

  • The economic occupancy rate strengthened each quarter, from 97.3% in the first quarter to 98.4% in the last quarter. The full-year occupancy rate in Finland was 97.9 (96.8)%.
  • Net sales grew 3.7% and stood at €290.4 (280.1) million.
  • Net rental income improved by 5.4% and amounted to €198.5 (188.4) million.
  • Profit before taxes improved by 25.2% and was €230.8 (184.4) million.
  • The change in the fair value of investment properties included in the result was €102.0 (68.6) million.
  • Housing investments stood at €143.5 (156.0) million.
  • Invested capital was €3,536.7 (3,329.3) million.
  • Return on invested capital was 7.9 (7.1) per cent.
  • Earnings per share were €3.26 (2.55).
  • The Board of Directors proposes to the Annual General Meeting that €0.50 (0.50) per share be paid in dividends.  

Highlights October-December 2018 (October-December 2017)

  • The economic occupancy rate in Finland was 98.4 (97.5)%.
  • Net sales stood at €73.2 (71.9) million.
  • Profit before taxes was €46.3 (53.5) million.
  • The change in the fair value of investment properties included in the result was €15.3 (22.4) million.
  • Investments in rental apartments stood at €47.0 (35.2) million.
  • Earnings per share were €0.65 (0.71).


Events after the review period
There are no significant events following the review period.

** **** **

CEO Saku Sipola:

"SATO's operating environment and the Finnish housing market in general have been in a phase of rapid change in the past decade. Urbanisation, the growing cost burden of house construction, changes resulting from regulation and from banks' own risk assessments of housing lending, uncertainty related to consumers' incomes and the rapid change in values related to ownership have contributed to the growing popularity of rental housing. There is good reason to believe this trend will continue. The development has led to a rapid increase in the offering of rental housing, as well as diversified the range of players offering rental apartments.

In the prevailing market situation, our property development and investments have focused almost entirely on complementary construction planning projects carried out in cooperation with cities and on our own construction.

The growing economic uncertainty and weakening development will curb housing investments on a general level in the coming years, which could open up interesting acquisition opportunities for SATO.

In an increasingly competitive environment, 2018 was a positive year for SATO, characterised by renewals and successes, which were reflected in the improvement in all our key ratios. Our Customer First strategy moved forward nicely, and particular bright points in our successes were the improved economic occupancy rate and the especially pleasing improvement in customer satisfaction across all measured areas.

One of the highlights of the year was the launch of the OmaSATO service, which helped us bring housing services to our residents' smart phones, so they can use the services any time and any place. More than 250 of our residents were involved in the planning, testing and further development of OmaSATO in various workshops. By the end of the year, there were 8,190 registered users of the service, and one of our main focus areas in 2019 will be to continue developing OmaSATO.

In 2018, we submitted city planning applications covering 63,000 floor square metres, and we reinforced our rental housing portfolio with investments valued at over EUR 140 million. In construction and renovations, we paid special attention to energy efficiency and life-cycle thinking. During the reporting year, 388 new SATOhomes were completed, all of which in the Helsinki metropolitan area.

Our long-term work and successes are reflected in our strengthened equity ratio, our lowered solvency ratio and the increase in our unencumbered assets, all of which play an important role in securing our financing and, in turn, our opportunities to support Finland's urbanisation through new investments.

In December of the reporting year, SATO's Board of Directors updated the Group's long-term financial targets. The Group's equity ratio target was raised from 35 per cent to 40 per cent. The Group's other financial targets remained unchanged: the interest coverage ratio must be over 1.8x and unencumbered assets 60 per cent or more. The long-term target for solvency ratio is not to exceed 50 per cent.

In 2018, we focussed on reinforcing our personnel's competence in areas that are key to implementing our strategy. We also cultivated our culture of safety and provided our customer service personnel with training in dealing with challenging situations at work. In average, SATO employees took part in 4.8 training days in 2018.  As in previous years, satisfaction at work was high at SATO, and assessments of supervisory work showed very positive development. SATO had a total of 218 (212) employees at the end of the year.

Our sustainability work was guided by SATO's strategy, sustainability policy and the material topics raised in our stakeholder survey. I would like to call attention to one particular area that is very important to us, which is housing health and safety; we developed our operations around this theme during the financial year. We established, among other things, the position of Housing Health Manager, and drew up an operating model for housing health and safety matters. From the perspective of corporate social responsibility, we also considered it important to be part of efforts to reduce two major societal issues, unemployment and homelessness. 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, 9 people who had participated in the project were living in a SATOhome. We measured our sustainability efforts during the reporting year in the Global Real Estate Sustainability Benchmark (GRESB), and we achieved a score of four out of five stars. SATO's long-term sustainability efforts reflected progress in nearly all areas.

Our successes from last year lay a strong foundation for developing our activities and services this year, too. The strong role and commitment of our customers, cooperation partners, employees, shareholders and Board of Directors were our strongest pillars of success in 2018, and they will continue to be in future, too. I thank everyone for the past year and aim for an even better 2019."

Key figures, Group

Report of the Board of Directors

Report of the Board of Directors 1 January - 31 December 2018

Operating environment
The Finnish economy has developed favourably over the past two years. As a result, employment has improved, which in turn, has had a positive impact on the balance of public finances. The operating environment is, however, becoming increasingly challenging. It is more and more difficult to predict economic development due to the high number of global threats. It is clear that the Finnish economy's strongest growth phase will experience a downturn as global economic growth weakens. In its January economic outlook, International Monetary Fund IMF projects a slowdown in global economic growth. The global economy is projected to grow at 3.5 percent this year and 3.6 percent next year. Just last year, in October, the IMF projected growth of 3.7 per cent for both years. In its outlook, the IMF highlights that there is a considerable risk that growth will weaken even more than previously anticipated. Global trade tensions and uncertainty related to Brexit are behind the weakened growth forecast. In its outlook published in December, the European Central Bank projected that GDP growth in the euro area will slow to 1.7 per cent in 2019.

Finland's economic growth will continue, but signs of a slowdown can already be seen. Based on the most recent statistics and short-term forecasts, annual growth of just under three per cent was achieved in 2018. Growth is, however, projected to slow to below two percent in 2019.

Similar to the preceding years, construction has remained brisk, but the strongest growth is losing momentum. According to an estimate by the Confederation of Finnish Construction Industries (RT), construction volume increased by around 6 per cent during the reporting year, with the number of housing starts reaching the all-time-high 2017 figure of 44,000. For 2019, zero growth is projected for the overall volume of construction investments. There was a sharp decline in the number of construction permit applications in 2018, which forecasts a significant slowdown in the number of new housing construction projects and thus also in the number of apartments that will be completed in 2020 and 2021.

New apartments are being built particularly in the largest centres in SATO's main areas of operation. According to KTI Property Information, close to 7,000 rental apartments were under construction in the Helsinki metropolitan area at the end of the reporting year, and a total of roughly 2,900 were under construction in other major cities in Finland (Tampere, Turku, Oulu, Jyväskylä, Lahti and Kuopio).

Three quarters of all Finnish households now consist of those living either alone or with one other person, and the corresponding figure for Helsinki is approximately 80 per cent. The majority of apartments under construction are small. The average size of rental apartments under construction in large cities is between 45 and 52 square metres.

Thanks to a strong economy, highly liquid markets, low interest rates and high equity valuations, considerable capital has been channelled to the real estate investment market in recent years. Foreign investors' interest in Finland has held strong, and the housing investment market has also become increasingly globalised.

The demand of rental apartments continues to exceed supply in most growth centres, despite the growth in supply and increase in construction costs. In some areas, an increased supply of rental apartments has reduced pressures to raise rent levels, but rents have increased as a result of higher costs arising from property management and maintenance.

According to Statistics Finland, the annual increase in rents of non-subsidized rental apartments was around 2.5 per cent in the Helsinki metropolitan area and 2.2 per cent in other parts of Finland. Rents of subsidized apartments went up by 2.4 per cent throughout the country.

Close to half of Finland's entire population already lives in the country's six major urban areas. A well-functioning rental apartment market promotes labour mobility and makes it easier for students to accept a place to study. 

The popularity of living in city centres has created a shortage of small apartments and also caused the demand for family apartments in city centres to increase. 

Helsinki's city master plans include preparations for as many as over 200,000 new residents by the year 2050. This entails making existing urban structures denser and planning for new residential areas, especially near public transport hubs.

Finns have learned to demand housing-related services, and according to a consumer survey commissioned by SATO, services that are related to the apartment or to rents, are important when choosing an apartment. A third of the respondents said they would use more housing-related services if they could be ordered digitally from a centralised service. Digitalisation is, in fact, one of the key enablers in developing SATO's service offering.

Sharing spaces and services among neighbours is also something that interests Finns, regardless of age and gender. The possibility of modifying apartments to meet changing needs is often considered important.

The megatrends of globalisation, digitalisation and sustainability, as well as functioning in an urban environment, are changing people's values and behaviour. That is why we believe that housing also needs to change. Our mission is to revolutionise housing by providing our customers with more than just walls. According to our vision, thriving cities will be home to people who enjoy a high level of well-being.

We are a provider of rental homes, and we create diverse housing concepts for different needs. We develop services that bring genuine benefits to our customers in their day-to-day lives. We focus on the customer experience in traditional channels, and especially in the digital realm. In addition to smooth daily living, we take care of our customers' well-being by promoting a sense of community, which increases not only their living enjoyment, but also their sense of security. We pay special attention to housing health and energy efficiency.

We are growing 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. In creating the preconditions for growth, the role of financing will increase even further. SATO has set the strengthening of its investment grade rating (currently Moody's Baa3) as a strategic goal. Our return on equity target for the strategy period is 12 per cent. In addition, our strategic goal is to achieve a continuously improving Net Promoter Score (NPS) among our residents.

According to SATO's dividend policy, a maximum of 40 per cent of the cash earnings will be paid in annual dividends, depending on the market situation, investment level, the development of the equity and the solvency ratios.

In December 2018, the Board of Directors approved the new equity ratio target at 40 per cent. The previous target was 35 per cent. The Group's other financial targets remain unchanged. The interest coverage ratio must be at least 1.8x and unencumbered assets ratio 60 per sent or more. The long-term target for solvency ratio is not to exceed 50 per cent.

Net sales and profit
SATO is engaged in investment activities where the profit comes from rental income (i.e. from net sales), sales income and changes in the fair value of investment properties. At the end of the year, capital invested in business operations stood at EUR 3,536.7 (3,329.3) million. When evaluating the business profitability, the key indicator is return on invested capital, which was 7.9 (7.1) per cent.

Consolidated net sales for 2018 were EUR 290.4 (280.1) million, an increase of 3.7 per cent compared to 2017. The growth was based on the increased number of apartments, the improved occupancy rate and our focus on apartments in growth centres.

Operating profit amounted to EUR 273.3 (230.1) million. The operating profit without the change in the fair value of investment properties was EUR 171.4 (161.6) million. The improvement in operating profit was due to the growth in net sales, good management of maintenance and repair costs and the positive change in fair value. The change in fair value was EUR 102.0 (68.6) million. In addition to investments and divestments, the change in value was effected by the development of market prices and some changes in yields for residential and non-residential properties.

Profit before taxes was EUR 230.8 (184.4) million. Cash flow from operations (free cash flow after taxes excluding changes in fair value) amounted to EUR 97.9 (92,4) million.

Earnings per share were EUR 3.26 (2.55). 

Financial position and financing
On 31 December 2018, the consolidated balance sheet total stood at EUR 3,922.4 (3,693.1) million. Equity was EUR 1,554.5 (1,397.6) million. Equity per share was EUR 27.46 (24.68).

The Group's equity ratio was 39.6 (37.8) per cent. In December, the Board of Directors updated the equity ratio target, raising it to 40 per cent from 35 per cent. EUR 257.1 million in new long-term financing was withdrawn, and the solvency ratio was 50.5 (52.1) per cent.

The Group's annualised return on equity was 12.4 (11.0) per cent. Return on invested capital was 7.9 (7.1) per cent.

Interest-bearing liabilities at the end of the financial period totalled EUR 1,982.2 (1,931.7), of which loans subject to market terms accounted for EUR 1,650.1 (1,552.1) million. The loan itemisation is in note 25 of the financial statements. At the end of the reporting year, the average loan interest rate was 2.1 (2.2) per cent. Net financing costs totalled EUR 42.5 (45.8) million. The average maturity of loans with market terms was 4.4 (4.9) years.

During the financial year, the calculated impact of changes in the market value of interest hedges on equity was EUR 1.0 (12.5) million.

During the reporting year, SATO increased the proportion of loans with no asset-based securities to 65.7 per cent of all loans. At the end of the year, the proportion of unencumbered assets was 74.1 per cent of total assets.

Group structure
SATO Corporation is the parent company of SATO Group. At the end of the reporting year, the parent company had a total of 26 (36) subsidiaries engaged in business operations. Mergers took place during the year in order to streamline 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.

Housing business

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.

SATO had approximately 50 000 customers at the end of the reporting year. Our objective is to continuously improve the net promoting score. The NPS improved by two percentage points in the reporting year.

Rental income increased by 3.7 per cent to EUR 290.4 (280.1) million. The economic occupancy rate of apartments in Finland was 97.9 (96.8) per cent on average, and the external tenant turnover was 29.5 (28.9) per cent. The occupancy rate rose during the review period to an excellent level, especially thanks to the measures in line with the Customer First strategy.

The average monthly rent for SATO's rental apartments in Finland at the end of the reporting year was EUR 16.86 (16.69) per m2. Rent increases remained moderate.

Net rental income stood at EUR 198.5 (188.4) million.

Investment properties

On 31 December 2018, SATO owned a total of 25,893 (25,793) apartments. Altogether 403 rental apartments were acquired or completed. The total number of divested rental apartments and shared ownership apartments redeemed by the owner-occupants was 253. 

Fair value

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.

At the end of the reporting year, the fair value of investment properties in Finland and St Petersburg was EUR 3,875.1 (3,632.5) million, of which the St Petersburg investment assets accounted for EUR 104.8 (118.9) million. The change in value of the St Petersburg investment assets is largely the result of a change in the value of the rouble. The change in the value of investment assets, including the rental apartments acquired and divested during the reporting year, was EUR 242.6 (146.3) million. In addition to investments and divestments, the change in value was affected by the development of market prices and by changes in the return requirement on certain residential properties and business and office properties.

Of the value of apartments, the commuting area of the Helsinki metropolitan area accounted for approximately 80 per cent, Tampere and Turku together made up approximately 13 per cent, Oulu and Jyväskylä approximately 4 per cent, and St Petersburg approximately 3 per cent.

Investments, divestments and property development

Investment activities are used to manage the housing portfolio and prepare the ground for growth. Since 2000, SATO has invested more than EUR 2.0 billion in non-subsidised rental apartments. 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.

During the reporting year, we launched new complementary planning projects corresponding to a total of nearly 62,000 floor square metres, which represents roughly 1,000 new apartments, in collaboration with various cities. The city planning development projects that are currently in progress include a permitted building volume of approximately 272,000 floor square metres, i.e. around 4,500 apartments.

Total investments in rental apartments stood at EUR 143.5 (156.0) million during the reporting year, with new apartments accounting for EUR 99.9 (100.8) million, or roughly 69.6 per cent, of that total. At the end of the financial year, binding purchase agreements in Finland totalled EUR 107.9 (54.9) million.

In total, 98 (294) rental apartments with a total value of EUR 12.7 (46.2) million were divested in Finland.

The book value of plot reserves totalled EUR 40.9 (54.0) million. The value of new plots acquired was EUR 19.9 (0) million.

The permitted building volume for some 2,800 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.

In Finland, a total of 403 (856) rental apartments and 0 (57) apartments for sale were completed. On 31 December 2018, a total of 985 (834) rental apartments and 131 (0) owner-occupied apartments were under construction. The reporting principle for apartments under construction changed as of the start of 2018. In addition to an investment decision, a signed construction contract and a valid construction permit are required. Earlier, apartments under construction included all apartments for which an investment decision had been made.

A total of EUR 53.6 (44.3) million was spent on repairing apartments and improving their quality.

At the end of the financial year, SATO owned 534 (534) completed apartments in St Petersburg. There were no apartments under construction during the reporting year. The economic occupancy rate of rental apartments in St Petersburg was 93.1 (89.6) 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 was guided by SATO's strategy and sustainability policy, as well as themes that we have evaluated to be material based on dialogue with our stakeholders.

We continued to focus on sustainability in many areas in 2018.

During the year under review, we created an operating model for housing health and safety matters. The operating model underlined particularly a quick response rate, keeping customers informed, and the flow of information. We also appointed a Housing Health Manager, who is an expert in all matters related to housing health and safety.

In 2018, we increased the number of our collection points for plastic packaging exponentially and made them available to nearly 5,000 of our customers in the Helsinki metropolitan area.

We also made energy-efficiency investments and life-cycle management development as focus areas, and we reinforced our recycling model for household appliances in our renovation sites.

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, nine people who had participated in the project were living in a SATOhome.

We were successful in the Global Real Estate Sustainability Benchmark (GRESB), scoring four out of five stars. SATO's long-term sustainability efforts reflected progress in nearly all areas. Compared to other European housing investors in its peer group, SATO's result exceeded the average.

During the reporting year we also developed our sustainability management and reporting, and we updated our sustainability materiality analysis. SATO reports its corporate sustainability annually in accordance with the Global Reporting Initiative (GRI) reporting guidelines. The environmental performance indicators presented in the report have been verified by an independent third party, KPMG Oy Ab.

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 policy are available at

Environmental impacts
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 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 remarkably more energy-efficient buildings, with our energy efficiency figure target being 81 for new buildings.

We are committed to the targets in the Energy Efficiency Agreement for the property sector, aiming for a reduction in the total consumption of electricity and heat by 10.5 per cent between 2014 and 2025.

During the reporting year, we continued to make significant energy-efficiency and water-conservation investments in SATOhomes, and we also encouraged our residents to save energy and water.

During the year under review, our weather-adjusted heat consumption decreased by 2.6 per cent, specific electricity consumption increased by 0.5 per cent and water consumption decreased by 0.7 per cent compared to 2017. During the reporting year, rated emissions from SATO's apartments fell by 2.8 per cent compared to 2017 and amounted to 33.2 (34.8) carbon dioxide equivalent kilograms per square metre. Emissions are calculated according to the absolute consumption of district heating.

During the reporting year, we made recycling easier by arranging recycling container tours, increasing the number of plastic-recycling points and designing waste bins that inspire and provide information about sorting. We also consolidated our collaboration with the Helsinki metropolitan area's Reuse Centre that started in 2017. In the course of 2018, some 200 functional appliances from our properties under major renovation found a new home through the collaboration.

The Group's environmental programme is available in its entirety at

Development activities
SATO's development activities were strongly focussed on digital development during the reporting year. The highlight of the year was the launch of the OmaSATO service, which brought housing-related services within our residents' reach digitally, regardless of time and place. What is significant about the development of OmaSATO is that our customers were closely involved in planning, testing and developing the service. During the reporting year, more than 250 residents took part in our workshops. OmaSATO was enthusiastically received by residents and by the end of the year, the service had 8,190 registered users. A survey carried out in autumn indicated that more than 75% of the OmaSATO users who responded to the survey considered the contents of the service either good or excellent.

In addition to digital development, we also made good headway in our development work thanks to our Customer First strategy programme. We especially developed operating models related to housing health, our partnership policy, our customer service, as well as concepts related to communality and customer communication.

Our third strategy programme, diverse housing solutions, focussed on refining the communality lessons gained from our first StudioHome, which was completed in 2017.

Development activities also concentrated on strategy development and IT systems development. A total of EUR 1.7 (1.9) million was spent on development, corresponding to 0.6 per cent of net sales.

Risk management
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.

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 and uncertainty stemming from them can 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 risk management principles have been defined in the treasury 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 means for managing the liquidity risk at SATO include cash assets, a bank account limit, committed credit facilities of EUR 400 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.

In our operations in St Petersburg, we have risks related to the business environment, 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 treasury 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

Pending legal proceedings
SATO has no such proceedings with public authorities, litigations 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 2018, SATO Corporation's share capital amounted to EUR 4,442,192.00 and the number of shares was 56,783,067. 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, representing 0.3 per cent of all shares and votes.

On 31 December 2018, the Board of Directors did not have authorisation to acquire or issue the company's own shares.

On 31 December 2018, the Board members or the CEO of SATO Corporation did not hold any shares in the company.

At the end of 2018, the Group had 218 (212) employees. There were 203 (201) permanent employees and 15 (11) employees with a fixed-term employment contract. In average, SATO employees took part in 4.8 training days in 2018.  As in previous years, satisfaction at work was high at SATO, and assessments of supervisory work showed very positive development. During the year, the Group had an average of 215 (206) employees. The Group's salaries and remunerations in 2018 totalled EUR 17.2 (16.1) 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 its 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 March 2018 confirmed that the Board of Directors consists of seven members.

In 2018, the members of SATO's Board of Directors were chairman Erik Selin, deputy chairman Jukka Hienonen and ordinary members Marcus Hansson, Esa Lager, Tarja Pääkkönen, Johannus (Hans) Spikker and Timo Stenius. 

The Board of Directors convened 9 times in 2018. The Board's work is supported by two committees: the Nomination and Remuneration Committee and the Audit Committee.

Saku Sipola (M.Sc. Eng.) has acted as the CEO.

As the company's auditor, the Annual General Meeting elected 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 team
During the financial year 2018, members of the management team were Saku Sipola, Antti Aarnio (EVP, investments), Monica Aro (EVP, development), Antti Asteljoki (EVP, rental housing business), Miia Eloranta (EVP, Marketing and Communications) and Markku Honkasalo (CFO).

In the operating environment, SATO's business activities are mainly effected by urbanisation, housing policies, consumer confidence, the development of purchasing power, the rent and price development for apartments, general competition and interest rates.

The Finnish economy is expected to continue its growth path, but growth is projected to slow down. Interest rates are expected to remain low in 2019, 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 be the highest form of 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.

According to estimates by Pellervo Economic Research (PTT), prices and rents will continue to rise, demand for owner-occupied apartments will grow, and a pick-up in housing sales will somewhat alleviate the pressure on the rental market.

The historically high rate of housing construction is expected to decrease in the coming years.

According to the Bank of Finland's forecast, global economic growth will slow down. Loose financing conditions will support the positive development of the eurozone, even though this growth outlook is overshadowed by the uncertainties related to the Brexit negotiations, other political events that may slow down economic growth, and concerns related to the state of the banking sector in certain countries in the eurozone and to the public finances outlook. Serious threats, such as an increase in protectionism and geopolitical tensions, cast a shadow on the global economic outlook. The risk of weaker financial performance will also increase due to possible global corrections in asset prices and the deceleration of the reform rate in both China and the eurozone, while the volume of debt remains large.

In order to align its policy with that of its majority shareholder, SATO Corporation will not publish guidance on its 2019 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 2018, the parent company's distributable funds amounted to EUR 302,887,045.77, of which profit for the period was EUR 49,670,104.13. The company had 56,623,067 outstanding shares entitling to dividends for year 2018.

According to our dividend policy, annual dividends are at most 40 per cent of our operational cash flow, depending on the market situation, investment level, the development of our equity and solvency ratios.

The Board of Directors proposes to the Annual General Meeting that EUR 0.50 per share be paid in dividends for the 2018 financial period (EUR 0.50 per share for 2017), and that EUR 21,358,570.63 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

On 31 December 2018, the Group had 116 shareholders entered in the book-entry register. The turnover of SATO Corporation's shares was 0.71 per cent during the reporting year.
More information at

Annual General Meeting 2019
The Annual General Meeting of SATO Corporation will be held on April 3, 2019.

Financial publications in 2019
Publication dates for interim reports and the half-year financial report:
Interim report January-March 8 May 2019
Half-year financial report January-June 17 July 2019
Interim report January-September 25 October 2019

Further information
CEO Saku Sipola, tel. +358 201 34 4001
CFO Markku Honkasalo, tel. +358 201 34 4226


Saku Sipola
Chief Executive Officer

Report of the Board of Directors and Financial Statements 2018
Financial Statements 2018 presentation

NASDAQ OMX, main media,

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 2018 SATO owned around 26,000 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 2018 were EUR 290 million, operating profit EUR 273 million and profit before taxes EUR 231 million. The value of SATO's investment assets is roughly EUR 3.9 billion.