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Correction: Finnish version of the Financial Statements Bulletin 2019: Number of rental apartments exceeded 26,000

Feb 27, 2020

SATO Corporation, Stock Exchange Release 27 February 2020 at 11:05 a.m.

This is a correction to the Finnish version of the Financial Statements Bulletin 2019: Number of rental apartments exceeded 26 000, Highlights January–December 2019 (January–December 2018): The Board of Directors proposes to the Annual General Meeting that €0.50 (0.50) per share be paid in dividends. In the English version there is no need for correction. Please find the Financial Statements Bulletin 2019 published earlier below.

SATO Corporation’s Financial Statements Bulletin 2019

Highlights January–December 2019 (January–December 2018)

  • The economic occupancy rate remained at a good level throughout the year and in Finland was 98.1 (97.9)%.

  • Net sales stood at €295.6 (290.4) million.

  • Net rental income amounted to €207.1 (198.5) million. 

  • Profit before taxes improved and was €670.5 (230.8) million. 

  • The change in the fair value of investment properties included in the result was €552.2 (102.0) million. In its financial statements, SATO Corporation switched to the yield-based valuation method. 

  • Housing investments amounted to €185.9 (143.5) million. 

  • Invested capital was €4,154.2 (3,536.7) million. 

  • Return on invested capital was 18.9 (7.9) per cent. 

  • Earnings per share were €9.45 (3.26). 

  • The Board of Directors proposes to the Annual General Meeting that €0.50 (0.50) per share be paid in dividends.  

Highlights October–December 2019 (October–December 2018)

  • The economic occupancy rate in Finland was 98.1 (98.4)%.

  • Net sales were €75.0 (73.2) million.

  • Profit before taxes was €520.6 (46.3) million.

  • The change in the fair value of investment properties included in the result was €488.2 (15.3) million.

  • Investments in rental apartments amounted to €75.8 (47.0) million.

  • Earnings per share were €7.34 (0.65).

             
Events after the review period

SATO’s EVP, Rental Housing Business, Antti Asteljoki left the company on 4th February 2020. SATO´s EVP, Investments Antti Aarnio, was appointed also as the head of Rental Housing Business as of 5th February 2020.

**
CEO Sharam Rahi:**

**“Our operating environment is defined by strong urbanisation and growth in the popularity of rental housing. Nearly half of the permanently occupied apartments in the Helsinki metropolitan  area, Turku and Tampere are already rental apartments. **

2019 was a year of positive reforms for SATO. Our customer satisfaction grew by 4 NPS points, and was 6. Our economic occupancy rate approached our all-time best year, at 98.1 per cent.

In the reporting year, we reached our strategic goal of improving our credit rating (BBB with stable outlook), which further increases our ability to grow.

During the reporting year, we gave sustainability work a central role in our business, and we published our sustainability programme for years 2019–2022. The programme emphasises carbon-neutral cities and the well-being of residents and neighbourhoods. 

Our Customer First strategy moved forward, and we piloted the SATO House Expert operating model, which gives us the possibility to be even closer to our customers. Our goal is to have approximately 60 SATO House Experts working close to our customers in the coming years.

In 2019, we submitted city planning applications covering 36.750 floor square metres, and we reinforced our rental housing portfolio with investments valued at over EUR 185.9 million. During the reporting year, 321 new SATOhomes were completed, all of which in the Helsinki metropolitan area. In the reporting year, we introduced a planning principle, according to which studios are no longer bordered with load-bearing 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.

During the reporting year, we launched the FlexHome concept, which is a new model for part ownership that enables home ownership with a small initial capital outlay and a five-year part-ownership period.

At the end of the year, we shifted from a transaction-based valuation method to a yield-based valuation method in the valuation of our investment properties. The change had a significant positive effect on the fair value of our investment properties and our result for the financial year.

SATO had a total of 229  employees at the end of the year, and employee satisfaction improved. In digital development, we unified our online services for our customers for even more fluent service. 

I thank our customers, our personnel and our partners for a successful year, and we are aiming for an even better year 2020. I also welcome all ideas from our customers, my colleagues and our partners that could help us make SATO an even better company. We can always be better, for sure. Please send me an email: sharam.rahi@sato.fi. Thank you!”

Report of the Board of Directors

Report of the Board of Directors 1 January – 31 December 2019

**Operating environment
**
SATO’s operating environment is defined by strong urbanisation and growth in the popularity of rental housing. In the Helsinki metropolitan area, Tampere and Turku, nearly half of the permanently occupied apartments are already made up of rental apartments.

Finland’s economic growth is projected to decelerate clearly and, for 2019, is expected to remain well below two per cent. Consumers’ expectations weakened, particularly with respect to Finland’s economic development and employment situation.

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 decreasing in 2031. The Helsinki metropolitan area is expected to grow by well 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 amount of small households continue to increase. As a result of immigration, the proportion of foreigners living in the Helsinki metropolitan area is predicted to grow from the current 17 per cent to 25 per cent by 2030. The aging population is moving 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 Helsinki metropolitan area, Tampere and Turku. Outside of growth centres, the real prices of apartments are declining, which makes acquiring an owner-occupied home in growth centres even more challenging for those coming outside growth centres.

Rents in privately financed apartments have increased 1.7 per cent in recent years in the Helsinki metropolitan area, and elsewhere in Finland the increase has been 1.2 per cent annually. KTI Property Information Ltd.’s index illustrating rents under new rental agreements increased 3.3 per cent in a year, between September 2018 and 2019, in the capital city area. In other large cities, the rents under new agreements increased at the same time by an average of 2.4 per cent.

The number of construction permits experienced a downswing in 2019, with permits for apartment buildings experiencing the greatest decline. The number of completed apartments started to decline in the summer. Throughout Finland, following the record figures (45,600 apartments) of 2018, production settled at a more normal level (38,000 apartments) during the reporting year.

Thanks to the low interest rate level, housing remains an appealing investment. Housing investors have concluded roughly half of the new housing transactions, and they are especially interested in small apartments. Interest among foreign investors towards Finnish rental apartments has grown.

At the end of 2019, large-scale housing investors increased their investments, whereas interest among private investors waned. Builders responded to the growing investor demand by selling whole buildings as rental apartments to investors. Planned changes in housing company loans and how the real estate investments of foreign funds are taxed are, however, increasing the uncertainty for some actors related to housing investments. The production of owner-occupied apartments and the volume of presales declined at the end of the year.

Mitigating emissions from the construction sector plays a significant role in achieving both national and international climate targets, as construction and operating buildings currently account for over a third of Finland’s greenhouse gas emissions. In addition to energy consumption during use, the sector has started to pay attention to the carbon footprint of buildings throughout their life cycle. Finland targets carbon neutrality by 2035. 

**
Strategy**

**As cities and people 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 connections, 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.

Sustainability guides our operations, and during the reporting year we released our sustainability programme for 2019–2022. The programme emphasises carbon-neutral cities and the well-being of residents and neighbourhoods. 

We operate profitably and with a long-term view. We increase the value of our housing stock by investing in homes in good 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 the strengthening of its investment grade rating as a strategic goal, and this goal was met in 2019. Our return on equity target 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, and the development of the equity and solvency ratios.

**Net sales and profit
**
In 2019, consolidated net sales were EUR 295.6 (290.4) million.

Operating profit was EUR 725.6 (273.3) million. Operating profit without the change in the fair value of investment properties was EUR 173.3 (171.4) million. The change in fair value was EUR 552.2 (102.0) million. SATO Corporation switched to the yield-based valuation method to determine the value of the company’s investment properties in its financial statements as of 31 December 2019. The effect of the change of valuation method on the fair value of investment properties was approximately EUR 430 million. (The adoption of the IFRS 16 Leases standard improved the review period’s operating profit by EUR 3.0 million. The Group applies IFRS 16 using the modified retrospective approach, without the restatement of comparative information.)

Financial income and expenses totalled EUR -55.1 (-42.5) million. The adoption of the IFRS 16 standard increased the review year’s financial expenses by EUR 3.1 million. The financial expenses include a one-off cost item of MEUR 11.8, due to the repurchase of outstanding bonds in May 2019 with a maturity in 2020 and 2021.

Profit before taxes was EUR 670.5 (230.8) million. Cash flow from operations (free cash flow after taxes excluding changes in fair value) amounted to EUR 91.2 (97.9) million.

Earnings per share was 9,45 (3,26) euros.

**Financial position and financing
**
The consolidated balance sheet totalled EUR 4,718.2 (3,922.4) million at the end of December. Equity was EUR 2,055.8 (1,554.5) million. Equity per share was EUR 36.31 (27.46).

The Group’s equity ratio was 43.6 (39.6) per cent at the end of the year. The adoption of IFRS 16 reduced the equity ratio by 0.5 percentage points. EUR 657.2 million in new long-term financing was withdrawn, and the solvency ratio was 44.4 (50.5) per cent at the end of December. The strengthening of the equity ratio and the solvency ratio is the result of a rise in the value of investment properties and a long period of good earnings performance.

The Group’s return on equity was 29.6 (12.4) per cent. The return on investment was 18.9 (7.9) per cent.

Interest-bearing liabilities at the end of December totalled EUR 2,098.4 (1,982.2) million, of which loans subject to market terms accounted for EUR 1,830.1 (1,650.1) million. The loan itemisation is in note 26 of the financial statements. At the end of 2019, the average loan interest rate was 1.7 (2.1) per cent. Net financing costs totalled EUR -55.1 (-42.5) million, of which the impact of the adoption of the IFRS 16 standard was EUR -3.1 million. The average maturity of loans was 4.0 (4.4) years.

The calculated impact of changes in the market value of interest hedging on equity was EUR -5.3 (1.0) million.

During the reporting year, SATO increased the proportion of loans without asset-based securities to 77.3 per cent of all loans. At the end of the year, the proportion of unencumbered assets was 80.8 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 25 (26) 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, life-cycle 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 retain 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. The net promoter score measuring customer satisfaction, NPS, improved by 4 percentage points, and was 6 in the reporting year.

Due to an improved economic occupancy rate, rental income rose by 1.8 per cent and was EUR 295.6 (290.4) million. The economic occupancy rate of apartments in Finland was 98.1 (97.9) per cent on average, and the external tenant turnover was 29.6 (29.5) per cent. The rise in the economic occupancy rate was, above all, the result of measures based on the Customer First strategy.

The average monthly rent for SATO’s rental apartments in Finland at the end of the reporting year was EUR 17.25 (16.86) per m2.

Net rental income from apartments was EUR 207.1 (198.5) million.

**
Investment properties**

On 31 December 2019, SATO owned a total of 26,074 (25,893) apartments. Altogether 321 rental apartments were acquired or completed. The total number of divested rental apartments and shared ownership apartments redeemed by the owner-occupants was 140. 

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 of increasing rental apartment demand over the longer term. The allocation of building repairs is based on life-cycle plans and repair need specifications.

At the end of December, the fair value of investment properties came to a total of EUR 4,657.9 (3,875.1) million. The change in the value of investment properties, including the investments and divestments during the year under review, was EUR 782.78 (242.6) million.

SATO Corporation switched to the yield-based valuation method to determine the value of the company’s investment properties in its financial statements as of 31 December 2019. The sales prices of owner occupied apartments as well as investment apartments have grown significantly over the past years, whilst the interest rates have decreased to all time low level. The low interest rates have also decreased investor´s yield requirements, and in many locations investment apartments are being paid more than those that are owner occupied. This development has been monitored in SATO for a long period of time, and we have now switched our valuation method in order to increase transparency and comparability. The switch of the valuation method increased the average square price of the apartments by 10 per cent.

The effect of the change of valuation method on the fair value of investment properties was approximately EUR 430 million. An external expert, JLL, issues quarterly a statement on the valuation of SATO’s investment properties. The latest valuation statement was issued on the valuation prepared on 31 December 2019. The criteria for determining fair value are presented in the Notes to the Financial Statements.

In addition, the change in value was affected by investments and divestments, the adoption of the IFRS 16 standard, as well as the changes in the market prices and in the value of the rouble.

Of the value of apartments, the Helsinki metropolitan area accounted for 82 per cent, Tampere and Turku made up 12 per cent, Jyväskylä and Oulu 3 per cent, and St. Petersburg covered 3 per cent at the end of the year.

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.

Investments in rental apartments amounted to EUR 185.9 (143.5) million. Investments in the Helsinki metropolitan area represented 93 per cent of all investments during the review year. Investments in new apartments represented 72 per cent of the investments. On 31 December 2019, binding purchase agreements in Finland totalled EUR 40.9 (107.9) million.

During the year under review, 29 (98) rental apartments were divested in Finland. Their total value was EUR 5.9 (12.7) million.

The book value of plot reserves totalled EUR 63.1 (40.9) million at the end of December. The value of new plots acquired by the end of December totalled EUR 37.0 (19.0) million.

The permitted building volume for approximately 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 321 (403) rental apartments and 32 (0) owner-occupied apartments were completed. On 31 December 2019, a total of 769 (985) rental apartments and 99 (131) owner-occupied apartments were under construction.

A total of EUR 73.9 (53.6) million was spent on repairing apartments and improving their quality.

At the end of the year, SATO owned 534 (534) apartments in St. Petersburg. The economic occupancy rate of rental apartments in St. Petersburg was 92.8 (93.1) per cent on average. For the time being, SATO will refrain from making new investment decisions into Russia. The share of investments in Russia is limited to a maximum of 10 per cent of the Group’s housing assets.

**Sustainability
**
During the reporting year, we released our sustainability programme for 2019–2022. The programme emphasises carbon-neutral cities and the well-being of residents and neighbourhoods. 

With the help of artificial intelligence, we improved housing comfort and further reduced energy consumption. We installed more than 6,000 sensors in our apartments to measure temperature and humidity. During the review year, electricity used in SATO´s buildings was produced by wind power and thus, emission free.

We improved our residents’ recycling opportunities by bringing plastic recycling to roughly 10,000 SATO homes, which brings the percentage of households in our buildings who have plastic recycling to 69 per cent. During the reporting year, we also took the decision to purchase rugs and pillows made from recycled plastic for the shared spaces in SATO buildings. We launched a neighbour mentor programme that aims to help residents get to know one another. By the end of the reporting year, already 18 SATO residents were volunteering as neighbour mentors.

In 2019, 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, 11 people who had participated in the project were living in a SATOhome.

We were again successful in the Global Real Estate Sustainability Benchmark (GRESB), scoring four out of five stars.

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 programme are available at www.sato.fi.

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 below 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 2015 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 standardised heating consumption decreased by 2.2 per cent, specific electricity consumption by 0.8 per cent and water consumption by 0.5 per cent compared to 2018. Rated emissions from SATO’s apartments decreased 15,4 per cent compared to 2018 and amounted to 28,1 (33,2) carbon dioxide equivalent kilograms per square metre. Emissions are calculated according to the absolute consumption of district heating. Electricity was produced by wind power, and did not  produce any emissions.

The Group’s environmental programme is included in the sustainability programme, which is available in its entirety at www.sato.fi.

Development activities

SATO’s development activities were focussed during the reporting year on further improving our customer-care processes. During the year under review, we introduced a new operating model, in which SATO House Experts assume some of the tasks of maintenance companies. The first five SATO House Experts started working in December 2019.

We also placed a high priority on developing new housing concepts. We launched a new form of part ownership housing, called FlexHome, which opens the door to home ownership within a period of five years with a small initial capital outlay. First FlexHome building will be completed in Helsinki Tali area in summer 2020.

In the reporting year, we introduced a planning principle, 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 one- or two-bedroom apartments if demand shifts to larger apartments.

In digital development, we unified our online services for our customers for even more fluent service. In 2019, building-specific digital noticeboards, SATO’s customer benefits and home temperature data were added to OmaSATO, the online service for residents that was launched in 2018.

Development activities also concentrated on strategy development and IT systems development.

A total of EUR 1.2 (1.7) million was spent on development, corresponding to 0.4 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 financing related risk management principles have been defined in the financing 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. In 2019, the company has established an EMTN (Euro Medium Term Notes) programme of 1.5 billion euros.

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 fixed rate loans or by interest rate hedges. According to our financing 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 are exposed to 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 financing 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 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.

**Shares
**
On 31 December 2019, 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 2019, the Board of Directors had no authorisation to acquire company’s own shares or issue shares in SATO.

On 31 December 2019, the Board members or the CEO of SATO Corporation did not hold any shares in the company.
**
Personnel**

At the end of 2019, the Group had 229 (218) employees. There were 212 (203) permanent employees and 17 (15) employees with a fixed-term employment contract. During the year, the Group had an average of 223 (215) employees. The Group’s salaries and remunerations in 2019 totalled EUR 15.8 (17.2) 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 on 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 3 April 2019 confirmed that the Board of Directors consists of seven members.

In 2019, 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 10 times in 2019. The Board’s work is supported by two committees: the Nomination and Remuneration Committee and the Audit Committee.

SATO Corporation’s CEO until 31 August 2019 was Saku Sipola, and as of 1 September 2019, SATO’s CEO has been Sharam Rahi. Rahi is the company’s interim CEO until a permanent CEO is appointed. Mr. Rahi is the Vice CEO at Fastighets AB Balder, the main owner of SATO. The Annual General Meeting elected as the company’s auditor 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 2019, members of the management team were CEO Saku Sipola (until 31 August 2019), CEO Sharam Rahi (since 1 September 2019), Antti Aarnio (EVP, Investments), Antti Asteljoki (EVP, Rental Housing Business), Miia Eloranta (EVP, Marketing and Communications) and Markku Honkasalo (CFO). 

**Outlook
**
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.

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 2020, 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 the 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.

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

According to the Bank of Finland’s forecast, economic growth will slow down in 2020. Finland´s most important trading partner´s economic growth has already slown down, and this reflects to Finland´s economic growth. In Finland, the confidence of business and consumers has already grown weaker for long, which shows as moderate growth of consumption. Also, the employment is not expected to improve much.

In order to align its policy with that of its majority shareholder, SATO Corporation will not publish guidance on its 2020 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 2019, the parent company’s distributable funds amounted to EUR 312,114,835.06, of which profit for the period was EUR 37,539,322.79. The company had 56,623,067 outstanding shares entitling to dividends for year 2019.

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, as well as the development of our equity and solvency ratios.

The Board of Directors proposes to the Annual General Meeting that dividends EUR 0,50 per share be paid in dividends for the 2019 financial period (EUR 0.50 per share for 2018), and that EUR 9,227,789.29 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

Omistajat 311220 ENG

On 31 December 2019, the Group had 119 shareholders entered in the book-entry register. The turnover of SATO Corporation’s shares was 0,23 per cent during the reporting year.
More information at www.sato.fi.

**
Annual General Meeting 2020**

The Annual General Meeting of SATO Corporation will be held on April 1, 2020.

Financial publications in 2020
Publication dates for interim reports and the half-year financial report:
Interim report January–March: 8 May 2020
Half-year financial report January–June: 16 July 2020
Interim report January–September: 5 November 2020

Further information
CEO Sharam Rahi, tel. +358 201 34 4001
CFO Markku Honkasalo, tel. +358 201 34 4226
www.sato.fi

SATO CORPORATION

Sharam Rahi
Chief Executive Officer

ATTACHMENTS
Report of the Board of Directors and Financial Statements 2019
Financial Statements presentation 2019

DISTRIBUTION:
NASDAQ Helsinki Ltd., 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 2019, SATO owned over 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 2019 were EUR 296 million, operating profit EUR 726 million and profit before taxes EUR 671 million. The value of SATO's investment assets is roughly EUR 4,7 billion.

Attachments