RUSSIA - Sponda's chief executive Kari Inkinen said the Finnish property firm was on course for its planned Russian expansion despite a fall in interim profits from the same period last year.

Inkinen made the comments as the company, whose major shareholders include a cluster of domestic pension funds, revealed a post-tax profit of €19m, down from €59m in the same period the previous year.

Interim figures also included total revenues of €52m in Q1, down from €59m.

The firm attributed the results in part to an upward revaluation of €12.6m on existing properties and an increase in market rents while rental growth over the past two years was 6.9% for office and retail, and 7.9% for logistics.

Operating income from its assets totalled €38.2m in Q1, down from €40.4m the previous year. At least of this 72% came from office and retail sectors, while 19% originated from logistics, 6% was generated by real estate funds and 3% was in assets in Russia and the Baltics.

First quarter figures showed there was investment of €55m during the same period and in a presentation accompanying the results, Inkinen described progress in the firm's Russian expansion as "according to plan".

With  €143m already invested in the Russian market, Sponda plans to invest €150m annually, resulting in a portfolio of up to €400m by the end of 2009.

Inkinen cited as drivers for the investment GDP of just under 8% and a growth in private consumption of just under 10% nationwide - 20% in St Petersburg.

Sponda will also open a Russian office before the summer.

Sponda also remains optimistic about its domestic market as Inkinen noted market activity in Q1 saw market transactions worth €2bn, and sustained property prices and office rents in Helsinki.

He warned, however, the supply of new office in the capital would increase the vacancy rate to above its current level of 8% in 2009, affecting its  portfolio which comprises 65% office and 35% logistics.

Following a recently agreed loan cluster totalling €350m, Inkinen said the company's aim in 2008 would be "to strengthen its solidity".

In addition to the 34% equity held by the Finnish state, Sponda's shareholders include Varma Mutual pension company (1.8%), the Finnish State Pension Fund (0.63%),  Ilmarinen pension firm (0.42%), Yleisradio Pension Fund (0.31%) and Etera pension firm (0.29%).