S IMMO AG: third quarter net profit up again
EBT increased by 12.7%
- Attractive FFO yield of 11.6%
- Net income for the period up again to EUR 21.4m
- Higher net profit for 2013 and increase in dividend expected
For stock exchange listed S IMMO AG (Bloomberg: SPI:AV, Reuters: SIAG.VI) the third quarter of 2013 was once again highly successful. Once again, financial indicators such as gross profit, EBT and funds from operations have been successfully raised compared to the same period last year.
Highly satisfactory improvement in gross profit
In the first three quarters of 2013, S IMMO AG’s total revenues came to EUR 145.3m (Q3 2012: EUR 146.3m). As expected, the rental income of EUR 88.3m was lower than the EUR 89.5m achieved in the same period last year, as a result of property disposals. According to plan, the property portfolio was reduced by more than 4% since the beginning of the year, while rental income decreased by only 1.3%. In the first three quarters of 2013 expenses directly attributable to properties of EUR 45.9m were 8.8% lower than in the same period last year. The increase in gross profit from hotel operations and the reduction in property-related expenses more than made up for the decrease in rental income, leading to a higher gross profit of EUR 81.3m (Q3 2012: EUR 77.8m), an improvement of 4.6%.
Successful property sales
In 2013 S IMMO plans to dispose of properties to the value of around EUR 100m. The sales during the first nine months consisted of two freehold apartments, four residential properties and one retail property, all in Austria and Germany. As at 30 September 2013 the sale proceeds totalled EUR 90.9m, compared with EUR 130.1m in the first three quarters of 2012. Gains on disposals came to EUR 5.1m, as against EUR 9.7m in the same period last year. Compared with the estimated values as at 30 September 2012, the gains were EUR 10.1m.
Net profit for period up again
Similarly to property-related expenses, management expenses were also reduced again, and for the first nine months amounted to EUR 11.0m (Q3 2012: EUR 12.2m) – a reduction of 9.5%. EBITDA rose to EUR 75.4m (Q3 2012: EUR 75.3m). As at 30 September 2013 properties with a fair value of EUR 49.9m were classified as “held for sale”. Selling prices in signed contracts for sale were EUR 14.3m higher than the estimated values of the respective properties as at 30 June 2013, and their fair values were adjusted to match. At the same time, it became necessary to recognise impairments on Budapest office properties. Overall valuation gains amounted to EUR 4.0m (Q3 2012: EUR 5.5m), and EBIT came out at EUR 72.1m (Q3 2012: EUR 73.9m).
In the first three quarters of 2013 financing costs were down by 9.8% to EUR 37.7m (Q3 2012: EUR 41.8m), reflecting among other things the lower borrowings. Financing costs also include non-cash effects from the valuation of derivatives and foreign currencies totalling EUR -0.6m (Q3 2012: EUR -1.7m). Lower financing costs also resulted in a 12.7% increase in EBT to EUR 25.6m (Q3 2012: EUR 22.7m). Overall, net profit for the period improved by 5.2% to EUR 21.4m, compared with EUR 20.4m for the first nine months of 2012.
Number one in efficiency
The positive earnings performance was also reflected in higher funds from operations (FFO): At the end of the third quarter of 2013, it had climbed 10.6% to EUR 27.5m, compared to EUR 24.9m a year earlier. With a market capitalisation of EUR 315.4m as at 30 September 2013, the FFO yield is a very attractive 11.6%. The cost savings detailed above resulted in a further increase in net operating income (NOI), which amounted to EUR 76.7m (Q3 2012: EUR 72.7m) at balance sheet date. For the first three quarters of 2013, operating cash flow was up 10.7% to EUR 75.2m (Q3 2012: EUR 68.0m). In the same period both book value (balance sheet NAV) per share and EPRA NAV were up again: As at 30 September 2013 book value stood at EUR 7.62 (31 December 2012: EUR 7.17) per share, while EPRA NAV was EUR 9.45 (31 December 2012: EUR 9.18) per share.
Daily volumes traded for the S IMMO Share have increased in the past few months, but the overall share price performance at balance sheet date was still lacklustre at -3.7%. Taking the dividend distribution into account improves the performance to -0.6% since the beginning of the year. In the third quarter S IMMO continued its repurchase programmes for the S IMMO Share and the S IMMO INVEST participating certificate.
Since October 2013 an upward trend has become noticeable, with respect to the share price and the traded volumes. This encouraging development is supported by two new analysts’ coverage reports – both buy recommendations – underlining the Share’s potential. The average Share price target of the six analysts is EUR 5.915. The current price of the S IMMO Share is EUR 5.05 (closing price 20 November 2013).
Outlook for 2013 confirmed
Over the coming months S IMMO AG’s main focus will continue to be on the booming residential property market in Germany. The Group is planning to selectively sell properties in Berlin and Hamburg, while at the same time looking at various investment possibilities in Berlin. The Management is expecting a strong performance in the final quarter of 2013 as well. For the financial year 2013 as a whole S IMMO AG is expecting better results than in 2012, which suggests that a further increase in dividend will be justified.
|01 – 09/2013||01 – 09/2012|
|Revenues from operating costs||27.9||27.3|
|Revenues from hotel operations||29.2||29.5|
|Other operating income||4.6||5.1|
|Expenses directly attributable to properties||-45.9||-50.3|
|Hotel operating expenses||-22.8||-23.3|
|Income from property disposals||90.9||130.1|
|Carrying value of property disposals||-85.8||-120.4|
|Gains on property disposals||5.1||9.7|
|Earnings before interest, tax, depreciation and amortisation (EBITDA)||75.4||75.3|
|Depreciation and amortisation||-7.2||-6.8|
|Results from property valuation||4.0||5.5|
|Operating result (EBIT)||72.1||73.9|
|Participating certificates results||-8.8||-9.4|
|Net income before taxes (EBT)||25.6||22.7|
|Taxes on income||-4.2||-2.3|
|Consolidated net income for the period||21.4||20.4|
|of which attributable to shareholders in parent company||19.6||19.3|
|of which attributable to non-controlling interests||1.8||1.1|
|Earnings per share (EUR)||0.29||0.29|