Sparkassen Immobilien AG Financial year 2009 – a year of contrasts

Ad hoc release
  • First ever post-tax full-year loss following market-related property revaluations
  • Increase in revenues less directly attributable expenses to EUR 70.9m
  • Occupancy rate steady at 90.3%
  • Conversion of participating certificates into shares planned
  • Outlook: strong Q1, cash from operations set to double starting in 2011

For stock exchange listed Sparkassen Immobilien AG (Bloomberg: SPI:AV, Reuters: SIAG.VI), the financial year 2009 was a successful year operationally. However, for the first time in the Group’s 22-year history the final results for the year were negative, as a result of the effects of the financial crisis and non-cash property revaluations.

For Sparkassen Immobilien AG the financial year 2009 was a year of contrasts. While for 2009 the effects on post-tax results of the financial crisis and non-cash revaluations were significantly negative, the consistent, long-term business strategy produced satisfactory operating results. Major operating indicators such as rental income, occupancy rate and cash flow were maintained at their existing level or even improved. Starting in the financial year 2011, the Company will more than double its operating cash flow, as development projects are completed.

Operating results: rental income up, occupancy rate stable at high level

The highly satisfactory operating results were primarily attributable to persisting high occupancy levels. Despite the difficult market environment, Sparkassen Immobilien AG has been successful in holding its occupancy rate constant, at 90.3%. The rental yield was 6.65%. In the last financial year rental income rose by 2% and property assets increased to EUR 1.901bn (2008: EUR 1,808bn). As at 31 December 2009, Sparkassen Immobilien AG’s property portfolio comprised 256 properties with total lettable space of 1,355,000 m².

The revenues less directly attributable expenses increased to EUR 70.9m, after EUR 70.5m in 2008. Cash flow from operations of EUR 49.4m was approximately at the same level as last year (EUR 50.0m). The completed development projects will be making their full contribution to profits starting in the financial years 2010/2011. One-off increases in expenses in connection with the successful completion of the projects resulted in a fall in Funds From Operations (FFO) to EUR 22.0m.

Taking advantage of favourable sales opportunities

During 2009 six rental properties were disposed of at a profit. This included the Gemini office building in Prague, which was sold to Deka Immobilien GmbH for a price far in excess of the land acquisition costs and construction costs. This transaction, with a value of around EUR 110m, was not only the biggest sale in the history of Sparkassen Immobilien AG, but also one of the Company’s most successful development projects to date.

Increased transparency with EPRA standards

The financial statements for 2009 have been prepared in accordance with the standards of the European Public Real Estate Association (EPRA). The changes in presentation affect the income statement and the method of calculating NAV. This change as a result of the increased transparency makes the Company even more attractive to institutional investors, and easier to compare with other property companies. EBITDA fell from EUR 59.2m to EUR 53.3m. The good operating results were outweighed by non-cash property revaluations of EUR 97.2m, resulting in a negative EBIT of EUR 53.1m (2008: positive EBIT of EUR 23.8m).

Sparkassen Immobilien AG’s cash reserves as at 31 December 2009 stood at EUR 210m.

All development projects on schedule

In spite of the extremely difficult market environment, in 2009 Sparkassen Immobilien AG was able to continue all development projects – the shopping centres and office buildings Serdika Center in Sofia and Sun Plaza in Bucharest – as planned. Two other projects – the fully let student residence and geriatric centre in Sechshauser Strasse in Vienna and the Austria Trend Hotel in Bratislava – were successfully completed in 2009 and officially opened.

The two biggest projects in the history of the Group to date, the shopping centres Serdika Center in Sofia and Sun Plaza in Bucharest, are almost fully let. The biggest shopping centres in their respective countries, they were successfully opened in the first quarter of 2010.

s IMMO Share: year-to-date gain of 152.5%

Sparkassen Immobilien AG’s share performed outstandingly in 2009, closing the year at EUR 5.00 (closing price 27 April 2010: EUR 5.10), a year-on-year increase of 152.5%. Erste Group and Vienna Insurance Group, two of the region’s largest established financial service providers, continue to be Sparkassen Immobilien AG’s strategic core shareholders.

Analysts’ interest in the s IMMO Share also continued to strengthen: Prominent names such as HSBC and SRC Research have started providing coverage of the share. All the analysts have currently issued “buy” recommendations, and stress as a special strength the balanced portfolio in terms of use type and regional spread, the consistently high occupancy rate, the good tenant mix and the broad spread of investors.

Conversion of participating certificates into shares planned

On 22 April 2010 the Management and Supervisory Boards resolved on a further step to standardise the treatment of the two groups of investors in Sparkassen Immobilien AG, the shareholders (ISIN AT0000652250), and the holders of the participating certificates (ISIN AT0000630694 und ISIN AT0000795737). On 21 May the Annual General Meeting of Sparkassen Immobilien AG will vote on a motion to offer participating certificate holders the option to convert their certificates into ordinary shares during three conversion windows.

The new shares necessary for the conversion will be issued out of conditional capital. Based on the book value of the participating certificates and depending on the conversion window in question, the subscription price will be between 15% and 35% above the current share price of the s IMMO share (closing price 27 April 2010: EUR 5,10). Exercising the conversion option enables the participating certificate holders to convert to the significantly more liquid s IMMO Share. The shareholders in Sparkassen Immobilien AG benefit from a more transparent capital structure and an increase in market capitalisation, making the s IMMO Share more attractive.

Outlook: strong Q1, cash from operations set to double staring in 2011

For Sparkassen Immobilien AG, 2010 will be another good year, which has already started with a strong first quarter. The years of project development and construction, during which several hundred million euro were not generating any rental income, are over and the projects are contributing positively. For 2010, the Group is calculating on cash flows of EUR 75–85m from operations, compared with EUR 49.4m in 2009, and for 2011 cash flows from operations are expected to be in excess of EUR 100m.

Consolidated income statement for the year ended 31 December 2009 EUR m / fair value basis

2009

2008

Revenues

153.6

125.7

      Rental income

      87.6

      85.7

      Revenues from service charges

      29.1

      23.5

      Revenues from hotel operations

      36.9

      16.5

Other operating income

      8.2

      2.6

Property management expenses

      -61.2

      -45.2

Hotel operating expenses

      -29.7

      -12.6

Revenues less directly attributable 
expenses

      70.9

      70.5

Income from property disposals

      152.2

      53.0

Carrying values of property disposals

      -150.3

      -44.7

Gains on property disposals

      1.90

      8.3

Management expenses

      -19.5

      -19.6

Profit before interest, tax, property valuation 
adjustments, and depreciation and amortisation 
(EBITDA)

      53.3

      59.2

Depreciation and amortisation

      -9.1

      -4.7

Losses on property valuations

      -97.2

      -30.7

Operating profit (EBIT)

      -53.1

      23.8

Finance costs

      -35.5

      -9.6

Participating certificates results

      11.2

      -6.4

Profit before taxes (EBT)

      -77.5

      7.8

Taxes on income

      -1.4

      -2.1

Profit on taxes

      -78.9

      5.7

      of which attributable to shareholders in parent
     company

      -78.6

      5.8

      of which attributable to minority interests

      -0.3

      -0.09

 

 

 

Earnings per share (EUR)

      -1.15

      0.09

1 Adjusted

 

Property indicators 

 

31 December 2009

Completed properties

Units

256

Total usable space

m2

1,355m

Rental yield

%

6.65

Occupancy rate

%

90.3

Land bank

Units

6