S IMMO AG: goals for 2014 confirmed by good start to year

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Net income for the period up again to EUR 6.7m

  • NOI margin increased by 2.4 percentage points
  • Management costs reduced again

After highly successful annual results for 2013, stock exchange listed S IMMO AG (Bloomberg: SPI:AV, Reuters: SIAG.VI) made a good start to the first quarter of 2014. Ernst Vejdovszky, Chairman of S IMMO AG’s Management Board, comments: “The operative success of our business is demonstrated by the net operating income margin, which we have further increased. Our net profit for the period was also slightly higher. With these results, we are pleased to reaffirm our goal for 2014: for the year as a whole, we want to achieve another increase in consolidated net income.”

The four regions in which the Group operates make differing contributions to its performance. Friedrich Wachernig, Member of S IMMO AG’s Management Board, explains: “We can feel the markets’ growing optimism – particularly in Bucharest and Sofia, the news is getting more and more encouraging. What continues to be a challenge is the market for office properties in Budapest. But with the wholehearted commitment of our local team, even there we have letting successes to report time and again.”

Gross profit
S IMMO AG’s revenues in the first quarter of 2014 totalled EUR 44.8m, compared with EUR 46.7m in the same period last year. As expected, the rental income of EUR 28.2m was lower than the EUR 29.4m achieved in the first quarter of 2013, as a result of the property disposals. While the property portfolio was reduced by more than 7% since the start of 2013, rental income decreased by less than 4%. Revenues from hotel operations (revenues from the Vienna and Budapest Marriott Hotels, both operated under management agreements) came to EUR 7.9m (Q1 2013: EUR 8.0m). The gross profit from hotel operations nonetheless improved to EUR 1.2m (Q1 2013: EUR 0.9m).

Expenses of property management in the first quarter of 2014 of EUR 12.9m were down by another 11.0% compared with EUR 14.5m for the same period last year. The higher gross profit from hotel operations combined with the lower property management expenses made up for the reduction in rental income. Since however other operating income of EUR 0.4m was significantly lower (Q1 2013: EUR 2.3m), the gross profit came out at EUR 25.6m (Q1 2013: EUR 27.5m).

Successful property sales
For the year 2014 S IMMO is planning on property disposals amounting to about 5% of the portfolio. In the first quarter of the year three properties were sold for a total of EUR 21.6m (Q1 2013: EUR 32.6m). In the income statement for the first quarter of 2014 there were no gains to be recognised on these sales, because the properties in question had already been revalued in 2013 to reflect the final selling prices. Without the revaluations, the gains on sale would have amounted to EUR 5.1m, more than 20%.

EBITDA and EBIT
As with the property management expenses, general management expenses were reduced once again, and for the first quarter came to EUR 3.2m (Q1 2013: EUR 3.6m) – savings of more than 11%. EBITDA was EUR 22.4m (Q1 2013: EUR 25.3m). Overall valuation gains amounted to EUR 5.9m (Q1 2013: EUR 4.1m), and EBIT came out at EUR 26.5m (Q1 2013: EUR 27.0m).

Net profit for period up slightly
Financing costs including the participating certificates result amounted to EUR 17.8m, more or less the same as the EUR 17.6m in the first quarter of 2013. Foreign currency effects, principally the result of changes in the exchange rate of the Hungarian forint, were also at the same level as in the first quarter of last year. The resulting EBT came to EUR 8.7m (Q1 2013: EUR 9.4m). The lower costs and higher valuation gains meant that the net profit for the period of EUR 6.7m (Q1 2013: EUR 6.6m) was slightly up despite lower other operating income.

Operative efficiency
In spite of the reduced size of the property portfolio, the cost savings detailed above resulted in a slight increase in net operating income (NOI), which for the first quarter came to EUR 25.20m (Q1 2013: EUR 25.16m). The NOI margin increased by an impressive 2.4 percentage points, highlighting S IMMO’s operative efficiency.

In the first quarter of 2014 both the book value per share and EPRA NAV rose again: the book value at 31 March 2014 stood at EUR 7.95 (31 December 2013: EUR 7.83) per share, while EPRA NAV was EUR 9.87 (31 December 2013: EUR 9.76) per share.

Capital markets
The mood in the capital markets is noticeably more optimistic, and the interest of international investors in S IMMO has increased significantly. On the basis of the very satisfactory results for 2013, at the Annual General Meeting on 11 June 2014 the Management Board will propose a dividend of EUR 0.20 per share. The S IMMO share has performed extremely satisfactorily over the past weeks, and on 26 May 2014 stood at EUR 5.890.

An offer that opened on 21 May 2014 allows holders of participating certificates to exchange their certificates for a 7-year fixed term bond with a fixed coupon of 4.5% at the rate of EUR 79.11 per certificate. The offer closes on 06 June 2014.

Outlook
Over the coming months S IMMO AG’s main focus will be on the booming residential property market in Germany. In the light of current developments, the Management Board continues to see the greatest potential in the residential property market in Berlin, where there is still a pressing need for more homes. S IMMO is exploiting this potential by beginning the planning and development of freehold apartments on land the Group already owns.

 

 

01 – 03/201401 – 03/2013*
Revenues 44.846.7
Rental income 28.229.4
Revenues from operating costs8.79.3
Revenues from hotel operations7.98.0
Other operating income0.42.3
Expenses directly attributable to properties-12.9-14.5
Hotel operating expenses -6.7-7.1
Gross profit25.627.5
Proceeds of property disposals 21.632.6
Carrying value of property disposals -21.6-31.2
Gains on property disposals01.4
Management expenses-3.2-3.6
Earnings before interest, tax, depreciation and amortisation (EBITDA)22.425.3
Depreciation and amortisation-1.9-2.4
Gains on property valuation 5.94.1
Operating result (EBIT)26.527.0
Financing expense-15.5-14.7
Financing income0.40.3
Income from companies measured at equity0.030
Participating certificates results-2.7-3.2
Net income before taxes (EBT) 8.79.4
Taxes on income -2.0-2.8
Consolidated net income for the period6.76.6
of which attributable to shareholders in parent company5.75.9
of which attributable to non-controlling interests 1.00.7
Earnings per share (EUR) 0.080.09

* Adjusted