S IMMO AG: Half-year results highlight positive trend
Profit for the period increases to EUR 20.9m
- Considerable improvement in financing costs
- Rental income, EBITDA and EBIT down due to property sales
- Goal: doubling FFO
With the publication of the results for the first half of 2015, stock exchange listed real estate company S IMMO AG (Bloomberg: SPI:AV, Reuters: SIAG.VI) is confirming its positive trend and its goals for the current financial year. Ernst Vejdovszky, CEO of S IMMO AG, has the following comment: “We are on track with our ambitious plans, and the operating figures are completely in line with our expectations. Our stated goal is to nearly double our FFO by 2018, raising it from EUR 21.3m for the whole financial year 2014 to over EUR 40m.”
Overall, the profit for the period increased by more than 27% to EUR 20.9m. Earnings per share climbed to EUR 0.30 – a gain of roughly 36%. This positive development is largely due to the financing result. The company already started readjusting its financial structure in 2014. As part of this process, several bonds were successfully issued, and participating certificates were bought back and cancelled. Interest rate hedging instruments that were concluded in a higher interest rate environment and were set to expire in the coming years were also bought back. At the same time, S IMMO secured the current historically low interest rate level for an average of roughly ten years for around two thirds of its financing with variable interest rates.
Development of earnings
During the first six months of 2015, S IMMO AG’s total revenues amounted to EUR 92.2m (HY 2014: EUR 93.2m). The rental income included in this figure reflects the property sales completed since the beginning of 2014 and came to EUR 54.6m (HY 2014: EUR 56.8m). The gross profit was EUR 50.7m (HY 2014: EUR 54.6m).
Six properties with a total book value of EUR 45.9m (HY 2014: EUR 39.6m) were sold during the first half of 2015. EBITDA amounted to EUR 43.1m in the first half of 2015 (HY 2014: EUR 47.0m).
The valuation result increased to EUR 9.7m (HY 2014: EUR 8.9m) during the reporting period. This was largely due to the asset management activities aimed at raising the value of the properties along with the steadily improving sentiment in S IMMO’s markets. EBIT totalled EUR 48.9m (HY 2014: EUR 52.2m).
The financing result including the participating certificate result came to EUR -22.0m (HY 2014: EUR -31.6m) for the reporting period. This significant improvement can be attributed to lower interest payments and a better foreign currency result compared to the prior year. As a result, EBT amounted to EUR 26.9m (HY 2014: EUR 20.6m), which is 30.5% higher than the prior-year figure.
Due to the effects described above, the net income for the period edged up by 27.3% to EUR 20.9m (HY 2014: EUR 16.4m). Earnings per share increased by roughly 36% to EUR 0.30 (HY 2014: EUR 0.22).
FFO I, which does not include sales effects and represents the key indicator for the operating performance of a real estate company, rose by 17.8% in the first half of 2015, totalling EUR 17.9m (HY 2014: EUR 15.2m).
The S IMMO share significantly outperformed the ATX and the IATX during the reporting period, with a gain of more than 20%. The share price at the end of the quarter was EUR 7.45.
In the first half of 2015, both book value per share and EPRA NAV per share increased compared with the first half of 2014, with the book value of equity per share improving to EUR 8.44 as at 30 June 2015 (30 June 2014: EUR 7.87) and EPRA NAV per share advancing to EUR 10.26 (30 June 2014: EUR 9.80).
Outlook for 2015: Investments and a further increase in consolidated net income
S IMMO is confirming its goal to once again increase its consolidated net income in the current financial year. In addition, it aims to nearly double FFO by 2018, raising it from EUR 21.3m to over EUR 40m. The company’s stated goal is and will continue to be to position the S IMMO share as a reliable dividend-paying share. In the medium term, the company aims to grow its property portfolio. Roughly two thirds of the planned volume under the current investment programme is earmarked for the acquisition of properties and land in Germany. The management sees tremendous potential in Berlin’s commercial real estate market.
As in the past, hedging interest rate risk is an important part of the company’s strategy. The current historically low interest rate level offers a favourable environment for real estate companies in general. Therefore, interest rate hedging instruments that were concluded in a higher interest rate environment and were set to expire in the coming years were bought back. At the same time, S IMMO is securing the current interest rate level by concluding new, long-term hedging arrangements at the current conditions. The very positive effects of these measures will start to be reflected in operating figures such as cash flow, FFO I and FFO II in the second half of 2015 and then to their full extent in the 2016 financial year.
S IMMO Management Board member Friedrich Wachernig sums up the company’s outlook as follows: “Our current investment programme, the hedging measures taken to secure the current very favourable interest rate level, and the potential for value increases offered by our portfolio provide ideal conditions for the coming quarters and for our long-term dividend policy.”
|01 – 06/2015||01 – 06/2014|
|Revenues from operating costs||16.7||17.3|
|Revenues from hotel operations||20.9||19.1|
|Other operating income||1.4||2.3|
|Expenses directly attributable to properties||-27.0||-26.2|
|Hotel operating expenses||-15.9||-14.6|
|Income from property disposals||15.9||39.6|
|Book value of property disposals||-15.9||-39.6|
|Gains on property disposals||0||0|
|Depreciation and amortisation||-3.8||-3.7|
|Gains on property valuation||9.7||8.9|
|Operating profit (EBIT)||48.9||52.2|
|Results from companies measured at equity||1.0||0.3|
|Participating certificates results||-1.4||-2.9|
|Net income before tax (EBT)||26.9||20.6|
|Taxes on income||-6.0||-4.2|
|Consolidated net income for the period||20.9||16.4|
|of which attributable to shareholders in parent company||19.9||14.8|
|of which attributable to non-controlling interests||1.0||1.6|
|Earnings per share (EUR)||0.30||0.22|