Positive result – despite COVID-19
- Net income for the period of plus EUR 16.1m
- Operating losses in second quarter
- Positive valuation result of EUR 10.2m
The listed company S IMMO AG has published its figures as of 30 June 2020 and is taking stock of the first half of the year, which was heavily impacted by the COVID-19 pandemic. Ernst Vejdovszky, CEO of S IMMO AG, comments: “2020 is the year of the coronavirus. Its impact can be felt in all areas of life and all sectors, and the property industry is no exception. The second quarter – particularly the months of April and May – brought coronavirus-related losses on a massive scale in some cases. Nonetheless, we still achieved a positive result overall and are continuing to work on minimising the impact of the crisis. We currently expect that the biggest losses are behind us and that we will see a gradual recovery in the second half of the year.”
Positive valuation results
Despite the negative effects of the COVID-19 crisis, the result from property valuation was positive overall and came to EUR 10.2m (HY 2019: EUR 134.1m). This was chiefly due to increases in value in Germany, which totalled EUR 32.9m and more than compensated for the write-downs in CEE (EUR -20.5m) and the slight corrections in Austria (EUR -2.2m). Broken down by types of use, the company had to recognise write-downs totalling EUR 17.6m in the hotel and retail sector, while the value of the office portfolio increased by EUR 12.0m (mainly in Germany) and in the residential asset class S IMMO achieved a significant increase in value of EUR 19.5m. These results show the benefits of S IMMO’s diversified strategy, with a portfolio comprising 30.0% residential, 41.8% office, 18.9% retail and 9.3% hotel properties as of 30 June 2020.
Operating performance: decline due to COVID-19
S IMMO was heavily impacted by COVID-19 in the hotel and retail sector in the first half of the year. Total revenues saw a decline of 13.1% compared with the same period last year and amounted to EUR 87.8m (HY 2019: EUR 101.0m). On the positive side, however, it should be noted that some of the lost income was offset by a decrease in expenses from hotel management to EUR 11.1m (HY 2019: EUR 18.3m).
Rental income climbed by around 4.2% to EUR 60.6m (HY 2019: EUR 58.1m). But at the same time, the negative effects of COVID-19 led to considerably higher valuation allowances for receivables, causing expenses for valuation allowances and write-downs on trade receivables to deteriorate to EUR 3.4m (HY 2019: EUR 0.4m).
Gross profit amounted to EUR 45.7m (HY 2019: EUR 52.7m). The fact that the decrease could be kept within reasonable limits is thanks to major operational efforts by our asset management team and strict cost management.
EBITDA and EBIT
At EUR 9.6m (HY 2019: EUR 9.4m), management expenses were in line with the prior-year level, meaning that EBITDA amounted to EUR 36.1m (HY 2019: EUR 43.3m). EBIT came to EUR 41.8m (H1 2019: EUR 173.3m).
Positive net income for the period
The financial result totalled EUR -21.8m (HY 2019: EUR -2.5m). Due to the postponement of the Annual General Meetings, the dividends from the shareholdings in CA IMMO and Immofinanz were not received in the second quarter as before (HY 2019: EUR 17m), but instead are expected only in the second half of the year. Total tax expense improved to EUR -3.9m (HY 2019: EUR -22.9m). This resulted in net income of EUR 16.1m for the first half of 2020 (HY 2019: EUR 147.9m), despite the COVID-19 crisis. Earnings per share therefore amounted to EUR 0.22 (HY 2019: EUR 2.23).
On the capital market, S IMMO – like its peers and the market as a whole – is affected by the current developments. The property company’s share closed the first half of the year at EUR 15.96 with a year-to-date performance of -28.43%, just slightly outperforming the ATX (-29.50%) and the IATX (-29.21%). However, the EPRA NAV of EUR 23.8 per share and the average analyst price target of EUR 20.50 are well above the current share price and clearly show the stock’s potential.
Forecasts are still difficult to make in the current climate. Nonetheless, the management is assuming that several tested vaccines or different treatment methods will be available in the first quarter of 2021, which would have a positive impact on the economy. Based on this scenario, the company is already working on continuing its long-term upward trend again from 2021 onward. This includes making selected investments and pressing ahead with project developments and various planning activities in relation to the land bank.
At the same time, the management considers itself well equipped to take advantage of any opportunities that arise, even at very short notice. Friedrich Wachernig, member of the S IMMO AG’s Management Board, is confident: “We have a strong equity ratio, a highly qualified team and the right properties – ideal conditions for getting through challenging times. The current situation once again shows that our diversified portfolio strategy brings major advantages. While the hotel segment will probably take a while to return to its pre-crisis level, we are hardly seeing any constraints in the office segment. For residential properties – which account for 30% of our portfolio and the majority of our land bank – we even consider rising prices to be a possibility. We are confident for the future. This crisis will also pass.”
Consolidated income statement for the period from 01 January 2020 to 30 June 2020
in EUR m / fair value method
|thereof rental income||60.6||58.1|
|thereof revenues from operating costs||16.0||16.2|
|thereof revenues from hotel operations||11.2||26.7|
|Other operating income||1.1||1.0|
|Property operating expenses||-32.1||-31.0|
|Hotel operating expenses||-11.1||-18.3|
|Income from property disposals||40.6||6.5|
|Book value of disposed properties||-40.6||-6.5|
|Result from property disposals||0||0|
|Depreciation and amortisation||-4.5||-41|
|Results from property valuation||10.2||134.1|
|Operating result (EBIT)||41.8||173.3|
|Earnings before taxes (EBT)||20.0||170.8|
|Taxes on income||-3.9||-22.9|
|Consolidated net income for the period||16.1||147.9|
|thereof attributable to shareholders in parent company||15.9||147.6|
|thereof attributable to non-controlling interests||0.2||0.3|
|Earnings per share (in EUR)||0.22||2.23|