S IMMO increases earnings to over EUR 20m
Results for the first three quarters 2011
- EBIT up by 63%
- Net profit for the period increased to EUR 20.3m
- Operating cash flow up by 40%
- Strong focus on further improving earnings performance
- Dividend payment proposal planned for next Annual General Meeting
The financial year 2011 is turning out to be very successful for Austrian stock exchange listed S IMMO AG (Bloomberg: SPI:AV, Reuters: SIAG.VI). “Despite the challenging economic environment, we can look back on
an outstanding third quarter; all key indicators are up, and once again we have good news to report from our asset management division. In addition, we have sent the capital markets an important signal by initiating the share repurchase programme at the start of October and continuing the repurchase programme for participating certificates,” says Ernst Vejdovszky, Member of S IMMO AG’s Management Board.
Gross profit up by more than 30% compared with 2010
The excellent performance in the first half of 2011 continued into the third quarter. Rents were thoroughly satisfactory at EUR 91.8m (Q3 2010: EUR 75.5m). A major part of the rental income came from the buildings on the Viennese Viertel Zwei site, acquired last December, and from the development projects completed in 2010. The continuing positive trend in the hotel industry in Vienna and Budapest was also reflected in the performance of S IMMO’s hotels. Income from hotel operations for the first three quarters climbed from EUR 27.1m in 2010 to EUR 29.3m this year. Profits from hotel operations were up 16.7% to EUR 6.9m. In the first nine months of 2011 S IMMO improved its gross profit by an impressive 30.9% to EUR 80.1m (Q3 2010: EUR 61.2m).
EBITDA up by roughly 40%
In the first three quarters of 2011, properties were sold in Austria and Germany. Proceeds from disposals came to EUR 40.5m and the gains on disposal came to a very satisfactory EUR 9.2m. EBITDA climbed significantly to EUR 76.6m (Q3 2010: EUR 55.0m), an increase of 39.4% compared with the same period last year. EBIT also increased, by roughly 63%, to EUR 74.0m (Q3 2010: EUR 45.5m).
For the nine months ending 30 September 2011, net financing result totalled EUR -40.3m, including a non-cash foreign exchange gain of EUR 3.3m, which was attributable to the rise of the EURO’s value against currencies in Central and Southeastern Europe. Overall, S IMMO’s consolidated net income for the period was a very impressive EUR 20.3m, compared with EUR 1.3m for the same period last year.
Operating cash flow up by 40%
S IMMO’s funds from operations (FFO) in the first three quarters improved markedly – by 45.7% – to EUR 32.9m, compared with EUR 22.6m for the same period last year. Including participating certificates expenses, FFO for the first nine months in 2011 was EUR 23.1m, compared with EUR 14.5m in 2010. The Group’s excellent performance was also reflected in the improved NOI, which rose from EUR 57.5m last year to EUR 75.0m. The operating cash flow amounted to EUR 74.0m, a 40.0% increase compared with the same period last year.
As at 30 September 2011 the balance sheet NAV was EUR 7.11 per share (31 December 2010: EUR 7.07 per share). The EPRA NAV, the net asset value of the share calculated in accordance with the guidelines of the European Public Real Estate Association, was EUR 8.64 per share (31 December 2010: EUR 8.34 per share).
Widely diversified portfolio with a value of nearly EUR 2bn
S IMMO Group owns a total of 239 properties in Austria, Germany and six other countries in Central and Southeastern Europe. It will continue to concentrate its investments mainly in European Union capitals and
large German cities. The value of the Group’s property portfolio as at 30 September 2011 was EUR 1,988.2m with a floor space of approximately 1,400,000 m².
The portfolio is diversified by region and by property use type. At the balance sheet date, around 60% of the property portfolio was in Western Europe and roughly 40% in Central and Southeastern Europe. A detailed breakdown by region shows that 31.7% of the properties were in Austria, 27.8% in Germany, 21.3% in SEE and 19.2% in CEE. According to property use type, the portfolio is made up of office properties (36.0%), retail properties (26.7%), residential properties (23.3%) and hotels (14.0%). The occupancy rate was a highly satisfactory 91.8%. The overall rental yield is 6.6%.
Active asset management and development focus on Quartier Belvedere Central
The Group will continue to emphasise active asset management. Friedrich Wachernig, Member of S IMMO’s Management Board, said: “We are happy to announce that further tenancy agreements with renowned companies such as H&M, PepsiCo and Uniqua have been signed. Our project development activities are concentrating on the Viennese inner city development project Quartier Belvedere Central, for which we are expecting planning permission in 2012.”
Over the next few years a unique office, residential and retail quarter – located at Vienna Central Station – is to be built on a total area of 550,000 m². Within this urban development – one of the largest in Europe – S IMMO and its partners are responsible for the Quartier Belvedere Central project, with 136,000 m² of gross floor space made up of a mixture of offices, hotels and retail space. The development of the various sites will take place in phases over several years, most likely to begin in 2013.
Participating certificate and share repurchase programmes
At the balance sheet date the S IMMO Share price stood at a discount of more than 50% to its net asset value. The year-to-date performance showed a drop of 24.8% –disappointing both to the Management and to S IMMO’s investors. To improve the liquidity of the S IMMO Share and also to attract new investors, the company has been working with a second market maker since August 2011. As a further initiative, S IMMO launched a share repurchase programme at the beginning of October which, in view of the current difference between share price and net asset value per share, Management at present considers to be the most sensible investment possible.
Streamlining the capital structure requires addressing the participating certificate issue, which S IMMO’s new repurchase programme for the certificates is intended to do. Overall, approximately 12% of the participating certificates issued have now been repurchased. The annual participating certificate distribution will in future be based on actual results.
Outlook: continued focus on improving earnings performance
In all of its business activities, S IMMO is concentrating on further enhancing its earnings performance by focusing on several key areas. The buildings refurbishment programme in Germany has been a success and will be completed on schedule at the end of 2012. This will mean the end of ongoing investment activities and the related costs, while at the same time the occupancy rate will continue to improve and the rents will increase. Another continuing focus will be on active asset management and providing quality services to tenants. As in the past, S IMMO will take advantage of opportunities to dispose of properties at above their estimated values, and aims to turn over approximately 5% of its portfolio every year. Due to S IMMO’s extensive diversification the Group can take advantage of the various real estate cycles. Revenue from disposals will be used to further repurchase shares and participating certificates. On the assumption that the financial year 2011 will be a successful year, S IMMO AG’s Management Board intends to propose the distribution of a dividend of EUR 0.10 per share at the Annual General Meeting in June 2012.
Holger Schmidtmayr, Member of S IMMO AG’s Management Board, said: “We are focusing on measures that maximise profitability for our shareholders. S IMMO is ideally positioned for this. We are currently predicting a successful financial year for 2011 and continuing success in the following year.”
Consolidated income statement for the nine months ended 30 September 2011
EUR m / fair value basis
|01 – 09/2011||01 – 09/2010|
|Revenues from service charges||30.8||23.6|
|Other operating income ||5.1||3.6|
|Expenses directly attributable to properties||-54.5||-47.5|
|Hotel operating expenses||-22.5||-21.2|
|Income from property disposals||40.5||81.2|
|Carrying value of property disposals||-31.3||-74.4|
|Gains on property disposals||9.2||6.8|
|Earnings before interest, tax, depreciation and amortisation (EBITDA)||76.6||55.0|
|Depreciation and amortisation||-7.0||-7.2|
|Gains / losses on property valuation||4.3||-2.2|
|Operating result (EBIT)||74.0||45.5|
|Participating certificates results||-9.8||-8.1|
|Net income before taxes (EBT) ||23.9||4.5|
|Taxes on income||-3.7||-3.3|
|Consolidated net income for the period||20.3||1.3|
|of which attributable to shareholders in parent company||16.7||1.6|
|of which attributable to non-controlling interests||3.6||-0.4|
|Earnings per share (EUR)||0.24||0.02|
|Property information||30 September 2011|
|Gross rental yield||(%)||6.6|