S IMMO AG: final results for 2011 confirm tenfold increase in consolidated net income
EBIT up by 52.4%
• Consolidated net income up from EUR 2.1m to EUR 21.2m
• FFO yield reaches 9.4%
• Dividend proposal for Annual General Meeting of EUR 0.10 per share
The financial year 2011 proved to be highly successful for S IMMO AG (Bloomberg: SPI:AV, Reuters: SIAG.VI): EBIT and funds from operations (FFO) in particular were both much higher than in the previous year. Ernst Vejdovszky, member of S IMMO AG’s Management Board, comments, “We are particularly pleased with this achievement given the continuing problems in the global economic environment. Our efforts, in particular the completion of the development projects in 2010 and the investments made over the past few years, are now bearing fruit. S IMMO is exceptionally well positioned to meet the challenges of the coming years. In 2012 we will be concentrating on further improving all our key performance indicators, which guide the operational side of our business.”
Gross profit up 33.4%
S IMMO Group’s rental income in 2011 was remarkably strong, at EUR 125.9m (2010: EUR 104.0m), a year-on-year increase of 21.1%. The development projects completed in 2010 were a major contributor in this improvement, together with the Group’s acquisitions. Gross profit from hotel operations also rose by 3.9%, in spite of the difficulties posed by the uncertain economic climate, and ended the year at EUR 9.0m (2010: EUR 8.7m).
Total gross profit climbed by an impressive EUR 26.8m, to EUR 107.0m, compared to EUR 80.2m in 2010. This represents an increase of 33.4%.
EBITDA up 42.0%
In 2011, management expenses were cut back by EUR 1.5m from EUR 18.7m to EUR 17.2m, a reduction of more than 8%. In addition, eleven properties and 16 freehold apartments in Vienna and Berlin were sold. This is in line with the Group’s strategy of disposing of parts of the portfolio where a profit can be realised. The properties were sold well above most recent estimated values, and the gains on disposal amounted to EUR 11.6m (2010: EUR 9.9m). Altogether, these factors accounted for a 42.0% increase in EBITDA, or EUR 30.0m, to EUR 101.4m (2010: EUR 71.4m).
Significant growth in EBIT
As in 2010, valuation adjustments were not material coming in at EUR 0.1m (2010: EUR -0.8m). Germany and Austria in particular showed significant valuation gains, while values in Central and Southeastern Europe were down. Operating profit (EBIT) of EUR 92.3m improved by EUR 31.7m compared with the EUR 60.5m achieved in 2010, an increase of 52.4%.
Excellent financial results
Net financing costs totalled EUR 51.5m (2010: EUR 41.2m), including a non-cash foreign exchange gain of EUR 7.3m. The gain was attributable to the rise of the euro against functional currencies in Central and Southeastern Europe (Romanian leu, Hungarian forint, Czech crown and Croatian kuna). The income entitlements of participating certificate holders for 2011 resulted in expenses of EUR 11.2m (2010: EUR 10.2m).
Consolidated net income up to EUR 21.2m
Total tax expense for 2011 amounted to EUR 8.4m (2010: EUR 7.0m) and for the most part consisted of non-cash changes in deferred taxes. Compared with the previous year, consolidated net profit for 2011 increased tenfold, to EUR 21.2m (2010: EUR 2.1m), of which EUR 20.0m (2010: EUR 1.8m) was attributable to shareholders of the parent company.
All key performance indicators up
S IMMO’s funds from operations (FFO) in 2011 improved by 54.6% to EUR 28.9m (2010: EUR 18.7m). This gives a very respectable FFO yield (ratio of FFO to share price) of 9.4%. The Group’s excellent performance was also reflected in the improved net operating income (NOI), which rose from EUR 75.2m to EUR 99.3m, also partly as a result of the projects completed in 2010. Operating cash flow for the year was also very satisfactory, and rose from EUR 74.2m in 2010 to EUR 96.0m in 2011.
As at 31 December 2011, the balance sheet net asset value (NAV) stood at EUR 6.96 per share (31 December 2010: EUR 7.07 per share). The EPRA NAV, the inner value of the share calculated in accordance with the guidelines of the European Public Real Estate Association, was EUR 8.70 per share (31 December 2010: EUR 8.34 per share). EPRA NAV represents the value of equity adjusted for the factors that have no long-term effect on the business activities of the Group, such as valuations of derivatives and deferred taxes.
Capital markets: share repurchase and second market maker
The S IMMO Share performed considerably better than the industry average in 2011, most notably in the fourth quarter, however Management has expressed disappointment in the performance. Holger Schmidtmayr, member of S IMMO’s Management Board, on the present situation, “We have turned the gap between market price and net asset value to our advantage: last autumn we launched a share repurchase programme – currently the best way to invest the Group’s resources. By adding a second market maker we are also aiming to improve the share’s liquidity and to gain greater access to new groups of investors.”
Outlook and proposed dividend
In spite of the positive developments in Germany, the European property market overall presents a far from stable picture. Debt crises, euro crash scenarios, and the Austrian capital gains tax on securities are just some of the negative issues that will continue to dominate the headlines in the coming months. Even though the overall economic situation will remain challenging, S IMMO is exceptionally well positioned to meet the tasks of the coming years.
In Germany, the refurbishment programme will, for the most part, be completed by the end of the year. This will reduce exceptional investment costs, while simultaneously increasing the value of the properties. S IMMO will take advantage of opportunities to sell properties at a profit, particularly in Austria and Germany, and aims to dispose of approximately 5% of its portfolio every year. In the medium term, the focus will be on the Quartier Belvedere Central development project, part of one of Europe’s largest inner-city development projects centred next to Vienna’s future Central Station. In successive stages, S IMMO and its partners will be constructing a mixture of office, hotel and retail properties with a gross floor space of around 136,000 m².
Friedrich Wachernig, member of S IMMO’s Management Board, comments, “After our highly satisfactory performance in 2011, we do not intend to rest on our laurels. We shall continue to be as highly committed as ever to increasing profitability and sustainable value for the benefit of our shareholders. To achieve our goals, we shall continue to rely on our proven diversification strategy and maintain our focus on selected European Union capital cities. This gives us the balanced portfolio that allows us to take advantage of property cycles in the various regions.”
S IMMO will continue to buy back shares until the repurchase programme ends on 31 May 2012, with the aim of further increasing the Group’s attractiveness in the capital markets. At the Annual General Meeting on 01 June 2012 S IMMO’s Management Board will propose a dividend distribution of EUR 0.10 per share to the shareholders.
|01 – 12/2011||01 – 12/2010|
|Revenues from service charges||41.3||32.6|
|Revenues from hotel operations||40.6||38.3|
|Other operating income ||7.7||5.0|
|Expenses directly attributable to properties||-77.0||-70.1|
|Hotel operating expenses||-31.6||-29.6|
|Income from property disposals||46.5||102.7|
|Carrying value of property disposals||-34.9||-92.8|
|Gains on property disposals||11.6||9.9|
|Earnings before interest, tax, depreciation and amortisation (EBITDA)||101.4||71.4|
|Depreciation and amortisation||-9.3||-10.1|
|Gains / losses on property valuation||0.1||-0.8|
|Operating result (EBIT)||92.3||60.5|
|Participating certificates results||-11.2||-10.2|
|Net income before taxes (EBT) ||29.6||9.1|
|Taxes on income||-8.4||-7.0|
|Consolidated net income for the period||21.2||2.1|
|of which attributable to shareholders in parent company||20.0||1.8|
|of which attributable to non-controlling interests||1.2||0.3|
|Earnings per share (EUR)||0.29||0.03|
|Property indicators ||31 December 2011|
|Total let floor space||m2||1,409,623|
|Gross rental yield||%||6.7|