01.08.2014
IMMOFINANZ Group records increase in net profit for 2013/14 – Property sales top EUR 1 billion
KEY FIGURES (in MEUR)* // 1 May 2013 - 30 April 2014 // Δ in % // 1 Mai 2012 - 30 April 2013
Rental income // 506.7 // -7.2% // 546.2
Rental income like-for-like // 472.7 // -1.3% // 478.7
Results of asset management // 401.2 // -5.9% // 426.5
Results of property sales // 32.8 // -52.4% // 68.8
Results of property development // -39.9 // -19.0% // -33.5
Expenses not directly attributable // -92.8 // 3.0% // -95.6
Results of operations // 319.2 // -19.5% // 396.4
Operating profit (EBIT) // 521.1 // 54.0% // 338.4
Net profit** // 180.4 // 62.8% // 110.8
* The spin-off of the residential property subsidiary BUWOG led to the adjustment of values on individual lines for both of the above financial years.
** Net profit includes earnings from discontinued operations.
IMMOFINANZ Group announces net profit totalling EUR 180.4 million for 2013/14, for a year-on-year increase of 62.8%. Rental income was lower as a result of the extensive, planned property sales. The delayed completion of the GOODZONE shopping center in Moscow prevented the full recovery of this decline during the past year. Rental income amounted to EUR 506.7 million (-7.2%) and results of operations totalled EUR 319.2 million (-19.5%). In like-for-like comparison (i.e. after an adjustment for new acquisitions, completions and sales), rental income was generally stable (-1.3% to EUR 472.7 million). Property sales set a new record at roughly EUR 1 billion.
“The past financial year was shaped by the successful BUWOG spin-off. BUWOG has been very well received by the capital market – the discount to the net asset value has declined significantly“, explained Eduard Zehetner, CEO of IMMOFINANZ Group. “In the development area, we completed our GOODZONE shopping center in Moscow. The original plans called for GOODZONE to make a contribution to rental income during the entire 2013/14 financial year and offset the properties we sold, in particular the Silesia City Center. This will now be the case in 2014/15.“
Results of property sales totalled EUR 32.8 million (2012/13: EUR 68.8 million). Properties, including funds, with a combined value of slightly over EUR 1 billion were sold during 2013/14 (2012/13: EUR 661.3 million). “We originally intended to sell EUR 2.5 billion of properties over a five-year period. After only four years, we had reached a volume of EUR 2.7 billion – and that at a double-digit margin over the book value“, added Zehetner. In accordance with IFRS, the revaluation gains connected with the two largest sales – the Silesia City Center and the Egerkingen logistics property – were included in results for 2012/13, but the derecognition of the properties and the cash flows were only recorded in 2013/14.
Results of property development amounted to EUR -39.9 million (2012/13: EUR -33.5 million). These negative results were caused, among others, by delays and construction cost overruns on the GOODZONE project in Moscow due to the bankruptcy of the former general contractor and the higher discount rates used by the appraisers for property valuation due to the current political situation. Based on the comparatively low valuation of GOODZONE, appropriate increases in value can be expected over the coming years.
Revaluation results adjusted for foreign exchange effects amounted to EUR -177.9 million (2012/13: EUR -31.4 million) and are attributable, above all, to the Russian property portfolio. These results reflect the political unrest in Ukraine and the previously imposed, as well as potential sanctions against Russia. Revaluation results resulting from foreign exchange effects improved from EUR 96.6 million to EUR 311.0 million, above all due to an increase in the Euro versus the Russian Ruble during the reporting year. The revaluation results also include a positive non-recurring effect of EUR 77.7 million from an earn-out adjustment for the Rostokino shopping center in Moscow (versus a negative non-recurring effect of EUR -106.4 million in the prior year). This positive effect reflected successful negotiations by IMMOFINANZ over the price for the remaining 50% of the shopping center.
Net profit rose by 62.8% to EUR 180.4 million. Diluted earnings per share equalled EUR 0.18 as of 30 April 2014 (2012/13: EUR 0.11). The net asset value declined from EUR 5.79 to EUR 4.57 as of 30 April 2014, above all due to the spin-off of BUWOG.
OUTLOOK:
“We are expecting continued positive development in our core markets, they should benefit from an ongoing gradual economic recovery. This is also true for Russia, assuming an escalation of the crisis and long-term negative effects on the purchasing power of the population can be avoided“, indicated CEO Eduard Zehetner.
The political tensions between Russia and Ukraine and the reciprocal economic sanctions between the EU and Russia represent uncertainty factors. The effects of this crisis on the commercial development of IMMOFINANZ Group’s target markets, above all Russia, cannot be estimated at the present time. “Neither a weak Ruble nor underlying fears of war among the population would be beneficial for our business in Russia over the medium- to long-term because either of these factors could lead to decline in consumer spending. We therefore hope to see an early easing of the situation in Ukraine. In general, Russia still has substantial potential for growth,” added Zehetner.
The rental income from the Russian portfolio is generally coupled to the Euro or US Dollar, but an ongoing decline in the Ruble would have a negative effect on tenants’ cost structures. As indicated in the report on the first three quarters of 2013/14, short-term arrangements were concluded with a number of tenants in the Moscow shopping centers to reduce the currency-related pressure. This also proved to be a sustainable procedure during the 2008/09 financial crisis.
Asset Management will continue to focus on the further reduction of vacancies in the individual asset classes. A wide range of operational measures (stronger customer orientation and local market presence through decentralisation, relationship and key account management etc.) is designed to raise occupancy rates in the office segment to the retail level (> 90%) over the medium-term.
The goal for Development is to increase activities and generate solid earnings contributions. As of 30 April 2014 the development projects under construction had an expected post-completion fair value of EUR 773.2 million. This level is expected to increase up to EUR 2.0 billion over the medium-term, whereby the focus will be directed to the markets in Germany, Poland, Russia and Romania.
Plans for Trade call for maintaining the speed reached in property sales during the past years, which represents an average annual volume of approx. EUR 500.0 million to EUR 600.0 million. The Executive Board is optimistic that the realisable sale prices will continue to confirm the conservative valuation approach.
The IMMOFINANZ Executive Board will not propose a dividend payment to the annual general meeting for the 2013/14 financial year. This decision is based, above all, on the fact that IMMOFINANZ invested major parts of its internally generated funds in German residential properties during the past year. This strategy supported the positioning of BUWOG as a German-Austrian residential property company and paved the way for the majority spin-off from IMMOFINANZ.
The dividend payment should be resumed starting with the current financial year. From the present point of view, a distribution of EUR 0.15 to EUR 0.20 per share is targeted for 2014/15, whereby a combination of dividend and share buyback programme is possible.
Rental income // 506.7 // -7.2% // 546.2
Rental income like-for-like // 472.7 // -1.3% // 478.7
Results of asset management // 401.2 // -5.9% // 426.5
Results of property sales // 32.8 // -52.4% // 68.8
Results of property development // -39.9 // -19.0% // -33.5
Expenses not directly attributable // -92.8 // 3.0% // -95.6
Results of operations // 319.2 // -19.5% // 396.4
Operating profit (EBIT) // 521.1 // 54.0% // 338.4
Net profit** // 180.4 // 62.8% // 110.8
* The spin-off of the residential property subsidiary BUWOG led to the adjustment of values on individual lines for both of the above financial years.
** Net profit includes earnings from discontinued operations.
IMMOFINANZ Group announces net profit totalling EUR 180.4 million for 2013/14, for a year-on-year increase of 62.8%. Rental income was lower as a result of the extensive, planned property sales. The delayed completion of the GOODZONE shopping center in Moscow prevented the full recovery of this decline during the past year. Rental income amounted to EUR 506.7 million (-7.2%) and results of operations totalled EUR 319.2 million (-19.5%). In like-for-like comparison (i.e. after an adjustment for new acquisitions, completions and sales), rental income was generally stable (-1.3% to EUR 472.7 million). Property sales set a new record at roughly EUR 1 billion.
“The past financial year was shaped by the successful BUWOG spin-off. BUWOG has been very well received by the capital market – the discount to the net asset value has declined significantly“, explained Eduard Zehetner, CEO of IMMOFINANZ Group. “In the development area, we completed our GOODZONE shopping center in Moscow. The original plans called for GOODZONE to make a contribution to rental income during the entire 2013/14 financial year and offset the properties we sold, in particular the Silesia City Center. This will now be the case in 2014/15.“
Results of property sales totalled EUR 32.8 million (2012/13: EUR 68.8 million). Properties, including funds, with a combined value of slightly over EUR 1 billion were sold during 2013/14 (2012/13: EUR 661.3 million). “We originally intended to sell EUR 2.5 billion of properties over a five-year period. After only four years, we had reached a volume of EUR 2.7 billion – and that at a double-digit margin over the book value“, added Zehetner. In accordance with IFRS, the revaluation gains connected with the two largest sales – the Silesia City Center and the Egerkingen logistics property – were included in results for 2012/13, but the derecognition of the properties and the cash flows were only recorded in 2013/14.
Results of property development amounted to EUR -39.9 million (2012/13: EUR -33.5 million). These negative results were caused, among others, by delays and construction cost overruns on the GOODZONE project in Moscow due to the bankruptcy of the former general contractor and the higher discount rates used by the appraisers for property valuation due to the current political situation. Based on the comparatively low valuation of GOODZONE, appropriate increases in value can be expected over the coming years.
Revaluation results adjusted for foreign exchange effects amounted to EUR -177.9 million (2012/13: EUR -31.4 million) and are attributable, above all, to the Russian property portfolio. These results reflect the political unrest in Ukraine and the previously imposed, as well as potential sanctions against Russia. Revaluation results resulting from foreign exchange effects improved from EUR 96.6 million to EUR 311.0 million, above all due to an increase in the Euro versus the Russian Ruble during the reporting year. The revaluation results also include a positive non-recurring effect of EUR 77.7 million from an earn-out adjustment for the Rostokino shopping center in Moscow (versus a negative non-recurring effect of EUR -106.4 million in the prior year). This positive effect reflected successful negotiations by IMMOFINANZ over the price for the remaining 50% of the shopping center.
Net profit rose by 62.8% to EUR 180.4 million. Diluted earnings per share equalled EUR 0.18 as of 30 April 2014 (2012/13: EUR 0.11). The net asset value declined from EUR 5.79 to EUR 4.57 as of 30 April 2014, above all due to the spin-off of BUWOG.
OUTLOOK:
“We are expecting continued positive development in our core markets, they should benefit from an ongoing gradual economic recovery. This is also true for Russia, assuming an escalation of the crisis and long-term negative effects on the purchasing power of the population can be avoided“, indicated CEO Eduard Zehetner.
The political tensions between Russia and Ukraine and the reciprocal economic sanctions between the EU and Russia represent uncertainty factors. The effects of this crisis on the commercial development of IMMOFINANZ Group’s target markets, above all Russia, cannot be estimated at the present time. “Neither a weak Ruble nor underlying fears of war among the population would be beneficial for our business in Russia over the medium- to long-term because either of these factors could lead to decline in consumer spending. We therefore hope to see an early easing of the situation in Ukraine. In general, Russia still has substantial potential for growth,” added Zehetner.
The rental income from the Russian portfolio is generally coupled to the Euro or US Dollar, but an ongoing decline in the Ruble would have a negative effect on tenants’ cost structures. As indicated in the report on the first three quarters of 2013/14, short-term arrangements were concluded with a number of tenants in the Moscow shopping centers to reduce the currency-related pressure. This also proved to be a sustainable procedure during the 2008/09 financial crisis.
Asset Management will continue to focus on the further reduction of vacancies in the individual asset classes. A wide range of operational measures (stronger customer orientation and local market presence through decentralisation, relationship and key account management etc.) is designed to raise occupancy rates in the office segment to the retail level (> 90%) over the medium-term.
The goal for Development is to increase activities and generate solid earnings contributions. As of 30 April 2014 the development projects under construction had an expected post-completion fair value of EUR 773.2 million. This level is expected to increase up to EUR 2.0 billion over the medium-term, whereby the focus will be directed to the markets in Germany, Poland, Russia and Romania.
Plans for Trade call for maintaining the speed reached in property sales during the past years, which represents an average annual volume of approx. EUR 500.0 million to EUR 600.0 million. The Executive Board is optimistic that the realisable sale prices will continue to confirm the conservative valuation approach.
The IMMOFINANZ Executive Board will not propose a dividend payment to the annual general meeting for the 2013/14 financial year. This decision is based, above all, on the fact that IMMOFINANZ invested major parts of its internally generated funds in German residential properties during the past year. This strategy supported the positioning of BUWOG as a German-Austrian residential property company and paved the way for the majority spin-off from IMMOFINANZ.
The dividend payment should be resumed starting with the current financial year. From the present point of view, a distribution of EUR 0.15 to EUR 0.20 per share is targeted for 2014/15, whereby a combination of dividend and share buyback programme is possible.
IMMOFINANZ – a publicly listed European commercial real estate group with focus on two asset classes: Office and retail in eight core markets.