IMMOFINANZ with stable operating performance in the first three quarters

KEY FIGURES (in MEUR) // 1 May 2014 - 31 Jan. 2015 // Δ in % // 1 May 2013 - 31 Jan. 2014

Rental income // 344.4 // -4.5% // 360.7
Results of asset management // 263.0 // -10.6% // 294.2
Results of property sales // 12.9 // n.a. // -0.7
Results of property development // 3.1 // -7.0% // 3.3
Expenses not directly attributable // -44.8 // -30.2% // -64.2
Results of operations // 241.9 // -0.2% // 242.3
Net profit from continued operations // 79.2 // -44.3% // 142.1
EBIT // 955.6 // >100% // 377.9
Gross cash flow* // 214.9 // -18.1% // 262.3
Net Loan to Value // 47.6% (1) // -9.3% // 52.5% (2)

* The comparable prior year figure is including 100% BUWOG
(1) LTV net: actual remaining debt (nominal debt) less liquid funds and the exchangeable bond (in the money) divided by fair value
(2) LTV net: actual remaining debt (nominal debt) less liquid funds divided by fair value

The results of operations generated by IMMOFINANZ Group were stable in year-on-year comparison at EUR 241.9 million for the first three quarters of 2014/15 (Q1-3 2013/14: EUR 242.3 million). Net profit totalled EUR 79.2 million for the first three quarters of 2014/15 (Q1-3 2013/14: EUR 142.1 million or EUR 220.2 million incl. 100% of BUWOG). This decline resulted primarily from the negative effects caused by the foreign exchange-adjusted revaluation of investment properties, which reflected the decline in the value of properties in Eastern Europe and above all in Russia, Poland, the Czech Republic and Slovakia. Foreign exchange-adjusted revaluation results of EUR -99.1 million in the first three quarters reduced net profit, but have no effect on cash.

The third quarter of the reporting year also included a negative effect from the IFRS-valuation of the 2014-2019 bond exchangeable into BUWOG shares. However, these non-cash valuation effects of EUR -31.1 million from the exchangeable bond are contrasted by undisclosed reserves of approx. EUR 107.8 million as of 31 January attributable to the 49%-stake in BUWOG. Net profit for the third quarter 2014/15 amounts to EUR 109.4 million (second quarter 2014/15: EUR -16.2 million, first quarter 2014/15: EUR -14.0 million).

“The third quarter of our 2014/15 financial year was characterised by the significant weakening of the Russian Ruble versus the Euro and US Dollar. We therefore decided to continue our policy of temporary reductions in the lease payments for the tenants in our five Moscow shopping centers. These steps will not only help our long-standing partners in a difficult situation, but also ensure continued high occupancy in our shopping centers”, says CEO Eduard Zehetner. “The effects of these measures are clearly reflected in our rental income for the third quarter: the rental income from Russia performed positively in the first quarter of 2014/15 and stable during the second quarter (in like-for-like comparison with the respective previous quarter), but fell by 14% to EUR 38.2 million in the third quarter. The number of visitors in our Moscow shopping centers is roughly 10% lower than in the first three quarters of the previous year (excluding GOODZONE).”

In view of the ongoing reductions and exchange rate freeze, further declines in rental income and receivable write-downs from Russia can be expected over the coming quarters from the current point of view.

The other core countries of IMMOFINANZ Group recorded stable development.

Sustainable free cash flow (FFO) amounted to EUR 102.5 million for the first three quarters of 2014/15, which represents an annualised FFO yield after tax of 7.4% (3) based on market capitalisation. After FFO of EUR 16.7 million in the second quarter of 2014/15, this indicator rose to EUR 38.2 million in the third quarter. The increase in FFO was supported by higher earnings from property sales, lower tax payments and lower interest expense.

The negative effects in Russia and scheduled property sales led to a decline in Group rental income to EUR 344.4 million (Q1-3 2013/14: EUR 360.7 million). The results of property sales totalled EUR 12.9 million, compared with EUR -0.7 million in the first three quarters of the previous year. The results of property development were stable at EUR 3.1 million (Q1-3 2013/14: EUR 3.3 million).

Payout policy

The 2014/15 share buyback programme that started shortly before the end of the 2014 calendar year has since been concluded. Nearly 10.2 million shares were purchased over the stock exchange for a total price of approx. EUR 23.0 million by the beginning of March. On 13 March 2015, a new share buyback programme was approved with a volume of up to 30 million shares and an upper price limit of EUR 3.20. Roughly 44.5 million treasury shares (originating from the financing transaction with treasury shares, which will be repaid on schedule) will be withdrawn before the start of the buyback.

The payment of a cash dividend for the 2014/15 financial year is dependent on whether IMMOFINANZ AG can record a distributable balance sheet profit. In light of current and further developments in Russia, the Executive Board of IMMOFINANZ has decided not to issue concrete guidance on the amount of a possible dividend. However, there are positive effects, such as the increase in the price of the BUWOG share, which are currently generating undisclosed reserves.

BUWOG with 50% increase in share price

The majority spin-off of BUWOG nearly one year ago has led to a completely new valuation of this former subsidiary’s residential assets in Austria and Germany. Instead of roughly 40% discount under the IMMOFINANZ umbrella, BUWOG is now the only Austrian real estate company in the Prime Market segment that is trading at a premium to the net asset value (NAV). This premium equalled roughly 15% in mid-March (based on the NAV as of 31 October 2014). A look at the share price shows an increase of nearly 50% over the initial listing price of EUR 13.20 on the Vienna Stock Exchange at the end of April 2014 (closing price on 17 March: EUR 19.86) – and this despite a dividend payment of EUR 0.69 per share. Including the dividend, the BUWOG share generated an impressive total return of 55.7% in almost 11 months.

As stated in connection with the spin-off, we plan to sell our 49% stake in BUWOG over the medium-term and with a minimum impact on the market. We took the first step to monetarise this investment in the previous year by issuing a EUR 375.0 million exchangeable bond for part of the BUWOG shares.

Announcement of a voluntary takeover offer by O1/CA Immo

Initially on 25 February and most recently on 16 March 2015, O1 Group Limited and CA Immo announced their intention to make a voluntary tender offer for a minority interest in IMMOFINANZ. “Although we welcome this interest in our company and the new shareholders, we consider the indicated offer prices (EUR 2.51 and EUR 2.80) to be completely unsatisfactory because they do not reflect the value of our share. We are pleased to see that our strategy is attractive for investors and appreciate the renewed confidence of the branch in the earnings potential of East European portfolios”, says CEO Zehetner.

(3) Sustainable cash flow (excl. BUWOG): Gross cash flow (EUR 214.9 million) + interest received on financial investments (EUR 3.3 million) – interest paid (EUR 113.2 million) - cash outflows for derivative transactions (EUR 15.4 million) + results of property sales (EUR 12.9 million) based on market capitalisation as of 17 March 2015 (share price: EUR 2.79) excl. treasury shares and market capitalisation of the BUWOG shares held (EUR 969.3 million based on a share price of EUR 19.86 as of 17 March 2015).