- FFO I up by 27.8% to EUR 13.8m
- Rental income advanced by 9.6%
- EBITDA improved by 9.4%
- EUR 31.5m in write-downs (roughly 1.3% of the real estate assets)
The listed real estate company S IMMO AG announced that is pleased to look back on a very successful first quarter of 2020 in operating terms, despite the impacts suffered since the middle of March due to the COVID-19 crisis. Rental income rose by around 10% in annual comparison to EUR 31.1m (Q1 2019: EUR 28.4m). And especially the FFO I – a key figure for operating performance – advanced by 27.8% to EUR 13.8m (Q1 2019: EUR 10.8m). At the same time, the results on property valuation turned negative to reach minus EUR 31.5m in the wake of the COVID-19 pandemic (Q1 2019: plus EUR 9.9m). This corresponds to around 1.3% of the IFRS real estate assets. All in all, the company saw a loss for the period of EUR 21.4m as of 31 March 2020 (Q1 2019: profit for the period of EUR 15.1m).
Ernst Vejdovszky, CEO of S IMMO AG, commented: “The closing weeks of the first quarter were already dominated by the COVID-19 pandemic, but we still generated very solid operating results in this period. We have of course not been able to avoid the effects of this crisis, but not all regions and especially not all types of use are being impacted to the same degree. In March we were particularly affected in the second half of the month, hotels and retail were hit the hardest in April. May was by no means a pleasure, but we are seeing more positive signs, the gradual easing of lockdown measures, and a glimmer of hope on the horizon. In addition, residential properties (which make up close to 30% of our portfolio) have suffered little adverse impact and may even be able to profit from the general uncertainty in the coming months. The capital increase we conducted at the beginning of 2020 has also provided us with a very comfortable cash buffer, which makes us optimistic about 2021.”
Operating performance: increase in total revenues and gross profit
The company’s total revenues advanced by 5.9% in annual comparison in the first quarter and came to EUR 50.6m (Q1 2019: EUR 47.8m). This can be attributed primarily to an increase in rental income, while revenues from hotel operations fell to EUR 9.9m after the record high posted in 2019 (Q1 2019: EUR 11.1m) due to COVID-19.
The improvement of rental income was driven by the increased number of rented properties in CEE and Germany to the portfolio and the good like-for-like performance. Property management expenses rose to EUR 16.8m (Q1 2019: EUR 15.7m), primarily due to the increased number of rented properties. Overall, gross profit improved by 7.5% to EUR 25.8m (Q1 2019: EUR 24.0m) despite the effects of the COVID-19 crisis.
EBITDA up by 9.4%, EBIT down
Management expenses came to EUR 4.4m (Q1 2019: EUR 4.5m), down slightly in annual comparison, allowing EBITDA to improve by 9.4% to EUR 21.4m (Q1 2019: EUR 19.5m) year-on-year. Despite the positive operating result, the negative results on property valuation caused EBIT to decline to minus EUR 12.5m (Q1 2019: gain of EUR 27.4m).
Due to the impacts of the COVID-19 pandemic, the valuation result for S IMMO turned negative at minus EUR 31.5m as of 31 March. The regions were affected to different degrees in this. Write downs were made to the tune of EUR 8.6m in Austria and of EUR 22.9m in CEE. The valuation result for the German real estate portfolio was even slightly positive because the selling price of a property in Germany far exceeded its valuation as of 31 December 2019. All in all, the negative valuation result only equates to around 1.3% of the company’s real estate assets according to IFRS.
Development of net result for the period and earnings per share
The financial result decreased by around EUR 3.6m to minus EUR 13.2m (Q1 2019: minus EUR 9.7m), primarily due to non-cash effects. The write-downs on properties led to contrary positive effects on deferred taxes. As a consequence, income taxes came in at net earnings of EUR 4.3m (Q1 2019: expenses of EUR 2.6m). All in all, the company saw a loss for the period of EUR 21.4m as of 31 March 2020 (Q1 2019: profit for the period of EUR 15.1m). The earnings per share came to minus EUR 0.30 (Q1 2019: plus EUR 0.23).
The COVID-19 pandemic has also had a significant impact on the capital market. The S IMMO share performed very well up until the beginning of March, briefly reaching a record high of over EUR 27. The S IMMO share was then unable to escape the overall downtrend and closed the quarter at a price of EUR 17.60 as of 31 March 2020 – which equates to a year-to-date performance of minus 21.1%. A comparison with the Austrian benchmark index ATX (year-to-date performance of minus 37.19%) and the industry index IATX (year-to-date performance of minus 27.72%) shows that the S IMMO share substantially outperformed its benchmarks in this difficult environment.
Outlook for 2020
Forecasts are especially difficult to make under the current conditions, and the further effects that the COVID-19 pandemic will have on the results for the financial year 2020 cannot be reliably predicted at this time. Especially factors such as the duration of the restrictions, a possible second wave of infections, and the impacts on economic growth are great sources of uncertainty. S IMMO feels that it is well equipped for the coming challenges. “We have a high-quality portfolio at established sites, an eminently qualified team, and a very stable equity and liquidity basis – in part thanks to the capital increase in January 2020. This enables us to continue working successfully in the current challenging environment and to focus already on 2021. This crisis will give rise to opportunities, and we have the strength, the expertise, and also the means with very high cash and cash equivalents of over EUR 230m to seize these opportunities at the right time,” said Friedrich Wachernig, member of S IMMO AG’s Management Board.