Convincing Result for 2017 Financial Year
Ad hoc announcement pursuant to Art. 53 LR
Zürich, 27 February 2018: Allreal reported a very gratifying net profit excluding revaluation gains in the year under review of CHF 113.3 million. Thanks to higher rental income, the increased profitability of the Projects & Development division and lower cost of financing, the operating result is shown above that of the previous year despite clearly lower earnings resulting from the sale of development real estate. At the shareholders’ meeting, the board of directors will propose a higher profit distribution of CHF 6.25 per share.
Net profit including revaluation gains for the 2017 financial year amounted to CHF 129.2 million, or 25.6% below that of the previous year which was characterised by extraordinarily high appreciation gains and the sale of development real estate.
Earnings generated by the Real Estate division and the project volume completed by the Projects & Development division resulted in total sales of CHF 603.4 million.
The company expects operating net profit for the 2018 financial year to be reported slightly above that of the period under review.
Owing to the good result for the period under review and the stable business development expected for the coming years, the Board of Directors at the Shareholders’ Meeting scheduled for 20 April 2018 will propose a higher profit distribution of CHF 6.25 per share in the form of a par value reduction. Compared to the closing price on 31 December 2017 this corresponds to a cash yield of 3.8%. The pay-out is tax-free for private investors.
Real Estate division with higher rental income and historically low vacancy rate
The growth of the portfolio of yield-producing properties experienced in the second half of 2017 and the reduction of vacancy-related earnings losses in the period under review resulted in 3.4% growth in rental income to CHF 179.2 million.
The cumulated vacancy rate decreased by 2.5 percentage points in the year under review to a very low 2.6%. Real-estate expenses amounted to CHF 24.6 million corresponding to a 13.7% reduction in the expense ratio compared to the previous year. Net yield resulting from letting residential and commercial real estate amounted to a gratifying 4.3%.
On 31 December 2017, the portfolio of yield-producing properties included a total of 63 buildings, 20 residential and 43 commercial, reflecting four additions and one divestment owing to reclassification.
The valuation of all yield-producing properties carried out as at the end of 2017 by an external real estate valuer resulted in a revaluation gain of CHF 21.8 million.
The market value of the entire portfolio as at 31 December 2017 amounted to CHF 3.96 billion.
Projects & Development division with higher profitability
As expected, the earnings of CHF 66.7 million reported by the Projects & Development division for the year under review are below the comparable value the previous year which was characterised by high profits from the sale of development real estate.
Owing to adjustments of both project volume and workforce introduced in previous years in view of enhancing profitability, operating expenses for 2017 of CHF 51.2 million represent a decline of 6.6% compared to the previous year.
The operating profit (EBIT) reported by Projects & Development, therefore, amounted to a gratifying CHF 20.8 million.
In the period under review the Realisation department implemented a project volume of CHF 420.0 million. The projects are designated for Allreal’s own portfolio and for third parties. The amount is lower compared to the previous year owing to Allreal’s consistent focus on the acquisition and realisation of projects with predictable risk and existing profit potential.
The share of third-party projects in the completed project volume processed in the period under review amounted to 81.7%, while that of own projects increased to 18.3% as expected.
The order backlog as at 31 December 2017 of about CHF 710 million will secure capacity utilisation for about one-and-a-half years.
Financial liabilities grew by 19.5% to CHF 1.9 billion owing, especially, to the acquisition of four commercial properties during the fourth quarter 2017.
By issuing a 0.875% bond worth CHF 160 million with maturity in 2027 plus a 0.75% bond worth CHF 150 million with maturity in 2026, about 50% of financial liabilities on the cut-off date were refinanced via the capital market, as desired.
On the cut-off date, the average interest rate for debt amounted to 1.53%, while the average fixed-interest rate was 49 months. Credit facilities available short-term of CHF 544 million ensure consistently high scope for financial action.
The Group’s equity increased by CHF 63.9 million in the period under review to CHF 2.15 billion corresponding to a net asset value (NAV) per share of CHF 135.15.
As at 31 December 2017, Allreal’s equity ratio was reported at 49.3%, net gearing at 87.2%, and the interest coverage ratio at 6.0.
A solid platform for continued successful business development
Higher rental income and the positive order situation in Projects & Development will ensure continuation of the stable business development.
Consequently, the company expects operating net profit for the 2018 financial year to be reported slightly above that of the period under review.
Allreal combines a stable-income property portfolio with the activities of a general contractor (development and realisation). The company’s property portfolio is worth over CHF 5.1 billion. During the 2021 financial year, the volume of projects completed by the Projects & Development division amounted to CHF 343 million. The property company employs more than 250 members of staff across Zurich, Basel, Bern and Geneva. With its registered office on Glattpark, Allreal operates exclusively in Switzerland. Shares in Allreal Holding AG are listed on the SIX Swiss Exchange.