Allreal pleased to report increase in profits in financial year 2021, putting it on course for growth
Ad hoc announcement pursuant to Art. 53 LR
Glattpark, 8 March 2022: In the financial year 2021, Allreal’s net profit was significantly higher than in the year before. For Allreal – a real estate company with its own projects and development division – the acquisition of several companies marks a significant expansion of its business activities in Western Switzerland, thereby creating an additional driver of steady and high-quality portfolio growth. Allreal expects net operating profit for the financial year 2022 to exceed the level of the previous year.
Allreal reported net profit including revaluation effect of CHF 182.6 million in the period under review, compared with CHF 167.2 million in the previous year – a rise of 9.2%. Revaluation gains for investment real estate again had a positive impact on net profit.
Excluding revaluation effect, the company is pleased to report a net operating profit of CHF 133.3 million, compared with CHF 124.7 million in the previous year – an increase of 6.9%. This was primarily a result of higher rental income on account of the portfolio growth, as well as of profit from the sale of development real estate in the Projects & Development division.
Given the pleasing increase in profits, the growth potential from the expansion into Western Switzerland and the stable business development, the Board of Directors will propose a profit distribution of CHF 7.00 per share at the annual general meeting scheduled for 8 April 2022, an increase of CHF 0.25. This is composed of a dividend of CHF 3.50 per share and a distribution of CHF 3.50 per share from capital reserves, which is tax-free to Swiss private investors.
Real Estate division performs very well
Allreal achieved an excellent result in the Real Estate division. With the expansion of the portfolio in Western Switzerland, the market value of investment real estate increased to CHF 5.11 billion. The properties newly added to the portfolio have been contributing to net income since mid-October 2021 and had already generated rental income of CHF 2.2 million by the end of the year. An office property in Wetzikon ZH acquired in the second half of the year 2020 contributed in the reporting period for the first time over the full 12 months to earnings. Together with the properties from the Grünhof site and Hardstrasse 299/301 in-house projects in the city of Zurich that were realised and let, rental income went up to CHF 204.4 million in the financial year 2021 from CHF 200.4 million in 2020.
Unlike in the previous year, waived rent payments in connection with the coronavirus crisis were no longer significant and came to just CHF 0.5 million (2020: CHF 1.5 million).
Real estate expenses amounted to CHF 27.8 million, compared with CHF 27.9 million in 2020). This resulted in an expense rate of 13.6% (2020: 13.9%). It is to be assumed that the expense rate will settle in the future around an average of 15% as a result of additional investment in the area of ESG.
Owing to low losses of earnings and stable real estate expenses, Allreal’s net yield was high (4.0%), underlining the quality of both its existing portfolio and the newly acquired yield-producing properties in Western Switzerland.
Owing to a reduction in the discount and capitalisation rates, the continuing low vacancy rate and stable rental income, the portfolio as a whole was revalued upwards by CHF 64.3 million. The revaluation carried out by the external property valuer, as well as the changes in the portfolio, led to the market value of the overall portfolio being increased by around 12.8% to CHF 5.11 billion.
Within the Real Estate division, Allreal recorded a net profit excluding revaluation effect of CHF 123.4 million (2020: CHF 118.6 million).
Projects & Development division benefits from high sales proceeds
In the financial year 2021, earnings from Allreal’s Projects & Development division were considerably higher than in the previous year (CHF 53.4 million, up from CHF 46.6 million in 2020). The company benefited strongly from positive one-off effects resulting from the sale of development real estate.
The market situation for the Realisation department was challenging. The impact of the coronavirus was particularly evident in inefficiencies in the construction process. In some cases, work was scheduled but had to be postponed at short notice, which led to a high degree of flexibility being required in the construction process. In addition, supply shortages made planning and using construction materials more difficult. Nevertheless, Allreal managed to complete practically all the projects that were terminated in the period under review at the handover stage on time and to the required quality. However, these circumstances all had a noticeable effect on margins.
Even in the previous year, the volume of projects completed was less dynamic than expected owing to the economic situation. This pattern continued in the period under review – albeit to a lesser extent – resulting in a figure of CHF 343.2 million, compared with CHF 363.4 million in 2020. Earnings from the Projects & Development division’s Realisation department amounted to CHF 24.5 million in the period under review (2020: CHF 33.7 million). The gross margin in third-party business fell to 9.1%.
Allreal disposed of two pieces of land from its development reserves in the period under review. As with the sale of residential real estate, the sale of development real estate generated sizeable income of CHF 21.0 million, compared with CHF 3.7 million in 2020.
Operating expenses fell by 7.4% year on year to CHF 40.2 million (2020: CHF 43.4 million). This resulted in an operating profit of CHF 20.9 million (2020: CHF 10.6 million).
The secured order backlog as at the cut-off date amounted to around CHF 694 mil-lion, corresponding to capacity utilisation for around two years. In addition, the Development department manages in-house and third-party projects with a potential construction volume of around CHF 1.9 billion.
The Projects & Development division recorded a net profit of CHF 13.8 million in the period under review, compared with CHF 7.8 million in the previous year.
Stable financing situation
As at the cut-off date, financial liabilities had increased to CHF 2.73 billion, up by around CHF 547 million on the previous year. The average interest rate for financial liabilities had decreased again to 0.61% by 31 December 2021, by which point the average fixed-interest period had decreased to 44 months from 49 months a year earlier, which is relatively low.
In the financial year 2021, Allreal issued a 0.6% bond issue of CHF 250 million maturing in 2030, meaning that the company had refinanced 49.4% of financial liabilities through the capital market by the cut-off date. Fixed-rate mortgages accounted for 27.9% and fixed advances for 22.7%.
Group equity rose to CHF 2.56 billion, corresponding to a net asset value (NAV) per share of CHF 177.25 before deferred taxes. The equity ratio at the end of the year amounted to 44.1% and net gearing to 103.7%. This means that the company still has considerable debt capacity of around CHF 1.2 billion.
Growth path supports positive outlook for the financial year 2022
As a result of the expansion of its portfolio in Western Switzerland, Allreal is expecting income from real estate and in turn profits in the Real Estate division to increase. In the Projects & Development division, the company is expecting income from business activity to stabilise. Thus, the tried-and-tested business model that combines real estate with projects and development endures.
Allreal therefore expects net operating profit for the financial year 2022 to exceed the level of the previous year.
Allreal combines a stable-income property portfolio with the activities of a general contractor (development and realisation). The company’s property portfolio is worth around CHF 5.1 billion. During the 2022 financial year, the volume of projects completed by the Projects & Development division amounted to CHF 320 million. The property company employs more around 240 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.