Allreal achieves record operating result in 2022 financial year
Ad hoc announcement pursuant to Art. 53 LR
- Net operating profit hits new record
- Revaluation gains confirm real estate portfolio is robust
- Future growth underwritten by large pipeline of developments
- CO2 reduction path set as part of ESG targets
- Proposal for a stable profit distribution of CHF 7.00 per share
Glattpark, 1 March 2023: In the period under review, Allreal achieved a record-breaking net operating profit of CHF 142.9 million, which is significantly above the previous year’s result (2021: CHF 133.3 million). This 7.2% increase was primarily the result of higher rental income in the Real Estate division, consistently low financial expenditure, and positive one-off effects relating to tax expenses.
Factoring in the revaluation effect, the net profit amounted to CHF 154.7 million, which is actually lower than in the previous year (2021: CHF 182.6 million). This can be explained by the fact that revaluation gains for investment real estate were lower than the previous year at CHF 16.5 million (2021: CHF 64.3 million).
The Board of Directors is proposing to the annual general meeting to be held on 21 April 2023 an unchanged distribution of CHF 7.00 per share. This is composed of an ordinary 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 increases rental income significantly
Within the Real Estate division, Allreal increased its rental income to CHF 214.2 million, which is up 4.8% on the previous year (2021: CHF 204.4 million). This considerable jump is the result of the portfolio of yield-producing properties being expanded in Western Switzerland and the vacancy rates remaining low.
The cumulative vacancy rate stayed in line with the previous years at 1.6%, which is very low by industry standards. The low vacancy rate also had a positive impact on the net yield, which stood at a respectable 3.8%.
Direct expenses for yield-producing properties in the period under review remained stable, sitting just below the value from the previous year at CHF 27.4 million. The expense rate was 12.8%.
By the end of December 2022, the company had sold two residential properties in Basel for CHF 62.5 million due to ESG considerations and a lack of potential to increase value, putting it around 2.6% above market value.
The valuation of investment real estate by the external real estate valuer was heavily impacted by the sharp rise in discount and capitalisation rates by around 40 basis points on average. Higher investments relating to the implementation of the sustainability strategy were also factored into the valuation models.
Nevertheless, rising rents and the generally high quality of the portfolio with low vacancy rates and real estate expenditure resulted in revaluation gains – a confirmation of the value of the portfolio.
Despite the sale of the two properties in Basel, the market value of the real estate portfolio was only CHF 8.6 million lower than on the cut-off date in the previous year, amounting to CHF 5.10 billion (31 December 2021: CHF 5.11 billion).
Within the Real Estate division, Allreal recorded a net profit excluding revaluation effect of CHF 133.6 million (2021: CHF 123.4 million).
Projects & Development division makes welcome contribution to profit
Within the Projects & Development division, Allreal saw a slight improvement on the earnings from the previous year, recording CHF 54.6 million compared to CHF 53.4 million in 2021. As in the previous year, the company benefited from positive one-off effects resulting from the sale of development real estate, while seeing a boost in profitability in third-party business.
Despite the challenging market conditions caused by supply shortages affecting building materials and rising production costs, the Realisation department still managed to increase the gross margin for third-party projects to an impressive 11.0% (2021: 9.1%). The volume of projects completed by the Projects & Development division in the year under review was CHF 319.6 million (2021: CHF 343.2 million). Of this volume, in-house projects accounted for 22.4%. Earnings from realisation Projects & Development increased to CHF 27.2 million (2021: CHF 24.5 million).
In Rümlang ZH, the company sold the last part of the Bäuler development reserve and benefited from the high land prices. Together with the sale of residential real estate in Winterthur ZH and three projects in Western Switzerland, the sale of development real estate generated sizeable income of CHF 17.2 million (2021: CHF 21.0 million).
Operating expenses were up 20.4% on last year, amounting to CHF 48.3 million (2021: CHF 40.2 million). The main reason for this increase is the expansion into Western Switzerland during the previous year. The operating profit amounted to CHF 13.9 million (2021: CHF 20.9 million).
The secured order backlog as at the cut-off date amounted to about CHF 611 million, corresponding to capacity utilisation for around two years. The potential investment volume worked on by the Development department is over CHF 2.0 billion. This department has an important role to play in releasing future growth potential and makes a significant contribution towards the workload of the Realisation department.
The Projects & Development division recorded a net profit of CHF 12.3 million during the 2022 reporting period (2021: CHF 13.8 million).
Allreal finances up to two thirds of financial liabilities through the capital market. Given the rising interest rates, the capital market was not drawn on additionally during the period under review.
As at the cut-off date, financial liabilities had been reduced by CHF 116.2 million compared to the previous year, taking them down to CHF 2.61 billion (31 December 2021: CHF 2.73 billion). Of this amount, bond issues accounted for 50.9%, fixed-rate mortgages for 21.0% and fixed advances for 28.1%.
The average interest rate for financial liabilities was sitting low at 0.86% on 31 December 2022. The average interest lock-in period amounted to 37 months (31 December 2021: 44 months).
Cutting the net finance debts improved the loan-to-value ratio and equity ratio significantly, thereby confirming that Allreal still has a stable financial foundation.
Group equity rose to CHF 2.60 billion, corresponding to a net asset value (NAV) per share of CHF 179.75 before deferred taxes. As at 31 December 2022, the equity ratio amounted to 45.6%, net gearing to 99.9% and interest coverage ratio to 11.5 (31 December 2021: 44.1% / 103.7% / 12.9).
Less profit expected for 2023
With rental income increasing, Allreal will achieve operating profit (EBIT) on a par with the previous year within the Real Estate division. The Projects & Development division will do less well despite rising fees and construction earnings, because these will be lower due to the cyclicality of recognising gains on sales in 2023.
Appreciably higher net financial expense and the absence of positive one-off tax effects mean an impact on net operating profit can be anticipated.
For fiscal year 2023, Allreal therefore expects its operating result to be lower than in 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.
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