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Balance sheet as at 31 March 2019: CA Immo increases rental income and long-term earnings (FFO I)

Major portfolio expansion in 2018 raises rental income (+9%) and recurring earnings (+7%)

  • Recurring earnings (FFO I) of € 29.6 m up 6.6% on last year (€ 27.7 m) 
  • Net rental income increased by 9.4% to € 46.7 m (2018: € 42.7 m) 
  • Consolidated net profit of € 5.4 m (–81.2% year-on-year) impacted mainly by non-cash valuation effects in connection with the convertible bond plus interest rate hedges (financial result)
  • EPRA NAV (undiluted) per share at € 33.46 (31 December 2018: € 33.30)
  • Dividend increase to 90 cents per share (+12.5%) approved 
  • The annual target for recurring earnings – an increase in FFO I on last year’s value of €118.5 m to over €125 m – is confirmed

 

The results for quarter one of 2019 have followed seamlessly on from a highly successful year of growth and profits in 2018. With a 9% rise in the result from renting driving, inter alia, an increase in FFO I of 7%, CA Immo benefits from last year’s intensive development and acquisition activity. With the market environment in Germany remaining dynamic, productive development activity is set to continue in 2019. The company’s efficiently managed asset portfolio (occupancy rate: 94.4%), which is continually expanding, will provide a stable foundation for corporate performance based on sustainable rental revenue.

According to Andreas Quint, CEO of CA Immo: “Our positive operational start to 2019 follows logically on from a strong period of expansion last year. Having expanded our property assets with four completed projects and three portfolio acquisitions in 2018, we are now beginning to reap the rewards of portfolio growth – and we will hold the same course in 2019. As of the end of May, preletting for the three office projects in Berlin that are scheduled for completion in the second half of 2019 stands at 90% to 100%.”

Results of the first quarter of 2019

FFO I, a key indicator of the Group’s recurring earning power, is reported before taxes and adjusted for the sales result and other non-recurring effects. In the first three months of 2019, an FFO I of € 29.6 m was earned, 6.6% above the previous year’s value of € 27.7 m. FFO I per share stood at € 0.32 on the key date, an increase of 6.7% on the 2018 value of €0.30 per share. FFO II, which includes the sales result and applicable taxes, stood at € 25.1 m on the key date, –3.7% below the 2018 value of € 26.0 m. FFO II per share amounted to € 0.27 (€ 0.28 per share in 2018).

Rental income rose by a strong 9.8% to € 50.7 m (adjusted for the IFRS 16 effect in the amount of € 7.6 m) in the first three months of 2019. This positive development was linked to portfolio expansion in 2018. Completion of the KPMG building in Berlin, InterCity Hotel Frankfurt Hauptbahnhof and Orhideea Towers in Bucharest alongside the acquisition of the Warsaw Spire C office building in Warsaw, Campus 6.1 in Bucharest and the Visionary building in Prague delivered a positive contribution in terms of yearly comparisons. The net result from renting after the first quarter was € 46.7 m, up 9.4% on the 2018 value of € 42.7 m. The efficiency of letting activity (also adjusted for the IFRS 16 effect), measured as the operating margin in rental business (net rental income in relation to rental income), was 92.2%, stable compared to the previous year’s value of 92.5%.

As at the key date, the result from trading and construction works was € –0.4 m (€ 4.5 m in 2018). The result from the sale of investment properties stood at € 1.3 m on 31 March 2019 (€ 3.6 m in 2018). As a result of the developments outlined above, earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 6.4% to € 38.1 m (compared to € 40.8 m in 2018).

The cumulative revaluation result of € 16.1 m on the key date developed positively compared to the previous year’s reference value (€ –0.6 m in 2018). The largest contributions to the revaluation gain in terms of amount came from value adjustments linked to construction progress on the development projects Cube, MY.B and Kunstcampus (BT2) office building in Berlin as well as MY.O and NEO in Munich.

Current results of joint ventures consolidated at equity are reported under ‘Result from investments in joint ventures’ in the consolidated income statement. The low contribution to earnings of € 0.4 m (€ 17.0 m in 2018) reflects the reduced volume of joint ventures as part of the strategic streamlining of the portfolio. Earnings before interest and taxes (EBIT) were € 53.5 m, 5.5% below the 2018 result of € 56.6 m.

The financial result stood at € –39.7 m after the first three months (€ –18.0 m in 2018). Despite a higher financing volume, the Group’s financing costs, a key element in recurring earnings, were essentially stable (–0.9% down on the 2018 value at € –9.5 m). The result from interest rate derivative transactions includes non-cash valuation effects in connection with the convertible bond (€ –15.8 m) plus interest rate hedges and amounted to € –28.2 m (€ –9.3 m in 2018). The convertible bond issued in 2017 comprises a debt component and a separable embedded derivative based on the option of repayment in CA Immo shares. The attributable fair value of the derivative corresponds to the difference at the time of issue between the attributable fair value of the convertible bond and the attributable fair value of the debt component.

Earnings before taxes (EBT) totalled € 13.7 m, 64.4% below the previous year’s value of € 38.6 m, largely because of the somewhat lower financial result. On the key date, taxes on earnings stood at
€ –8.3 m (€ –9.7 m in 2018). The result for the period was € 5.4 m, 81.2% below the 2018 value of
€ 28.8 m. Earnings per share amounted to € 0.06 on the balance sheet date (€ 0.31 per share in 2018).

Further increase in shareholder value

The net asset value (NAV = IFRS equity) per share (undiluted) stood at € 28.50 on 31 March 2019 against € 28.37 at the end of 2018. The EPRA NAV (undiluted) was € 33.46 per share as at the key date (31.12.2018: € 30.30 per share). The EPRA NNNAV (undiluted) – after adjustments for financial instruments, liabilities and deferred taxes – stood at € 30.02 per share as at 31 March 2019 (€ 30.08 per share on 31.12.2018). The equity ratio of 48.4% remained nearly unchanged and within the strategic target range (the comparative value for the end of 2018 was 49.3%).

The Group’s financial liabilities stood at € 2,028.5 m on the key date (against € 1,943.4 m on 31.12.2018). Cash and cash equivalents stood at € 403.3 m on the balance sheet date (€ 374.3 m on 31.12.2018). Netdebt (interest-bearing liabilities less cash and cash equivalents) stood at € 1,622.9 m at the end of March 2019 against € 1,566.9 m in 2018. The loan-to-value ratio based on market values as at 31 March 2019 was 35.6% (net, taking account of Group cash and cash equivalents) compared to 35.0% at the start of the year. On the key date, gearing was 61.2% (59.4% on 31.12.2018).

As at key date 31 March 2019, CA Immo’s total property assets stood at € 4.6 bn (31.12.2018: € 4.5 bn). Property assets include investment properties (€ 3.8 bn or 83% of the total portfolio) and investment properties under development (€ 709 m or 16%), the remaining 1% of the total property assets is intended for trading or sale (short-term property assets). As at the key date, Germany accounted for 45% of total property assets, 12% are located in Austria and 43% in CEE. Unchanged to the end of 2018, the portfolio yield was 5.8% ) and the occupancy rate stood at 94.4%1). Properties under development include projects under construction and land reserves with a total book value of around € 709.0 m (31.12.2018: € 651.6 m), of which Germany accounts for 98% and CEE for 2%.

The CA Immo share also continued its positive development in the first quarter of the year. The share price rose by 17% since the start of the year to stand at €32.20 on the final day. By comparison, the ATX and EPRA, the European index for real estate (excluding the UK), reported increases of approximately 11% and 12% respectively.

Outlook: continued growth of property assets, earnings and dividend

Demand for (office) projects developed by CA Immo remains high. In the second quarter 2019, long-term rental agreements were concluded for more than 10,000 sqm of floor space at MY.B in Berlin and ONE in Frankfurt, both of which are under construction. Pre-letting for the three Berlin office projects due to be completed in the second half of 2019 was 89% (for MY.B), 100% (Kunstcampus office building) and 93% (cube berlin) as of the end of May. CA Immo plans to transfer two of the three buildings (MY.B and the Kunstcampus office building) to the portfolio on completion; cube berlin was sold to an investor before construction work started under the terms of a forward sale. The annual target for recurring earnings – an increase in FFO I on last year’s value of €118.5 m to over €125 m – is hereby confirmed.

Dividend raised to €0.90 per share

Shareholders attending the Ordinary General Meeting on 9 May 2019 approved the Management Board´s proposal to raise the dividend for the sixth time in succession on the basis of the strong operational result and pay 90 cents per share for business year 2018. The dividend therefore rose by 12.5% in yearly comparison (2018: 80 cents per share). This corresponds to the long-term objective of paying out approximately 70% of long-term revenue (FFO I).

The Report as at 31 March 2019 of CA Immobilien Anlagen AG is available at:
www.caimmo.com/en/investor-relations/financial-reports/

1)  Excl. the office buildings Orhideea Towers (Bucharest), ViE (Vienna) and Visionary (Prague), which have been completed in 2018 and are still in the stabilisation phase