CA Immo achieves record result – Consolidated net income increased by 29%
• Recurring earnings (FFO I) up 13% on last year to € 133.3 m (€ 1.43 per share); annual target of at least € 125 m solidly exceeded
• Rental income increased by 15% to € 220.7 m (2018: € 192.4 m)
• High revaluation result of € 462.8 m reflects profitable development activity (three project completions in 2019) and excellent market environment, especially in Germany
• Highest consolidated net profit in the company's history at € 393.3 m (+29%)
• Property assets increased by 16% to € 5.2 bn driven by strong organic growth
• Return on equity up to 14.0% (2018: 12.1%)
• EPRA NAV per share at € 38.37 (+15%)
CA Immo presents another extraordinarily good result for the year as a whole. With a significant increase in recurring earnings (FFO I +13%) and rental income (+15%), the company is benefiting from the successful development and acquisition activities of previous years. Two high-quality project completions were added to the investment portfolio in 2019. The resulting continuously growing, efficiently managed portfolio (occupancy rate: 96%; total property assets: € 5.2 bn) forms the stable backbone of the company's performance and delivers sustainable, calculable rental income.
Andreas Quint, CEO of CA Immo: "Thanks to the profitable portfolio growth of recent years, we were able to significantly exceed the financial target set for 2019 to increase sustainable profitability, improve all profitability ratios and achieve another record consolidated net income. But even our successful business development is currently overshadowed by the global COVID-19 pandemic, the effects of which on our company cannot be fully assessed at this time. Thanks to the high quality of our portfolio's locations and buildings, the sector-diversified and high-quality tenant structure and our very robust balance sheet and high liquidity, we consider ourselves well equipped to meet this chal-lenge and all its economic consequences with a high degree of resilience and stability. Our investment grade rating Baa2 with stable outlook was last confirmed by Moody's on March 18, 2020."
Results of the business year 2019
FFO I, a key indicator of the Group’s long-term earning power, is reported before taxes and adjusted for the sales result and other non-recurring effects. In 2019, a FFO I of € 133.3 m was generated, 12.5% above the previous years’ value of € 118.5 m. FFO I per share stood at € 1.43 at the reporting date (2018: € 1.27 per share). The FY 2019 guidance of > € 125 m was therefore clearly exceeded. Analog to previous quarters, this underlines the robust and very strong operative performance independent from the revaluation result, which is also the basis for CA Immo’s sustainable dividend policy. FFO II, which includes the sales result and applicable taxes and indicates the Group's overall profitability, was € 122.3 m compared to € 111.3 m in 2018 (+9.8% compared to the previous year). FFO II per share stood at € 1.31 (2018: € 1.20).
Rental income increased by 14.7% to € 220.7 m in 2019. Adjusted for the IFRS 16 effect of € 10.2 m, rental income amounted to € 210.5 m, an increase of 9.4% year-on-year. In addition to the successful management of the investment portfolio with a high occupancy rate, this positive development is related to the portfolio growth in 2018. In addition to the project completions of the office building on Heidestrasse (Berlin), InterCity Hotel Frankfurt Central Station, Orhideea Towers (Bucharest) and ViE (Vienna), the acquired office buildings Warsaw Spire C (Warsaw), Campus 6.1 (Bucharest) and Visionary (Prague) made a clearly positive contribution year-on-year.
The net result from renting attributable to leasing activities rose by 11.2% (from € 175.2 m to € 194.7 m) after the deduction of direct management costs. Adjusted for IFRS 16 effects, net rental income stood at € 193.4 m (+10.4% year-on-year). The operating margin on letting activities (net rental income relative in relation to rental income) – an indicator of the efficiency of the rental business – increased from 91.0% in the previous year to 91.9%.
The earnings contribution from the trading portfolio totalled € –1.3 m (2018: € 7.4 m). At € 15.6 m, profit from the sale of investment properties was above the previous year's value of € 8.2 m. The biggest contribution came from the sale of a non-strategic property in Munich.
Indirect expenditures fell by 18.4% from € –53.2 m in the previous year to € –43.5 m in 2019, mainly driven by a significant reduction of material costs year-on-year. In particular, an increase in the item “own work capitalized” to € 14.3 m (2018: € 9.8 m) had a clearly positive effect on the total indirect expenditure.
Earnings before interest, taxes, depreciation and amortization (EBITDA) of € 171.7 m were up 18.4% on the previous year's level of € 145.1 m. This rise was predominantly driven by a clearly higher rental result and reduced indirect expenditure.
The revaluation result of € 462.8 m as at 31 December 2019 was highly positive and significantly above the previous years’ level (2018: € 276.5 m). This result reflects the company's profitable development activity (three project completions in 2019 as well as five planned project completions in 2020) and the extremely positive market environment in the core markets of CA Immo, specifically in Germany. The largest contribution to the revaluation gain was delivered, on the one hand, by value adjustments due to construction progress on development projects and, on the other hand, by existing investment properties on the basis of the positive market development, particularly in the core markets of Berlin and Munich. In combination with strong fundamental data on the letting markets, the booming investment activity in the German property market and further yield compression continued with a direct effect on CA Immo's high-quality property portfolio in the core markets of Munich, Frankfurt and Berlin.
Earnings before interest and taxes (EBIT) stood at € 633.7 m, 43.3% up from the corresponding figure for last year of € 442.3 m – in particular due to the high revaluation result.
The financial result for 2019 was € –94.4 m, compared to € –46.1 m last year. The Group´s financing costs, a key element in recurring earnings, went up mainly due to the higher financing volume to € –43.1 m (2018: € –37.0 m). The result from derivatives amounted to € –59.2 m (2018: € –21.3 m). The figure for 2019 includes a derivative valuation of the convertible bond issued in October 2017 in the amount of € –38.4 m. This instrument consists of a debt component and, due to the cash repayment option of CA Immo, an embedded derivative that must be separated. The embedded derivative of the convertible bond is reported at fair value.
The interest rate development over the year 2019 also led to a negative valuation effect on the company's interest rate derivatives. At € 11.5 m, the result from financial investments was just above the value for the reference period (2018: € 11.1 m). This result includes income from dividends of € 4.7 m (2018: € 3.8 m).
Earnings before taxes (EBT) of € 593.3 m increased by 36.1% year-on-year (2018: € 396.2 m). The result for the period reached € 393.3 m, 28.8% above the previous year´s value of € 305.3 m and the highest level in the company's history. Earnings per share amounted to € 4.23 (2018: € 3.28 per share).
Substantial increase in shareholder value
The net asset value (IFRS NAV) per share stood at € 31.90 on 31 December 2019 against € 28.37 at the end of 2018, an increase of 12.4%. The EPRA NAV was € 38.37 per share as at the key date (2018: € 33.30 per share), an increase of 15.2%. The EPRA NNNAV – after adjustments for financial instruments, liabilities and deferred taxes – stood at € 33.69 per share as at 31 December 2019 (€ 30.08 per share in 2018). Despite a balance sheet expansion of around 10%, the equity ratio was stable at 50.4% (31.12.2018: 49.3%) on the reporting date.
As at the key date, interest-bearing liabilities amounted to € 2,097.3 m (2018: € 1,943.4 m). Cash and cash equivalents stood at € 439.1 m on the balance sheet date (2018: € 374.3 m). Net debt (interest-bearing liabilities less cash and cash equivalents) increased from € 1,566.9 m in the previous year to € 1,656.3 m. Gearing (ratio of net debt to shareholders’ equity) was 55.8% at year-end (2018: 59.4%). The loan-to-value ratio (financial liabilities less cash and cash equivalents to property assets) stood at 31.9%, after 35.0% in 2018. The Group's average financing costs (incl. hedging costs) stood at 1.8% as of the key date (2018: 1.7%). Taking the € 500 m benchmark bond issued in January 2020 into account, the average financing costs stand at around 1.6%.
Mainly as a result of construction progress of active development projects as well as the positive revaluation result due to the good market environment, the book value of property assets increased by 16% over the course of the year to € 5.2 bn as at reporting date (2018: € 4.5 bn). Property assets include investment properties (83% of the total portfolio) and investment properties under develop-ment (17%). Of the investment portfolio with a value of approx. € 4.3 bn (31.12.2018: € 3.8 bn), 47% account for CEE, 40% for Germany and 13% for Austria. The portfolio yield was 5.5% 1) (2018: 5.8%)2); the occupancy rate stood at 96.1%1) (2018: 94.4%2)). Properties under development include projects under development and land reserves with a total book value of around € 878.5 m (incl. short-term property assets), of which Germany accounts for 98% and CEE for 2%.
1) Excl. the project completions Orhideea Towers (Bucharest), ViE (Vienna) and MY.O (Munich), which are still in the stabilisation phase
2) Excl. the project completions Orhideea Towers, Campus 6.1 (Bucharest), ViE (Vienna) and Visionary (Prague), which were still in the stabilisation phase as at 31 December 2018
Successful sale of the non-strategic stake in Immofinanz
In 2019, CA Immo successfully sold the remaining stake in Immofinanz AG (a share volume of around 4.9% of the share capital issued by Immofinanz) on the market. The total investment generated a return on investment of € 19 m, which corresponds to some 15% of the investment volume of around € 130 m. CA Immo will use the proceeds from this non-strategic disinvestment to maintain its strong cash-position and invest in its core activities of investing, managing and developing modern office properties in its core markets.
All economic forecasts have been revised in recent weeks on the occasion of the global COVID-19 pandemic. As a consequence, we expect challenging conditions on CA Immo's core markets for the time being. The full impact on individual sectors and regions cannot yet be conclusively assessed, but is subject to ongoing evaluation by CA Immo. With around 90% office share of the investment portfolio, which is almost fully occupied (occupancy rate: 96.1%), a very good quality of location and buildings, and a diversified, high-quality tenant structure with a wide range of sectors, CA Immo is highly resilient. The robust balance sheet (50.4% equity ratio) and very comfortable liquidity position (cash and cash equivalents of € 439.1 m as at 31.12.2019 and additional net income of around € 400 m from the benchmark bond issued in February 2020) provide stable backing and enable investments to be made even in a more difficult market environment. Beyond that, CA Immo takes a variety of measures to minimise potential negative effects on the company. The CA Immo Investment grade long-term issuer rating Baa2 with positive outlook was last confirmed by Moody's on 18 March 2020.
In order to protect the safety of its tenants and staff as effectively as possible, CA Immo provides ongoing information on epidemiological and medical recommendations from local authorities and the WHO. According to the recommendations of the authorities, CA Immo also ensures that its buildings are equipped with adequate disinfection equipment and that general surfaces are cleaned and disin-fected particularly frequently.
Proposed dividend for business year 2019
For business year 2019, the Management Board proposes a dividend of € 1.00 per share with divi-dend entitlement. Compared to last year, this represents a rise of approximately 11%. In relation to the closing rate as at 31 December 2019 (€ 37.45), the dividend yield was approximately 3%. The profit appropriation proposal reflects the current assessment of the Management and Supervisory Boards. Since neither the duration of the COVID-19 crises nor the further financial, general business and real estate specific impacts as well as the timing of the Annual General Meeting of 2020 can be predicted with certainty, the Management and Supervisory Boards will evaluate the proposal for de-cision until the Annual General Meeting on an ongoing basis and reserve the right to modifications.
The Annual Report 2019 of CA Immobilien Anlagen AG is available at: