A condensed version of IMMOFINANZ Group’s income statement for the 2014/15 and 2013/14 financial years is presented in the following table:
All amounts in TEUR 1 May 2014–
30 April 2015 30 April 20141 May 2013–
Rental income 426,280.3 478,533.6
Results of asset management 313,339.8 383,852.6
Results of property sales 43,453.2 5,664.4
Results of property development 11,000.5 -45,036.3
Other operating income 22,336.4 17,084.6
Other operating expenses -73,646.2 -91,089.2
Results of operations 316,483.7 270,476.1
Other revaluation results -100,481.0 199,206.2
Operating profit (EBIT) 216,002.7 469,682.3
Financial results -565,177.8 -248,578.9
Earnings before tax (EBT) -349,175.1 221,103.4
Net profit for the period from continuing operations -361,372.9 71,950.2
Net profit from discontinued operations1 0.0 104,980.6
Net profit for the period -361,372.9 176,930.8
1 The net profit from discontinued operations in 2013/14 include the proportional share of results from BUWOG. Results of asset management
Results of asset management include rental income, other revenues, operating income and operating costs as well as expenses from investment property. Rental income fell by 10.9% to EUR 426.3 million in 2014/15 (2013/14: EUR 478.5 million). This decline resulted, above all, from the deterioration of the economic environment in Russia, where IMMOFINANZ Group has granted temporary rental reductions to the tenants in its Moscow shopping centers, and also reflected the sale of properties during the year. Since the esti- mates for the future development of the Russian economy are still connected with substantial uncertainty, the current situation leads to expectations that the temporary reductions and fixed exchange rates for the tenants in IMMOFINANZ’s Moscow properties will have to be continued on a quarterly basis.
In like-for-like comparison, rental income was 10.0% lower than the previous year at EUR 387.2 million in 2014/15. This calculation only includes properties that were held by IMMOFINANZ Group during both financial years, i.e. an adjustment was made for new acquisitions, completions and sales (further information is provided in the portfolio report on page 71).
Revenues declined – similar to rental income – by 10.5% to EUR 546.6 million. Therefore, results of asset management were 18.4% below the previous year at EUR 313.3 million in 2014/15. This decrease exceeded the change in revenues and rental income due to an increase in property expenses that resulted primarily from receivables write-offs of EUR 10.7 million in Russia. The remaining balance of outstanding rents receivables in Russia, after the write-offs, amounted to EUR 15.0 million as of 30 April 2015.
Results of property sales
Results of property sales amounted to EUR 43.5 million in 2014/15 (2013/14: EUR 5.7 million). The optimisation and adjustment of the portfolio was reflected in the sale of several smaller retail properties in Austria and three residential projects in Houston, USA. The sale of three logistics properties in Switzerland to a Credit Suisse real estate fund marked the strategic exit from the Swiss market. IMMOFINANZ Group‘s logistics commitment in Poland and the Czech Republic was reduced, as planned, through the sale of two prop- erties (Bokserska Distribution Park in Warsaw and Westpoint Distribution Park in Prague). After the end of the reporting year, the Dutch self-storage chain City Box with 23 locations was sold to Shurgard. A residential property portfolio in Vienna was sold to an Austrian insurance group, and the Leonardo Hotel Vienna – the last hotel in the IMMOFINANZ portfolio based on the primary use – was sold to the lessee.
These sales, which also took place after the end of the 2014/15 financial year, will further reduce the share of the “Other“ business segment in the standing investment portfolio.
Results of property development
Results of property development cover the sale of real estate inventories as well as the valuation of development projects completed during the reporting year or currently in progress. In 2014/15 results of property development equalled EUR 11.0 million (2013/14: EUR -45.0 million). Positive effects resulted, above all, from the sale of apartments in the Gerling Quartier, Cologne, and the comple- tion and opening of the Tarasy Zamkowe shopping center in Lublin, which has 38,000 sqm of rental space.
The first shopping center in the new IMMOFINANZ brand – VIVO! – opened in October 2014. It is located in Piła, Poland, has approx. 24,000 sqm of rental space and an occupancy rate that had already reached 91.0% on the opening date. Three locations in the STOP. SHOP. retail park chain were also completed during the reporting year.
Results of operations
Results of operations rose by 17.0% year-on-year to EUR 316.5 million in 2014/15 (EUR 270.5 million). The decline in results of asset management was more than offset by higher earnings contributions from property sales and property development. Other operat- ing expenses (overhead costs) fell by 19.1% to EUR -73.6 million (2013/14: EUR -91.1 million), among others due to a reduction in legal, auditing and consulting fees and personnel expenses.
EBIT, financial results and EBT
EBIT fell by 54.0% year-on-year to EUR 216.0 million, and other revaluation results were negative at EUR 100.5 million (2013/14: EUR 199.2 million). Revaluation results adjusted for foreign exchange effects amounted to EUR -312.3 million (2013/14: EUR -179.7 mil- lion) and were related primarily to the Russian property portfolio at EUR -197.0 million. The decline in the value of the Russian port- folio resulted, above all, from the temporary reduction in rental income and an increase in the discount rates used for valuation – both as a consequence of the uncertainty over economic developments in Russia. In addition, property-specific factors led to changes in the value of several East European office properties: higher capital costs for current and planned modernisation projects (Bratislava and Prague) and a temporary increase in the vacancy rate due to the departure of larger tenants (Warsaw). In Warsaw, the high pace of new construction in recent years has had an effect on the overall market situation through an increase in vacancies. Positive val- uation effects were recorded, in contrast, in Austria and Germany where the property markets recorded sound development due to the current low interest rate level.
Financial results declined to EUR -565.2 million (2013/14: EUR -248.6 million). Financing costs amounted to EUR -200.4 million (2013/14: EUR -193.8 million), but the net total remained stable at EUR -175.2 million (2013/14: EUR -175.3 million). Financial results also included non-cash foreign exchange effects of EUR -270.6 million (2013/14: EUR -126.9 million), above all from the valuation of the USD financing for the Moscow shopping centers. This represents, more or less, the counterpart to the currency-related value increase in the Russian portfolio, which equalled EUR 224.0 million. Other financial results (EUR -81.7 million; 2013/14: EUR -12.7 mil- lion) were negatively affected, among others, by a EUR 49.3 million increase in the liability from the exchangeable bond 2014–2019. The strong rise in the BUWOG share price (approx. +20.6% since the placement of the exchangeable bond) resulted in an increase in the liability to EUR 425.0 million (nominal value: EUR 375.0 million). Accounting rules prevent the write-up of the BUWOG shares held by IMMOFINANZ (as a counterpart to the liability) because the investment in the BUWOG Group is accounted for at equity. However, these non-cash valuation effects of EUR -49.3 million from the exchangeable bond are contrasted by undisclosed reserves. The undisclosed reserves in the roughly 48.8 million BUWOG shares amounted to approx. EUR 155.7 million1 as of 30 April 2015.
The decline in the share of profit/loss from equity-accounted investments to EUR -37.6 million (2013/14: EUR 66.2 million) resulted chiefly from an impairment loss of EUR -24.4 million recognised to the 25.0% investment in TriGránit following its sale at the end of July 2015. This transaction is subject to the approval of the responsible authorities and the closing is expected to take place in autumn 2015. In the previous year, this position included a positive valuation effect of EUR 24.1 million from the BUWOG investment. Earnings before tax (EBT) equalled EUR -349.2 million in 2014/15, compared with EUR 221.1 million in 2013/14.
Net profit
The negative effects from the foreign exchange-adjusted valuation of properties and the decrease in financial results led to a decline in net profit to EUR -361.4 million (2013/14: EUR 72.0 million, resp. EUR 176.9 million incl. 100.0% of BUWOG).
Earnings per share
Diluted earnings per share for the 2014/15 financial year equalled EUR -0.35 (2013/14: EUR 0.17).
1 48.8 million BUWOG shares x EUR 18.09 (share price on 30 April 2015) - EUR 14.9 (book value per share on 30 April 2015) x 48.8 million shares = EUR 155.7 million 80 Group ManaGeMent report – earninGs, Balance sheet anD cash Flow analysis