3  Notes on the consolidated statement of comprehensive income

3.1  Income from renting investment real estate

 

2016

 

2015

     
 

32.7

 

31.5

 

140.6

 

143.4

 

173.3

 

174.9

The rental income is calculated as follows:

 

186.9

 

192.3

 

–9.6

 

–14.4

 

–4.0

 

–3.0

 

173.3

 

174.9

The accumulated vacancy rate for the 2016 financial year amounted to a total of 5.1% of projected rental income (2015: 7.5%), with commercial properties accounting for 2.4%, while residential properties accounted for 5.7% (2015: 5.0% and 8.0%, respectively).

The rest of the rental income breaks down as follows:

 

2016

 

2015

     
 

32.1

 

31.5

 

139.7

 

141.7

 

0.6

 

0.6

 

0.9

 

1.1

 

173.3

 

174.9

3.2  Direct expenses for rented investment real estate

 

2016

 

2015

     
 

–1.6

 

–2.2

 

–7.0

 

–6.5

 

–2.7

 

–2.3

 

–13.1

 

–20.8

 

–24.4

 

–31.8

The real estate expenses relate solely to the yield-producing properties in the Real Estate division.

The administrative and operating expenses break down as follows:

 

2016

 

2015

     
 

–3.9

 

–3.6

 

–1.5

 

–2.0

 

–0.6

 

–0.7

 

–2.6

 

–2.4

 

–8.6

 

–8.7

In 2016, real estate expenses for unlet properties amounted to CHF 0.6 million (2015: CHF 1.0 million).

3.3  Income from real estate management services

 

2016

 

2015

     
 

4.0

 

5.4

 

0.7

 

0.7

 

4.7

 

6.1

3.4  Earnings from sale of investment real estate

 

2016

 

2015

     
 

100.4

 

116.0

 

–1.6

 

–0.7

 

–93.2

 

–94.2

 

5.6

 

21.1

The period under review saw the sale of the commercial properties Lagerstrasse 41/45 in Zurich, Max Högger-Strasse 2 in Zurich, Alte Dübendorferstrasse 17 in Dietlikon and Badenerstrasse 141 in Zurich. After deduction of transaction costs, the sale resulted in earnings of CHF 5.6 million on a total selling price of CHF 100.4 million. In 2015, the sale of three properties produced earnings of CHF 21.1 million.

3.5  Earnings from Projects & Development division

 

2016

 

2015

     
 

414.7

 

467.0

 

–372.0

 

–418.6

 

42.7

 

48.4

 

232.1

 

126.3

 

–197.5

 

–108.3

 

34.6

 

18.0

 

6.1

 

11.5

 

0.6

 

0.9

 

84.0

 

78.8

Income from realisation Projects & Development consists of architects’ and project & development fees (CHF 29.3 million) and earnings from construction activity (CHF 16.9 million) (2015: CHF 36.8 million/CHF 13.6 million). This contrasts with directly offset sales deductions of CHF –3.5 million for construction insurance and guarantees, performance guarantees, bad debt allowances and third-party expenses arising from tendering (2015: CHF –2.0 million).

During the 2016 financial year, ownership of units under the projects Cholplatz Bülach (CHF 17.4 million), Lerchenbergstrasse Erlenbach (CHF 17.5 million), Holengass Meilen (CHF 2.9 million), Pfruendmatt Mettmenstetten (CHF 29.6 million), Stauffacher Steinen (CHF 14.5 million), Guntenbachstrasse Volketswil (CHF 4.6 million), Escherhof Wallisellen (CHF 4.2 million) and Guggach Zurich (CHF 141.4 million) was transferred to third parties, resulting in gains on sales of CHF 34.6 million.

Diverse income includes fees for third-party project development activities amounting to CHF 0.4 million and other earnings from commissions and services provided for third parties amounting to CHF 0.2 million.

3.6  Personnel expenses

 

2016

 

2015

     
 

–38.9

 

–43.5

 

–3.6

 

–3.7

 

–4.5

 

–5.6

 

–0.1

 

–0.1

 

–2.3

 

–2.6

 

–49.4

 

–55.5

A CHF 1.2 million past service cost was credited to employee pension expenses in application of IAS 19 (2015: CHF 1.1 million); see 3.11.

Other personnel expenses include spending on actual and flat-rate staff expenses (CHF –1.8 million), training and development (CHF –0.2 million), costs for the recruitment of new employees (CHF –0.2 million) and other directly attributable staff expenses (CHF –0.1 million).

On the balance sheet cut-off date, the staff headcount stood at 292 employees, corresponding to 276 full-time equivalents (31.12.2015: 337 employees/312 full-time equivalents).

3.7  Other operating expenses

 

2016

 

2015

     
 

–1.2

 

–1.4

 

–3.6

 

–3.8

 

–1.8

 

–2.3

 

–3.5

 

–4.1

 

–1.9

 

–1.7

 

–0.8

 

–0.6

 

–12.8

 

–13.9

Rental expenses relate to business premises and parking spaces in Zurich, Basel, Bern, Cham and St. Gallen. For its head office in Zurich, Allreal has an indexed lease which runs until 31 January 2018, with an annual rent of CHF 2.8 million. The leases for the other sites, with annual rents of CHF 0.7 million, have fixed terms, the longest of which runs until January 2022.

 

31.12.2016

 

31.12.2015

     
 

3.5

 

3.5

 

1.6

 

4.6

 

0.9

 

0.0

 

0.0

 

0.0

 

6.0

 

8.1

Administrative expenses include the cost of corporate communications, telecommunications, property insurance and office supplies.

Other general operating expenses consist essentially of costs for the operation, maintenance and repair of operating facilities, postage costs and the cost of pre-tax cuts in VAT.

3.8  Financial income

 

2016

 

2015

     
 

1.8

 

1.8

 

1.8

 

1.8

3.9  Financial expense

 

2016

 

2015

     
 

–7.4

 

–9.2

 

–23.1

 

–25.5

 

–9.6

 

–10.4

 

0.6

 

1.5

 

–39.5

 

–43.6

The expense for derivatives comprises interest paid of CHF –18.1 million (2015: CHF –20.4 million) in respect of interest rate swaps until terminated. In addition, in the period under review until the time of termination of all interest rate swaps, ineffective portions of the changes in market value and derivatives no longer qualifying for hedge accounting were taken to the income statement in the amount of CHF –4.2 million (2015: CHF –5.1 million). In connection with the recycling of the hedging reserves, CHF –0.8 million was charged to the income statement.

The financial expense for bond issues includes paid and accrued interest of CHF –9.4 million (2015: CHF –10.0 million) up to the balance sheet cut-off date and amortisation of CHF –0.2 million (2015: CHF –0.4 million) between the debt components and the redemption amounts.

Capitalised building loan interest of CHF 0.6 million (2015: CHF 1.5 million) breaks down into development real estate under construction (CHF 0.4 million) and investment real estate under construction (CHF 0.2 million), applying an average interest rate of 1.67 to 2.31% (2015: 2.10–2.30%).

The average interest rate on the outstanding financial liabilities is 1.67%, with an average interest lock-in period of 3.0 years for all financial liabilities (2015: 2.15% and 4.3 years).

3.10  Earnings per share/net asset value (NAV) per share

  

2016

 

2015

     
 

15 910

 

15 941

 

21

 

–31

 

15 931

 

15 910

 

15 929

 

15 907

 

112.2

 

109.7

 

85.0

 

15.8

 

–23.6

 

–3.6

 

173.6

 

121.9

 

10.90

 

7.66

 

7.04

 

6.89

    
 

10.90

 

7.65

 

7.04

 

6.90

The diluted earnings per share for the 2015 financial year were restated owing to a change in calculation method; see 1.3.

The share-based remuneration of members of Group Management has the effect of diluting the earnings per share. For the calculation of the diluted net profit, the average number of outstanding shares increases from 15 928 818 to 15 929 586 shares.

 

2016

 

2015

     
 

15 931

 

15 910

 

2 086.8

 

1 994.1

 

131.00

 

125.35

 

2 244.7

 

2 115.3

 

140.90

 

132.95

At the end of the year, the share price stood at CHF 151.30 (31.12.2015: CHF 133.60). This represents a premium of 15.5% compared to the net asset value per share after deferred taxes of CHF 131.00 (31.12.2015: premium 6.6%).

3.11  Employee pension plans

Swiss pension institutions are regulated by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The BVG stipulates that pension institutions must be managed autonomously and as legally independent institutions.

The Board of Trustees, as the governing body of the pension fund, is made up of an equal number of employee and employer representatives. The Board of Trustees is tasked with defining and implementing investment strategy.

Plan members are insured against the economic consequences of old age, disability and death, in respect of which the BVG stipulates minimum benefits. Both employer and employee pay a share of the contributions to the pension fund; these are based on the insured salary and on the age of the plan member. Pension contributions and annual interest are credited to the individual savings accounts. Upon retirement of a plan member, the balance of the savings account is either paid out or, applying a statutory conversion rate, converted into a retirement pension. Benefits will also be paid in cases of long-term occupational disability.

All actuarial risks, comprising demographic risks (life expectancy) as well as financial risks (return on plan assets or development of wages, salaries and pensions), are borne by the pension fund and regularly assessed by the Board of Trustees. In the event of a shortfall in cover as defined by the BVG, recourse may be had to various measures. These primarily include increasing current contributions, payment of additional restructuring contributions by the employer, or adjusting the conversion rates.

Development of pension fund commitments and assets

 

31.12.2016

 

31.12.2015

     
 

–150.6

 

–141.8

 

137.7

 

137.6

 

–12.9

 

–4.2

Defined benefit pension plan expenses break down as follows:

 

2016

 

2015

     
 

5.4

 

6.0

 

–1.2

 

–1.1

 

4.2

 

4.9

 

0.0

 

0.1

 

4.2

 

5.0

The past service cost of CHF 1.2 million was credited to the income statement under personnel expenses (2015: CHF 1.1 million).

Change in pension commitments

 

2016

 

2015

     
 

141.8

 

151.1

 

5.4

 

6.0

 

–1.2

 

–1.1

 

1.3

 

1.5

 

2.8

 

3.1

 

–8.4

 

–9.0

 

–0.2

 

–0.2

 

9.1

 

–9.6

 

150.6

 

141.8

Changes in pension fund assets at market value

 

2016

 

2015

     
 

137.6

 

137.0

 

1.5

 

1.8

 

1.2

 

1.3

 

3.2

 

3.4

 

2.8

 

3.1

 

–8.4

 

–9.0

 

–0.2

 

–0.2

 

137.7

 

137.6

As at the balance sheet cut-off date, plan assets break down into the individual investment categories as follows:

 

31.12.2016

 

in %

 

31.12.2015

 

in %

         
 

3.5

 

2.5

 

4.5

 

3.3

 

41.2

 

29.9

 

41.4

 

30.1

 

34.0

 

24.7

 

37.7

 

27.4

 

0.9

 

0.7

 

0.7

 

0.5

 

79.6

 

57.8

 

84.3

 

61.3

 

58.0

 

42.2

 

53.3

 

38.7

 

58.0

 

42.2

 

53.3

 

38.7

 

137.6

 

100.0

 

137.6

 

100.0

The calculation was performed on the basis of the following assumptions:

  

31.12.2016

 

31.12.2015

     
 

0.30%

 

0.90%

 

0.60%

 

0.60%

 

0.00%

 

0.00–0.25%

The discount rate and the future development of wages and salaries were identified as significant actuarial assumptions.

If the discount rate were 25 basis points higher or lower than at the balance sheet cut-off date and if all other variables were to remain constant, the present value of pension fund commitments would be CHF 4.9 million lower or CHF 5.3 million higher (31.12.2015: CHF 4.3 million/CHF 4.7 million).

If the development of wages and salaries were 25 basis points higher or lower than the assumptions made at the balance sheet cut-off date and if all other variables were to remain constant, the present value of pension fund commitments would be CHF 0.5 million higher or CHF 0.6 million lower, respectively.

The revaluation component of pension fund positions recognised in other comprehensive income breaks down as follows:

 

2016

 

2015

     
 

0.0

 

0.0

 

–11.0

 

2.4

 

1.6

 

7.2

 

1.5

 

1.8

 

–7.9

 

11.4

A probable CHF 4.4 million will be paid out under defined benefit commitments within the next twelve months, and a probable CHF 42.8 million in the subsequent nine years.

The average term of defined benefit commitments to the end of the period under review is 16.8 years (31.12.2015: 16.7 years).

For the following year, contributions to the plan are expected to come to CHF 3.0 million (employer) and CHF 2.7 million (employee) (2015: CHF 3.4 million and 3.0 million, respectively).

In addition to the Allreal pension fund, some Allreal staff are covered by a management insurance plan taken out with an insurance company. Allreal’s only commitment in respect of this plan is to pay the annual contributions. In the period under review, these amounted to CHF 0.7 million (2015: CHF 0.6 million). The management plan is classified as a defined contribution plan in accordance with IAS 19.

In 2016, employee benefits came to a total of CHF 4.9 million (2015: CHF 5.6 million).

3.12  Share-based reimbursement

Members of Group Management receive an additional remuneration in the form of shares of Allreal Holding AG. Entitlements will be satisfied by the company by means of treasury shares. The amount in connection with the share allocation is charged to personnel expenses over the vesting period.

Number of
Allreal shares

Share price
in CHF

Expenses
in CHF
million

Availability

     

441

134.00

0.027

30.11.2016

581

134.00

0.026

30.04.2018

621

134.00

0.083

immediately

Provided that all preconditions are met, a total of 581 shares of Allreal Holding AG will in future be distributed to eligible beneficiaries.

Total expenses for share-based reimbursement amounted to CHF 0.14 million in the period under review (2015: CHF 0.14 million).