3  Notes on the consolidated statement of comprehensive income

3.1  Income from renting investment real estate

2017

2016

33.6

32.7

145.6

140.6

179.2

173.3

The rental income is calculated as follows:

187.8

186.9

–4.9

–9.6

–3.7

–4.0

179.2

173.3

The accumulated vacancy rate for the 2017 financial year amounted to a total of 2.6% of projected rental income (2016: 5.1%), with residential properties accounting for 1.6% and commercial properties 2.8% (2016: 2.4% and 5.7%, respectively).

The rest of the rental income breaks down as follows:

2017

2016

33.6

32.1

142.3

139.7

3.3

0.6

0.0

0.9

179.2

173.3

3.2  Direct expenses for rented investment real estate

2017

2016

–1.6

–1.6

–5.5

–7.0

–4.7

–2.7

–12.8

–13.1

–24.6

–24.4

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:

2017

2016

–2.7

–3.9

–1.6

–1.5

–0.5

–0.6

–2.3

–2.6

–7.1

–8.6

In 2017, real estate expenses for unlet properties amounted to CHF 0.5 million (2016: CHF 0.6 million).

3.3  Income from real estate management services

2017

2016

3.7

4.0

0.5

0.7

4.2

4.7

3.4  Earnings from sale of investment real estate

2017

2016

0.0

100.4

0.0

–1.6

0.0

–93.2

0.0

5.6

No yield-producing properties were sold in the period under review. In 2016, the sale of four properties produced earnings of CHF 5.6 million.

3.5  Earnings from Projects & Development division

2017

2016

343.2

414.7

–298.2

–372.0

45.0

42.7

86.4

232.1

–74.6

–197.5

11.8

34.6

7.5

6.1

2.4

0.6

66.7

84.0

Income from realisation Projects & Development consists of architects’ and Project & Development fees (CHF 27.1 million) and earnings from construction activity (CHF 23.5 million) (2016: CHF 29.3 million)/CHF 16.9 million). This contrasts with directly offset sales deductions of CHF –5.6 million for warranty expenses, construction insurance and guarantees, performance guarantees, bad debt allowances and third-party expenses arising from tendering (2016: CHF –3.5 million).

During the 2017 financial year, ownership of units under the projects Fangleten-/Solistrasse Bülach (CHF 29.7 million), Guggach Zurich (CHF 30.3 million), Pfruendmatt Mettmenstetten (CHF 8.6 million), Lerchenbergstrasse Erlenbach (CHF 15.7 million), Stauffacher Steinen (CHF 1.7 million) and Cholplatz Bülach (CHF 0.4 million) was transferred to third parties, resulting in gains on sales of CHF 11.8 million (2016: eight projects / CHF 34.6 million).

Diverse income includes fees for third-party project development activities amounting to CHF 0.6 million as well as other earnings from commissions and services provided for third parties amounting to CHF 0.5 million and rental income from development real estate in the amount of CHF 1.3 million.

3.6  Personnel expenses

2017

2016

–36.2

–38.9

–3.6

–3.6

–5.4

–4.5

–0.1

–0.1

–2.3

–2.3

–47.6

–49.4

A CHF 4.5 million past service cost was credited to employee pension expenses in application of IAS 19 (2016: CHF 4.2 million), see 3.11. Other personnel expenses include spending on actual and flat-rate staff expenses (CHF –1.5 million), training and development (CHF −0.2 million), costs for the recruitment of new employees (CHF –0.1 million) and other directly attributable staff expenses (CHF –0.5 million).

On the balance sheet cut-off date, the staff headcount stood at 274 employees, corresponding to 259 full-time equivalents (31.12.2016: 292 employees/ 276 full-time equivalents).

3.7  Other operating expenses

2017

2016

–1.3

–1.2

–3.6

–3.6

–1.2

–1.8

–3.0

–3.5

–2.1

–1.9

–0.7

–0.8

–11.9

–12.8

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 a lease which runs until 31 January 2021, with an annual rent of CHF 2.7 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.

31.12.2017

31.12.2016

3.4

3.5

6.6

1.6

0.5

0.9

0.0

0.0

10.5

6.0

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

2017

2016

1.7

1.8

1.7

1.8

3.9  Financial expense

2017

2016

–13.3

–23.1

–9.0

–9.6

–7.3

–7.4

0.4

0.6

–29.2

–39.5

The expense for derivatives is in connection with the recycling of hedging reserves, CHF 13.3 million of which was charged to the income statement as non-cash expense in the period under review.

The financial expense for bond issues includes paid and accrued interest of CHF –8.7 million up to the balance sheet cut-off date (2016: CHF –9.4 million) and amortisation of CHF –0.3 million (2016: CHF –0.2 million) between the debt components and the redemption amounts.

Capitalised building loan interest of CHF 0.4 million (2016: CHF 0.6 million) breaks down into development real estate under construction (CHF 0.0 million) and investment real estate under construction (CHF 0.4 million), applying an average interest rate of 0.85% (2016: 1.67–2.31%).

The average interest rate on the outstanding financial liabilities is 1.53%, with an average interest lock-in period of 49 months for all financial liabilities (2016: 1.67% and 36 months).

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

2017

2016

15 931

15 910

–18

21

15 913

15 931

15 929

15 929

113.3

112.2

21.8

85.0

–5.9

–23.6

129.2

173.6

8.11

10.90

7.11

7.04

8.11

10.90

7.11

7.04

The share-based remuneration of members of Group Management has the effect of diluting the earnings per share. For this calculation, the average number of outstanding shares increases from 15,928,874 to 15,929,790.

2017

2016

15 913

15 931

2 150.7

2 086.8

135.15

131.00

2 330.0

2 244.7

146.40

140.90

At the end of the year, the share price stood at CHF 164.80 (31.12.2016: CHF 151.30). This represents a premium of 21.9% compared to the net asset value per share after deferred taxes of CHF 135.15 (31.12.2016: premium 15.5%).

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

31.12.2017

31.12.2016

–141.4

–150.6

151.3

137.7

9.9

–12.9

Defined benefit pension plan expenses break down as follows:

2017

2016

4.4

5.4

0.0

–1.2

4.4

4.2

0.1

0.0

4.5

4.2

In the period under review, there was no past service cost (2016: CHF –1.2 million).

Change in pension commitments

2017

2016

150.6

141.8

4.4

5.4

0.0

–1.2

0.9

1.3

2.7

2.8

–5.9

–8.4

–0.2

–0.2

–11.1

9.1

141.4

150.6

Changes in pension fund assets at market value

2017

2016

137.7

137.6

13.4

1.5

0.8

1.2

2.8

3.2

2.7

2.8

–5.9

–8.4

–0.2

–0.2

151.3

137.7

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

31.12.2017

in %

31.12.2016

in %

4.7

3.1

3.5

2.5

53.2

35.2

41.2

29.9

23.4

15.5

34.0

24.7

9.3

6.1

0.9

0.7

90.6

59.9

79.6

57.8

60.7

40.1

58.0

42.2

60.7

40.1

58.0

42.2

151.3

100.0

137.6

100.0

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

 

31.12.2017

31.12.2016

0.70%

0.30%

0.60%

0.60%

0.00%

0.00%

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 4.4 million lower or CHF 4.6 million higher (31.12.2016: CHF 4.9 million / CHF 5.3 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 0.4 million higher or CHF 0.4 million lower.

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

2017

2016

0.0

0.0

1.8

–11.0

9.3

1.6

13.4

1.5

24.5

–7.9

A probable CHF 4.8 million will be paid out under defined benefit commitments within the next twelve months, and a probable CHF 42.2 million in the subsequent nine years.

The average term of defined benefit commitments to the end of the period under review is 16.2 years (31.12.2016: 16.8 years).

For the following year, contributions to the plan are expected to come to CHF 2.9 million (employer) and CHF 2.6 million (employees) (2016: CHF 3.0 million and 2.7 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 0.9 million (2016: CHF 0.7 million). The management plan is classified as a defined contribution plan in accordance with IAS 19.

In 2017, employee benefits came to a total of CHF 5.4 million (2016: CHF 4.9 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

 

581

 

134.00

 

0.039

 

30.04.2018

 

502

 

166.50

 

0.028

 

30.04.2019

 

502

 

166.50

 

0.083

 

immediately

Provided that all preconditions are met, a total of 1,083 shares of Allreal Holding AG will in future be distributed to eligible beneficiaries.

Total expenses for share-based reimbursement amounted to CHF 0.15 million (2016: 0.14 million).