Gratifying result for 2018 financial year
- Convincing operating net profit
- Continued portfolio growth by means of own projects and acquisitions
- Profitable Projects & Development division
- Advantageous financing secured across the long term
- Proposal for higher profit distribution of CHF 6.50 per share
Net profit including revaluation gains for the 2018 financial year amounted to CHF 161.0 million, representing a gratifying increase over the previous year’s result of CHF 31.8 million or 24.6 percent.
Net profit excluding revaluation gains amounted to CHF 115.6 million, representing a 2.0 percent increase over the comparable value the previous year of CHF 113.3 million. In addition to the earnings recorded by the Projects & Development division, excellent Real Estate earnings, especially, contributed toward the very good operating result.
As at 31 December 2018, Allreal provided work for 229 employees in total, of which 216 full-time positions. Compared to the previous year, the total number of employees fell by 45 positions, or 43 full-time positions, owing to the divestment of Hammer Retex AG.
Proposal for higher profit distribution
Allreal’s share held up well in 2018, especially in the second half of the year, which was characterised by a weakening stock market. The share on 31 December 2018 closed at CHF 153.10. Compared to the reference period the previous year, this corresponds to a value decrease of 7.1 percent. The share’s price fluctuation in addition to the distribution of CHF 6.25 per share carried out in July 2018 resulted in a slightly negative overall performance of 3.3 percent. Owing to the very good result and the emerging stable business trend, the Board of Directors will at the Shareholders’ Meeting scheduled for 12 April 2019 propose a higher profit distribution compared to the previous year of CHF 6.50 per share. The payout will be made from capital reserves and, therefore, is tax-free for private Swiss investors. Compared to the closing price on 31 December 2018, the proposed payout corresponds to a cash yield of 4.2 percent.
Real Estate division with larger portfolio and outstanding real-estate performance
Expansion of the portfolio of yield-producing properties achieved in the second half of 2017 by means of acquisitions and own projects which, for the first time, affected net income for a twelve-month period, the addition of further yield-producing properties in the 2018 financial year plus an added reduction of vacancy-related income losses resulted in a CHF 15.6 million increase in rental income to CHF 194.8 million.
The cumulative vacancy rate experienced a further reduction by 0.6 percentage points to a very low 2.0 percent, substantiating the high quality of the portfolio and of facility and portfolio management.
Direct expenses for yield-producing properties amounted to CHF 22.6 million which, in a multi-year comparison, corresponds to a low expense rate of 11.6 percent. Net yield is reported at a gratifyingly high 4.4 percent.
The portfolio of yield-producing properties records the addition of one residential and one commercial property. The portfolio of investment real estate under construction shows two additions and one divestment. The portfolio of investment real estate on the cut-off date thus comprised 21 residential and 44 commercial properties plus 2 investment properties under construction.
Valuation of the entire portfolio, which was characterised by decreasing yield expectations by market participants (yield compression) and a historically low vacancy rate, resulted in a strongly positive value adjustment by CHF 60.6 million.
Expansion of the portfolio by net three properties and the valuation carried out by an external real-estate valuer resulted in a market value of the entire portfolio of CHF 4.16 billion, or CHF 203.3 million above that of the previous year.
Projects & Development division with consistently high profitability
Earnings from Projects & Development amounted to CHF 52.6 million. The amount is reported 21.1 percent below that of the previous year and is based, on the one hand, on the expected lower profit from the sale of condominiums and, on the other, on lower third-party project volume.
Operating profit (EBIT) reported by Projects & Development resulting from the realisation of own and third-party projects and the sale of development real estate amounted to CHF 12.1 million.
In the period under review, the Development division processed own and third-party projects with a potential construction volume of several hundred million francs to be realised in the coming years. Various projects were brought to implementation stage and transferred to Realisation; among them, two own projects comprising a total of 80 residential units for sale to third parties. Acquisition activity intensified by the Development department resulted in the acquisition of two plots of land suitable for the development and realisation of condominium buildings.
Project volume implemented with the realisation of projects for third parties or for Allreal’s own account amounted to CHF 351.9 million, of which 82.5 percent are accounted for by third-party projects and 17.5 percent by own projects. In the future, the share of own projects in the completed project volume will further increase.
The order backlog as at 31 December 2018 of CHF 657 million will secure capacity utilisation for about 18 months.
Continued sound and well secured financing
Owing to the increased financing activity, financial liability in the period under review grew by about CHF 159.0 million to CHF 2,072 million.
In March 2018, Allreal issued a 0.50% bond issue of more than CHF 125 million maturing in 2023. On the balance sheet date, therefore, 52 percent of financial liability was financed via the capital market. The share of fixed-rate mortgages amounted to 29 percent and that of fixed advances to 19 percent.
As at 31 December 2018, the average interest rate for financial liability compared to that of the previous year amounted to slightly lower 1.48 percent. The average duration of the fixed-interest period grew in the period under review to 52 months.
Thanks to the credit limit of CHF 625 million available in the short term, the company enjoys a high level of financial freedom of action.
Group equity rose to CHF 2,218.8 million, corresponding to a net asset value (NAV) per share of CHF 139.65.
Allreal’s equity ratio as at 31 December 2018 was reported at 48.1 percent, net gearing at 91.5 percent and interest coverage ratio at 6.1.
Stable business performance despite demanding parameters
Owing to the foreseeably stable income from letting yield-producing properties, the successful Projects & Development and the synergies resulting from the combination of the two divisions, Allreal enjoys the foundations to continue profitable business activity.
The company expects to report operating net profit for the 2019 financial year in line with that of the previous year.
The Board of Directors and Group Management express their gratitude to all employees for the contribution toward the outstanding result and to shareholders for their trust in the company and for their support.