Net profit from continuing operations (i.e. excluding Russia) returned to the profit zone with a significant improvement to €181.0 million in 2017 (2016: €-147.4 million). That represents earnings per share of €0.17 (2016: €-0.15). Rental income was slightly higher at €234.5 million (2016: €233.4 million) despite the continuing sale of properties which do not fit in with the corporate strategy. After an adjustment for new acquisitions, completions and sales (like-for-like), rental income grew by a sound 4.5% to €200.0 million (annualised). The results of Asset Management rose by 13.4% to €150.8 million. In total, the results of operations increased by 44.4% to €107.6 million (2016: €74.5 million). Financial results turned substantially positive at €88.8 million (2016: €-107.6 million), above all due to positive valuation effects from the investments in CA Immo and BUWOG and a reduction in financing costs.
Group net profit for the 2017 financial year (including the results of discontinued operations/Russia) was negative, as expected, at €-537.1 million (2016: €-421.8 million). The results from Russia include – as reported in connection with Q3 data – the reclassification of accumulated historical currency translation differences of €-540.2 million to the income statement. This reclassification has no effect on cash and does not lead to a reduction in the Group’s equity or the EPRA NAV. Earnings from discontinued operations also include (as announced in Q3) a negative valuation effect of €-160.6 million, which resulted from the sale of the retail portfolio Moscow to the FORT Group.
“Our principal focus for the 2017 financial year was to systematically eliminate the last major problems from the past and strengthen our balance sheet, optimise the operating business and reduce costs. The sale of the retail portfolio in Russia shortly before the end of the year marked the final point in a long restructuring phase for investors. Our balance sheet has become stronger and weatherproof. Immofinanz’s property portfolio totals approximately €4.2 billion, and the value of our investment in CA Immo has increased to over €680 million. Cash and cash equivalents rose substantially to roughly €480 million during the past year, and our debt ratio in the form of net LTV improved to 40.8%“, commented Oliver Schumy, CEO of Immofinanz, on this development. “The overriding goal for this multi-year reorientation of Immofinanz was to create a stable and significantly stronger company which pays sustainably attractive dividends, has a solid foundation for future growth and is capable of playing a leading role in the possible future consolidation of the commercial property sector.“
Results in detail
Rental income rose slightly to €234.5 million, compared with €233.4 million in the unaudited 12-month period of 2016. The decline in revenues resulting from the sale of non-strategic properties was offset by completions and new rentals. Rental income rose by 2.5% to €113.3 million in the office sector and by 1.0% to €103.5 million in the retail sector.
The results of asset management improved by a sound 13.4% to €150.8 million (2016: €133.1 million). Property expenses were 14.9% lower than the previous year at €-95.0 million (2016: €-111.5 million). This decline is attributable, above all, to a reduction in maintenance costs (€-28.9 million versus €-38.9 million), operating costs charged to building owners (€-13.0 million versus €-18.1 million) and vacancy costs (€-12.1 million versus €-13.2 million).
The results of property sales turned clearly positive at €26.0 million (2016: €-18.9 million), in particular, based on a contribution of €32.9 million (2016: €5.8 million) from deconsolidations. This contribution resulted almost entirely from the non-cash reclassification of accumulated historical currency translation differences to the income statement following the sale of a Ukrainian land-owning company. The revaluation of properties sold and held for sale (adjusted for and resulted from foreign exchange effects) amounted to €-4.8 million (2016: €-10.5 million) and is a consequence, among others, of the portfolio optimisation in the Austrian retail sector.
In spite of substantial positive valuation effects from the development projects in Germany (€35.2 million) – above all trivago, FLOAT and the Cluster Produktionstechnik which was completed during the reporting year – the results of property development were negative at €-28.8 million (2016: €-6.5 million). As reported in the second quarter of 2017, this loss was caused primarily by added costs for real estate inventories in the Gerling Quartier and by outstanding obligations related to the transfer, repair of deficiencies and completion of the Cologne properties. The Gerling Quartier has already been sold, and the transaction is expected to close in 2018.
The results of operations rose significantly from €74.5 million in the comparable prior year period to €107.6 million in 2017. Other operating expenses were reduced by 5.6% to €-49.2 million (2016: €-52.1 million), among others due to a decline in legal, audit and consulting expenses.
The foreign exchange-adjusted revaluation of investment property totalled €6.5 million (2016: €-109.8 million). Financial results turned clearly positive at €88,8 million (2016: €-107.6 million). The refinancing carried out in 2017 reduced financing costs by 13.8% to €-94.9 million (2016: €-110.0 million). Key measures included the interest savings from the incentivised conversions of the convertible bond 2018 (coupon: 4.25%) and the issue of the new convertible bond 2024 (coupon: 2.0%) as well as refinancing at the property level. The 5.25%, €100 million corporate bonds was also redeemed during the past year.
Other financial results of €-12.1 million (2016: €13.1 million) are attributable chiefly to the valuation of derivatives at €8.2 million and to the earnings effect from the incentivised conversions of the convertible bond 2018 at €-37.7 million. Positive contributions to earnings were made by a revaluation of €11.3 million to the remaining BUWOG shares and a revaluation of €2.9 million to shares in real estate funds.
The share of profit/loss from equity-accounted investments rose substantially to €200.0 million (2016: €-19.8 million) and comprises the following: €61.5 million from the proportional share of earnings from CA Immo and €91.9 million from an increase in the value of the CA Immo shares as well as a profit of €18.1 million on the sale of 4.5 million BUWOG shares and €25.8 million from the market-based valuation of the remaining BUWOG shares following the termination of equity accounting. The book price of the CA Immo share equalled €26.55 as of 31 December 2017 (31 December 2016: €21.02).
Earnings before tax (EBT) improved significantly to €200.4 million (2016: €-168.9 million). Income tax expense totalled €-19.4 million for the 2017 financial year (2016: €21.4 million).
The results of discontinued operations totalled €-718.1 million (2016: €-274.4 million) and resulted primarily from the reclassification of accumulated historical currency translation differences of €-540.2 million to the income statement. These differences were recorded directly in equity through other comprehensive income (OCI) in previous years in accordance with IAS 21. The reclassification has no effect on cash and does not lead to a reduction in the Group’s equity or the EPRA NAV. The negative currency translation differences resulted from Immofinanz’s entry into the Russian market at a time, based on the current EUR/RUB exchange rate when the Ruble was much stronger. Also included here is a negative valuation effect of €-160.6 million which resulted from the sale of the retail portfolio Moscow to the FORT Group.
The purchase agreement with the FORT Group was signed on 13 November 2017, and the transaction closed on 6 December 2017. As previously announced, the purchase price of up to RUB 15.0 billion for the net assets includes three components: a cash purchase price of RUB 5.0 billion (converted: approximately €72.0 million) which has already been paid, a guaranteed payment in January 2022 of RUB 1.0 billion (converted at a fixed EUR/RUB exchange rate of 68.9655: €14.5 million with a present value of €9.4 million on the closing date) and an earn-out of up to RUB 9.0 billion which is based on revenues in 2021 but is payable in 2022 and has not yet been recognised by Immofinanz. Immofinanz can also participate with up to RUB 0.8 billion in the possible realisation of contingent receivables from tax refund proceedings which are currently in progress.
The net profit from continuing operations improved substantially to €181.0 million (2016: €-147.4 million) and represents earnings per share of €0.17 (2016: €-0.15). Total net profit (including the results of discontinued operations/Russia) amounted to €-537.1 million (2016: €-421.8 million) and represents earnings per share of €-0.51 (2016: €-0.43).
