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EANS-Adhoc: ECO Business-Immobilien AG
ECO Business-Immobilien AG:
Increase in revenues - negative earnings due to impairment charges
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ECO Business-Immobilien AG: Increase in revenues - negative earnings due to impairment charges
Vienna, 25 March 2009. The development of earnings at ECO Business-Immobilien AG (Vienna Stock Exchange: ECO) in 2008 was negatively influenced by the financial crisis and the resulting effects on the real economy. In spite of a further improvement in revenues to EUR 74.8 million, Group earnings fell to EUR -35.7 million for the reporting year (2007: EUR 32.8 million). This shift was triggered above all by a market-related decline in the value of the portfolio during the second half of the year, which amounted to roughly 5% of property assets. However, net cash earnings (FFO after interest and tax, incl. impairment charges) were positive at EUR 5.0 million despite a substantial rise in finance costs and a challenging market environment throughout the entire year. The equity ratio equalled 33.7% as of the balance sheet date on 31 December 2008.
Revenues rose by 54% to EUR 74.8 million in 2008 (2007: EUR 48.6 million). This growth resulted above all from the acquisition of the former BAWAG properties at the end of 2007, which made their first full year´s contribution to revenues in 2008. The increase in revenues was also supported by stable rental prices in the company´s core markets and a concentration on tenants with sound credit ratings. The liquidity shortage on financial markets had an unfavourable effect on the investment market for business properties during the entire year. Accordingly, income from the sale of properties declined from EUR 16.5 million in 2007 to EUR 4.5 million for 2008. However, the profit margin on these sales in relation to the IFRS carrying amounts remained clearly positive at 22.3%.
Operating profit (EBIT) fell to EUR -6.8 million, compared with EUR 60.8 million in 2007. The main cause of the drop in EBIT was the net loss from fair value adjustments, which totalled EUR 49.0 million or roughly 5.0% of property assets - compared with a net gain of EUR 17.1 million from fair value adjustments in the prior year. In addition to a lower volume of property sales, EBIT was also negatively affected by non-recurring expenses related to the cancellation of a property transaction during the second quarter of 2008.
Financial results deteriorated from EUR -19.1 million in 2007 to EUR -43.2 million for the reporting year, and were influenced by significantly higher finance costs. The increase in finance costs resulted from a substantial rise in the volume of financing from EUR 491.8 million in 2007 to EUR 740.9 million for 2008 as well as higher average basis interest rates in the reporting year. Profit before tax fell from EUR 41.7 million in 2007 to EUR -49.9 million in 2008. Earnings per share equalled EUR -1.05 for 2008, compared with EUR 1.11 in the previous year.
Net cash earnings (FFO after interest and tax, incl. impairment charges), which illustrates the operating strength of ECO, was positive at EUR 5.0 million in 2008 despite the substantial year-on-year increase in finance costs, but remained below the EUR 24.7 million recorded in 2007. The positive operating development of the company supported an increase in FFO before interest and tax to EUR 48.1 million (2007: EUR 44.2 million).
A decrease in liabilities as of the balance sheet date led to an improvement in the equity ratio, which rose from 32.6% at the end of 2007 to 33.7% as of 31 December 2008. The loan-to-value ratio (LTV) equalled 64.5% as of 31 December 2008 (2007: 66.1%). Equity of EUR 375.1 million was contrasted primarily by non-current liabilities of EUR 470.8 million (2007: EUR 618.3 million). Approximately one-third of the company´s debt financing was hedged against fluctuations in interest rates. Excluding the effects of hedging instruments, the average interest rate for the ECO Group equalled roughly 3.9% at the end of the reporting year (basis interest rate incl. margin). Cash and cash equivalents totalled EUR 14.6 million as of the balance sheet date (2007: EUR 34.7 million) and were increased at the beginning of 2009 by proceeds of over EUR 100 million from the sale of properties.
Net asset value (NAV) per share declined from EUR 12.40 to EUR 10.80, primarily as a result of the above-mentioned impairment charges. Adjusted NAV equalled EUR 10.72 per share.
The property portfolio of ECO Business-Immobilien AG comprised 117 objects with a combined value of EUR 1.07 billion at the end of 2008. During the past year, ECO focused primarily on the management of the properties in its portfolio.
In order to further strengthen its focus on office and commercial properties, ECO sold objects that cannot be classified in full under this segment of business and/or are used predominately for residential purposes. These properties comprise 50% of the Allianz trading portfolio (EUR 52.0 million) as well as individual objects in Austria and Germany with a combined value of EUR 61.3 million. The properties were purchased by the conwert Group, which previously held the remaining 50% stake in the Allianz portfolio. The agreed purchase price was based on an appraisal by independent experts as of 31 December 2008. As a result of the current market environment and the resulting effect on property valuations, the sale price of EUR 113.3 million is less than the historical acquisition cost of the related properties. This transaction will not only optimise the ECO portfolio, but will also largely repay the liability to the conwert Group. The transferred portfolio is comprised mostly of residential objects at inner city locations and also includes a hotel in Austria and two senior citizens´ residences in Germany. Following the completion of the sale in 2009, ECO will only hold portfolios in the investment and development segments of business.
During the first weeks of 2009, ECO sold two properties in Vienna to private investors for a total of EUR 112.7 million. These funds will strength the liquidity of the company over the long-term and also increase the equity ratio.
Since the further development of the real economy and the duration and extent of the current recession are difficult to estimate, ECO assumes the 2009 financial year will be characterised by a difficult market environment.
In addition to the optimisation of the portfolio through the sale of selected objects, activities for the coming year will concentrate on the management of the existing properties. ECO is currently conducting a thorough analysis of each object to ensure optimal realisation. Ongoing measures to improve the equipment, structure and realisation of the ECO properties should ensure a stable level of occupancy and rental prices in times of a downturn, and also form the basis for an increase in value and earnings when the current market trend reverses. ECO intends to utilise selective prospects for acquisitions and also to take advantage of opportunities for sales. Financing has already been secured for projects in the development portfolio, and these assignments will now be completed. However, ECO´s current plans do not call for the start of any new projects.
Effective asset management should allow ECO to meet its current expenses from operating income and also generate positive cash earnings in 2009. ECO expects rental income will remain stable in comparison with the previous year, while proceeds from the sale of properties will be used above all to reduce debt and strengthen liquidity. Therefore, the equity ratio should increase in relation to the 2008 level. In the financing area, ECO will profit from the decline in interest rates and should record an improvement in financial results compared with 2008.
Selected Company Data in accordance with IFRS
01-12/2008 01-12/2007 Revenues (TEUR) 74,794 48,589 Thereof rental income (TEUR) 61,668 39,959 Income from the disposal of non-current assets (TEUR) 4,517 16,508 Net gain/(loss) from changes (TEUR) -48,985 17,146 in the fair value of investment properties Operating profit (EBIT) (TEUR) -6,790 60,801 Profit before tax (EBT) (TEUR) -49,940 41,654 Profit after tax (after minority interests)(TEUR) -35,698 32,772 Earnings per share (EUR) -1.05 1.11 Weighted average number of shares (Nr.) 34,100,000 29,550,000 FFO (funds from operations)1)(TEUR) 48,067 44,195 before interest and tax, incl. impairment charges Cash earnings (FFO - funds from operations)2)(TEUR) 4,991 24,723 after interest and tax NAV per share(EUR) 10.80 12.40 1) EBIT + depreciation and amortisation +/- fair value adjustments +/- impairment charges
2) EBIT + depreciation and amortisation +/- fair value adjustments +/- impairment charges - financial results - income taxes paid
Balance sheet indicators
Balance Sheet - Summary (TEUR) 31/12/2008 31/12/2007 Non-current assets 1,085,709 1,244,766 Thereof investment properties 981,890 1,140,019 Thereof construction in progress 40,421 34,746 Thereof properties available for sale 51,881 58,319 Current assets 27,904 93,330 Total Assets 1,113,614 1,338,095 Equity and reserves 375,113 435,685 Thereof minority interests 6,918 12,784 Non-current liabilities 470,846 618,343 Current liabilites 267,654 284,067 Total Equity and Liabilities 1,113,614 1,338,095 Property Data 31/12/2008 31/12/2007 Number of objects 117 127 Thereof investment portfolio 72 73 Thereof trading portfolio 41 46 Thereof development projects 4 8 Rentable space in m²* 662,700 668,000 Thereof trading portfolio 39,100 42,800 Thereof development projects 38,800 53,100 Garage spaces (number) 3,530 3,380 Thereof trading portfolio 270 280 Thereof development projects 150 230 Property assets (in TEUR) 1,074,192 1,233,083 Thereof properties under construction 40,421 34,746 Thereof trading portfolio 51,881 58,319 * Garage spaces were included at 20 m² each This press release includes forward-looking estimates and statements that are based on the information available to ECO Business-Immobilien AG at the present time. Forward-looking statements are normally described with terms such as "expect", "estimate", "plan", "anticipate", "assume", "should", "could", etc., and reflect conditions at the time they are made. ECO notes that numerous factors may cause actual circumstances and, therefore also actual results, to differ from the expectations described in this press release.
end of announcement euro adhoc --------------------------------------------------------------------------------
Further inquiry note:
ECO Business-Immobilien AG
Friedrich Scheck, CEO
Tel.: +43(1)535 21 99-9012
Head of Investor Relations
Tel.: +43(1)535 21 99-9035
Tel.: +43(1) 504 69 87-331
Branche: Real Estate
Börsen: Wiener Börse AG / Regulated free trade