The listed real estate investment company S IMMO AG once again turned in a strong operating performance in the first quarter of 2022. Bruno Ettenauer, CEO of S IMMO AG, had the following comment on the results: “Although we would have wished for a better start to the year, the first quarter was relatively unaffected by the effects of the war in Ukraine and the start of the interest rate turnaround. With sales revenues up by around 33 percent, we once again succeeded in increasing net profit for the period to €24.1 million. This corresponds to an increase of more than 140 percent compared with the previous year, which is attributable not only to good operating performance but also to valuation and non-recurring effects. The current environment poses a wide range of challenges for us, but we believe that we are very well equipped thanks to our high-quality and diversified portfolio, our proven business model and our extremely stable financial structure.”
A marked increase in revenues and gross profit
In the first quarter, the operating result increased significantly and gross profit rose by around 28 percent to €29.8 million. In conjunction with non-cash valuation effects in the financial and tax result, a significant increase in the profit for the period was achieved for the first quarter. Revenues climbed by around 33 percent to €57.0 million (Q1 2021: €43.0 million). This development is attributable on the one hand to the increase in rental income and revenues from operating costs and to the rise in revenues from hotel operations on the other.
Rental income saw an increase of around 12 percent compared with the same period last year and amounted to €35.8 million (Q1 2021: €32.0 million). Property management expenses increased to €19.7 million (Q1 2021: €18.3 million), in part because the number of rental properties rose. Together with the income from hotel operations, gross profit, therefore, totalled €29.8 million (Q1 2021: €23.2 million). This corresponds to an increase of around 28 percent compared with the same period in the previous year.
Significant improvement in gross profit from hotel operations
Revenues from hotel management increased significantly compared to the first quarter of 2021 and amounted to €9.2 million (Q1 2021: €1.9 million). The gross profit from hotel operations improved to €1.3 million (Q1 2021: € -1.3 million), particularly reflecting the less severe pandemic-related restrictions compared with the previous year.
Net income for the period was substantially higher
Although the result from property valuation came to € -0.7 million (Q1 2021:€2.5 million) in the first quarter of 2022, EBIT rose by roughly 12 percent to €20.4 million (Q1 2021: €18.2 million).
The financial result improved to a net result of €1.7 million (Q1 2021: € -5.4 million), primarily due to positive derivative valuations. Due to a one-off effect in the area of deferred taxes in connection with the eco-social tax reform, the total tax expense improved from € -2.9 million to €2.0 million. As a result of these effects, the net income for the period increased by over 140 percent to €24.1 million in the first quarter of 2022.
In an environment dominated by uncertainties in which international indices were almost continuously in the red, the S IMMO share performed well and closed the first quarter for €22.15 and year-to-date performance of 1.84 percent. EPRA NAV per share amounted to 29.31 per share at the end of the first quarter of 2022.
Focus on core business
Although geopolitical developments and the events surrounding the COVID-19 pandemic are beyond the influence of S IMMO AG, they are being closely monitored and the company’s strategies are being adapted where necessary. After the successful sale of the 12.69 percent stake in IMMOFINANZ AG at the beginning of the year, S IMMO feels it has a comfortable liquidity cushion for the coming months. The focus is now once again entirely on the core business of acquiring, letting and managing profitable properties to strengthen cash flow in the long term. Along with the acquisition of additional top properties, such as BudaPart Gate in Budapest at the end of 2021 and the anticipated closing of EXPO Business Park in Bucharest in the second quarter of 2022, the possibility of recognising a portion of the strong valuation results in the German residential portfolio is being examined.
Herwig Teufelsdorfer, CIO of S IMMO AG, noted: “The geographical diversification of our portfolio has proven to be extremely resilient to crises, which is why we want to maintain it in the same constellation as in the past. At the same time, we are considering investment opportunities in the Austrian market, which has proven to be very stable of late.”
Update on the takeover offer from CPI Property Group
The shareholder structure of S IMMO was further strengthened in the first quarter of 2022. On 14 April 2022, CPI Property Group S.A., which now holds 42.55 percent of all shares, requested the convening of an Extraordinary General Meeting to vote on removing the voting right cap. About the mandatory offer that CPI intends to announce to the shareholders of S IMMO after the registration of the amendment to the Articles of Association in the Austrian Business Register, we were able to negotiate an increase in the offer price from €22.00 to €23.50. We see the granting of a withdrawal right for €23.50 as a fair trade-off for the removal of the voting right cap. The proposal to remove the voting right cap will be voted on under agenda item 1 at S IMMO’s Annual General Meeting on 01 June 2022.
Outlook for 2022
In addition to the ongoing pandemic, the first quarter of 2022 was shaped by several events that will determine the remainder of the year to a significant degree. At this point, it remains to be seen how they will develop going forward. Friedrich Wachernig, COO of S IMMO AG, explained: “The war in Ukraine and the interest rate turnaround that has been underway since the first quarter have created an environment that is significantly more uncertain than at the end of 2021 in many respects. We have the advantage of being in a very stable position when it comes to financing. The cash and cash equivalents that were generated by the profitable disposal of the IMMOFINANZ AG shares at the beginning of the year enable us to wait for favourable market phases and exploit opportunities at the right time.”