The CA Immo Group has consolidated its sound start to the year with a strong result for the second quarter. The main earnings trends in the first six months of 2013 emerged as stable lettings activity, lower administrative costs and a much improved financial result. The reduction in administrative and financing costs in particular should continue to deliver a significant and sustained contribution to greater profitability in the periods ahead.
Given the operating result achieved in the first half in spite of the persistently challenging economic environment, there is cause for optimism regarding the annual result for CA Immo. As CA Immo CEO Dr. Bruno Ettenauer explains, „In strategic terms, continuing to raise profitability and strengthening the consolidated balance sheet by reducing financial liabilities remain top priorities. The CA Immo Group is aiming to raise its equity ratio (currently 31.5%) to 40% in the medium term. In this regard, we anticipate greater dynamism in the second six months as real estate transactions are concluded, including the proportionate sale of the Tower 185 in Frankfurt.“
Results for the first half of 2013
In comparison with the first half of 2012, rental income fell by a marginal 2% to stand at € 137.7 m. The main reason for the decrease was the sale of the Warsaw Financial Center in the final quarter of business year 2012, which was only partially offset by project completions in Germany. Property expenses directly attributable to the asset portfolio (including own operating expenses) were cut by a significant 19% to -€ 15.5 m. The result from renting, which is unchanged on the first half of 2012, was characterised by greater efficiency as a consequence: the operating margin in rental business (result from renting in relation to rental income) rose from 87% for the first half of 2012 to the current level of 89%. Net operating income of € 122.9 m was just below last year's value of € 123.7 m.
No significant real estate sales were transacted in the second quarter. During the first six months of business year 2013, profit from the sale of investment properties stood at € 3.3 m, roughly equivalent to the previous year's level.
Measures aimed at raising the company's profitability introduced in 2012 had a major impact during the second quarter. After six months, personnel spending had fallen by 11% on the first half of 2012. The operating result (EBITDA) increased by 1% on last year's figure to stand at € 113.9 m as earnings from property sales declined by almost 40%. With sales figures remaining basically constant, the EBITDA increased by 8.5% in the second quarter of 2013.
A negative revaluation result based on property-specific valuation effects of -€ 13.9 m (+€ 5.4 m in the first half of 2012) brought about a 15% fall in earnings before interest and taxes (EBIT) to € 97.7 m. This figure includes an exceptional one-time charge of -€ 5.5 m in connection with a development property in Basel.
In contrast to the decline in EBIT, earnings before taxes (EBT) developed by a positive 8.4 %. The satisfactory earnings trend is founded on a significant improvement in the financial result to -€ 50.8 m, up 29% on the value for the reference period (adjusted for other financial income/expenses, which includes the positive one-time effects, the improvement exceeds 40%). During the first six months, the financing costs of the CA Immo Group - a key component in sustainable revenue and the biggest expense item in the income statement - were cut by a significant 16% thanks to loan repayments linked to sales and lower interest rates on floating-rate loans. The valuation of interest rate derivatives continued to exert a positive influence after quarter one of 2013, delivering a contribution of € 15.5 m in the first half of the business year.
Taken together with lower taxes on earnings, the income components outlined above produced a considerable increase in earnings. Net operating income, which is critical to the shareholders, rose by 37% on the first half of last year to € 36.2 m (€ 0.41 per share against € 0.30 per share in 2012).
Funds from operations (FFO) of € 43.5 m (after actual taxes on earnings and before proportionate minority interests) were generated in the first half of 2013. The 21.4% fall on the comparable figure for last year (€ 55.3 m) was tempered by a one-time effect on the financial result of finance restructuring in the Eastern €ope segment during the first half of 2012. Adjusted to account for the other financial result, FFO increased by 17.3% year on year.
As at 30 June 2013, the equity ratio of CA Immo stood at 31.5%. The Group's net debt was € 3.1 bn on the key date, with property assets worth around € 5.3 bn. As at 30 June 2013, NAV (shareholders' equity excluding minority interests) stood at € 1,718.7 m (€ 19.56 per share), equivalent to a rise of 1.5% on the value at the start of the year.