conwert Immobilien Invest SE: conwert sees positive operating stimuli in first half 2014

Vienna (pta/26.08.2014/21:20 UTC+2) -
+ Like-for-like rental income rises by 2.6%
+ Personnel expenses fall by 18.3% and other operating expenses decline by 7.5%
+ Net finance costs hampered by negative non-cash effects of EUR31.9 mn
+ FFO I at EUR15.4 mn in first half 2014, guidance for 2014 at over EUR30 mn and EUR40 mn for 2015

conwert Immobilien Invest SE, listed on the Austrian ATX, managed to achieve further operating stimuli in the first half 2014.

Rental revenue rose by 7.1% to EUR121.2 mn (1-6/2013: EUR113.2 mn). A key factor in this sharp rise was the consolidation of the residential portfolio acquired from GE Capital Real Estate Germany in the third quarter 2013. On a like-for-like basis, however, rental revenue also rose by 2.6%. In addition, net rental income (NRI) increased from EUR73.0 mn to EUR74.4 mn; however, the NRI margin decreased to 61.4% (1-6/2013: 64.5%) owing to higher property expenses. The net initial yield was 6.3% at the reporting date following on from 6.1% in the reporting period the previous year. The total vacancy rate was 10.2% at the reporting date, thereby representing a decrease of 15% against the comparable period 2013 (1-6/2013: 12.0%).

Sales revenues in the first half 2014 were characterised by the sale of individual residential and commercial units and amounted to EUR36.3 mn (1 6/2013: EUR145.6 mn). The consequent IFRS margin was therefore 19.1% and the IFRS profit on properties sold amounted to EUR5.8 mn. However, conwert is maintaining its guidance for sales revenues of EUR150-200 mn as management is currently involved in advanced sales negotiations with potential purchasers for the Czech and Slovakian portfolio. This necessitated a negative fair value adjustment for individual properties in the Czech Republic and Slovakia. Furthermore, conwert also reduced the fair value of a conwert-owned office property in the Ukraine. These developments resulted in negative fair value adjustments totalling EUR7.1 mn.

Personnel expenses fell by 18.3% in relation to the comparable period to EUR13.8 mn; other operating expenses declined by 7.5% to EUR8.5 mn. Earnings before interest, tax, depreciation and amortisation (EBITDA) stood at EUR54.9 mn (1-6/2013: EUR65.2 mn), owing to the planned reduction of sales volumes and the concentration on selected service mandates.

As in the first quarter 2014 as a result of the historically low interest rates, net finance costs were hampered by negative non-cash effects totalling EUR31.9 mn and amounted to EUR(73.0) mn 1-6/2013: (EUR(34.1) mn). There was a slightly positive effect last year from the interest rate curve development. The increase in 2014 was mainly due to the decline in the interest rate curve in the first and second quarter 2014 and the consequent change in the market value of swaps which conwert originally concluded in the years 2007-2010 to hedge borrowed capital liabilities against interest rate fluctuations. This resulted in EBT of EUR(25.8) mn (1-6/2013: EUR29.6 mn), hampered by non-cash effects, and the loss for the period was EUR(22.9) mn, following on from a profit of EUR19.1 mn in the previous year.

Loan to value (LTV), i.e. debt in relation to property projects minus cash and cash equivalents, was unchanged at the reporting date at 54.4% against the first quarter 2014 (31/12/2013: 55.9%) and therefore within the target range of 50 to 55%.

Higher property expenses, which resulted mainly from the portfolios acquired in Germany in 2013, led to a 13.5% decline in funds from operations before sales income and one-off costs (FFO I) in the first half 2014 to EUR15.4 mn (1-6/2013: EUR17.8 mn after adjustments to the reporting system, resp. EUR18.4 mn under last year's reporting system). FFO II (FFO I plus sales income) amounted to EUR18.7 mn (1-6/2013: EUR27.1 mn) and was therefore just 31.0% below the figure for the comparable period in the previous year despite a 75.1% reduction in sales revenues.

Clemens Schneider, conwert CEO, on the results: "Following the purchases in Germany in 2013, conwert has succeeded in securing operating stimuli in the first half 2014. The improvements in vacancy rates and rental revenues, while simultaneously cutting costs, underline the positive operating developments in the first half 2014. Nevertheless, we have a lot of work ahead in order to achieve attractive returns for our shareholders."

The focus of conwert's business activities in 2014 will be on integrating the portfolios acquired in 2013 (KWG and GE). The focus on the six core markets (Vienna, Berlin, Potsdam, Dresden, Leipzig, North Rhine-Westphalia) should facilitate further improvements to the operating profitability of the portfolio and is tied to continuing sales activities for the ECO, commercial and CEE portfolios. conwert continues to forecast sales revenues of EUR150-200 mn for the full year 2014. Management expects to achieve FFO I of over EUR30 mn for 2014 and FFO I of EUR40 mn for 2015.

Key performance indicators

		1-6/2014	1-6/2013 (adjusted)*)	Change	2013
Rental income	mn EUR	121.2	113.2	7.1%	227.3
Proceeds from sale of properties	mn EUR	36.3	145.6	-75.1%	273.9
Revenues from property services	mn EUR	4.5	9.9	-54.5%	15.2
Total revenues	mn EUR	162.0	268.6	-39.7%	516.4
EBITDA	mn EUR	54.9	65.2	-15.8%	116.8
EBIT	mn EUR	47.1	63.7	-26.1%	123.4
EBT	mn EUR	(26.0)	29.6	-	48.7
Funds from operations before sales income and one-off items (FFO I) **)	mn EUR	15.4	17.8	-13.5%	36.2
Funds from operations after net finance income/costs (FFO II) ***)	mn EUR	18.7	27.1	-31.0%	52.1
Net rental income (NRI)	mn EUR	74.4	73.0	1.9%	141.4
NRI margin	%	61.4	64.5	-4.8%	62.2
Basic earnings/share	EUR	(0.30)	0.21	-	0.09
Diluted earnings/share	EUR	(0.19)	0.22	-	0.18
FFO I **) / share	EUR	0.19	0.22	-13.6%	0.44

*) The interim financial statements as at 30 June 2013 recognised a gain on bargain purchase of Eur7.3 mn, which was amended to Eur1.0 mn in the fourth quarter 2013. For interim reporting purposes, recognition of this merger has been adjusted retrospectively.
**) FFO I: Earnings before tax (EBT) - difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests + restructuring costs/one-off costs
***) FFO II: FFO I + difference between sales and carrying amount of properties sold - operating expenses of sales income

Balance sheet indicators

		30/06/2014	31/12/2013	Change
Total assets	mn EUR	3,034.6	3,165.7	-4.1%
Non-current loans and borrowings	mn EUR	1,132.6	1,081.6	4.7%
Current loans and borrowings	mn EUR	240.1	378.0	-36.5%
Equity	mn EUR	1,096.4	1,128.6	-2.9%
Equity ratio	%	36.1	35.7	-1.2%
Gearing	%	159.5	154.2	3.4%
EPRA NAV (basic)/share	EUR	15.23	15.40	-1.1%

Property indicators

		30/06/2014	30/06/2013	Change	31/12/2013
Rental units	No.	31,451	29,243	7.6%	32,120
Parking spaces	No.	14,011	13,181	6.3%	14,187
Total usable space	1'000 sqm	2,561.0	2,441.5	4.9%	2,603.5
Property assets	mn EUR	2,843.4	2,795.1	1.7%	2,868.1

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This report contains forward-looking estimates and statements that were made on the basis of the information available at this time. Forward-looking statements reflect the point of view at the time they are made. We would like to point out that the actual circumstances and. consequently, the actual results realised at a later date may differ from the forecasts presented in this report for a variety of reasons.

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