conwert Immobilien Invest SE: conwert achieves best operating result in the company's history in 2015

Vienna (pta002/23.03.2016/04:23 UTC+1) -
+ Revenue increased by around 33% to EUR 506.4 mn
+ Further improvements to operating profitability: Rise in average rents, fall in vacancy rates
+ Operating expenses down by 4.8% to EUR 64.4 mn
+ Optimisation of financing structure - net interest costs improved by 38.7%
+ FFO I rose by 53.6% to EUR 53.4 mn - the best result in the company's history
+ Profit after tax of EUR 83.3 mn
+ FFO I Guidance for 2016 at over EUR 65 mn

conwert Immobilien Invest SE, listed on the Austrian ATX, managed to achieve the best operating annual results since its founding in the financial year 2015. Both the good performance of the rental business and the strong improvement in the net interest costs contributed to the outstanding financial statement, in addition to the value increase of the property portfolio.

In 2015 revenue increased year-on-year by around 33% to EUR 506.4 mn (2014: EUR 381.2 mn). The revenue performance reflects conwert's focus on residential property in A and B locations in metropolitan regions in Germany and Austria, as well as the related acceleration in selling off non-core property. By focusing on the core property portfolio and the subsequent reduction in lettable rental units from 30,385 to 27,494 (-9.5%), rental income slipped back slightly in line with expectations by 4.7% to EUR 226.1 mn (2014: EUR 237.3 mn). The higher average rents per square metre and the significant reduction in vacancy rates caused the net rental result (NRR) to slip back by just 1.2% to EUR 148.8 mn, despite the significantly reduced portfolio. The adjusted NRR margin*) as an indicator of operating efficiency even rose by 2.2 percentage points to 87.2 % (2014: 85.0 %).

*) Rental income adjusted for running costs charged to tenants, in order to facilitate comparisons with German residential property companies. Before adjustments, the NRI margin stood at 65.8% (2014: 63.5%).

By the end of the year 2015 the average vacancy rates for the entire portfolio fell sharply to 6.6% following on from 9.0% at 31 December 2014; in the core portfolio the vacancy rate was just 3.1%. Average rents across the entire portfolio also performed very well during 2015. There was a rise of 2.4% to EUR 6.42/sqm/m in the past financial year (31/12/2014: EUR 6.27/sqm/m). Average rents in the core portfolio even rose by 2.6% on a like-for-like basis.

In 2015 proceeds from the sale of properties more than doubled against 2014 and totalled EUR 272.6 mn (2014: EUR 133.5 mn) in the past financial year. By expediting the sale of properties which are not part of the core portfolio, sales proceeds from non-core properties totalled EUR 235.0 mn in 2015. As a result, the target of EUR 150 mn to EUR 200 mn was conclusively surpassed. The IFRS profit on sales amounted to EUR 18.9 mn (2014: EUR 11.1 mn). The IFRS margin fell by 1.5 percentage points year-on-year and stood at 7.5% in 2015. The decline in the margin was predominantly caused by the higher share of sales from the non-core portfolio.

At the same time as increasing total revenues, conwert also managed to achieve a significant reduction in operating costs. Personnel expenses fell by 2.1% from EUR 27.2 mn to EUR 26.6 mn year-on-year and other operating expenses were cut by 6.6% from EUR 40.4 mn to EUR 37.8 mn in the financial year 2015. In total, operating expenses went down by 5.0% from EUR 67.7 mn to EUR 64.4 mn in 2015.

Significant increases in value were recognised for large parts of the conwert portfolio in 2015. The net result of all fair value adjustments amounted to EUR 66 mn, following on from EUR 13 mn in the previous year. The value of most of conwert's property portfolio parts followed the same pattern. In the financial year 2015, the value of the core property portfolio increased sharply by 7.5% from EUR 1.8 mn to EUR 1.9 mn, with the strongest growth in the core residential portfolio Germany (+9.6% to EUR 1.3 mn). The value of the core residential portfolio Austria also rose by 3.8% to EUR 401 mn. In contrast, sales led to a pronounced reduction in the non-core portfolio Germany by 27.3%, in Austria by 17.1% and by 53.2% in other countries (Czech Republic, Slovakia, Hungary, Ukraine and Luxembourg). As a result of sales, the value of the conwert property portfolio thereby declined by 4.2% from EUR 2.8 mn in 2014 to EUR 2.7 mn.

The net interest costs developed very favourably in the previous year. Along with the operating results and the gains from the revaluation of the property portfolio, the reduction in net interest costs contributed significantly to the improvement in the company's results. At EUR (80.6) mn the net interest costs improved by 38.7% year-on-year (2014: EUR (131.5) mn). The significant reduction in non-cash expenses for the changes in the value of swaps from EUR 50.6 mn to EUR 16.2 mn was a decisive factor in this positive development. In addition, the average cash effective interest burden fell by 2.32% at 31 December 2015 due to the termination of the interest swaps (31.12.2014: 4.03%). This significant reduction in interest payments allowed conwert to achieve one of its main strategic objectives.

Against the background of the outstanding operative performance, the sharp improvement in the net interest costs and gains from the revaluation of the property portfolio, the net profit after tax of EUR 83.3 mn in 2015 against a loss of EUR (8.9) mn in 2014 confirms a clear turnaround.

As an important key indicator of the rental business, funds from operations (FFO) exceeded the positive expectations for the year 2015. Funds from operations before sales and one-off items (FFO I) rose by 53.6% to EUR 53.4 mn (2014: EUR 34.8 mn). The conwert guidance was EUR 48 mn. The higher sales proceeds also led to a marked increase in FFO II, which includes the book gains on property sales, rising by 66.0% to EUR 64.8 mn (2014: EUR 39.0 mn).

The basic Net Asset Value (NAV) was EUR 1.4 bn at 31 December 2015, rising by 7.1% compared to EUR 1.3 bn at 31 December 2014. The basic NAV per share increased from EUR 15.70 to EUR 15.72. During the business year 2015, net financial liabilities once again fell more sharply than property assets. This led to a decrease in the loan to value (LTV) of 4.4 percentage points to 49.2% under inclusion of the conversion of the 5.25% convertible bonds 2010-2016 which expired in January 2016 and were almost fully converted.

The management sees the annual results 2015 as positive and emphasises that it intends to continue its successful course consistently. CEO Wolfgang Beck said "conwert managed to achieve the best operating result in the company's history in the financial year 2015. The consistent implementation of the strategic restructuring of conwert led to notable improvements in earnings figures in 2015. By focusing on the three priorities - improving the operating profitability, optimising the financing structure and the strategic focus on residential property in Germany and Austria - we have implemented the right measures in order to prepare conwert for future developments." CFO Thomas Doll said "Following the successful restructuring of the swaps and the first investment grade rating to be awarded to an Austrian residential property company by S&P, conwert is very well placed for further optimisation of the interest costs".

For the financial year 2016 the management of conwert expects further progress to be made in improving the operating performance and the concentration on residential property in Germany and Austria. FFO I is expected to rise from EUR 53.4 mn in 2015 to more than EUR 65 mn in 2016. Since the cost of debt at 31 December 2015 were cut to an average interest rate of 2.32%, conwert expects a further decrease in the average cost of debt in 2016 as a result of renegotiating individual credit agreements. By concentrating the portfolio on the core markets, conwert is striving for further portfolio streamlining. Therefore, the goal is to generate a sales volume of EUR 300 mn to EUR 350 mn from properties in the non-core portfolio in 2016.

Key performance indicators		2015	2014	Change
Rental income	EUR mn	226.1	237.3	-4.7%
Proceeds from sale of properties	EUR mn	272.6	133.5	104.2%
Revenues from property services	EUR mn	7.7	10.5	26.7%
Revenue	EUR mn	506.3	381.2	32.8%
EBITDA	EUR mn	116.6	109.9	6.1%
Depreciation, amortisation and impairment expense	EURmn	(1.2)	(1.3)	4.8%
EBIT	EUR mn	181.3	121.6	49.2%
Funds from Operations I (before sales income and one-off items) *)	EUR mn	53.4	34.8	53.6%
Funds from Operations II **)	EURmn	64.8	39.0	66%
Net Rental Result (NRR)	EURmn	148.8	150.7	-1.2%
NRR margin	%	65.8	63.5	3.7%
Adjusted NRR margin ***)	%	87.2	85.0	2.5%
Basic earnings/share	EUR	0.95	(0.14)	-
Diluted earnings/share	EUR	0.85	(0.14)	-
FFO I *) /share	EUR	0.64	0.42	51.8%

*) 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
***) Margin on net rental income (rental income less running costs charged to tenants)

Balance sheet indicator		31/12/2015	31/12/2014	Change
Total assets	EUR mn	2,888.5	2,974.0	-2.9%
Non-current loans and borrowings	EURmn	1,028.2	1,120.4	-8.2%
Current loans and borrowings	EURmn	246.3	221.3	11.3%
Equity	EUR mn	1,264.8	1,104.6	14.5%
Equity ratio	%	43.8	37.1	17.9%
Gearing	%	107.3	143.8	-25.4%
EPRA NAV (basic)/share	EUR	15.72	15.70	0.1%

Property portfolio		31/12/2015	31/12/2014	Change
Rental units	No.	27,494	30,385	9.5%
Parking spaces	No.	11,386	13,573	9.0%
Total usable space	1,000 sqm	2,176	2,473.2	12.0%
Property assets	EUR mn	2,692.3	2,810.5	4.2%
Vacancy rate	%	6.6	9.0	-26.7%
ø Rent	EUR/sqm	6.42	6.27	2.4%

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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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