Financial commentary

Consolidated statement of comprehensive income

The 2013 financial year closed with operating net profit of CHF 116 million, marking a new high in Allreal’s history. The year-on-year increase of 11% is largely attributable to the Real Estate division, which achieved growth of approximately CHF 18 million in net profit, while the Projects & Development division posted a decrease of CHF 7 million.

The Real Estate division reported a year-on-year rise in rental income of CHF 6 million to CHF 149 million as a result of additions to the portfolio and lower losses in earnings. Like-for-like rental growth came to –1.5% (residential real estate –0.11%/commercial real estate –1.16%). Real estate expenses of 15% of rental income were higher than in the previous year, but still within the long-term standard range of 13% to 15%. Owing to the increase in real estate expenses, the net yield was down slightly to 4.8%. The cumulative vacancy rate decreased to 4.7% of target rental income (2012: 5.0%). The two commercial properties Luberzen Urdorf and Thurgauerstrasse Glattbrugg accounted for around 27% of all vacancies.

The sale of six yield-producing properties at an aggregate net selling price of CHF 216 million generated a gratifyingly high book profit of CHF 20 million, which is 10% higher than the market values stated as at 31 December 2012.

The valuation of investment real estate by an external real estate valuer resulted in an upward correction of CHF 8 million. The higher valuation was attributable to the three investment classes residential real estate (CHF 44 million), commercial real estate (CHF –55 million) and investment real estate under construction (CHF 19 million). The valuation results mirror current conditions on the transaction market and reflect the undiminished downward pressure on returns on residential real estate and the bleak prospects for commercial real estate and office rentals.

The Projects & Development division reported income from business activity of CHF 111 million. Despite a renewed year-on-year increase in the completed project volume, up by 16%, fee income, earnings from construction activity and capitalised company-produced assets fell by CHF 22 million to CHF 76 million (2012: CHF 98 million). This is primarily due to disappointing third-party business in the second half of 2013. Residential property sales generated a handsome profit of CHF 34 million (2012: CHF 17 million), around 77% of which stemmed solely from the Konrad- and Escherhof projects on the Richti site in Wallisellen. To deal with the large amount of work in hand, capacity was expanded substantially in 2012, as reflected in a CHF 6 million increase in operating expenses to CHF 76 million in the 2013 financial statements.

Operating tax expense of CHF 36 million represented 23.8% of net profit before tax. Of this amount, CHF 31 million was allotted to current taxes and CHF 5 million to deferred taxes. Tax expense reflects high property gains taxes, with rates of up 32% levied on income earned on property sales. Deferred taxes resulting from revaluation amounted to somewhat above CHF 2 million.

Consolidated balance sheet and consolidated statement of changes in shareholders’ equity

As at 31 December 2013, the market value of the investment real estate amounted to CHF 3 446 (31.12.2012: 3 159 million). It comprises residential real estate (CHF 511 million), commercial real estate (CHF 2 099 million) and investment real estate under construction (CHF 836 million). The overall increase in the value of the real estate portfolio was attributable to investments and sales (CHF 138 million), reclassification of development real estate (CHF 141 million) and revaluation (CHF 8 million). The definitive decision to reclassify Lilienthal-Boulevard Opfikon, Richtiring Wallisellen and Herostrasse Zürich Altstetten (all commercial properties under construction) as yield-producing properties on completion in 2014 has secured some attractive investment real estate for Allreal’s own portfolio. Investment properties under construction together represent a total investment volume of approximately CHF 950 million, more than CHF 100 million of which is scheduled for investment in 2014.

As at the balance sheet cut-off date, the book value of development real estate amounted to around CHF 383 million, the lowest level in five years. In 2013, ownership of development real estate worth CHF 294 million was transferred to third parties. Besides development reserves (CHF 51 million) and completed real estate (CHF 44 million), buildings under construction (CHF 288 million), spread over five projects, make up the largest share of this balance sheet item. With the exception of the residential development on the Guggach site, all buildings under construction will be competed in 2014.

Despite substantial investment activity, net financial debt increased year-on-year by only CHF 52 million to CHF 1 590 million as numerous cash inflows accrued from from the sale of investment and development real estate.

Deferred tax liabilities on the balance sheet cut-off date amounted to CHF 114 million net (2012: CHF 97 million). Other liabilities were CHF 57 million lower at CHF 254 million, owing mainly to a decrease in trade payables (CHF –28 million) and other long-term liabilities from the recognition of derivative financial instruments (CHF –31 million).

In the period under review, equity increased by CHF 62 million to CHF 1 969 million as at the balance sheet cut-off date. Factors that contributed to this growth included net profit (CHF 122 million), an improvement in the replacement values of interest rate swaps (CHF 29 million) and changes in the pension fund (CHF 2 million). By contrast, equity was impacted by payments to shareholders totalling CHF 88 million and the acquisition of treasury shares for CHF 3 million.

Consequently, net asset value (NAV after deferred tax) per share rose by CHF 4.10 to CHF 123.80.

Consolidated cash flow statement

Steady business performance led to a stable level of operating cash flow before changes in net working capital of CHF 153 million (2012: CHF 152 million). Taking into account the significant decrease in net working capital following the sale of development real estate, cash flow amounted to CHF 223 million. The amounts of CHF 35 million and CHF 30 million, respectively, were used to pay for net financial expenses and taxes. This resulted in a much higher cash flow from operating activities of CHF 158 million compared to the previous year (2012: CHF 72 million).

Investment activity remained high compared to previous years in spite of the extensive divestment of of yield-producing properties (CHF 216 million). At CHF 321 million, investment real estate under construction accounted for the largest share of the CHF 333 million in investments, as was expected. This resulted in a cash flow from investing activities of CHF 116 million (2012: CHF 203 million).

On the financing side, the issue of a new bond contributed to an increase of around CHF 49 million in borrowings. Factoring in the payout to shareholders (CHF 88 million) and the change in treasury shares (CHF 3 million), a net cash outflow from financing activities of CHF 42 million (2012: cash inflow of CHF 85 million) resulted.

Financial situation

Allreal’s investment and financing guidelines and the maximum borrowing level stipulated by the credit agreements with the banks were complied with for the entire period under review. As at 31 December 2013, the consolidated equity ratio amounted to 49.3% (minimum 35%), net gearing 80.8% (maximum 150%), interest coverage ratio 5.8 (minimum 2.0) and the borrowing level against investment and development real estate 42.2% (maximum 70%).

As at the balance sheet cut-off date, average interest on financial liabilities was 2.13%, with a slightly longer interest lock-in period of 56 months (31.12.2012: 2.13%/54 months). While new debt was settled at low short-term money market rates in the first half of 2013, interest hedging measures were taken in the second half. In the period under review, a CHF 150 million 2.00% bond maturing in 2020 was successfully issued on the capital market. In addition, a new ten-year interest rate swap with a contract value of CHF 35 million and a fixed rate of 1.45% was concluded.

Measures are planned for 2014 to keep the interest lock-in period at least at the current duration.

As at the balance sheet cut-off date, the immediately available bank credit lines amounted to CHF 658 million. With these resources, the high degree of interest hedging, existing financial liabilities and the comfortable equity ratio, Allreal has a stable financial basis.

Annual financial statement of Allreal Holding AG

At around CHF 44 million, the net profit was at the previous year’s level (2012: CHF 43 million). The subsidiary companies paid dividends of CHF 33 million to Allreal Holding AG. Net financial income remained constant year-on-year at CHF 14 million, as did other expenses and taxes at CHF 3 million.

Compared to the previous year, total assets rose to CHF 1 973 million as a result of the 2.00% bond issue 2013–2020. The funds so accrued were used to refinance the Group companies.

In the following year, the CHF 199.925 million 2.125% convertible bond 2009–2014 maturing in October is due for refinancing.

As at 31 December 2013, equity amounted to CHF 1 1467 million (31.12.2012: CHF 1 510 million), CHF 408 million of which was allocated to reserves from contribution of capital, which may be paid out tax-free to private shareholders.

The CHF 44 million decrease in equity is attributable to CHF 44 million in net profit for 2013, offset by CHF 88 million in reserves paid out in April 2013.

Back to top