Immofinanz AG

WSE:IIA

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the IMMOFINANZ Conference Call on the results of the first quarter 2022. [Operator Instructions]

I would now like to turn the conference over to IMMOFINANZ.

[Bettina Schragl, executive]

Yes. Hello. Good afternoon from Vienna. This is Bettina Schragl speaking. Thanks for your time and your interest in our Q1 results. As I've seen for many of you, it's not the first call today, but probably even the first call that we managed, at least, with our colleagues at other Austria real estate companies that our customers overlap.

Our call today will be hosted by our new Executive Board member, Radka Doehring, and by our executive Board member, Stefan Schönauer. They will guide us through a presentation and, of course, followed by a Q&A session. And with that, I pass on to Radka Doehring.

[Radka Doehring, executive]

Thank you, Bettina. Good afternoon. My name is Radka Doehring, and I have been a member of the Executive Board since 1st May of this year. My responsibility on the Board for the following departments: transactions, legal affairs, IT and procurement, audit, corporate legal affairs and compliance, risk and process management as well as public and investors relation.

Maybe a little bit on my professional background. I'm a charted certified public account in the U.S. But I have worked in the industry for now more than 25 years. My last position, I held for over 9 years in Slovakia, as a Director of Finance, property management and license fee department at RTVS, which is a Slovakian public broadcasting company.

I would like to now walk you through the highlights, which we have on Page 3. Here, we are particularly pleased to see that the like-for-like rental income rose by 4.3% to EUR 64 million. Other -- in the -- this increase was in both office business and also the retail business. In the office business, the increase was by 2.9%. And in the retail business, it was even higher by 5.6%, which is a [ testament ], we feel demonstrates our strength of our portfolio and brand itself.

The occupancy rate remained high at 94.4%. Results of management are also very similar to the previous quarter in 2021 at EUR 53.9 million. The value of our portfolio rose to EUR 5.2 billion, mainly to our second acquisition this year, which was in Italy. It was a STOP SHOP in Udine, and the gross returns rose slightly over last year to 6.2%. So that was on Page 3.

And on following page, we go to the highlights. And our most important KPIs from a financial operations is the [ FFO 1 ], which is very stable at EUR 34.4 million. And the equity ratio has improved. Now it's 52.3% and also we see an improvement in the LTV ratio to 32.7%.

In the net profit, we see a difference compared to the prior quarter 1991, up about -- sorry, 2021. And the difference is mainly due to the positive revaluation, which we took in year 2021 in our stake in S IMMO. The equity ratio we've talked about and our -- the EPRA NTA per share has also increased by EUR 0.20 to EUR 29.4. So this is the highlights, and I would like to hand over now to Stefan, who will give you more details on the numbers.

[Stefan Schönauer Bakk, executive]

Thank you very much, Radka, and ladies and gentlemen, welcome also from my side.

Let me take you through our profit and loss statement on Page 6 of our presentation. Our rental income at the first plant is a bit behind the previous year's first quarter with EUR 70.2 million. Why do I say at the first glance, because the previous year's first quarter was affected by nonrecurring compensation payment that we received for a pandemic-related sales reduction in the amount of EUR 6.7 million. So adjusting for this one-off effect in the previous years first quarter, our rental income first quarter this year is 3.1%, above the previous year and even 2.8% above the Q4 of 2021.

Result of asset management as we already heard from Radka, pretty much stable with EUR 53.9 million. The result of property sales increased slightly to EUR 0.6 million. Results of property development is minus EUR 4.1 million. Where does this negative effect come from? Well, it's coming from the overall digital price increases that we see in the one or the other development projects. And we come to the result of operations, that is [ EUR 38.1 million ] compared to EUR 46.4 million in the previous year's first quarter.

Let me continue on Page 7 with our financial results. Financial result is EUR 47.7 million compared to EUR 79.7 million in the previous year. This splits up in the net financing costs that improved by around about 16% and came in at EUR 60.3 million compared to minus EUR 90.4 million in the previous year.

The other financial results contributed a strong and positive to the financial results. Herein, our interest rate was that gained in value due to the change in interest rate environment. And last but not least, the line equity accounted investment, which account here for a positive contribution for income from our investment in S IMMO with EUR 17.3 million. The relative figure here was strongly positive with EUR 88 million revaluation in S IMMO. Therefore, we come to earnings before taxes of EUR 85.1 million and a net profit of EUR 72.4 million. This equals an earnings per share of EUR 0.55.

Let's have a look into the FFO calculation on Page 8. Relatively unspectacular, I think it is a very good situation that our FFO is basically stable compared also to the previous year with EUR 34.4 million. On the per share calculation, we had before declined by roughly 7% because of the higher number of shares.

As always in our quarterly presentation, we prepare a liquidity profile -- maturity profile for you. And you can see on this slide, this time also a pro forma chart. This performance chart like to explain a little bit. As you may all be aware of, we had quite a significant outflow of liquidity due to the change of control event when CPI Property Group was gaining control over IMMOFINANZ.

And with this case control event, we have to repurchase bonds -- outstanding bonds in the amount of roughly EUR 569 million. And since we already, let's say, took into account the pro forma calculation, so we reduced the outstanding bond amount according to this early repayments. And what you can also see at our convertible bond, with maturity in 2024, is almost gone or the disconvertible bond was converted because of the change of control event with CPI Property Group.

So what does -- what do we see here on this chart? Basically, we still have got close to EUR 500 million liquidity available in the bank financing that matures in the year 2022. We are intensively working on and are also here in advanced stage of refinancing and prolonged expense since we do not expect any repayment needs.

As you can see in the year 2023, the convertible bond due in January 2023 is already sharply reduced in size, and we will repeat the corporate bonds in 2023. The convertible is almost gone. And other than that, I think we have a quite manageable maturity profile of the remaining bank financing and one corporate point less with maturity in the year 2027.

Our net LTV is a very conservative, very moderate level of 32.7%. Our average financing costs are in the area of 1.95%. The remaining term of our financing is close to 4 years, and we have an unencumbered asset pool of, including S IMMO shares, more than EUR 2 billion. We haven't confirmed investment-grade rating with BBB- and a stable outlook and a hedging quarter that secures, so to say, the low interest rate environment of close to 86%.

Let us now jump to the next section, the outlook in our presentation. And let's recap a little bit on the change of control events that I mentioned already. In March, CPI Property Group gains control over of IMMOFINANZ means that they have purchased more than 50% of shares. In this event, [ triggered ] change control losses in bank financing and in bonds. So we saw an early repayment need in the bonds of EUR 569 million. This is all settled and done, and we repaid this from existing liquidity at hand.

With this repayment need in this larger outflow funds, the company also decided to set out the capital market guidance for the year 2022. And also, this repayment amount may have an impact on the ability of the dividend payment amount for the year 2022 and the year 2021. So our AGM will be held on the 12th of July. And well in advance, before this AGM, we will also announce the dividend payment for the year 2021.

Bank financing, as I already mentioned, were also affected by the [indiscernible] event, but we have not seen here any repayment needs and we also do not expect that we have to repay bank financing. Just the bonds to some extent, so to say, were due to early repayment.

When I come to Page 12 of the presentation, also a slide hasn't changed since our annual figures presentation. The last time, where do we target the further [ growth ] of finance, our goal is to grow further our multi-tenant office portfolios in capital cities of IMMOFINANZ, 4 countries with buildings that are institutional sites, more than 10,000 square meters.

We further want to grow our retail park portfolio in Central and Eastern Europe, where we have already a leading role in the region. And our target here is to reach 1 million square meter or round about 140 locations. And we're working here on this growth pipeline. And last but not least, to mention our new brand on top living, this is our, let's say, return also to residential, if you want to say so. We target to overbuild existing retail parks with sustainable and affordable housing and see here in the midterm a potential of up to 600,000 square meters of affordable housing or 12,000 smartly sustainable apartments.

Ladies and gentlemen, I'm here with [indiscernible] with our quick presentation on our Q1 results, and we are very pleased to take your questions now.

[Operator]

[Operator Instructions] And the first question is from the line of Oliver Simkovic from RBI.

[Oliver Simkovic, analyst]

I have two. The first one, what are your plans regarding refinancing the payback bonds? Do you intend to place new bonds this year or have some secured bank financing? Or could you give us some info on this?

[Stefan Schönauer Bakk, executive]

Yes. Thank you very much for this question. Well, at the moment, we are working on bank financing. And we currently do not intend to go toward a new bond in the market because we think the market is also not really open at the moment at reasonable terms. And the bank financing market still is quite retail and working, and we have also headroom here to take up new bank financing.

On the other end side, we have to say IMMOFINANZ is still equipped well with liquidity. And we have -- or it's just commented on the slide, around about EUR 500 million of liquidity, and that is enough for the current situation. And the growth effective midterm new financings, we will either go for banking financing or really is with the market when the situation changes. I currently don't see the bond [ market ] below or nor [indiscernible].

[Oliver Simkovic, analyst]

The second question, could you give us some insight about your plans about potential portfolio sales this year? I know there was a couple of weeks ago, this media report that you are considering to sell your Dusseldorf office assets. Anything, any time line on this or anything else that you could comment on here?

[Stefan Schönauer Bakk, executive]

Well, we -- as you know also from last year, we're always looking to potential portfolio rotation and mostly disposal or assets. And we also state clearly that cycle optimized sales can be a very interesting situation these days because we are in a changing interest rate environment.

We have not any large planes for disposing assets communicated and we also did comment on the -- let's say, rumors on the market only with -- yes, we always look into portfolio optimization, potential disposal at the peak of its life cycle, but we have not, let's say, defined plans yet what the policy of -- will be necessary for what -- [indiscernible] necessary and what volume. I think this will all depend on how the market fully develops and what opportunities are in front of us.

Let's say, the world changed in about 6 months, but dramatically this change in interest rate is further than expected rate hikes. And I think this will have also an impact on how we're looking to our portfolio and how we will continue to manage the portfolio. But that's not defined and not a strategy that we can communicate. No.

[Oliver Simkovic, analyst]

Then maybe one more. You mentioned that your like-for-like rent [ have ] increased by 4.3%. Do you -- or are you able to quantify how much of this is due to the CPI indexation of contracts? And what proportion is just new contracts that have been signed or other factors?

[Stefan Schönauer Bakk, executive]

Well, I think the indexation is maybe half of it and the rest is better performance of those assets, meaning also increasing occupancy of those assets that are in the like-for-like comparison.

I would -- yes, say, the 50-50 split further develops, yes, we will see, for the time being, we are able to really [ effectuate ] our safety process in the rent contracts. And I think that we would first set a good thing, and we'll also be [indiscernible] also fine with the tenants. No complaints at the moment. Let's see that. Let's see how the situation will develop, if we are seeing such a [indiscernible] environment with climbing costs and climbing inflation.

Thank you very much. Do we have any further questions?

[Operator]

[Operator Instructions] So there are no further questions at this time, and I hand back to IMMOFINANZ for closing comments.

[Stefan Schönauer Bakk, executive]

Well, if there are no further questions, thank you very much, ladies and gentlemen, for participating in our Q1 earnings call. I wish you a great day, and goodbye.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.