conwert Immobilien Invest SE: conwert achieves solid operating results in first quarter 2014

Vienna (pta032/27.05.2014/20:30 UTC+2) -
+ Strong improvement with regards to personnel expenses and other operating expenses
+ Yield of portfolio up from 6.0% to 6.2%
+ EBIT holds steady at EUR29.1 mn, despite higher maintenance costs
+ Net finance costs impacted by non-cash effects, particularly from swaps

conwert Immobilien Invest SE, listed on the Austrian ATX, concluded the first quarter with solid operating results.

Rental revenue rose by 5.0% to EUR59.2 mn (1-3/2013: EUR56.4 mn). The increase was primarily due to the acquisition of the residential portfolio from GE Capital Real Estate Germany (GE) following the strategic refocusing on residential property in Germany and Austria. Net Rental Income (NRI) also rose from EUR36.8 mn to EUR37.4 mn; however, the NRI margin slipped back as a result of higher maintenance costs in the first quarter 2014 to 63.1% (1-3/2013: 65.3%). The net initial yield was up from 6.0% in the previous year's reporting period to 6.2% at the reporting date. The total vacancy rate stood at 10.0% at the reporting date, thereby marking further improvement against the comparable period (1-3/2013: 11.8%).

Personnel expenses fell by 21.6% against the comparable quarter to EUR6.9 mn and a 19.1% reduction was achieved in other operating expenses to EUR7.6 mn. Earnings before interest and tax (EBIT) were almost unchanged - mainly because of EUR0.6 mn higher maintenance costs - at EUR29.1 mn (1-3/2013: EUR29.3 mn).

However, net finance costs were burdened by negative non-cash effects of EUR18.7 mn, following on from EUR5.0 mn in the previous year. This increase results from the fall in the interest rate curve in the first quarter 2014 and the change in the value of swaps respectively, which conwert had concluded to hedge debt against interest rate fluctuations. This resulted in a non-cash effect on EBT, which totalled EUR(7.7) mn (1-3/2013: EUR6.0 mn) and a Group loss of EUR(5.9) mn (1-3/2013: EUR3.6 mn). Given the current historically low interest-rate levels, conwert assumes that a further fall in the interest rate curve is unlikely. A slight increase, in contrast, would have a positive impact on net finance costs.

The loan-to-value (LTV), i.e. the debt ratio based on real estate projects including cash and cash equivalents, stood at 54.4% at the reporting date (31/12/2013: 55.9%) and was therefore within the target range of 50 to 55%. The equity ratio increased slightly to 36.5% (31/12/2013: 35.7%).

Maintenance costs were up by EUR0.6 mn, primarily due to the portfolios acquired in Germany in 2013. This led to a 7.7% decrease in Funds from Operations before sales income and one-off effects (FFO I) in the first quarter 2014 to EUR8.4 mn (1-3/2013: EUR9.1 mn). FFO II (FFO I plus sales income) stood at EUR10.7 mn (1-3/2013: EUR12.3 mn) and was therefore only 13.0% below the comparable figure, despite a 37.2% fall in proceeds from sale of properties.

Proceeds from the sale of properties fell by 37.2% in the first quarter to EUR17.7 mn (1-3/2013: EUR28.2 mn) as a result of focusing on the privatisation of individual units. In the first quarter 2014 the sales focus was once again on Germany with EUR14.8 mn. The IFRS margin was 25.5% due to the concentration on individual sales of apartments and commercial units, while the IFRS profit from properties sold amounted to EUR3.6 mn. The total revenues of conwert in the first quarter 2014 were EUR78.9 mn (1-3/2014: EUR89.4 mn). The 11.7% decrease is mainly due to the decline in sales volumes compared to the previous year, as well as lower revenue from services for third parties, as a result of the focus as a property holder in Germany and Austria. Total revenues from property services amounted to EUR2.0 mn at the end of the current period after EUR4.8 mn in the comparable period.

Clemens Schneider, conwert CEO, on the stable operating results: "Despite the necessary structural adjustments in the course of integrating the properties purchased in Germany in 2013, the year 2014 has started well. The improvement in vacancy rates and rental income at the same time as reducing costs has underlined the positive operating results from the first quarter 2014."

The focus of conwert's business activities in 2014 will be on integrating the portfolios acquired in 2013 (KWG and GE). conwert will continue to concentrate on the six core markets (Vienna, Berlin, Potsdam, Dresden, Leipzig, North Rhine-Westphalia) and the corporate focus will be on further improvements to operating profitability of the portfolio. Last but not least, there will be a focus on continuing sales activities for the ECO, commercial and CEE portfolios. conwert continues to forecast sales revenues of EUR150 to EUR200 mn for the full year 2014. Management expects to issue guidance on the outlook for year-end 2014 as part of the presentation of results for the second quarter.

The interim report 1-3/2014 of conwert Immobilien Invest SE is available at http://www.conwert.com.

Company indicators

		31/03/2014	1-3/2013 (adjusted)	Change	2013
Rental income	EUR mn	59.2	56.4	4.7%	227.3
Proceeds on sale	EUR mn	17.7	28.2	-37.2%	273.9
Service revenues	EUR mn	2.0	4.8	-58.3%	15.2
Total revenues	EUR mn	78.9	89.4	-11.7%	516.4
Earnings before interest, taxes and depreciation (EBITDA)	EUR mn	29.4	32.7	-10.1%	116.8
Depreciation, amortisation and other impairment charges	EUR mn	29.1	29.3	-0.7%	123.4
Earnings before interest and taxes (EBIT)	EUR mn	(7.7)	6.0	-	48.7
Funds from operations before sales income *) (FFO I)	EUR mn	8.4	9.1	-7.7%	36.2
Funds from operations after sales income **) (FFO II)	EUR mn	10.7	12.3	-13.0%	52.1
Net rental income (NRI)	EUR mn	37.4	36.8	1.6%	141.4
NRI margin	%	63.1	65.3	-3.4%	62.2
Basic earnings/share	EUR	(0.09)	0.04	-	0.09
Diluted earnings/share	EUR	(0.04)	0.06	-	0.18
FFO I *)/share	EUR	0.10	0.11	-9.1%	0.44

*) 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
***) The interim financial statements as at 31 March 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.

Balance sheet indicators

		31/03/2014	31/12/2013	Change
Total assets	EUR mn	3,070.0	3,165.7	-3.0 %
Non-current loans and borrowings	EUR mn	1,071.3	1,081.6	-1.0 %
Current loans and borrowings	EUR mn	331.0	378.0	-12.4 %
Equity	EUR mn	1,122.0	1,128.6	-0.6 %
Equity ratio	%	36.5	35.7	2.2 %
Gearing	%	154.9	154.2	0.5 %
EPRA NAV (basic)/share	EUR	15.41	15.40	0.1 %

Property indicators

		31/03/2014	31/03/2013	Change	31/12/2013
Rental units	No.	31,756	29,974	5.9 %	32,120
Parking spaces	No.	14,050	13,437	4.6 %	14,187
Total usable space	sqm	2,577,628	2,506,315	2.8 %	2,603.5
Property assets	EUR mn	2,858.1	2,884.7	-0.9 %	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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