Allreal Holding Ag · SIX:ALLN
Allreal — H1 2020 Earnings Presentation
50 slides from Allreal's earnings presentation, Aug 26, 2020
Slide 1: Analysts' and Media Conference: Sound 2020 Half-year Results
Allreal Group Analysts’ and Media Conference Wednesday, 26 August 2020 Sound 2020 Half-year Results Roger Herzog CEO Thomas Wapp CFO
Slide 2: Agenda
2020 Half-year Report Agenda • Overview • 2020 Half-year Results • Real Estate division • Projects & Development division • Valuation and Outlook 26.08.2020 Allreal Group – First half-year 2020 2
Slide 3: Overview: Sound 2020 Half-year Results – Group
Overview Sound 2020 Half-year Results Group • Due to the corona crisis Allreal was confronted with unusual problems • Fast and uncomplicated solutions were needed concern- ing both rental income from yield-producing properties and Project & Development’s project business • Further economic developme
Slide 4: Overview: Group – corona impact
Overview Sound 2020 Half-year Results Group • With corona crisis associated loss of earnings amounts to CHF 1.4 million • Neither substantial requests for rent deferment nor pay- ment defaults due to bankruptcy are pending as at cut-off date • A legislative regulation currently under discussion at n
Slide 5: Overview: Group – construction sites and postponements
Overview Sound 2020 Half-year Results Group • All construction sites were operating during the lock- down; hygiene measures are no cost drivers • Financial impact of project postponements in the first half-year 2020 is estimated to be about CHF 1.7 million 26.08.2020 Allreal Group – First half-year
Slide 6: Overview: Group – net profit
Overview Sound 2020 Half-year Results Group • Operating net profit of CHF 63.0 million almost at previous year’s level • Solid net profit incl. revaluation effect amounts to CHF 86.4 million • Previous year’s result impacted by positive tax-related one-off effect of CHF 3.0 million • Based on today’
Slide 7: Overview: Real Estate
Overview Sound 2020 Half-year Results Real Estate • The total value of the portfolio on the cut-off date amounted to CHF 4.39 billion • Positive revaluation of yield-producing properties by CHF 27.7 million • Decrease of rental income by 1.8% to CHF 100.1 million • Cumulated vacancy rate continued t
Slide 8: Overview: Real Estate – expenses and net yield
Overview Sound 2020 Half-year Results Real Estate • Expected increase of direct expenses for yield-producing properties of CHF 13.2 million due to a higher number of ongoing refurbishment projects • Net yield of yield-producing properties at very gratifying 4.1% 26.08.2020 Allreal Group – First half
Slide 9: Overview: Projects & Development
Overview Sound 2020 Half-year Results Projects & Development • Earnings from Project & Development division decreased by 12.5% to CHF 24.6 million affected by project post- ponements due to the corona crisis and lower income from the sale of development real estate • Gross margin third-party project
Slide 10: Overview: Finance
Overview Sound 2020 Half-year Results Finance • The consolidated half-year financial statements were prepared in accordance with Swiss GAAP FER for the first time • Investment activities, dividend distribution and increase of liquidity resulted in an increase of financial liabilities of about CHF 81
Slide 11: Overview: Finance – credit limit and shareholders
Overview Sound 2020 Half-year Results Finance • Credit limit available short-term of CHF 653 million • Equity ratio at 48.3% • Helvetia remains largest shareholder with an investment of slightly under 10%; in turn the free float of the share increases to 100% 26.08.2020 Allreal Group – First half-ye
Slide 12: Agenda
2020 Half-year Report Agenda • Overview • 2020 Half-year Results – Group – Share • Real Estate division • Projects & Development division • Valuation and Outlook 26.08.2020 Allreal Group – First half-year 2020 12
Slide 13: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results 243.2* 161.0 142.0* 129.2 113.3 115.6 -3.1% -6.5% 89.2* 86.4 66.0 70.3 67.4* 59.3 61.3 63.0 in CHF million 2017 2018 2019 1st HY 2020 2017 2018 2019 1st HY 2020 * Previous year’s figures restated Net profit incl. revaluation effect Net profi
Slide 14: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results In CHF million 1st HY 2020 1st HY 2019* Change Operating net profit 63.0 67.4 –6.5% Operating EBIT 86.1 91.9 –6.3% Net rental income 100.1 101.9 –1.8% Earnings from real estate 86.9 90.5 –4.0% Earnings from P&D 24.6 28.1 –12.5% Sales P&D 178
Slide 15: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results 1st HY 2020 2019* 2018 2017 ROE in % – excl. revaluation effect 6.4 6.8 5.9 5.9 – incl. revaluation effect 7.4 7.7 7.3 6.0 Net yield portfolio in % – Total 4.1 4.3 4.4 4.3 – Residential properties 3.0 3.1 3.3 3.4 – Commercial properties 4.4
Slide 16: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results Marginal value 30.06.20 31.12.19 31.12.18 31.12.17 Equity ratio > 35% 48.3% 49.7%* 48.1% 49.3% Net Gearing < 150% 87.2% 83.8%* 91.5% 87.2% Interest coverage factor > 2.0 10.9 10.2 6.1 6.0 Ø Interest on interest-bearing debt 0.83% 0.88%* 1.48
Slide 17: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results CHF 500 million 1.50% CHF 400 million 140 1.00% CHF 300 million CHF 200 million 150 0.50% 317 200 200 170 210 Bonds CHF 100 million 160 150 125 Fixed advances and 100 100 mortgages 31 30 CHF 0 million 0.00% Interest rate 2020 2021 2022 2023
Slide 18: 2020 Half-year Report – Group
2020 Half-year Report – Group Sound 2020 Half-year Results Financing structure 2020 2019 2018 2017 Capital market (bonds) 57.4% 57.7% 52.1% 49.9% Fixed-rate mortgages banks 14.6% 15.2% 14.9% 8.5% Fixed-rate mortgages pension 14.0% 14.6% 14.1% 12.6% funds / insurance companies Bank loans with short-t
Slide 19: 2020 Half-year Report – Share
2020 Half-year Report – Group Sound 2020 Half-year Results in CHF 1st HY 2020 1st HY 2019 Change or 30.06.2020 or 31.12.2019 EPS incl. revaluation effect 5.43 5.61* –3.2% EPS excl. revaluation effect 3.96 4.26* –7.0% NAV per share on cut-off date 146.70 148.10* –0.9% Share price on cut-off date 187.
Slide 20: Agenda
2020 Half-year Report Agenda • Overview • 2020 Half-year Results • Real Estate division - Overview - Portfolio - Results • Projects & Development division • Valuation and Outlook 26.08.2020 Allreal Group – First half-year 2020 20
Slide 21: Real Estate division Overview
Real Estate division Overview • Market value increases by about CHF 50 million to CHF 4.39 billion due to positive revaluation gains and project progress in investment real estate under construction • There have been no changes to the portfolio of investment real estate in the period under review •
Slide 22: Real Estate division – Portfolio
Real Estate division – Portfolio Future portfolio growth from own developments foreseeable 4.2* 4.3 4.1 3.9 3.5 3.5 3.5 in CHF billion / million 2.6 2.5 2.5 76% as at cut-off date 2.4 (rounded) (without investment real estate under construction) 3232* 3243 2699 3113 3226 2817 2756 1010* 1014 2099 91
Slide 23: Two investment real estates under construction
Real Estate division – Portfolio Two investment real estates under construction Hardstrasse 301, Zurich-West: commercial building with rentable floor space of more than 5,800 m2 (incl. public- oriented use and warehousing); development, realisation und building owner: Allreal; investment volume: abo
Slide 24: Two investment real estates under construction
Real Estate division – Portfolio Two investment real estates under construction Grünhof site, Zurich Aussersihl: new-build with a total of 88 rental apartments in the inner courtyard (previously used for commercial purposes) plus a replacement new-build in addition to office and commercial space; to
Slide 25: Stable mix of usage and tenants
Real Estate division – Portfolio Stable mix of usage and tenants in % of rental income as of Mix of usage Tenants commercial properties first half-year 2020 yield-producing properties (rounded) Office / Services 61% Canton of Zurich 16% Residential 20% Generali Switzerland 8% Trades / Ware
Slide 26: Balanced distribution of expiry without short term changes
Real Estate division – Portfolio Balanced distribution of expiry without short term changes 22 16 15 11 10 6 5 5 5 in % of target rental income 4 commercial properties 1 (rounded) Rental agreements by sector Banks / Insurances 23% indefinite 2028 2026 2020 2021 2022 2023 2024 2025 2027 2029ff Se
Slide 27: Customer focus reduces vacancy rate to record low
Real Estate division – Portfolio Customer focus and high own contributions reduce vacancy rate to record low in % (cumulated from gross 3.8 target income) 3.3 as at 30.06.2020 2.2 1.9 2.1 1.8 as at 31.12.2019 1.5 1.5 1.3 as at 30.06.2019 Yield-producing properties Residential properties Commercial p
Slide 28: Real Estate division Results
Real Estate division Results • The decrease in rental earnings of CHF 1.8 million to CHF 100.1 million is structured as follows (in CHF million): • Increase of loss of rental income -1.4 (waiver of rent due to corona) • Allreal’s own usage of office building -1.1 on Lindbergh-Allee 1, Glattpark • Re
Slide 29: Real Estate division Results
Real Estate division Results • Real estate expenses amounted to CHF 13.2 million, representing an expense rate of 13.2% due to a higher number of ongoing refurbishment projects • In the financial year 2020 the following refurbishment projects are affecting the real estate accounting: Fire protecti
Slide 30: Real Estate division Results
Real Estate division Results • Changes in rents (like-for-like) of +0.7% (residential properties) and -0.7% (commercial properties) • About CHF 0.8 million or 53% of total vacancy costs are attributed to the five largest vacancies 26.08.2020 Allreal Group – First half-year 2020 30
Slide 31: Real estate expenses close to normalised range
Real Estate division – Results Real estate expenses close to normalised range 18.2 normalised range 15.8 15–17% 14.8 14.9 15.0 13.3 13.8 13.3 13.7 13.5 13.2 11.6 Real estate expenses for yield-producing properties in % of rental income 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020 2
Slide 32: Positive profit contribution from revaluation
Real Estate division – Results Positive profit contribution from revaluation Residential Commercial Investment real Revaluation properties properties estate under in total construction +27.7 +34.2 1st half-year 2020 in CHF million +17.5 City of Zurich +6.3 Remaining +17.5 Canton of Zurich +13.0 Othe
Slide 33: Agenda
2020 Half-year Report Agenda • Overview • 2020 Half-year Results • Real Estate division • Projects & Development division - Overview - Portfolio - Results • Valuation and Outlook 26.08.2020 Allreal Group – First half-year 2020 33
Slide 34: Projects & Development division Overview
Projects & Development division Overview • Earnings from Projects & Development decrease by 12.5% to CHF 24.6 million • Lower income from sales of development real estate and project postponements as main reasons for this decline • Gross margin for third-party projects amounts to a high 13.8% 26.08.
Slide 35: Projects & Development division Overview
Projects & Development division Overview • Allreal strengthened the division by appointing Simon Räbsamen as new Head Realisation and Member of Group Management since 1 June 2020 • While pressure on prices and margins remains a determining issue in Projects & Development, the division expects to rep
Slide 36: Project development: third-party and own projects
Projects & Development – Project development Success-relevant development of third-party and own projects Eggen, Luzern: Winning project of project competition by Florenstrasse, Winterthur Seen ZH: Planning and Caruso St John Architects comprising 77 condominiums. execution of eight apartment buildi
Slide 37: Project development: third-party and own projects
Projects & Development – Project development Success-relevant development of third-party and own projects Bellerivestrasse 36, Zurich Riesbach: Refurbishment of a Spiserstrasse, Zurich Albisrieden: Study competition for a commercial building according to winning project by residential complex compri
Slide 38: Project development: third-party and own projects
Projects & Development – Project development Success-relevant development of third-party and own projects • Income resulting from the sale of residential real estate in Zufikon AG and Bülach ZH amounted to CHF 1.6 million • Demand for residential ownership in mid price segment remains excellent • Fo
Slide 39: High profitability in the Realisation of third-party projects
Projects & Development – Realisation High profitability in the Realisation of third- party projects • Completed project volume in the first half-year 2020 amounted to CHF 178.6 million • Due to the corona crisis postponements and individual delivery interruptions hampered growth of completed project
Slide 40: High profitability in the Realisation of third-party projects
Projects & Development – Realisation High profitability in the Realisation of third- party projects A high gross margin resulted from the limitation to third- party projects with calculable risks, realistic contractual conditions and sound profit expectations: 1st HY 20 2019 2018 2017 Completed thir
Slide 41: Up to 70 projects currently being processed
Projects & Development – Realisation Up to 70 projects currently being processed Bellariarain, Zurich Wollishofen: 13 five-storey apartment Datacenter ZUR2, Glattbrugg ZH: Three-story data centre buildings with a total of 180 rental units; owner: Helvetia; comprising 7,132 m2 of useful space located
Slide 42: Up to 70 projects currently being processed
Projects & Development – Realisation Up to 70 projects currently being processed Badenerstrasse, Zurich Wiedikon: Comprehensive Dietlimoos, Adliswil ZH: Site development for third parties refurbishment and extension of an office building used by of about 250 rental units and about 7,600 m2 commercia
Slide 43: Up to 70 projects currently being processed
Projects & Development – Realisation Up to 70 projects currently being processed Bahnweg, Lausen BE: Apartment building with a total of Letzi Turm, Zurich Altstetten: New construction of two 50 rental units in Minergie- and SNBS-Standard; owner: apartment towers with a height of 70 metres and a tota
Slide 44: Earnings impacted by lower sales gains
Projects & Development – Results Earnings impacted by lower sales gains Earnings from P&D 1st Half-year 2020 1st Half-year 2019 division in % (rounded) -5% - 6% 4% 6% 7% Earnings from construction 10% 34% Architects’ and P&D fees 13% 39% 13% Capitalised in-house activity Earnings from sales 42% 44%
Slide 45: Agenda
2020 Half-year Report Agenda • Overview • 2020 Half-year Results • Real Estate division • Projects & Development division • Valuation and Outlook 26.08.2020 Allreal Group – First half-year 2020 45
Slide 46: Profit forecast for 2020 full-year
Valuation and Outlook Profit forecast for 2020 full-year • The insecurities which emerged at the outbreak of the corona crisis can currently be assessed more reliably • Profit forecast from end of February 2020 is reconfirmed • Allreal expects operating net profit for the entire financial year 2020
Slide 47: Long-term effects of corona crisis: Real Estate
Valuation and outlook Long-term effects of corona crisis Real Estate • Working from home will not replace conventional office space, but pressure on lessors to be more customer- oriented, more flexible and open for short-term adjustments will increase • Conventional office space is going to change;
Slide 48: Long-term effects of corona crisis
Valuation and outlook Long-term effects of corona crisis Projects & Development • Postponements or cancellations of projects require great flexibility in financial and capacity planning • COVID-19 shows that financially strong and well-organized general contractors adapt quickly to new conditions •
Slide 49: Long-term effects of corona crisis
Valuation and outlook Long-term effects of corona crisis Projects & Development • Transparent risk identification and monitoring is even more important for business success • The importance (and profit potential) of own projects and specialisation is increasing • General contractors with a one-sided
Slide 50: Allreal builds value
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