Allreal: records a stable result in the first half of 2023

Allreal: records a stable result in the first half of 2023

Ad hoc communication according to Art. 53 RC

  • Increase in rental income in the Real Estate business sector and only minor write-downs on the portfolio

  • Main contractor gross margin in line with target value

  • Marc Frei joins the group management as CFO

Glattpark, August 30, 2023: In the first half of 2023, Allreal achieved an operating profit excluding revaluation effect of CHF 66.7 million (first half of 2022: CHF 81.8 million). In addition to the higher net financial costs, this lower result compared to the previous financial year can mainly be explained by the lesser success of the sale of development properties. Allreal also benefited from a one-off tax effect in the first half of 2022. Including the revaluation effect, the operating result amounted to CHF 44.3 million (first half 2022: CHF 82.7 million).

Despite the sharp rise in financing costs, the Real Estate business sector posted a good result
In the real estate sector, Allreal posted a good result in line with expectations. Rental income increased by CHF 108.5 million compared to the previous year (first half of 2022: CHF 106.8 million), mainly due to the indexation of commercial leases to the Swiss consumer price index. The lack of rental income from the properties sold in Basel at the end of last year could thus be amply compensated.

Cumulative vacancy was still low in the reporting period at 1.7% (first half of 2022: 1.5%). Allreal’s portfolio therefore again has a vacancy rate that is below the sector average in Switzerland. Allreal benefits from a very solid tenant base with which it maintains long-term partnership relationships. The low vacancy rate also testifies to the high quality of the buildings and their active management.

Due to the increase in rental income and the low vacancy rate, the net yield developed steadily to an attractive level of 4.0% (first half of 2022: 3.9%).

At CHF 10.5 million, the direct costs for investment properties were slightly lower than last year (first half of 2022: CHF 10.8 million). However, in the second half of the year, the rate of property charges should increase slightly again as a result of the implementation of various projects.

The valuation of investment properties, determined on 30 June 2023 by the external property valuation expert, resulted in a slight impairment of CHF 26.1 million. The positive revaluation of the fully renovated and leased commercial building at Bellerivestrasse 36 and two residential buildings in Zurich deserves to be underlined. On the other hand, higher depreciation was applied to the building on Freiburgstrasse in Bern and to some residential buildings in French-speaking Switzerland.

However, compared to the value of the portfolio, the effect is very small given the interest rate adjustments by the Swiss National Bank. On the reference date, the total value of the real estate portfolio amounted to CHF 5.09 billion (31.12.2022: CHF 5.10 billion).

In the first half of 2023, the Real Estate business segment generated an operating result excluding revaluation effect of CHF 69.4 million (first half of 2022: CHF 70.6 million).

General contractual gross margin stable
In the General Contracting business area, Allreal posted a result of CHF 17.6 million (first half of 2022: CHF 34.9 million). This result, which is significantly lower than the previous one, is explained by the high sales of development real estate in 2022, amounting to CHF 15.6 million. In addition to the sale of homes in Winterthur ZH and in French-speaking Switzerland, the sale of land belonging to the development reserves in Rümlang ZH in particular had a positive effect on the previous financial year. Sales of homes in the Spiserstrasse project in Zurich Albisrieden got off to a good start in the first half of the year. Given authentications expected in the second half of 2023, other sales are planned for the year.

Despite challenging market conditions, the Realization segment generated a solid gross margin of 9.9% for third-party projects (H1 2022: 11.2%). Compared to the same period last year, the volume of completed projects in the Realization division fell to CHF 143.0 million (first half of 2022: CHF 155.5 million). Of this total, CHF 116.4 million, or 81.4%, corresponded to third-party projects and CHF 26.6 million, or 18.6%, to proprietary projects.

At the reference date, the guaranteed work reserve amounted to approximately CHF 510 million and covered the use of existing capacities for a minimum of 18 months.

In the first half of 2023, the General Contracting business area achieved an operating result of CHF -0.3 million (first half of 2022: CHF 11.9 million).

Capital-Recycling contributes to the stability of long-term financing
In March 2023, the company issued its first fixed rate green bond. The CHF 150 million loan has a term of five years and an interest rate of 3.0%. As a result, the average interest rate on financial debt rose to 1.27% on June 30, 2023. Therefore, net finance costs are expected to be significantly higher going forward. The average duration of interest rate fixing was 41 months.

As expected, financial debt increased by CHF 82.9 million to CHF 2.69 billion compared to the end of the year, following the distribution to shareholders in April 2023 (31.12.2022: CHF 2.61 billion).

At the reference date, the equity ratio was 44.3%, the net gearing was 106.0% and the interest coverage ratio was 7.3 (31.12.2022: 45.6% / 99.9% / 11.5). These parameters must be monitored continuously. During the current financial year, Allreal follows the Capital-Recycling strategy that was initiated last year. This contributes to the stability of long-term funding. In this context, Allreal sold a commercial property in Urdorf ZH at a profit at the end of June, which was no longer in line with the portfolio.

Sustainable development strategy is implemented
In June, Allreal and eleven other major players in the real estate sector signed the ‘Charter for circular construction’. The ambitions formulated in the charter complement our objectives in this priority area for us, namely circular construction. In particular, Allreal is taking its first steps towards the circular economy within the framework of the Baarermatte flagship project. For example, the reuse of building materials from the existing building is taken into account from the planning of the project and clear objectives are set with regard to CO2 consumption during construction and operation.

The development of photovoltaic installations and electric charging stations has also accelerated. By 2024, Allreal aims to produce more than 5,500 kWp of electricity with photovoltaic installations and to equip more than 25% of parking spaces with charging stations.

The outlook for the whole of 2023 is becoming clearer
For the 2023 financial year, Allreal expects a slight increase in rental income compared to the previous financial year, due to the increase in the reference interest rate and the indexation of commercial leases to the Swiss consumer price index. The General Contracting business area is expected to make a positive profit contribution, albeit considerably lower than last year. The group result (excluding revaluation) should be slightly above CHF 120 million.

Renewal of the staff at the head of the company and strategic continuity
During the reporting period, there was a personnel change at the head of the company. In May, Stephan Widrig took over the management of the group as the new CEO. The Board of Directors has also appointed Marc Frei, who has held the position of Chief Financial Officer since the departure of Thomas Wapp, as CFO and full member of Group Management as of September 1, 2023. Marc Frei, born in 1986, has been with Allreal since 2019 , most recently as head of management control and deputy CFO.

As a player in the professional real estate sector with a healthy portfolio, Allreal believes it is well equipped to withstand the tougher cycles in the real estate market. Its high development and execution skills enable the company to generate additional added value for shareholders outside its portfolio. The strategy adopted so far remains valid under the new management.

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