report to shareholders
Significant increase in net profit excluding revaluation effect
Dear Sir or Madam
Investis continued to perform positively in the first half of 2018. The acquisitions of two property portfolios in Geneva led to a sustainable increase in rental income, while the Real Estate Services segment consolidated the level of profitability it achieved in the previous year.
Sustainable revenue growth – improved operating margin
The Group’s consolidated revenue went up by 5% in the first half of 2018 to CHF 98 million (previous year CHF 94 million). Both segments – Properties and Real Estate Services – contributed to this revenue growth. Like-for-like rent increases of 1.0% resulted in further valuation gains on the portfolio of CHF 2.7 million (previous year CHF 17.2 million). The sale of individual properties produced gains on disposal of CHF 7.9 million (previous year CHF 0.6 million). Operating profit (EBIT) came to CHF 29.2 million (previous year CHF 34.3 million).
Investis successfully launched its fourth bond issue in June. Worth CHF 100 million, the bond has a coupon of 0.35% and a two-year term; it was used to refinance in part the purchase of residential properties. The average interest rate in the first half year fell further to 0.5% (previous year 0.7%). Overall, net financial expense was slightly higher than the previous year. Tax expense and the tax ratio remained slightly lower than the average expected tax rate of 23%. Net profit came to CHF 21.7 million (previous year CHF 27.7 million). Net profit excluding revaluation effect went up to CHF 19.7 million (previous year CHF 13.2 million), representing an increase of 49% in the first half year.
As well as being on the right track operationally, Investis is also embracing the digital age: by collaborating actively with innovative start-up companies, it is exploiting the opportunities created by digitalisation and creating digital solutions that offer added value to its stakeholders. The group continued this work by investing in more start-ups in the first half of 2018.
Properties: Attractive portfolio acquisitions – Further 16% rise in rental income
During the first half of 2018, Investis acquired two real estate portfolios containing a total of 16 properties in Geneva for a purchase price of CHF 160 million. As a result of these acquisitions and various individual divestitures, as at 30 June the total portfolio consisted of 159 properties and 2,911 residential units, with a value of CHF 1,289 million (31.12.2017: CHF 1,121 million).
Rental income rose 16% to CHF 27.0 million (previous year CHF 23.3 million). On a like-for-like basis, rental income went up 1.0%. Continuous cost optimisations resulted in a higher gross margin of 71.1% (previous year 69.7%). The Properties segment achieved an operating profit (EBITDA) before revaluations and disposals of CHF 17.5 million (previous year CHF 15.3 million).
Thanks to the attractive locations of the properties and active portfolio management, the vacancy rate was further reduced to 2.5% as at 30 June 2018 (31.12.2017: 3.5%), while the annualised full occupancy property rent stood at CHF 57.2 million.
Real Estate Services: Further organic growth – EBIT margin consolidated
Revenue for the Real Estate Services segment went up to CHF 73.2 million in the first half-year (previous year CHF 72.6 million). The Construction Management activity, which has since been stopped, generated revenue of CHF 0.8 million in the previous year. Operating profit (EBIT) came to CHF 3.7 million, while the EBIT margin remained at the previous-year level of 5%.
Revenue at Property Management rose by 1.3% and the EBIT margin increased further. This top-line growth could be achieved despite the deliberate withdrawal from unprofitable mandates. Rents under management remained constant at CHF 1.68 billion (31.12.2017: CHF 1.68 billion).
At Facility Services, revenue went up 2.4% with a slightly lower EBIT margin owing to continuing integration costs and the rebranding of all caretaker services under one brand – hauswartprofis in German-speaking Switzerland and conciergepro in French-speaking Switzerland (CHF 0.4 million).
Solid balance sheet and comfortable equity base
Total assets were up 10% at CHF 1.4 billion, while the equity ratio remained solid at 41% (equity: CHF 556 million compared to CHF 569 million at 31.12.2017). The loan-to-value ratio (gross LTV) rose to 41% and remained within the strategic range that allows Investis to keep making transactions at short notice. The nominal value of deferred taxes increased to CHF 170 million (CHF 155 million at 31.12.2017).
The Investis Group expects another rise in revenue and net profit excluding revaluation effect in the second half of 2018 versus previous year, though growth rates are likely to be slower than in the first six months. The Properties segment’s targeted annualised rental income of over CHF 50 million will already have been achieved – one year ahead of schedule – by the end of the 2018 financial year.
Investis has reaffirmed its other medium-term targets for 2019:
– Real Estate Services: high single-digit EBIT margin
– Financing: through unsecured senior debt
On behalf of the Board of Directors and the Group Executive Board of Investis Holding SA, we would like to thank our shareholders for consistently placing their trust in us. Our thanks also go to all our employees, who show great commitment and loyalty.