Earnings Release • Aug 26, 2014
Earnings Release
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26 August 2014 – After closing of markets Under embargo until 17:40 CET
Aedifica's investment strategy is built on two underlying demographic trends, namely population ageing in Western Europe and population growth in Belgium's main cities.
A year and a half after the capital increase of December 2012, Aedifica has realised an impressive series of new investments, mainly in the senior housing segment, which has become the Company's principal development pillar. No less than 13 buildings entered into Aedifica's portfolio during the 2013/2014 financial year (not to mention various extensions, redevelopments, etc.). With these acquisitions, the number of senior housing sites has grown to more than 50. The fair value of investment properties rose well above €700 million during 2013/2014 to reach €785 million by 30 June 2014. This marks an increase of €142 million (or 22 %) in one year.
In addition to the €191 million in credit facilities established or renegotiated during the financial year, the Company was able to issue a significant number of new shares at the end of the period to finance its continued growth. These shares, which represent a cumulative amount of €16 million, were issued as part of two real estate operations (contributions in kind). This had an accretive effect on the net asset value per share and brought the total market capitalisation to €520 million.
Growth of the portfolio took place within the domestic market and, for the first time, by expanding beyond the country's borders. The acquisition of five rest homes in Germany was a major accomplishment for the Company in 2013/2014. Not only were these acquisitions Aedifica's first investments abroad since the Company was created in 2005, they are also the first investments of any Belgian REIT in the German market. These investments are consistent with Aedifica's strategy in the senior housing segment, allowing for better diversification of tenants and expanding the Company's operations in a market that tends to structure itself at a European level. Aedifica aims to continue its growth in Germany with its actions, communications, and other efforts ongoing in view of this goal. The German market has responded positively to Aedifica's arrival in the market: the Company was recognised as one of the top 5 investors in senior housing by Care-Invest during the Altenheim EXPO trade fair in Berlin in July 2014.
Even before considering the new opportunities to expand in Belgium and in Germany, future growth is ensured for Aedifica given the Company's existing commitments to acquire, renovate, extend, and/or redevelop multiple sites. These projects fit perfectly with Aedifica's strategy which, in the senior housing segment, aims to improve existing sites and to develop new projects in partnership with tenants/operators. The current pipeline for these types of projects represents a total committed budget in excess of €200 million, to be invested over a four year period. This strategy allows Aedifica to maintain a portfolio of high quality buildings that generate attractive net yields.
The assets of Aedifica's portfolio are divided into three segments:
Aedifica continues to improve its portfolio performance, which translates into excellent and increasing rental incomes (+12 %), an increasing EBIT margin (77 %), and well controlled financing costs. Profit excluding non-cash elements arising from application of accounting standards on financial instruments and investment property has reached €20.3 million (30 June 2013: €17.0 million, an increase of 19 %), i.e. €2.05 per share (30 June 2013: €1.95 per share).
Given the performance and achievements described above, Aedifica's Board of Directors proposes to the Annual General Meeting to distribute a gross dividend of €1.90 per share1 . This is higher than the prior year dividend distribution and above budget (€1.86 per share)
In light of the instable environment that continues to unfold around the world, the Board of Directors anticipates a higher dividend for 2014/2015, amounting to €1.93 per share.
The 2014/2015 financial year will also be a year of regulatory framework change for the Belgian REIT sector. Following the transposition of the European "Alternative Investment Fund Managers" ("AIFM") Directive, Belgian REITs will soon be subject to new reporting requirements. Within this context, the Belgian Parliament approved an act that introduces the status of "Regulated Real Estate Company" ("RREC") (in French "SIR" standing for "Société Immobilière Réglementée" or in Flemish "GVV" standing for "Gereglementeerde VastgoedVennootschap") and offers existing Belgian REITs the possibility to adopt this new status. This Act, and the Royal Decree which implements it, entered into force on 16 July 2014. Within the four months following publication of this Royal Decree in the Belgian Official Gazette, every Belgian REIT will have to choose from one of two options: obtain an authorisation from the FSMA ("Financial Services and Markets Authority") to operate as an AIFM, or request authorisation by the shareholders to adopt the RREC status. Aedifica's Board of Directors believes that it is in the best interest of the company, its shareholders and effectively all stakeholders to adopt the RREC status. Application of the AIFMD directive, on the other hand, would burden the operating structure of the Company and trigger application of other regulations, such as those applicable to derivative instruments ("European Market Infrastructure Regulation" or "EMIR"). The combination of all these factors would decrease of the Company's dynamism in the market and have an important financial impact, with a significant increase of financial and operating costs. Aedifica's Board of Directors has, thus, chosen to submit to the FSMA an application for authorisation to become a RREC. With approval, the Company will be in a position to convene an Extraordinary General Meeting in autumn 2014 to vote on the change in status. Aedifica will inform its shareholders in due time.
In conclusion, note that new investment opportunities are currently under consideration, both in Belgium and in Germany. These potential investments are fully aligned with the Company's strategy which is highly favoured by the market.
1 The net dividend per share will amount to €1.6150, after deduction of the withholding tax of 15 %.
26 August 2014 – After closing of markets Under embargo until 17:40 CET
Aedifica signed, in front of the notary, the purchase agreements for three rest homes in Germany on 20 June 2013 ("Seniorenzentrum AGO Herkenrath" in Bergisch Gladbach in North Rhine-Westphalia) and 12 September 2013 ("Seniorenzentrum AGO Dresden" and "Seniorenzentrum AGO Kreischa" in Saxony). These agreements were subject to the usual outstanding conditions in Germany, which are mainly of administrative nature. The conditions were met on 1 August 2013 for the rest home located in Bergisch Gladbach, on 22 November 2013 for the rest home located in Dresden and on 28 December 2013 for the rest home located in Kreischa. The purchase price (approx. €21 million in total) was paid, and Aedifica SA automatically acquired the property and full use of the buildings on those dates.
These three establishments are operated by subsidiaries of the AGO Betriebsgesellschaft für Sozialeinrichtungen mbH ("AGO group"), a quality operator in the healthcare industry with an excellent reputation in the German market. It operates more than ten establishments and has its headquarters
in Cologne. The contracts in place with the operator are irrevocable long-term leases with double net structure, meaning the repair and maintenance of the roof, structure and facades of the building remains the responsibility of the owner. The average remaining lease maturity of the three leases is approx. 23 years. Given the good quality of the buildings, the initial gross rental yield (double net) for the three rest homes amounts to approx. 7.5%. The contractual value of the three buildings amounts to approx. €21 million.
Aedifica (together with its subsidiary, Aedifica Invest SA) acquired all shares of the limited liability company Patrius Invest on 29 August 2013. Patrius Invest is the owner of two rest homes in the province of Antwerp: "Salve" in Brasschaat and "Plantijn" in Kapellen.
"Salve"
"Plantijn"
The total investment budget (as specified in the contracts) for the renovation and expansion works at these two sites amounts to approx. €16 million. These additional investments will, upon completion, generate a triple net yield of approx. 6%.
Aedifica (together with its subsidiary, Aedifica Invest SA) acquired all shares of the limited liability company Immo Dejoncker on 21 October 2013. Immo Dejoncker is the owner of the "Stephanie's Corner" apartment building in Brussels.
"Stephanie's Corner" comprises 27 apartments, 3 commercial spaces and a 27-space underground parking lot. The building (dated 2007) is located between rue Jean Stas and rue Dejoncker. This is an excellent location at the heart of the Louise district in Brussels, near to shops and public transportation links (trams and metros). The apartments are rented to private individuals on the basis of traditional residential leases while commercial spaces are rented under commercial leases. The contractual value of the building amounts to approx. €10 million (i.e. an acquisition value well below €3,000/m² for the apartments) and generates an initial gross rental yield above 5%.
"Stephanie's Corner"
Aedifica (together with its subsidiary, Aedifica Invest SA) acquired the control of the companies owning the "Huize Lieve Moenssens" rest home in Dilsen-Stokkem (Province of Limburg) and "De Stichel" rest home in Vilvoorde (Province of Flemish Brabant) on 16 December 2013.
"De Stichel"
"Huize Lieve Moenssens"
On 12 June 2014, Aedifica announced an agreement in principle between Aedifica, B&R and Oase for the acquisition of 5 new rest homes, in the region of Leuven, Aarschot and Tienen (Province of Flemish Brabant). This agreement in principle was partially executed with the acquisition of the rest home in Binkom on the same day and with the acquisition of the plot of land in Tienen on 30 June 2014.
The operation was partially realised through the contribution in kind of the building (by Oase ASBL (the former owner) and through the acquisition by Aedifica (together with its subsidiary, Aedifica Invest SA) of 100 % of the shares of Rugever BVBA, a subsidiary of the B&R group and owner of the plot of land. The transaction was partially financed with issuance of 258,475 new Aedifica shares in the amount of €12,158,664. The new shares are fully paid-up, with no par value. These shares have been quoted on the stock market since 16 June 2014 and give dividend rights for the 2013/2014 financial year, with Oase assuming responsibility for the expected dividend which accrued over the period 1 July 2013 to 11 June 2014. Rugever BVBA was merged with Aedifica SA at the Board of Directors on 30 June 2014.
26 August 2014 – After closing of markets Under embargo until 17:40 CET
"Oase Binkom"
Aedifica acquired the plot of land in Tienen through a contribution in kind made by Woon & Zorg Vg Tienen BVBA on 30 June 2014.
The contractual value of the plot of land amounts to approx. €4 million. The initial net yield amounts to approx. 6 %. Aedifica will receive this yield based on the surface rights granted to Woon & Zorg Vg Tienen BVBA in relation to the buildings under construction on this plot of land.
The transaction was entirely financed by the issuance of 86,952 new Aedifica shares. The new shares are fully paid-up, with no par value. These shares have been quoted on the stock market since 2 July 2014 and give dividend rights for the 2013/2014 financial year, with Oase assuming the amount of the expected dividend which accrued over the period 1 July 2013 to 29 June 2014. Completion of the building and its acquisition by Aedifica are foreseen in summer/autumn 2014.
"Oase Tienen"
On 5 May 2014, Aedifica announced the signing of the purchase agreements for two rest homes in Germany ("Haus Dottendorf" in Bonn, in North Rhine-Westphalia, and "Goldene Au" in Sonneberg, in Thuringia). These agreements signed in front of the notary in Frankfurt were subject to the usual outstanding conditions in Germany (mainly of administrative nature). The conditions were met on 24 June 2014 for the rest home located in Bonn and on 26 June 2014 for the rest home located in Sonneberg. The purchase price (€15 million) was paid at that time, and the property and full use of the buildings were automatically acquired.
This establishment is operated by Volkssolidarität, one of Germany's largest not-for-profit associations. It operates nurseries, social services and other establishments with social aims for the benefit of the German population. It operates more than sixty establishments and has its headquarters in Berlin.
"Goldene Au"
This establishment is operated by Senator, one of the largest private rest home operators in Germany with its headquarters in Lübeck and more than 50 establishments across the country.
"Haus Dottendorf"
The contracts in place with the operator are irrevocable long term leases with double net structure, meaning the repair and maintenance of the roof, structure and facades of the building remains the responsibility of the owner. The average remaining lease maturity of the two leases is approx. 22 years. The initial gross rental yield (double net) for the two rest homes amounts to approx. 7.5 %. The contractual value of the two leases amounts to approx. €15 million.
Construction of the new "Hestia" rest home, located in Wemmel (in the province of Flemish Brabant), was completed on 29 August 2013.
The rest home is located in close proximity to Brussels in a residential area of Wemmel. With a total capacity of 222 beds, it is the largest rest home in Aedifica's portfolio. The site is operated by the Soprim@ group under a 27-year triple net long lease. The contractual value amounts to approx. €22 million (including the land acquisition and building construction) and generates an initial triple net yield of approx. 6%.
The project was carried out on behalf of Aedifica in the context of an agreement in principle signed on 21 February 2011 with the Soprim@ group.
"Hestia"
Aedifica (together with its subsidiary Aedifica Invest SA) acquired all shares of the limited liability company Patrius Invest SA, owner of the "Salve" rest home on 29 August 2013 (see section 2.1.1). In the framework of the long lease, Aedifica committed to finance the redevelopment of the site (in two phases). Phase I of the project consisted of the demolition and reconstruction of the old section of the rest home while at the same time preserving the historical exterior front of the building; this phase was completed in February 2014. The phase I investment amounts to approx. €6 million and generates a triple net rental yield of approximately 6 %.
26 August 2014 – After closing of markets Under embargo until 17:40 CET
"Salve" (Phase I)
Phase II will see the renovation of the more recent sections (two buildings dated 1979 and 1997). Delivery of phase II is expected in 2015.
- 17 February 2014: "Larenshof" rest home (Laarne, province of East Flanders)
On 7 September 2011 Aedifica acquired Larenshof, a site comprising a rest home and an assistedliving building located in a residential district in Laarne (East Flanders). Phase I (construction of the 62-bed rest home) and phase II (construction of an assisted-living building comprising 29 assistedliving apartments) were both completed in 2010/2011. Phase III (extension of the rest home) reached completion on 17 February 2014. The total investment for the site (Phases I, II and III) amounts to approx. €17 million and generates a triple net rental yield of approx. 6 %. The site now comprises 119 units (90 rest home beds and 29 assisted-living apartments, of which 26 apartments belong to Aedifica). It is operated by the Armonea group, under a triple net long lease.
"Larenshof" (phase III)
The "Koning Albert I" rest home was acquired in 2011. In the context of the long lease with the operator of the rest home (the Soprim@ group), Aedifica committed to finance the extension and renovation of the site in order to bring its total capacity to 110 units (67 rest home beds and 43 assisted-living apartments).
The site redevelopment was carried out in two phases:
26 August 2014 – After closing of markets Under embargo until 17:40 CET
The total investment for the site, after the extension and renovation works, amounts to approx. €15 million and generates a triple net rental yield of approx. 6 %.
"Koning Albert I" (phase II)
- 15 May 2014: "De Edelweis" rest home (Begijnendijk, province of Flemish Brabant)
Phase II of the extension works of De Edelweis rest home in Begijnendijk was completed on 15 May 2014 and the rest home became operational the same day. Recall that the site, operated by an entity of the Senior Living Group, was acquired on 2010 with a 2-phase extension project planned for a total budget of approx. €3 million. Phase I was completed on 28 May 2013.
"De Edelweis"
26 August 2014 – After closing of markets Under embargo until 17:40 CET
As of 30 June 2014, the following development projects are in progress:
With regard to financing, €191 million in new and renegotiated financing has been secured since the beginning of the 2013/2014 financial year, through the following transactions and events:
Taking into account the abovementioned financing arrangements, the timetable showing the maturity of Aedifica's current credit facilities is as follows (in € million):
| 464 | |
|---|---|
| > 2022/2023 : | 14 |
| 2020/2021 : | 2 |
| 2019/2020 : | 30 |
| 2018/2019 : | 60 |
| 2017/2018 : | 67 |
| 2016/2017 : | 150 |
| 2015/2016 : | 85 |
| 2014/2015 : | 56 |
Establishment of these credit facilities demonstrates the strong and durable relationship Aedifica maintains with its banks.
Aedifica announced the acquisition (together with its subsidiary, Aedifica Invest SA) of 100 % of the shares of the BVBA Woon & Zorg Vg Aarschot on 10 July 2014. Woon & Zorg Vg Aarschot is the current owner of a plot of land and buildings in Aarschot (Wissenstraat) and was a subsidiary of the B&R group. This transaction is a part of the agreement in principle (announced on 12 June 2014) for the acquisition of a portfolio of five rest homes in the province of Flemish Brabant in partnership with Oase and B&R.
The site in Aarschot (Wissenstraat) is well located in a residential area close to the city centre, approx. 20 kilometres from Leuven. The site was completed in June 2014 and recently became operational. It comprises 164 units, including a 120-bed rest home and a 44-unit assisted-living apartment complex. Both buildings are connected underground and by an aboveground pedway. The rest home is operated by a non-profit organisation of the Oase group, on the basis of a 27-years triple net long lease, which generates an initial triple net yield of approx. 6 %. The Oase Group operates the assisted-living apartments under an agreement for the right to use with a duration of 27 years. Aedifica may consider selling the assisted-living apartments to third parties in the short term, since they are considered nonstrategic assets in this transaction. The contractual value of the entire site amounts to approx. €24 million.
« Oase Aarschot Wissenstraat »
During the 2013/2014 financial year (1 July 2013 – 30 June 2014), Aedifica increased its portfolio of marketable investment properties by €152 million, from a fair value of €614 million to €766 million (€785 million for the total portfolio, including development projects). This growth (of 25 %) is mainly attributed to acquisitions (see section 2.1.1.) and completions of development projects (see section 2.1.2.) realised during the financial year.
The changes in the fair value of marketable investment properties recognised in income (+€5.7 million, or +0.8 %) has been assessed by independent experts and is broken down as follows:
As of 30 June 2014, Aedifica has 139 marketable investment properties, with a total surface area of approx. 376,000 m2 , consisting mainly of:
The breakdown by sector is as follows (in terms of fair value):
The geographical breakdown is as follows (in terms of fair value):
The occupancy rate2 of the total unfurnished portion of the portfolio amounts to 97.6 % for the year ended 2013/2014 (represents 92 % of the fair value of marketable investment properties; 90 % as of 30 June 2014). This occupancy level remains very high, and is higher than that achieved over the 2012/2013 financial year (97.4 %).
The occupancy rate of the furnished portion of the portfolio reached 78.0 % for the year ended 2013/2014 (represents only 8 % of the fair value of marketable investment properties). This is a decrease as compared to the occupancy rate realised in the previous financial year (82.6 %) but higher than the last published occupancy rate (76.8% as of 31 March 2014). This reflects the amplified seasonality arising from the economic climate, as noted in previous publications, and is also explained by the fact that Aedifica is currently taking advantage of the economic slowdown to renovate some of its furnished apartments and the Company's will to gradually avoid rentals of less than 3 months.
2 The occupancy rate is calculated as follows:
- For the total portfolio (excluding the furnished apartments): (contractual rents + guaranteed income) / (contractual rents + estimated rental value (ERV) on vacant areas of the property portfolio). We note that this occupancy rate includes the investment properties for which units are in renovation and hence temporarily not rentable.
- For the furnished apartments: % rented days during the financial year. This occupancy rate can thus not be compared to the one calculated on the rest of the portfolio, as the methodology is specific to this segment.
Given the persistent high volatility in the furnished apartments market and the resulting on the net yield, have lead Aedifica to adapt the way it operates its apartments, in the short and medium terms, as follows:
The global occupancy rate3 of the portfolio reached 98 % for the year ended 30 June 2014.
The average remaining lease maturity for all buildings in the portfolio is 19 years, this is an increase compared to 30 June 2013 (18 years). According to the "Belgian REIT Overview", published each month by Bank Degroof, Aedifica is significantly ahead of the industry average in terms of its average remaining lease maturity. This impressive aggregate performance is explained by the large proportion of long term contracts (such as long leases) in the Company's portfolio.
| 30 June 2014 | |||||||
|---|---|---|---|---|---|---|---|
| Investment properties (x €1,000) |
Senior housing |
Apartment buildings |
Hotels and other |
Marketable investment properties |
Development projects |
Investment properties |
|
| Fair value | 482,401 | 210,128 | 73,260 | 765,789 | 19,191 | 784,980 | |
| Annual contractual rents * | 28,725 | 12,425 | * | 4,564 | 45,714 | - | - |
| Gross yield (%) ** | 6.0% | 5.8% | 6.2% | 5.9% | - | - |
| 30 June 2013 | |||||||
|---|---|---|---|---|---|---|---|
| Investment properties (x €1,000) |
Senior housing |
Apartment buildings |
Hotels and other |
Marketable investment properties |
Development projects |
Investment properties |
|
| Fair value | 343,550 | 197,689 | 72,972 | 614,211 | 28,633 | 642,844 | |
| Annual contractual rents * | 20,404 | 12,177 | * | 4,788 | 37,369 | - | - |
| Gross yield (%) ** | 5.9% | 6.1% | 6.6% | 6.1% | - - |
- - |
* The amounts related to the furnished apartments correspond to the annualised rental income excl. VAT.
** Based on the fair value (re-assessed every 3 months, increased with the goodwill and the furniture for the furnished apartments. In the senior housing segment, the gross yield and the net yield are generally equal ("triple net" contracts), the operating charges, the maintenance costs and the rents on empty spaces related to the operations being, in Belgium, supported by the operator. It goes the same for the hotels.
3 The global occupancy rate is calculated following EPRA methodology.
The following sections analyse the consolidated financial statements using an analytical framework that conforms to the Company's internal reporting structure.
| Consolidated income statement - analytical format | ||
|---|---|---|
| (x €1,000) | 30 June 2014 | 30 June 2013 |
| Rental income | 40,675 | 36,230 |
| Rental-related charges | -62 | -147 |
| Net rental income | 40,613 | 36,083 |
| Operating charges* | -9,192 | -8,549 |
| Operating result before result on portfolio | 31,421 | 27,534 |
| EBIT margin** % | 77% | 76% |
| Financial result excl. IAS 39 | -10,965 | -10,460 |
| Corporate tax | -141 | -70 |
| Profit excl. IAS 39 and IAS 40 | 20,315 | 17,004 |
| Weighted average number of shares outstanding (IAS 33) | 9,917,093 | 8,715,370 |
| Earnings per share excl. IAS 39 and IAS 40 (€/share) | 2.05 | 1.95 |
| Profit excl. IAS 39 and IAS 40 | 20,315 | 17,004 |
| IAS 39 impact: changes in fair value of hedging instruments | -2,990 | 1,600 |
| IAS 40 impact: Changes in fair value of investment properties | 3,816 | 9,013 |
| Impact IAS 40: gains on disposals of investment properties | 0 | 54 |
| Impact IAS 40: deferred taxes | 244 | 0 |
| Profit (owners of the parent) | 21,385 | 27,671 |
| Weighted average number of shares outstanding (IAS 33) | 9,917,093 | 8,715,370 |
| Earnings per share (owners of the parent - IAS 33 - €/share) | 2.16 | 3.17 |
* Items IV to XV of the income statement.
** Operating result before result on portfolio divided by the net rental income.
The consolidated turnover (consolidated rental income) for the year amounts to €40.7 million, an increase of 12 % compare to the prior year. This is slightly higher than the budget published in the 2012/2013 annual financier report.
The changes in total rental income (+ €4.4 million, i.e. +12 %, or -2 % on a like-for-like basis) are presented below by segment:
The evolution of rental income in the senior housing segment (+26 % and +2 % on a like-for-like basis) demonstrates the importance of Aedifica's investment strategy in this segment, which already
4 The income statement covers the 12 month period from 1 July 2013 to 30 June 2014. Acquisitions are accounted for on the date of the effective transfer of control. Therefore, these operations present different impacts on the income statement, depending on whether they took place at the beginning, during, or at the end of the period.
generates more than 60 % of the Company's turnover and almost 80 % of its operating result before result on portfolio. As mentioned in previous publications, the negative growth in other segments can be attributed mainly to the rent reductions granted to certain tenants during the 2012/2013 financial year in order to preserve their rent to EBITDAR ratios, and therefore their cash flows and asset values.
After deducting rental-related charges, the net rental income for the year ended 30 June 2014 amounts to €40.6 million (+13 % as compared to 30 June 2013).
The property result is €39.1 million (30 June 2013: €34.6 million). This result, less other direct costs, provides a property operating result of €35.6 million (30 June 2013: €31.2 million), which represents an operating margin of 88 % (30 June 2013: 87 %).
After deducting overheads of €4.2 million (30 June 2013: €3.9 million) and taking into account other operating income and charges, the operating result before result on portfolio has increased by 14 %, to reach €31.4 million (30 June 2013: €27.5 million). This result represents an EBIT margin of 77 % (30 June 2013: 76 %).
| 30 June 2014 | ||||||
|---|---|---|---|---|---|---|
| Segment result (x €1,000) | Senior housing | Apartment buildings |
Hotels en other |
Non-allocated and inter segment |
Total | |
| Rental income | 24,566 | 12,084 | 4,132 | -107 | 40,675 | |
| Net rental income | 24,565 | 12,024 | 4,132 | -108 | 40,613 | |
| Operating result before result on portfolio |
24,546 | 7,136 | 4,092 | -4,353 | 31,421 |
The share of each segment in the operating result before result on portfolio (constituting the segment result under IFRS 8) is detailed below:
| 30 June 2013 | ||||||
|---|---|---|---|---|---|---|
| Segment result (x €1,000) | Senior housing | Apartment buildings |
Hotels en other |
Non-allocated and inter segment |
Total | |
| Rental income | 19,517 | 12,235 | 4,579 | -101 | 36,230 | |
| Net rental income | 19,517 | 12,132 | 4,535 | -101 | 36,083 | |
| Operating result before result on portfolio |
19,517 | 7,416 | 4,511 | -3,910 | 27,534 |
After taking account of the cash flows generated by hedging instruments (described below), net interest charges amount to €11.1 million (30 June 2013: €10.0 million). The average effective interest rate (4.0 % before capitalising interest on development projects) is below that reported in 2012/2013 (4.2 %) and the average effective interest rate included in the budgeted figures (4.2%). Taking into account other income and charges of a financial nature (including €0.6 million of non-recurrent income resulting from two contributions in kind on 12 and 30 June 2014, which has been paid to Aedifica when the contributor assumed the expected dividend which accrued over the period 1 July 2013 up to the day before de date of contributions), and excluding the net impact of the revaluation of hedging instruments to their fair value (non-cash movements accounted for in accordance with IAS 39 are not included in the profit excluding IAS 39 and IAS 40 as explained below), the financial result excluding IAS 39 represents a net charge of €11.0 million (30 June 2013: €10.5 million).
The corporate taxes are composed of current taxes and deferred taxes. In conformity with the Company's legal status (i.e. as a Belgian REIT), current taxes (charge of €141 thousand; 30 June 2013: charge of €70 thousand) consist primarily of Belgian tax on Aedifica's non-deductible expenditures, tax generated abroad and tax on the result of consolidated subsidiaries. Deferred taxes are described below.
The profit excluding IAS 39 and IAS 40 reached €20.3 million (30 June 2013: €17.0 million), or €2.05 per share, based on the weighted average number of shares outstanding (30 June 2013: €1.95 per share). This includes the €0.6 million, or €0.6 per share, in non-recurrent financial income as mentioned above. The recurrent profit excluding IAS 39 and IAS 40 amounts to €19.7 million (an increase of 16 % as compared to €17.0 million in 2012/2013), or €1.99 per share. This result (in absolute terms and per share) is strongly ahead (+5 %) of expectations (€18.7 million, or €1.89 per share).
The income statement includes, among others, three elements with no monetary impact (that is to say, non-cash) which vary as a function of market parameters. These consist of (1) the changes in the fair value of investment properties (accounted for in accordance with IAS 40), (2) changes in the fair value of financial instruments (accounted for in accordance with IAS 39) and (3) deferred taxes (arising from IAS 40):
Given the non-monetary elements described above, the profit (attributable to owners of the parent) amounts to €21.4 million (30 June 2013: €27.7 million). The earnings per share (basic earnings per share, as defined in IAS 33) is €2.16 (30 June 2013: €3.17).
The adjusted statutory result as defined in the annex to the Royal Decree of 7 December 2010 regarding Belgian REITs, is €20.4 million (30 June 2013: €17.9 million), an increase of 14 %. Taking into account the dividends accruing for shares issued over the course of the financial year, this represents an amount of €1.99 per share (30 June 2013: €2.05 per share). The decrease of the adjusted statutory result per share can be attributed to two elements: financing for the acquisition of subsidiaries not yet absorbed by the parent company and the increase in the denominator (i.e. number of shares) resulting from the capital increase of 7 December 2012.
| Consolidated balance sheet | ||
|---|---|---|
| (x €1,000) | 30 June 2014 | 30 June 2013 |
| Investment properties (fair value) | 784,980 | 642,844 |
| Other assets included in debt-to-assets ratio | 9,678 | 8,827 |
| Other assets | 65 | 526 |
| Total assets | 794,723 | 652,197 |
| Equity | ||
| Excl. IAS 39 impact | 435,278 | 414,662 |
| IAS 39 impact* | -38,203 | -32,503 |
| Equity | 397,075 | 382,159 |
| Liabilities included in debt-to-assets ratio | 356,820 | 234,821 |
| Other liabilities | 40,828 | 35,217 |
| Total equity and liabilities | 794,723 | 652,197 |
| Debt-to-assets ratio (%) | 44.9 | 36.0 |
* fair value of hedging instruments.
As of 30 June 2014, investment properties represent 99 % (30 June 2013: 99 %) of the assets recognised on Aedifica's balance sheet, valued in accordance with IAS 40 (that is to say, accounted for at their fair value as determined by independent real estate experts) at a value of €785 million (30 June 2013: €643 million). This heading includes:
"Other assets included in the debt-to-assets ratio" represent 1 % of the total balance sheet (30 June 2013: 1 %).
Since the formation of Aedifica, its capital has evolved steadily along with its real estate activities (contributions, mergers, etc.) and thanks to capital increases in October 2010 and December 2012. It has increased to €270 million as of 30 June 2014 (30 June 2013: €254 million). The share premium amounts to €65 million as of 30 June 2014 (30 June 2013: €65 million). Recall that IFRS requires that
the costs incurred to raise capital are recognised as a decrease in the statutory capital reserves. Equity (also called net assets), which represents the intrinsic net value of Aedifica, taking into account the fair value of its investment portfolio, amounts to:
As of 30 June 2014, liabilities included in the debt-to-assets ratio (as defined in the Royal Decree of 7 December 2010 on Belgian REITs) reached €357 million (30 June 2013: €235 million), of which €346 million (30 June 2013: €227 million) represent amounts drawn on the Company's credit facilities. The debt-to-assets ratio amounts to 44.9 % on a consolidated level (30 June 2013: 36.0%) and 44.6 % on a statutory level (30 June 2013: 36.0 %). The maximum ratio permitted for Belgian REITs is set at 65 % of total assets, thus, Aedifica maintains an additional consolidated debt capacity of €159 million in constant assets (that is, excluding growth in the real estate portfolio) or €456 million in variable assets (that is, taking into account growth in the real estate portfolio). Conversely, the balance sheet structure permits, other things being equal, the Company to absorb a decrease up to a 31 % in the fair values of its investment properties before reaching the maximum debt-to-assets ratio. Given Aedifica's existing commitments with its banks, which further limit the maximum debt-to-assets ratio of 60 %, the headroom available amounts to €119 million in constant assets, €299 million in variable assets, and -25 % in the fair value of investment properties.
Other liabilities of €41 million (30 June 2013: €35 million) represent mainly the fair value of hedging instruments (30 June 2014: €38 million; 30 June 2013: €32 million).
The table below presents the evolution of the net asset value per share.
Excluding the non-monetary impact (that is to say, non-cash) of IAS 39 and after accounting for the payment of the 2012/2013 dividend in November 20135 , the net assets per share based on the fair value of investment properties is €42.47 as of 30 June 2014, as compared to €40.23 share on 30 June 2013.
| Net asset value per share (in €) | 30 June 2014 | 30 June 2013 |
|---|---|---|
| Based on fair value of investment properties | ||
| Net asset value after deduction of dividend 2012/2013, excl. IAS 39 | 42.47 | 40.23 |
| IAS 39 impact | -3.73 | -3.28 |
| Net asset value after deduction of dividend 2012/2013, excl. IAS 39 | 38.74 | 36.95 |
| Number of share outstanding (excl. treasury shares) | 10,249,083 | 9,902,998 |
| Number of shares | 30 June 2014 | 30 June 2013 |
| Number of shares outstanding* | 10,249,083 | 9,902,998 |
| Total number of shares | 10,249,117 | 9,903,690 |
| Total number of shares on the stock market** | 10,162,165 | 9,874,985 |
| Weighted average number of shares outstanding (IAS 33) | 9,917,093 | 8,715,370 |
Number of dividend rights*** 10,249,083 8,715,339
* After deduction of the treasury shares.
** Excluding 86,952 shares listed as from 2 July 2014.
*** Based on the rights to the dividend for the shares issued during the year.
5 Recall that IFRS requires the presentation of the annual accounts before appropriation. Net assets in the amount of €38.59 per share as of 30 June 2013 thus included the dividend distributed in November 2013, and should be adjusted by €1.64 per share in order to compare with the value as of 31 December 2013. This amount corresponds to the amount of the total dividend (€16 million) divided by the total number of shares outstanding as of 30 June 2013 (9,902,998) and is less than the coupons No. 10 an No. 11 which amounted to €1.86 per share (certain shares held only rights to a prorata temporis dividend).
The Board of Directors continues to pay close attention to the evolution of the economic and financial context and the associated effects on the Company's activities.
In the current economic climate, Aedifica's key strengths include the following:
Considering the Company's strengths and the assumptions listed above, the Board of Directors projects to generate rental income of €46.3 million, leading to a profit excluding IAS 39 and IAS 40 of €22.1 million, or €2.15 per share, permitting a gross dividend of €1.93 per share to be distributed to shareholders. These projections are based on the expected perimeter of the real estate portfolio, excluding unexpected events, and stand to generate an increasing dividend as compared to that proposed by the Board of Directors for the 2013/2014 financial year.
The Board of Directors considers that the key risk factors summarised in pages 2 to 7 of the 2012/2013 annual financial report remain relevant for the 2014/2015 financial year. The risk factors will of course be updated in the 2013/2014 annual financial report that will be available as from 17 September 2014. Moreover, the reader's attention is drawn to the penultimate paragraph of section 1 of this press release, relating to the Company's legal status.
The Auditor confirmed that the financial information contained in this press release requires no reservation on this part and is consistent with the consolidated financial statements for which he has released an unqualified opinion.
*****
The English version of this press release constitutes a free translation of the text in the French language, made for information purposes only. In case of inconsistency with the French version or inaccuracy of the English translation, the French text shall prevail.
26 August 2014 – After closing of markets Under embargo until 17:40 CET
Aedifica is a Belgian listed property company investing in residential real estate. Aedifica has developed a real estate portfolio of more than €750 million, with investment activities focussed on two strategic pillars:
- senior housing in Belgium and Germany;
- apartment buildings in Belgium's main cities.
Aedifica is a Belgian REIT quoted on the Euronext Brussels (continuous market) (AED; Bloomberg (AED: BB); Reuters (AOO.BR)).
Its market capitalisation was €514 million as of 31 July 2014.
Aedifica is included in the EPRA indices.
This document contains forward-looking information that involves risks and uncertainties, including statements about Aedifica's plans, objectives, expectations and intentions. Readers are cautioned that forward-looking statements include known and unknown risks and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Aedifica. Should one or more of these risks, uncertainties or contingencies materialise, or should any underlying assumptions prove incorrect, actual results could vary materially from those anticipated, expected, estimated or projected. As a result, Aedifica does not assume any responsibility for the accuracy of these forward-looking statements.
| Year ending on 30 June (x €1,000) | 2014 | 2013 | |
|---|---|---|---|
| I. | Rental income | 40,675 | 36,230 |
| II. | Writeback of lease payments sold and discounted | 0 | 0 |
| III. | Rental-related charges | -62 | -147 |
| Net rental income | 40,613 | 36,083 | |
| IV. | Recovery of property charges | 36 | 40 |
| V. | Recovery of rental charges and taxes normally paid by tenants on let properties | 1,096 | 1,151 |
| VI. | Costs payable by the tenant and borne by the landlord on rental damage and repair at end of lease |
0 | 0 |
| VII. | Rental charges and taxes normally paid by tenants on let properties | -1,096 | -1,151 |
| VIII. | Other rental-related income and charges | -1,510 | -1,565 |
| Property result | 39,139 | 34,558 | |
| IX. | Technical costs | -933 | -942 |
| X. | Commercial costs | -549 | -486 |
| XI. | Charges and taxes on unlet properties | -162 | -126 |
| XII. | Property management costs | -717 | -684 |
| XIII. | Other property charges | -1,187 | -1,078 |
| Property charges | -3,548 | -3,316 | |
| Property operating result | 35,591 | 31,242 | |
| XIV. | Overheads | -4,202 | -3,855 |
| XV. | Other operating income and charges | 32 | 147 |
| Operating result before result on portfolio | 31,421 | 27,534 | |
| XVI. | Gains and losses on disposals of investment properties | 0 | 54 |
| XVII. | Gains and losses on disposals of other non-financial assets | 0 | 0 |
| XVIII. | Changes in fair value of investment properties | 3,816 | 9,013 |
| Operating result | 35,237 | 36,601 | |
| XX. | Financial income | 894 | 326 |
| XXI. | Net interest charges | -11,128 | -9,953 |
| XXII. | Other financial charges | -731 | -833 |
| XXIII. | Changes in fair value of financial assets and liabilities | -2,990 | 1,600 |
| Net finance costs | -13,955 | -8,860 | |
| XXIV. | Share in the profit or loss of associates and joint ventures accounted for using the equity method |
0 | 0 |
| Profit before tax (loss) | 21,282 | 27,741 | |
| XXV. | Corporate tax | 103 | -70 |
| XXVI. | Exit tax | 0 | 0 |
| Tax expense | 103 | -70 | |
| Profit (loss) | 21,385 | 27,671 | |
| Attributable to : | |||
| Non-controlling interests | 0 | 0 | |
| Owners of the parent | 21,385 | 27,671 | |
| Basic earnings per share (€) | 2.16 | 3.17 | |
| Diluted earnings per share (€) | 2.16 | 3.17 |
| Year ending on 30 June (x €1,000) | 2014 | 2013 |
|---|---|---|
| I. Profit (loss) |
21,385 | 27,671 |
| II. Other comprehensive income recyclable under the income statement |
||
| A. Impact on fair value of estimated transaction costs resulting from hypothetical disposal of investment properties |
-3,736 | -418 |
| B. Changes in the effective part of the fair value of authorised cash flow hedge instruments as defined under IFRS |
-2,710 | 1,344 |
| H. Other comprehensive income*, net of taxes |
0 | 1,593 |
| Comprehensive income | 14,939 | 30,190 |
| Attributable to : | ||
| Non-controlling interests | 0 | 0 |
| Owners of the parent | 14,939 | 30,190 |
* Difference between the investment value determined by the independent expert and the contractual value agreed between parties, after deduction of ancillary costs related to acquisitions.
| ASSETS | 2014 | 2013 | |
|---|---|---|---|
| Year ending on 30 June (x €1,000) | |||
| I. | Non-current assets | ||
| A. | Goodwill | 1,856 | 1,856 |
| B. | Intangible assets | 21 | 21 |
| C. | Investment properties | 784,980 | 642,844 |
| D. | Other tangible assets | 1,911 | 1,849 |
| E. | Non-current financial assets | 461 | 968 |
| F. | Finance lease receivables | 0 | 0 |
| G. | Trade receivables and other non-current assets | 0 | 0 |
| H. | Deferred tax assets | 244 | 0 |
| I. | Equity-accounted investments | 0 | 0 |
| Total non-current assets | 789,473 | 647,538 | |
| II. | Current assets | ||
| A. | Assets classified as held for sale | 0 | 0 |
| B. | Current financial assets | 0 | 0 |
| C. | Finance lease receivables | 0 | 0 |
| D. Trade receivables and other non-current assets | 2,938 | 2,514 | |
| E. | Tax receivables and other current assets | 495 | 893 |
| F. | Cash and cash equivalents | 1,156 | 725 |
| G. | Deferred charges and accrued income | 661 | 527 |
| Total current assets | 5,250 | 4,659 | |
| TOTAL ASSETS | 794,723 | 652,197 |
| EQUITY AND LIABILITIES | 2014 | 2013 |
|---|---|---|
| Year ending on 30 June (x €1,000) | ||
| EQUITY | ||
| I. Issued capital and reserves attribuable to owners of the parent |
||
| A. Capital |
264,231 | 248,072 |
| B. Share premium account |
64,729 | 64,730 |
| C. Reserves |
46,730 | 41,686 |
| a. Legal reserve | 0 | 0 |
| b. Reserve for the balance of changes in fair value of investment properties | 91,863 | 82,798 |
| c. Reserve for estimated transaction costs resulting from hypothetical disposal of investment properties |
-17,582 | -13,848 |
| d. Reserve for the balance of changes in fair value of authorised hedging instruments qualifying for hedge accounting as defined under IFRS |
-19,484 | -16,637 |
| e. Reserve for the balance of changes in fair value of authorised hedging instruments not qualifying for hedge accounting as defined under IFRS |
-15,729 | -17,467 |
| h. Reserve for treasury shares | -56 | -84 |
| m. Other reserves | 0 | 0 |
| n. Result brought forward from previous years | 7,718 | 6,924 |
| D. Profit (loss) of the year |
21,385 | 27,671 |
| Equity attribuable to owners of the parent | 397,075 | 382,159 |
| II. Non-controlling interests |
0 | 0 |
| TOTAL EQUITY | 397,075 | 382,159 |
| LIABILITIES | ||
| I. Non-current liabilities |
||
| A. Provisions |
0 | 0 |
| B. Non-current financial debts |
||
| a. Borrowings | 274,955 | 171,484 |
| C. Other non-current financial liabilities |
37,774 | 32,373 |
| D. Trade debts and other non-current debts |
0 | 0 |
| E. Other non-current liabilities |
0 | 0 |
| F. Deferred taxes liabilities |
0 | 0 |
| Non-current liabilities | 312,729 | 203,857 |
| II. Current liabilities |
||
| A. Provisions |
0 | 0 |
| B. Current financial debts |
||
| a. Borrowings | 70,945 | 55,721 |
| C. Other current financial liabilities |
0 | 0 |
| D. Trade debts and other current debts |
||
| a. Exit tax | 615 | 137 |
| b. Other | 10,305 | 7,479 |
| E. Other current liabilities |
0 | 0 |
| F. Accrued charges and deferred income |
3,054 | 2,844 |
| Total current liabilities | 84,919 | 66,181 |
| TOTAL LIABILITIES | 397,648 | 270,038 |
| TOTAL EQUITY AND LIABILITIES | 794,723 | 652,197 |
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