Earnings Release • May 29, 2018
Earnings Release
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INSTONE REAL ESTATE GROUP N.V. 31 MARCH 2018
| LETTER FROM THE MANAGEMENT BOARD | 3 |
|---|---|
| KEY FIGURES | 4 |
| HIGHLIGHTS | 5 |
| KEY PERFORMANCE INDICATORS | 8 |
| BUSINESS DEVELOPMENT | 9 |
| NET ASSETS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11 |
| OUTLOOK | 12 |
| NOTES | 13 |
| CONTACT/FINANCIAL CALENDAR | 15 |
Note:
The values listed in the Financial Statements are shown rounded. Since the calculations are made with a larger number accuracy, small rounding differences may arise.
in the first quarter 2018 we started a new chapter in the corporate history of Instone Real Estate and we are very pleased to have you join us on our path to success. From now on, we will be informing you regularly through quarterly reports on relevant performance indicators, highlights from our business activities, and acquisitions with which we endeavour to grow our project pipeline.
The beginning of the year was mainly defined by our going public on the regulated market (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) in February 2018. Instone Real Estate placed a total of 19,900,000 shares with institutional investors, consisting of 7,000,000 new shares from a capital increase and 12,900,000 existing shares from the holdings of the former sole shareholders, which were funds established by ActivumSG Capital Management Limited and included additional shares from an over-allotment option. The placement price per share was €21.50. This successful placement and the inherent issue of 7,000,000 fresh shares allowed us to improve our equity. The net proceeds from the issue of new shares form a vital component in Instone Real Estate's growth strategy.
Four of our identified acquisition projects are already at an advanced acquisition stage. These new projects represent over 1,000 residential units which are expected to create a sales volume of roughly €470 million.
The findings from the Project Developer Survey 2018 conducted by bulwiengesa further substantiated our successful growth strategy. Once again, Instone Real Estate occupied the second place among Germany's residential home developers. In the overall rating across all asset classes, Instone came in fourth again. With our project development volume reaching a total 478,890 square meters of space Germany-wide, we moved much closer to the third position compared to last year's 2,100 square meters' figure.
Our aim is to further expand this position and to enlarge our attractive project portfolio, currently worth €3.4 billion. With our 27 years of experience and your confidence, we are headed into the next quarter with a positive outlook and would like to thank you for your trust.
Your Management Board of Instone Real Estate Group N.V.
| in € million | Q1 17 | Q2 17 | Q3 17 | Q4 17 | Q1 18 |
|---|---|---|---|---|---|
| Volume of sales contracts | 90.8 | 211.2 | 299.7 | 358.1 | 30.0 |
| Volume of new permits | 0.0 | 174.2 | 378.0 | 506.1 | 0.0 |
| Handovers | 17.9 | 43.7 | 126.1 | 201.8 | 30.3 |
| Project portfolio (existing projects) | n/a | 3,039.8 | 3,374.8 | 3,410.0 | 3,408.5 |
| in units | Q1 17 | Q2 17 | Q3 17 | Q4 17 | Q1 18 |
| Volume of sales contracts | 193 | 527 | 716 | 826 | 56 |
| Volume of new permits | 0 | 555 | 1,013 | 1,371 | 0 |
| Handovers | 10 | 62 | 270 | 460 | 75 |
| Project portfolio (existing projects) | n/a | 7,675 | 8,042 | 8,390 | 8,355 |
| in € million | Q1 17 | Q2 17 | Q3 17 | Q4 17 | Q1 18 |
| Operating performance | 39.6 | 91.5 | 154.2 | 319.9 | 69.3 |
| Consolidated earnings before interest and tax (EBIT) | -3.3 | -9.6 | 3.9 | -10.8 | 9.1 |
| Consolidated earnings before tax (EBT) | -8.5 | -20.1 | -11.0 | -31.2 | 6.0 |
| Consolidated earnings after tax (EAT) | -8.2 | -18.6 | -13.0 | -31.0 | -7.0 |
| Earnings per share (in €) | -0.23 | -0.51 | -0.36 | -0.84 | -0.17 |
Unless otherwise stated, the key figures are the cumulative status of the reporting year as at the reporting date.
The first quarter in the real estate calendar tends to be defined by early real estate fairs, studies on the development of property companies in the previous year, and project business. Our Instone highlights will portray a selection of events during the first quarter 2018 that are relevant to Instone Real Estate.
17.01.2018, HAMBURG
The strategy of Instone Real Estate is to create additional value for its project portfolio and to keep and further strengthen the Company's competitive position in the German residential real estate development market. To achieve this, the Company will leverage its strong platform and deep market knowledge and expand its competitive position in the German residential development sector. Also, Instone Real Estate aims to fuel further growth through the realisation of growth opportunities, among others in Germany's key metropolitan regions, for which Instone Real Estate expects further growth potential.
The business success of Instone Real Estate depends to a large extent on the Company's revenue growth and German market leadership. Results-based key financial performance indicators (KPIs) used in managing the Group include gross profit and EBIT.
The management of Instone Real Estate also uses the following key performance indicators to lead the Group:
The volume of sales contracts covers all sales-related transactions such as notarised sales contracts and individual orders from customers, supplemented by rental income.
The volume of new internal acquisition permits for Instone Real Estate is seen as an indicator for the trend of the future business volume – expressed in revenue.
Transfer of title, use and encumbrances to the buyers of the properties that are for sale.
Instone divides its project portfolio into three different stages, depending on the development status of the respective project. A pre-sale status defines projects where land has either been bought or secured but where marketing has not yet been released for launch and therefore has not yet commenced. Once marketing has been released and launched, a pre-construction status applies. Once a project's construction is underway, and until its complete handover, its status is under construction.
For the period under review, the recorded volume of sales contracts totaled €30.0 million, which includes 56 residential units. The period value is therefore clearly below that of the same period last year, which totaled €90.8 million. The reason for this is that 2018's principal marketing launches will presumably take place in the second half of the year. No contracts of sales from customers were cancelled during the period under review.
No new projects were approved in Q1 2018.
The 75 residential units that were handed over in Q1 2018 equate a total value of €30.3 million. As these handovers are from projects in the process of being transferred or partially transferred, they continue to be included in the project portfolio.
The project portfolio on the quarterly closing date comprises 45 projects and currently points to an anticipated overall volume of revenue of €3,408.5 million, which reflects stability in relation to 31 December 2017.
1) includes Wiesbaden, Ulm, Freiburg, Mannheim 1) includes Wiesbaden, Ulm, Freiburg, Mannheim Inner circle:
The main share in the expected overall sales volume of the project portfolio as at 31 March 2018, approximately 91%, is situated in the key metropolitan regions (Berlin, Bonn, Cologne, Dusseldorf, Frankfurt am Main, Hamburg, Leipzig, Munich and Stuttgart) and 9% in other prospering medium-sized cities (cf. Project portfolio by region).
1) 2.9% of the project portfolio were already handed over
As shown in the Project portfolio by status diagram, around 23% of the project portfolio's expected overall sales volume were already sold by the quarterly closing date. 1) 2.9% of the project portfolio were already handed over No unit sales agreement
The balance sheet total fell by €110.0 million to €679.1 million on the balance sheet date. This decrease is essentially the result of the first-time adoption of IFRS 15 for the reporting period starting 1 January 2018 and ending 31 March 2018, and the respective offsetting tied to this.
The equity ratio on the balance sheet date was around 31.7%. The nominal increase in equity by €162.9 million to €215.2 million is mainly the result of income generated from the issue of 7,000,000 fresh shares plus the first-time adoption of IFRS 15.
The Group's cash and cash equivalents have increased by €66.5 million, to €140.2 million and largely stem from the influx of funds following the successful issue of new shares in the amount of €150.5 million, minus the repayment of shareholder loans in the amount of €55.6 million.
Financial liabilities have decreased to €305.4 million. The decrease by €70.3 million is essentially the result of repaying the shareholder loans.
During the period under review, no major investments were made towards the consolidated non-current assets.
Instone Real Estate Group closed the first quarter in 2018 with positive earnings before taxes of €6.0 million. The first-time adoption of IFRS 15 positively impacted the operating performance during the period under review.
We confirm our outlook for the financial year 2018 as been given in the annual report for the financial year 2017.
In particular, we expect the volume of concluded sales contracts to increase to more than €500 million based on projects available for sale or ready for the start of the marketing phase.
Based on the planned handovers for 2018, we expect an operating performance of more than €500 million and an adjusted EBT between €25 million and €30 million without taking into account the first-time adoption of IFRS 15. We expect better operating results for the future as the effects of PPA will not impact future results as much compared to previous years.
| in thousands of euros | 31 March 2018 | 31 December 2017 |
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Intangible assets | 3 | 0 |
| Property, plant and equipment | 1,550 | 1,597 |
| Equity-method investments | 318 | 396 |
| Other financial assets | 308 | 333 |
| Financial receivables | 683 | 683 |
| Other receivables | 1,022 | 1,022 |
| 3,885 | 4,032 | |
| Current assets | ||
| Inventories | 386,270 | 659,444 |
| Financial receivables | 6,688 | 32,360 |
| Trade receivables | 117,709 | 4,217 |
| Other receivables and other assets | 23,346 | 15,452 |
| Current income tax assets | 1,062 | 0 |
| Cash and cash equivalents | 140,173 | 73,624 |
| 675,248 | 785,097 | |
| Total assets | 679,132 | 789,130 |
| Equity and liabilities | ||
| Equity | ||
| Share capital | 36,988 | 8 |
| Capital reserve | 192,252 | 85,379 |
| Retained earnings/loss carryforwards | -14,593 | -34,329 |
| Accumulated other comprehensive income | -348 | -348 |
| Equity attributable to shareholders | 214,299 | 50,710 |
| Non-controlling interests | 868 | 1,510 |
| Total equity | 215,168 | 52,220 |
| Non-current liabilities | ||
| Provisions for pensions and similar obligations | 4,334 | 4,181 |
| Other provisions | 1,271 | 1,330 |
| Financial liabilities | 183,860 | 241,007 |
| Deferred tax liabilities | 31,439 | 7,669 |
| 220,904 | 254,188 | |
| Current liabilities | ||
| Other provisions | 14,974 | 49,159 |
| Financial liabilities | 121,549 | 134,672 |
| Trade payables | 77,714 | 275,692 |
| Other liabilities | 13,006 | 9,406 |
| Income tax liabilities | 15,817 | 13,793 |
| 243,060 | 482,721 | |
| Total equity and liabilities | 679,132 | 789,130 |
| in thousands of euros | 1 Jan.–31 Mar. 2018 | 1 Jan.–31 Mar. 2017 |
|---|---|---|
| Revenue | 34,847 | 26,154 |
| Changes in inventories | 34,429 | 13,436 |
| 69,276 | 39,590 | |
| Other operating income | 2,704 | 1,351 |
| Cost of materials | -46,961 | -30,160 |
| Staff costs | -7,222 | -6,423 |
| Other operating expenses | -8,583 | -7,606 |
| Income from associated affiliates | -79 | 24 |
| Other income from investments | 93 | 68 |
| Earnings before interest, tax, depreciation and amortization (EBITDA) |
9,229 | -3,156 |
| Depreciation and amortization | -114 | -95 |
| Earnings before interest and tax (EBIT) | 9,115 | -3,251 |
| Finance income | 74 | 0 |
| Finance costs | -3,157 | -5,277 |
| Write-down of long-term securities | -13 | 0 |
| Finance result | -3,096 | -5,277 |
| Earnings before tax (EBT) | 6,019 | -8,528 |
| Income taxes | -13,033 | 324 |
| Earnings after tax (EAT) | -7,015 | -8,204 |
| Attributable to: | ||
| Shareholders of the Group | -6,373 | -8,488 |
| Non-controlling interests | -642 | 283 |
| -7,015 | -8,204 |
29 June 2018 General shareholders' meeting
August 2018 Publication of half-year financial report
November 2018 Publication of quarterly statement (Q3 closing date)
Contact: Thomas Eisenlohr Head of Investor Relations Telephone +49 (0) 201 45355-365 Fax +49 (0) 201 45355-904 [email protected]
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