News Detail - DIC Assets

DIC Asset AG plans strong growth in earnings for 2012


DIC Asset AG / Key word(s): Final Results

13.03.2012 / 07:30


DIC Asset AG plans strong growth in earnings for 2012

- Target FFO of EUR 40.6 million achieved in 2011 (2010: EUR 44.0 million) FFO per share of EUR 0.92 (2010: EUR 1.15).

- Property values up 0.7 per cent - NAV per share stable, at EUR 14.93 (2010: EUR 15.27)

- Vacancy rate declined markedly, to 12.4 per cent (2010: 14.3 per cent)

- Successful launch of the MainTor project

- Stable dividend of EUR 0.35 per share

- Forecast: DIC Asset AG expects a 10 per cent increase in FFO for 2012

DIC Asset AG (German Securities ID 509840 / ISIN DE0005098404) today reported results of the 2011 financial year. At EUR 40.6 million (2010: EUR 44.0 million), FFO for 2011 was within the forecasted target range. Consolidated profit for the period of EUR 10.6 million was also in line with projections (2010: EUR 16.5 million) The year-on-year decline was attributable, in particular, to three factors which were accounted for in the planning for 2011: firstly, the transfer of real estate assets to the special fund, combined with a higher disposal volume during 2010, had reduced the real estate portfolio by a total of around EUR 300 million (or approximately 15 per cent) by the beginning of 2011. Secondly, the result from co-investments was lower, due to the outgoing rental income from the MainTor Quarter development as planned; and thirdly, DIC deliberately kept disposals during 2011 at a low level, reflecting the targeted portfolio growth.

The positive operating results for 2011 were mainly attributable to stable rental income which increased during each quarter, but also to lower financing costs and higher real estate management fees. The Company succeeded in improving the vacancy ratio more strongly than planned, by nearly two percentage points, to 12.4 per cent (2010: 14.3 per cent). Like-for-like rental income (up 1.7 per cent) also outperformed the target (2010: +0.5 per cent).

The market value of the real estate portfolio increased by 0.7 per cent year-on-year. The portfolio volume as at year-end was approximately EUR 2.2 billion (end of 2010: EUR 2.0 billion), reflecting EUR 222 million in additions, EUR 38 million in disposals and value appreciation of EUR 16 million. Net asset value (NAV) per share was thus stable at EUR 14.93 (2010: EUR 15.27), despite the higher number of shares outstanding following the capital increase in March 2011.

The MainTor Quarter development enjoyed a successful launch, with two sub-projects pre-marketed within six months. The 'Primus' building complex was sold even before construction started and 70 per cent of the 'MainTor Porta' office building has been let. This means that the first two sub-projects - worth an aggregate EUR 190 million - are being realised, accounting for around one-third of the project's commercial real estate portion. The MainTor project was voted 'Best German Project' at the MIPIM Awards, the most prestigious prize in the international real estate industry.

All profit targets set at the beginning of the year were thus reached. Against this background, and given the positive outlook for 2012, DIC Asset AG plans to let shareholders participate in the Company's performance with an unchanged dividend of EUR 0.35 per share. Approximately 52 per cent of dividends will be distributed tax-free for 2011. Based on the year-end share price, this translates into an attractive dividend yield of 6.5 per cent.

The acquisitions during the financial year under review and the successful letting activity provide the basis for a strong increase in results in 2012. Accordingly, the Company projects FFO for 2012 to increase by approximately 10 per cent, to between EUR 43 million and EUR 45 million (equivalent to around EUR 1.00 per share).

Detailed review of results for 2011:

At EUR 40.6 million, the FFO (funds from operations, defined as earnings before interest and taxes, and excluding profits from disposals and development projects) for 2011 was exactly within the target range, albeit - as expected - down on the previous year (2010: EUR 44.0 million). FFO per share was EUR 0.92 (2010: EUR 1.15); the earnings per share were EUR 0.24, compared to EUR 0.43 the year before (both figures include the effects of the capital increase).

DIC Asset AG's gross rental income for 2011 amounted to EUR 116.7 million (2010: EUR 124.9 million). As commented above, the 7 per cent decline was largely attributable to the reduced portfolio size following disposals, and placement of the investment fund. At EUR 31.0 million, the consistent quarter-on-quarter increase in gross rental income continued in the fourth quarter (Q1 2011: EUR 27.6 million, Q2: EUR 28.9 million, Q3: EUR 29.3 million).

DIC Asset AG's operating costs continue to be efficient relative to rental income: in spite of lower rental income, the operating cost ratio of 11.5 per cent was only slightly higher year-on-year (2010: 11.1 per cent), and has remained within the target range of 11-12 per cent. Reflecting the expansion of business activity, staff expenses increased slightly, to EUR 10.2 million (2010: EUR 9.4 million), while administrative expenses rose marginally by EUR 0.5 million to EUR 8.5 million. This was offset by EUR 5.3 million in fees from real estate management, up by more than 50 per cent year-on-year (2010: EUR 3.5 million).

With an average term of around 3.5 years, most of the Company's EUR 1.52 billion financial debt is medium to long-term, of which only 13 per cent (mostly in three independent loans with an aggregate volume of approximately EUR 160 million) will need to be refinanced over the next 12 months.

DIC Asset AG has a sound financial position. As at 31 December 2011, the Company posted a net interest result of EUR -56.0 million, a marked improvement by EUR 8.0 million (+13 per cent) on the previous year. Interest expenses were EUR 6.5 million (9 per cent) lower, at EUR 63.9 million: the reduction was due to lower liabilities, new borrowings and renewals of existing loans at more attractive terms, as well as the lower interest rate levels. Reflecting the higher level of cash and cash equivalents from the capital increase, interest income of EUR 7.9 million was higher than in the previous year (2010: EUR 6.4 million). The average interest rate across all liabilities (including the interest expense for the corporate bond) was 4.35 per cent as at 31 December 2011, up five basis points year-on-year (31 Dec 2010: 4.30 per cent). It is worth noting that the average rate was able to be reduced during the final quarter of 2011, by a notable 10 basis points, from 4.45 per cent.

The equity ratio (as reported on the balance sheet) stood at 27.8 per cent as at 31 December 2011 (31 December 2010: 28.6 per cent). The decrease was due in particular to the higher total assets (reflecting investments), and to a lower carrying amount of equity due to the negative hedging reserve. Total equity rose from EUR 587 million to EUR 624 million.

Cash flow from operating activities (after interest and taxes paid) rose slightly, from EUR 37.7 million in the previous year, to EUR 38.4 million, mainly on account of lower interest payments. Cash and cash equivalents as at 31 December 2011 remained at a high level of EUR 100.2 million (2010: EUR 117.3 million).

At the end of 2011, DIC Asset AG's real estate portfolio comprised 278 properties with an aggregate rented space of 1.9 million sq m. Real estate assets under management amounted to approximately EUR 3.3 billion (31 December 2010: approximately EUR 3.1 billion). Market values, which are externally reviewed by independent experts each year, increased again, rising by 0.7 per cent - reflecting especially the successful rental activity. Net asset value (NAV) stood at EUR 682.6 million at the end of 2011, an increase of EUR 84.1 million (or 14 per cent) year-on-year. Factors which increased NAV in 2011 were, in particular, the net profit for the year, the higher market value of real estate assets, as well as the capital increase. At the end of 2011, NAV per share of EUR 14.93 was almost in line with the previous year's figure of EUR 15.27, despite the higher number of shares outstanding following the capital increase.

Intensified new rental activities (+16 per cent, to 119,800 sq m) in a positive economic environment kept total letting volume of 247,000 sq m almost at the previous year's level (2010: 256,600 sq m), even though the portfolio was considerably smaller. At 127,200 sq m, the level of renewals was once again high (2010: 153,400 sq m). Total new rentals were equivalent to annualised rental income of EUR 27.3 million (2010: EUR 27.0 million): despite the slightly lower volume, the figure was in line with the previous year. Thanks to the strong rental performance, the occupancy rate rose by approximately 2 percentage points to 87.6 per cent (31 December 2010: 85.7 per cent), thus exceeding the full-year target of 87 per cent.

Like-for-like rental income (up 1.7 per cent) also outperformed the target and was markedly higher than the year before (2010: +0.5 per cent). The marked increase in new rentals contributed significantly to this increase, as did rent increases following contractually-agreed index adjustments in some cases.

The volume of acquisitions totalled around EUR 300 million, which was at the upper end of the planned growth target range for 2011. As part of the efforts to optimise the portfolio, the volume of disposals in 2011 was reduced - as planned - to EUR 72 million; accordingly, sales profits of EUR 1.7 million were lower year-on-year (2010: EUR 5.1 million), in line with expectations.

DIC Asset AG's debut special fund 'DIC Office Balance I' with a volume of approximately EUR 210 million and comprising five properties was fully placed at the beginning of the 2011 business year. The fund volume was increased to around EUR 275 million, and two more properties acquired, by the end of the year. Besides growing the DIC Office Balance I Fund further, the Company plans a second special fund from this year onwards. The new fund, with a target volume of around EUR 250 million, will focus on investing in first-class commercial buildings in prime city locations.

Outlook for 2012: DIC Asset AG anticipates positive economic growth for the current year, with stable real estate markets. The Company aims to further boost the profitability of its real estate portfolio, and plans to further reduce the vacancy ratio to around 11.5 per cent. At least EUR 200 million in new investments is planned, and disposals of around EUR 80 million. Gross rental income is envisaged to rise to between EUR 124 million and EUR 126 million. Based on further acquisitions which will impact results and enhanced profitability of the existing real estate portfolio, DIC Asset AG plans to increase FFO by approximately 10 per cent in 2012, to EUR 43 million to EUR 45 million, equivalent to approximately EUR 1.00 per share.

Ulrich Höller, Chairman of the Management Board, said: 'DIC Asset AG continues to deliver a strong operating profit to its shareholders for 2011. This provides the foundation for an attractive dividend yield. With a strong increase in operating results in 2012, DIC will continue to be an attractive investment.'

New portfolio presentation to reflect the regional structure: starting with the 2011 Annual Report, DIC Asset AG will provide new information to its shareholders in order to further improve transparency and clarity in presenting its business model. Segment reporting now also includes details on the portfolio's regional structure by disclosing key business indicators for the Company's five business regions (North, South, Centre, East and West). This regional structure has evolved into the key element of internal enterprise management. The portfolio is also broken down by the strategic objectives: The 'Commercial Portfolio' comprises existing properties generating rental income, which are carried in the statement of financial position; the value of this portfolio was just under EUR 1.9 billion in 2011. The 'Co-Investment' segment comprises DIC Asset AG's fund investments, joint-venture investments, and investments in development projects where the Company holds a minority interest. This portfolio is valued at over EUR 300 million. This new information is provided on pages 11ff and 34ff.

First separate sustainability report published: DIC Asset AG has published its first sustainability report. In order to provide an adequate setting for this ever-more important topic, the report - which previously formed part of the Company's annual report - is now available as a separate publication, providing more details and more comprehensive information. Based on an energy consumption analysis of around 60 properties, the report shows that DIC Asset AG is well-positioned, compared to German and European reference data. DIC Asset AG has continued to pursue its 'Green Energy' project during the year under review. The Company plans to switch the electricity supply for common areas of virtually all its properties to renewable energy sources by the end of 2012.

For more information on DIC Asset AG, the 2011 Annual Report, and the Sustainability Report which the Company has prepared for the first time, please visit www.dic-asset.de.

About DIC Asset AG:

Established in 2002, DIC Asset AG, with registered offices in Frankfurt/Main, is a real estate company with a dedicated investment focus on commercial real estate in Germany, pursuing a return-oriented investment policy. Real estate assets under management amount to approx. EUR 3.3 billion, comprising around
280 properties, of which EUR 2.2 billion is carried on DIC Asset AG's statement of the balance sheet. The Company's investment strategy is geared to the continued development of a high-quality, highly profitable and regionally diversified portfolio. The real estate portfolio is structured in two segments: the Commercial Portfolio (EUR 1.9 billion) comprises existing properties with long-term rental contracts generating attractive rental yields. The Co-Investments segment (EUR 0.3 billion) comprises fund investments, joint-venture investments, and interests in development projects. We provide a direct service to tenants through our own real estate management teams in six branch offices located at the regional hubs within our portfolio. This provides us with an edge in terms of market presence and expertise, and builds the foundation for maintaining and increasing the value of our real estate assets. DIC Asset AG has been included in the SDAX(R) segment of the Frankfurt Stock Exchange since June 2006. The Company's shares are also included in the EPRA index, which tracks the performance of the most important European real estate companies.

Key financial indicators

Operating performance indicators
(EUR mn)
2011 2010   H2/2011 H1/2011  
             
Gross rental income 116.7 124.9 -7% 60.2 56.5 +7%
Fees from real estate management 5.3 3.5 +51% 3.0 2.3 +30%
Property disposal proceeds 17.7 81.2 -78% 8.4 9.3 -10%
Total income 157.3 228.8 -31% 81.3 76.0 +7%
Profits on property disposals 1.7 5.1 -67% 1.1 0.6 +83%
Results of associated companies 2.4 7.8 -69% 1.5 0.9 +67%
Funds from Operations (FFO) 40.6 44.0 -8% 20.5 20.1 +2%
Consolidated profit for the period 10.6 16.5 -36% 4.4 6.2 -29%
Cash flow from operating activities 38.4 37.7 +2% 19.1 19.3 -1%
 
 
           
Indicators per share (EUR) 2011 2010   H2/2011 H1/2011  
             
FFO* 0.92 1.15 -20% 0.45 0.47 -4%
Basic/diluted Earnings* 0.24 0.43 -44% 0.10 0.14 -29%
Net asset value (NAV) 14.93 15.27 -2%      

 

* The previous year's figures were adjusted for the effects of the capital increase, in accordance with IFRS (IAS 33)

Statement of financial position
(EUR mn)
  31 Dec 2011 31 Dec 2010
       
Equity ratio (%)   27.8 28.6
Investment property   1,902.1 1,718.2
Equity   624.2 587.1
Financial debt   1,519.7 1,376.1
Total assets   2,248.1 2,050.0
Cash and cash equivalents   100.2 117.3


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160267  13.03.2012