InCity's development is on target for the first half of 2023

by   CIJ News iDesk III
2023-09-14   09:09
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– Semi-annual net loss of EUR -1.16 m at Group level and of EUR -60 k at single-entity financial statement level
– Group results under commercial law still primarily influenced by scheduled depreciation of portfolio properties
– Continued solid equity ratio and financial stability
– Net asset value (NAV) unchanged at EUR 1.66 per share as of 30 June 2023

In its semi-annual financial statements for 2023 published today, InCity Immobilien AG (“InCity AG”) reports a semi-annual net loss of EUR 1.16 m at Group level for the first six months of 2023. The single-entity financial statements recorded a semi-annual net loss of EUR 60 k. This means that the Company’s revenue and results developed according to plan as of the middle of the year. As in the previous reporting periods, the Group result is again primarily due to the scheduled depreciation of the property portfolio in accordance with the German Commercial Code (HGB). In the first half of 2023, this depreciation amounted to approximately EUR 919 k (first half of 2022: EUR 919 k) and had an accordingly negative effect on the result. By contrast, the HGB result does not reflect the market values of the portfolio properties and the resulting hidden reserves, which remain high.

“Our results for the first half of the year are in line with our planning. In view of the challenging economic market environment, the continuing very good letting situation of our portfolio properties and the progress according to plan of our project development activities are particularly positive. In light of development in the first half of 2023, the Management Board therefore confirms the forecast which it issued as part of the 2022 annual report”, says CFO Helge H. Hehl.

As of the reporting date on 30 June 2023, the InCity Group’s property portfolio was unchanged, comprising five residential and commercial buildings and two office properties in Berlin and Frankfurt am Main. The HGB carrying amounts of these seven properties amounted to approximately EUR 148 m as of the reporting date (31 December 2022: approximately EUR 149 m). The decrease can be explained by the standard annual amortisations and depreciations to be carried out according to HGB.

The InCity Group’s sales revenue amounted to approximately EUR 3.7 m in the first half of 2023 (prior year: approximately EUR 4.1 m). The greater part of this by far was due to rental income from portfolio properties, which amounted to approximately EUR 3.5 m in the reporting period and thus decreased by approximately EUR 0.3 m in comparison to the same period of the prior year. This decrease was mainly due to the lower net cold rents generated (EUR -0.2 m) that, on the one hand, resulted from the temporary higher vacancy rate due to renovation measures in the property located at “Jägerstrasse 34/35” in Berlin and, on the other hand, from the increased vacancy rate in the property located at “Stiftstrasse 18/20” in Frankfurt am Main after the expiry of a lease agreement with an existing tenant. Part of the decrease in net cold rents for these two properties was offset by an increase in the net cold rents generated by the remaining five portfolio properties. While various scenarios for future use or exploitation are currently being developed for the property in Frankfurt am Main, the marketing of the residential units at Jägerstrasse 34/35 in Berlin, which are temporarily vacant due to renovation measures, is due to start presently.

The InCity Group’s EBITDA was approximately EUR 0.6 m in the first half of 2023. This decline of EUR 0.8 m compared to the prior-year value of around EUR 1.4 m is largely explained by scheduled investments of EUR 0.4 m made in the portfolio properties in the reporting period, the already mentioned lower operating income from net cold rents (EUR -0.2 m) and slightly higher one-off and/or special effects (EUR -0.2 m) in other operating expenses. These are mainly due to specific bad debt allowances on rent receivables from two former tenants. Overall, the InCity Group’s property portfolio continued to prove its resilience and profitability. Accordingly, the very good letting situation continues unchanged for almost all the portfolio properties.

At the single-entity annual financial statement level, the decrease in the result to EUR 60 k (EUR -80 k compared to the prior year) is mainly attributable to a EUR 106 k lower EBIT. This is primarily due to the restructuring of the operating asset management fees of the portfolio companies, which since the beginning of fiscal year 2023 are being collected by InCity AG’s wholly-owned subsidiary, IC Immobilien Betriebsgesellschaft mbH, and can therefore flow indirectly to InCity AG via profit distributions in future.

Continuously high equity ratio highlights InCity’s financial stability

InCity Immobilien AG’s equity ratio was 91.4% as of the reporting date on 30 June 2023 (31 December 2022: 89.6%). The Group’s equity ratio was approximately 44.0% as of 30 June 2023 (31 December 2022: approx. 45.9%) and thus remained at a high level. The decrease of the Group’s equity ratio is mainly due to the net loss at Group level generated in the reporting period as well as the increase of total assets in connection with the progress in construction of the new office property in Schönefeld. The net asset value (NAV) of InCity AG’s shares remained stable at EUR 1.66 per share as of 30 June 2023 and was thus consistently unchanged from the end of the prior fiscal year (31 December 2022: EUR 1.66 per share). With regard to the HGB result of the Group, it should again be noted that significant scheduled depreciation and amortisation reduce the result and that this does not show the difference between the market value and the carrying amount known as hidden reserves.

Management Board confirms forecast for fiscal year 2023

In view of the development in the first half of 2023, the Management Board of InCity Immobilien AG has confirmed its forecast for the current fiscal year 2023. The forecast assumes a net loss between EUR -3.8 m and EUR -4.3 m for the year in the InCity consolidated financial statements. This will primarily be due to ordinary HGB depreciation of approximately EUR 1.9 m on property, plant and equipment, of which in turn approximately EUR 1.8 m is attributable to the portfolio properties, as well as investments in the portfolio. Investments in the portfolio are expected to generate a volume of EUR 3.1 m to EUR 3.6 m and have a corresponding negative effect on results. Although they cannot be capitalised on the balance sheet, most of the planned investments are value-enhancing measures. The Management Board continues to project a net loss between EUR -0.4 m and EUR -0.9 m for 2023 at single-entity annual financial statement level for InCity AG. Any profit contributions from potential acquisitions or sales of portfolio properties are not taken into account by the planning.

Michael Freund, CEO of InCity Immobilien AG, says, “As in the first half of the year, we expect business to develop as planned in the remaining months of 2023. Although the economic environment remains challenging, we believe we are well positioned with our property portfolio. In the past year, following the COVID-19 pandemic, this proved remarkably resilient for the second time within a short period. In addition to our active management, we attribute this to the strict purchasing criteria we take as a basis for establishing and expanding our portfolio and which we will continue to adhere to in future.”

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