The Grounds reports first half of 2024 with loss, confirms revised annual forecast

The Grounds Real Estate Development AG (ISIN: DE000A2GSVV5) has reported a consolidated loss for the first half of 2024, citing declining sales and impairment losses as the primary reasons. From January to June 2024, the company generated sales revenues of EUR 8.7 million, down from EUR 16.2 million during the same period in 2023. Group EBIT (earnings before interest and taxes) fell sharply to EUR -4.3 million, compared to EUR 0.4 million in the first half of last year.

The decline in revenues was largely attributed to reduced sales from key projects such as the Property Garden project in Magdeburg and the Maggie project in Berlin-Lichtenberg, which were recognized using the percentage-of-completion method. The Grounds also recorded EUR 871,000 in rental revenue and other income during the period.

The company’s balance sheet saw a reduction of EUR 8.3 million, bringing the total down to EUR 139.5 million as of June 2024, compared to EUR 147.8 million at the end of 2023. On the asset side, non-current assets, including shares in companies accounted for using the equity method, decreased by EUR 2.3 million. Current assets, such as inventories, trade receivables, and cash, also saw significant reductions.

On the liabilities side, equity dropped from EUR 24.8 million to EUR 16.8 million, bringing the equity ratio down to 12.1%. Non-current liabilities, on the other hand, increased significantly due to a EUR 30.7 million bond, pushing long-term financial liabilities to EUR 48.0 million. Meanwhile, current liabilities decreased from EUR 106.4 million to EUR 74.6 million.

Jacopo Mingazzini, CEO of The Grounds, commented on the company’s performance, acknowledging the challenging market conditions. “Compared to 2023, we have not yet seen a significant improvement in our operating business, and a stable economic recovery in Germany remains elusive. However, some of the negative factors impacting the property industry are showing signs of improvement. Inflation has stabilized, and the European Central Bank’s recent interest rate cuts have boosted transaction activity in the property market,” Mingazzini noted. He also highlighted successful sales, including the full sell-out of units in the Margaretenstrasse project in Berlin-Lichtenberg and additional contracts in Dallgow-Döberitz.

The company remains optimistic about the future, despite current challenges. Mingazzini expressed hope that recent market trends, including rising rental prices in major German cities, would lead to increased interest from potential buyers in the coming months.

The Grounds confirmed its revised forecast for 2024, projecting a negative EBIT of between EUR -7 million and EUR -9 million, with annual sales expected to fall between EUR 10 million and EUR 12 million.

The recent approval of capital measures at the company’s Annual General Meeting on September 19, 2024, marks a significant step toward its partnership with H.I.G Capital, setting the stage for future growth.