Instone Real Estate Group AG ("Instone") has shown a good start to the year, despite the COVID-19 pandemic related economic slowdown. In the first quarter, adjusted revenues increased significantly year-on-year with a clearly overproportionate growth in adjusted earnings after tax. Demand for the Instone residential product remains at a high level. Prices for residential properties in German metropolitan areas continue their upward trend. Against this background, Instone has completed its first two forward deals to institutional investors during the typically rather quiet Q1 period. In order to support its envisaged step change in growth, Instone is currently in exclusive negotiations for land acquisitions with a total GDV of around EUR 1.3 billion. Projects with a GDV of around EUR 230 million have already been approved year-to-date. Based on our Q1 results, the continued strong trading environment and despite some headwinds from rising commodity prices, managements fully confirms the financial targets for the current fiscal year.
Instone with a good start to the year
The adjusted revenues in the first quarter of fiscal year 2021 rose by 28.5 percent year-on-year to EUR 128.1 million. The Instone residential product continues to enjoy strong demand from both, private as well as institutional investors. In the first quarter of 2021, the sales ratio to private investors stayed above the long-term mean. In addition, Instone successfully concluded its first two forward sales transactions with institutional investors at a comparatively early stage of the year.
The adjusted gross margin of 31.6 percent (Q1-2020: 29.8 percent) remains at an elevated level in particular when compared to typical industry margins. Instone continues to benefit from the positive demand and price trends for German residential properties in metropolitan areas as well as a favourable sales mix, with a higher revenue share from particularly high-margin projects. Rising material costs due to the jump in certain commodity prices have not had a noticeable impact on the Q1 financial result. Management reiterates the communicated financial targets for fiscal year 2021 despite a detrimental trend in certain material costs.
The adjusted EBIT for the reporting period amounted to EUR 26.7 million (Q1-2020: EUR 18.0 million). This corresponds to an adjusted EBIT margin of 20.8 percent (Q1-2020: 18.1 percent), a strong outcome despite continued investments into the platform for future growth.
Lower financial debt compared to the previous year, due to the execution of a capital increase in Q3-2020 and positive operating cash flow and improved financing conditions resulted in a decrease in adjusted net financial expenses (EUR -4.1 million in Q1-2021 vs. EUR -4.7 million in Q1-2020).
Accordingly, the adjusted earnings after tax (EAT) rose significantly to EUR 16.1 million (Q1-2020: EUR 8.7 million).
„Growth and profitability in the first quarter again underscore the strength of the Instone business model. With our highly attractive core business, our innovative affordable living product and our pioneering role in the area of sustainability, we have good reasons to look to the future with optimism“, says Kruno Crepulja, CEO of Instone Real Estate Group AG.
Strong balance sheet remains important pillar for future growth
Based on the strong operating cash flow of EUR 151.3 million, Instone’s financial leverage ratios have further improved during the first quarter of 2021. The loan-to-cost ratio, i.e. the net financial debt relative to inventories plus contract asset recognised at cost is at a very low level of only around 11 percent. Similarly, the net debt to EBITDA ratio, which stands at 1.1x at the end of Q1-2021 (Q4-2020: 2.8x) is testament to Instone’s financial strength. Cash including unused corporate credit lines amounted to more than EUR 420 million at the reporting date. Additionally, the company has unused project financing lines of approximately EUR 90 million. Instone therefore remains ideally positioned to take advantage of current land acquisition opportunities and to drive future growth.
Promising acquisition pipeline for future growth
The value of the project portfolio (GDV) was stable at around EUR 6.1 billion as of the reporting date (Q4-2020: EUR 6.1 billion). Instone will continue to expand its project portfolio in order to drive a step change in growth over the coming years. Presently, the company is in exclusive negotiations for several acquisitions including larger size opportunities with an expected future GDV of around EUR 1.3 billion. Three projects in the metropolitan regions of Stuttgart, Rhine-Main and Nuremberg/Fürth/Erlangen with a total GDV of around EUR 230 million have already been approved, year-to-date.
"With our strong balance sheet and our attractive acquisition pipeline we are well positioned for the planned step change in growth", says Foruhar Madjlessi, CFO of Instone Real Estate Group AG.
Confirmation of earnings guidance for 2021
Management reiterates its financial targets for fiscal year 2021, despite anticipated COVD-19 related delays in building permits and masterplanning processes. Accordingly, management continues to expect adjusted revenues of between EUR 820 and 900 million and adjusted earnings after tax of between EUR 90 and 95 million. The Company expects the positive demand and pricing trends as well as the positive effects from a lower capacity situation in the construction industry to compensate for the expected rising material costs. Finally, the company also intends to keep its dividend policy unchanged for 2021 with a payout ratio of 30.0 percent of EAT.
The definitions of the key performance indicators mentioned in the statement can be found in the glossary on the company's homepage at:
Instone Real Estate
Grugaplatz 2–4, 45131 Essen, Germany
Tel.: +49 (0)201 45355-137
Instone Real Estate
Grugaplatz 2–4, 45131 Essen, Germany
Tel. +49 (0)201 45355-113