Essen, 28 May 2020: Instone Real Estate Group AG ("Instone") started to the current financial year in the first quarter of 2020 as planned. The group continued its dynamic course of growth with a significant increase in revenues and earnings compared to the same quarter in the previous year. Beginning in the second quarter, however, a noticeable slowdown, particularly in sales, is anticipated due to the effects of the COVID-19 pandemic. While construction activity continues to progress according to plan, demand is currently restrained as a result of the adopted restrictions and the general increase in uncertainty. Nevertheless, Instone expects a clearly positive operating cash flow for the full year and confirms its mid-term targets.
"In view of the noticeable economic effects of the COVID-19 pandemic, it appears German residential real estate has once again gained in relative attractiveness as an asset class due to its high level of stability and value retention. As a leading residential developer, Instone is in an excellent position to seize the opportunities that arise on the market and to achieve its ambitious mid-term growth targets," says Kruno Crepulja, CEO of Instone Real Estate Group AG.
Good start to the year, as planned
The final figures for the first quarter of 2020 confirm the preliminary results. Adjusted revenues increased by 18.4% year-on-year to EUR 99.7 million in the reporting quarter (Q1-2019: EUR 84.2 million). According to Instone management, the continued high gross profit margin of 29.8% is clear evidence of the high quality of Instone's project pipeline and its focus on attractive city-centre locations in A-cities and metropolitan regions and of Instone's expertise in project acquisition, planning and execution capabilities.
Platform costs in the first quarter were nearly at previous year’s level, thus the adjusted operating result (EBIT) rose by 14.6% to EUR 18.0 million (previous year EUR 15.7 million). As expected, the purchase of land particularly in the second half of 2019, thus investments in future growth, resulted in a significant increase in financing costs to EUR 4.7 million (previous year EUR 2.5 million).
COVID-19: restraint in demand, construction activity proceeds according to plan
With the escalation of the corona crisis, the Management Board's focus is on safeguarding the health of employees, customers and suppliers. Moreover, in view of the existing project pipeline of EUR 5.75 billion, the Management Board has temporarily put additional growth investments on hold, despite the favourable cash position and strong balance sheet, and currently plans to only selectively carry out further project acquisitions during the year. As of the reporting date, available cash including unused loan facilities totalled EUR 250 million. The company also had around EUR 240 million in unused lines for project-level financing.
Management Board confirms targets for the 2021 and 2022 financial years and its intention for a first-time dividend payment for the 2020 financial year
Based on the existing project portfolio as of 31 March 2020 with an expected sales volume of EUR 5.75 billion, management confirms the targets communicated for the 2021 and 2022 financial years.
Beginning in the second half year, the Management Board expects a gradual stabilisation and recovery of the macroeconomic environment and confirms the existing mid-term targets for adjusted revenues (2021: EUR 900.0 million to EUR 1.0 billion; 2022: > EUR 1.0 billion). At the same time, the company confirms its earnings outlook for the 2021 financial year with an expected adjusted net income of at least EUR 90.0 million.
Given the existing cash position, Instone is in an outstanding position to take advantage of additional growth opportunities.
Furthermore, the Management Board still intends to distribute a share of around 30% of its adjusted net income as a dividend to shareholders, starting in 2021 for the 2020 financial year.
"Instone is financially very well positioned. Despite the distortions related to COVID-19, we also expect to continue generating a clearly positive operating cash flow for the current financial year and maintain our intention to pay a dividend, for the first time, for the 2020 financial year," says Foruhar Madjlessi, CFO of Instone Real Estate Group AG.
The Quarterly Group Statement Q1 2020 is available on the company website for download at the following address: https://ir.de.instone.de/websites/instonereal/English/3200/financial-reports.html
* The definitions of the alternative performance indicators mentioned in the press release can be found in the glossary on the company's website at https://ir.en.instone.de/websites/instonereal/English/3600/glossary.html
Instone Real Estate
Tel.: +49 (0)201 45355-137
Instone Real Estate
c/o RUECKERCONSULT GmbH
Tel.: +49 (0)30 2844987-47