- Increase in property income to CHF 37.1 million (+5.3%)
- Vacancy rate in overall portfolio reduced further to a record low of 3.5%
- Positive changes in value of CHF 11.6 million due to further progress in developments
- Sale of condominium units makes substantial contribution to earnings of CHF 11.1 million (H1 2023: CHF 5.3 million)
- Cash-effective tax savings over the next two years following the merger of subsidiaries
- Significant increase in net income for the period to CHF 36.2 million (+63.5%)
- High financial flexibility with a solid balance sheet structure (equity ratio: 53.6%; LTV net: 39.5%)
Basel, 26 August 2024 – The pleasing half-year results once again reflect HIAG's operational strength and the solidity of its business model. Property income increased substantially and vacancy rates were further reduced. The development portfolio was dominated by successful project completions and the handover of numerous rental and owner-occupied flats to the tenants and buyers. The current economic conditions with falling interest rates have a stabilising effect on financing costs and support property values. The merger of three subsidiaries will lead to considerable tax savings over the next two years. From a balance sheet perspective, HIAG continues to stand on a very firm foundation and has the entrepreneurial flexibility and security to realise its promising project pipeline as planned. Against the backdrop of the good business performance and assuming the stable development of the Swiss economy, HIAG expects 2024 to be a good business year overall, which would also support the continuation of the current dividend policy.
Property income increased and vacancy rate reduced again
Property income increased by CHF 1.9 million or 5.3% compared to the previous year to CHF 37.1 million (H1 2023: CHF 35.3 million). The further reduction in the vacancy rate from 4.0% to 3.5% as well as successful project completions and the associated new rental agreements in Biberist (SO), Windisch (AG) and Cham (ZG) contributed to this. The gross yield of the yielding properties increased slightly to 5.6% (2023: 5.4%), while the net yield rose to 4.7% (2023: 4.2%). The weighted average unexpired lease term (WAULT) remained constant at 6.8 years as at 1 July 2024 (1 January 2024: 6.7 years). In relation to the 15 largest tenants, the WAULT as at 1 July 2024 was 8.6 years (1 January 2024: 9.0 years).
Successful project completions and good progress in property development
The construction of the “Librec” commercial property on the “Papieri site” in Biberist (SO) was largely completed during the reporting period, and the property was handed over to the tenants in February 2024. During the same period, the "kessel haus" was completed with 24 apartments and a share of commercial space, thereby finalising the multi-year development of the historic Kunzareal site in Windisch (AG). The "CHAMA" rental and condominium project in Cham (Canton of Zug) was also completed on time and within budget, and the rented or sold units were handed over to the tenants and buyers. With the sales and project status in the first half of the year, HIAG realised a profit contribution from promotions of CHF 11.1 million in the first half, which is considerably better than in the prior-year period (H1 2023: CHF 5.3 million). The building permit for the second stage on the Cham site (ZG) became legally valid during the reporting period. Construction of the 140 rental and condominium units started in August. The construction work that started in the second half of 2023 on the vehicle-accessible “FAHRWERK” logistics and industrial building in Winterthur (ZH) and the 80-metre-high “ALTO” residential tower in Zurich-Altstetten is progressing as expected. Following the discovery of additional polluted areas during the preparatory work for the planned construction projects on “Campus Reichhold” in Hausen/Lupfig (AG), the start of construction on the site planned for the second half of 2024 is likely to be delayed by several months.
Further increases in value in the development portfolio
Compared to the first half of the previous year, which was still dominated by rising interest rates, the interest rate environment for HIAG has now improved significantly. The Swiss National Bank (SNB) reduced the policy rate in two steps from 1.75% to 1.25% in the first half of 2024, with a further policy rate cut expected by the end of the year. In addition to easing the cost of financing, this interest rate trend also supports property values, which is why the value of the yielding portfolio remained stable with a change of CHF 1.0 million or 0.1% (H1 2023: devaluation of CHF 14.8 million or -1.3%). Despite the expected higher investments for “Campus Reichhold”, the progress made in project developments led to an overall appreciation of the development portfolio of CHF 10.6 million or 1.3% (H1 2023: revaluation gain of CHF 7.8 million or 1.1%).
Transactions expected in the second half of the year
The transaction market has already picked up noticeably against the backdrop of the positive development of the interest rate environment. As already communicated, individual property sales are expected in the second half of the year, which should again make positive contributions to earnings. As expected, no properties were sold in the reporting period.
Good business performance reflected in higher net income for the period
At CHF 45.7 million, EBIT was up substantially by 32.6% on the previous year (H1 2023: CHF 34.5 million). The encouraging valuation result as well as the higher property income and higher income from the sale of condominiums more than compensated for the high income from the sale in the previous year of properties that were no longer in line with the strategy. Cost discipline also supported the good business result.
As expected, the maturing fixed-interest loans had to be refinanced at higher interest rates in the past and current year, which is reflected in the financial expenses. Overall, the financial result improved by CHF 1.7 million to CHF 7.5 million (H1 2023: CHF 5.9 million).
The optimisation of the Group structure will lead to considerable tax savings over the next two years, as existing loss carryforwards from previous years can be taken into account in current taxes.
Overall, HIAG significantly increased its net income for the period by 63.5% to CHF 36.2 million (H1 2023: CHF 22.1 million). Adjusted for revaluation effects, net income for the period was CHF 25.5 million or 6.9% below the prior-year figure (H1 2023: CHF 27.4 million). This is primarily due to the high proceeds from the sale in the previous year of properties that were no longer in line with the strategy.
Great financial flexibility and solid balance sheet structure
At CHF 260 million, around half of the sustainability-linked committed syndicated credit line of CHF 500 million had been utilised as at the reporting date. The net loan-to-value (LTV) ratio was 39.5% as at the reporting date (31 December 2023: net LTV ratio of 39.8%) and is well below the self-imposed cap of 45%. As at the reporting date, the equity ratio was very comfortable at 53.6% (31 December 2023: 53.9%). This leaves HIAG with sufficient financial leeway to realise current and medium-term property projects.
Progress made in the implementation of the sustainability strategy
HIAG also consistently pursued the goals of its sustainability strategy during the reporting period. In mid-April, a 4,500 m² photovoltaic system was installed on the “Papieri site”. This is located on the completed new “Librec” building and was realised by HIAG Solar. The new system not only makes it possible to supply “Librec” with solar power, but it also feeds surplus energy directly into the “Papieri” site grid. With the commissioning of another HIAG Solar system in Kleindöttingen, the announced expansion target of 6 MWp capacity by 2024 was significantly exceeded. With an output of 1,170 kWp, this system is the largest in HIAG Solar's portfolio.
Positive future based on the proven business model
HIAG's strategy with its three business segments has proven to be robust, especially in challenging times, and allows management to look to the future with confidence, even in an environment that is still dominated by some uncertainty. The expected reduction in the policy rate by the Swiss National Bank (SNB) by the end of the year should further ease financing costs and also have a positive impact on property values and the transaction market. The acute housing shortage in some regions of Switzerland is likely to worsen because of the continuing high level of immigration, so that good demand can be expected for HIAG's current residential construction projects in Zurich, Cham and Wetzikon. Given the strength and resilience of the Swiss economy, HIAG expects rental demand for commercial space to develop positively even in the current volatile environment, whereby locations with good transport connections are likely to benefit.
Against this backdrop, HIAG expects a good business year overall in 2024, which also supports a continuation of the current dividend policy.
Weblinks
Online Half-Year Report 2024 | Half-Year Report 2024 (Reporting Center)
Conference call and webcast
On Monday, 26 August 2024, at 9.00 am, Marco Feusi, CEO, and Stefan Hilber, CFO, will explain the 2024 half-year results and answer questions during a conference call with audio webcast.
The presentation will be given in German.
To join the conference call, please use the following numbers:
+41 58 310 50 00 (Switzerland/Europe) / +44 207 107 06 13 (UK).
Other international numbers are listed here: Dial-in list
The webcast can be attended under the following link: Webcast
Replay
A replay of the webcast will be provided at the following link: Replay
