DGAP-News: Adler Group S.A.: reports robust operational performance and adequate cash position in H1 2022

Adler Group S.A. reports robust operational performance and adequate cash position in H1 2022

• Thomas Echelmeyer appointed as CFO effective as of 1 September 2022
• Net rental income of 130.8m (-24.8%) due to asset disposal, FFO 1 at 49.9m
• Reshaping of portfolio leads to like-for-like (LFL) rental growth of +2.3% and improved monthly average residential rent per square meter^{of 7.47 along with low vacancy rate of 1.6%}
• NOI margin from rental activities up to 88.2%, EBITDA from rental activities at 85.9m Group loss for the period of 604.4m impacted by one-off non-cash impairments of development projects and receivables
• Cash position up by 215m to 771m proceeds from disposals used to repay bonds and long-term loans, keeping LTV (58.0%) below required level despite impairments
• FY 2022 guidance for net rental income raised by 30m to a range of 233m to 242m, FFO 1 forecast raised to range of 84m to 88m due to the inclusion of BCP KPIs

Luxembourg, 29 August 2022: The Board of Directors of Adler Group S.A. (Adler Group) has appointed Thomas Echelmeyer (61) as Chief Financial Officer (CFO) with effect as of 1 September 2022. Mr. Echelmeyer, a qualified auditor and tax advisor, has already held this position in the senior management of Adler Group ad interim based on a consultancy mandate since 1 June 2022. The Board of Directors will propose to the Company's next ordinary Annual General Meeting (AGM) or extraordinary AGM that Mr. Echelmeyer also be appointed to the Company's Board of Directors as an additional member.

The chairman of the Board of Directors Prof. Dr. A. Stefan Kirsten said: "The Board of Directors and I are very pleased that Thomas Echelmeyer is now taking over this role on a permanent basis, in what is undoubtedly a difficult time for the Group. With Thomass expertise, especially in the real estate business, he is exactly the right person at the right time for Adler Group. In addition, Thomas has already familiarized himself very well with the Company over the past months. The appointment was preceded by a structured search process, which succeeded in attracting other very good candidates who expressed an interest in this important position at Adler Group. The appointment strengthens the Group's corporate governance and our ambition to lead Adler Group back to stability."

Thomas Echelmeyer commented, "It is as Stefan Kirsten already said earlier this year: Adler Group is struggling, but vital. I have been able to see this in the past three months and am therefore happy to continue working permanently with my colleagues in management to lead the Adler Group towards a better future. I would like to thank the Board of Directors for the trust they have placed in me."

Robust operational performance in first half of 2022

Adler Group reports a robust operational performance of its yielding portfolio and an improved liquidity position in the first half of the financial year 2022. Adler Group made further progress in increasing the portfolio quality by means of asset disposals, resulting in a like-for-like fair value growth of 6.0% YoY and a low operational vacancy rate of 1.6%. Like-for-like rental growth was 2.3%.

By reshaping our portfolio, we maintain a robust operational performance and further grow the quality and substance of our yielding property assets, commented Thierry Beaudemoulin, CEO of Adler Group.

As a result of streamlining the residential portfolio to 26,243 units, income from rental activities decreased to 195.4m (H1 2021: 230.5m). Funds from operations from rental activities (FFO 1) totaled 49.9m compared to 67.8m in H1 2021. This corresponds to a FFO 1 per share of 0.42 (H1 2021: 0.58).

The average rent of the residential portfolio increased to 7.47/sqm/month in the reporting period, representing a like-for-like rental growth of 2.3% on a 12-month-basis, which was mainly driven by the Berlin portfolio. At 1.6% as of 30 June 2022, the vacancy rate was more than halved compared to mid-year 2021 (3.8%) but showed a slight increase over year-end 2021.

EBITDA from rental activities was down 23.7% in line with expectations to 85.9m (H1 2021: 112.5m), resulting in a moderate EBITDA margin uplift to 65.7% (H1 2021: 64.7%), which was mainly attributable to the disposal of the Northern portfolio to LEG.

As of 30 June 2022, the fair value of the entire portfolio including developments amounted to 9.5bn (year-end 2021: 10.0bn). The high-quality portfolio remains anchored in Berlin. The EPRA NTA as of 30 June 2022 amounted to 3,535m or 30.08 per share, compared to 4,269m / 36.33 per share at year-end 2021.

Cash position improved further proceeds from sales expected

In the reporting period, Adler Group generated proceeds from disposals of investment properties of 1.06bn which were used to repay bonds and long-term loans by a total of 0.90bn. Compared to year-end 2021, the Groups cash position rose by 215m to 771m, also thanks to a significantly improved operating cashflow. For the second half of the year, we expect the proceeds from sales to be adequate for meeting the liquidity requirements for financing and operational purposes, said CEO Thierry Beaudemoulin.

With the previously announced sale of the Waypoint portfolio, Adler Group has already realised an inflow of approximately 170m. Furthermore, Adler Group has announced the completed sale of the development projects Ostend Quartier and Westend Ensemble Upper West LEA B, both located in Frankfurt with combined cash proceeds of c. 166m. In a challenging environment, Adler Group sold these projects with a combined discount to Gross Asset Value (GAV) of just 13.6%. This underscores our ability to deliver on our pledge of further improving our liquidity position in 2022 and beyond, added Beaudemoulin.

One-off non-cash impairments impacting EPS and LTV

Against the background of recent market developments, Adler Group changed its assessment of credit risks inherent in receivables from the sale of real estate, resulting in one-off non-cash credit impairments (trade and other receivables) in the amount of 375.1m. In addition, the remaining goodwill of 91.4m attributable to the subsidiary Consus Real Estate was impaired in full, whereas the fair value of the investment properties decreased by 147.4m among others.

As a result, Adler Group reports a net loss for the reporting period of 604.4m, corresponding to earnings per share of -4.94. By reflecting goodwill impairments and the credit reassessment of inherent risks associated with receivables, both based on a constant monitoring process, the Adler Group management team continues its approach of eliminating risks off the balance sheet, commented CFO Thomas Echelmeyer.

Mainly influenced by the one-off impairments, the net loan-to-value (LTV) increased to 58.0% as of
30 June 2022 (year-end 2021: 50.9%), below the required bond covenant level of 60%.

Guidance updated: net rental income now expected in the range of 233m to 242m

Because of the inclusion of BCP KPIs into the second half of the year, Adler Group updated its guidance for FY 2022 to a net rental income in the range of 233m to 242m (previous forecast: 203m to 212m) and FFO 1 in the range of 84m to 88m (previous forecast 73m to 76m).  For reasons of prudence the Board of Directors has previously decided not to submit a dividend proposal to the shareholders of the Adler Group until an unqualified audit opinion has been issued and will therefore not make any forward-looking statement on the dividend until further notice.

Search for auditor of the 2022 financial statements continues

During todays Board meeting, the Board of Directors also discussed the ongoing search for an auditor for the 2022 financial statements in the wake of the previous auditors decision last May to decline to continue to act as auditor of the group. The formal audit tender process was launched directly after the Annual General Meeting in June; it has since closed without any audit tenders having been received. Individual auditing firms are therefore currently being approached directly.

"As soon as there will be a new factual situation in this regard, we will communicate it immediately," explained Chairman of the Board of Directors Stefan Kirsten, adding, "It is crucial for us to appoint an auditor, as we can only restore our credibility on the capital market and beyond with independently audited figures. We are doing everything possible to appoint an auditor, especially since Adler Group is a member of the Dax family, the flagship of Germany's financial center."

Finally, and as stated before, the Board of Directors, together with the management, has commenced a review of its strategy. As previously indicated, the Board of Directors expects to be able to present results from this review process at or about the time of the publication of the Group's Q3 results at the end of November 2022.

Earnings call

An Analyst & Investor webcast and conference call will be held on Tuesday, 30 August 2022, at 
10 am CET.

PLEASE USE THIS LINK FOR THE WEBCAST:
https://media.choruscall.eu/mediaframe/webcast.html?webcastid=BWrr3x06

Contact

Investor Relations:
T +352 278 456 710
F +352 203 015 00
E investorrelations@adler-group.com