LETTER TO SHAREHOLDERS
Business performance 2023/24
Dr. Markus Wesnitzer
Chairman of the Board of Directors
Züblin can look back on an operationally successful year at the end of the 2023/24 financial year. However, the uncertain economic situation and the rise in interest rates have had an impact on the revaluations of our properties. In spite of this, corporate key figures confirm our track record in asset management, which has enabled us to achieve a solid result for the full financial year ended on 31 March 2024 in a market environment that continues to be challenging. This performance sets an important cornerstone for the coming and subsequent financial years.
Improved earnings situation - rise in EBITDA by 5%
In a still demanding market environment, Züblin achieved a solid result in the financial year 2023/24 thanks to operational successes. EBITDA rose by 5% from CHF 6.0 million to CHF 6.3 million, while the operating result increased by 3.6% from CHF 8.3 million to CHF 8.6 million, mainly due to index increases and new lettings. In spite of special one-off items, administrative expenses remained stable at the previous yearʼs level at CHF 2.4 million. The decline in the administrative expenses/rental income ratio from 28.6% to 27.5% underlines our efficiency improvements.
The revaluation of the investment property portfolio led to an adjustment of CHF 3.4 million (–0.8%), whereby a positive impact of CHF 1.1 million was reported in the previous year. This was mainly due to the increase in the average nominal discount rate by 30 basis points as a result of the higher interest rate environment. Despite this adjustment, net rental income remained at an attractive level of 3.9% (previous year: 3.7%). Financial expenses rose from CHF 0.8 million to CHF 1.6 million as a result of the interest rate increases. The average effective interest rate on the balance sheet date was 3.1% (previous year: 2.0%). Financing is variable on the basis of SARON.
Good operating performance, particularly in the rental business, enabled Züblin to close the 2023/24 financial year with a positive overall result despite the difficult environment and market challenges. The profit generated in the reporting period totalled CHF 1.3 million. Compared to the previous year (CHF 5.3 million), this represents a decrease of CHF 4.0 million, which is primarily attributable to lower revaluations (–CHF 3.6 million after tax) and higher financial expenses (+CHF 0.8 million). However, successful lettings demonstrate the stability of the portfolio and thus of the company. For the current financial year, the operating income from letting is expected to continue to develop positively due to the rental agreements already concluded and coming into force in the second quarter.
Resilient portfolio - WALT 6.4 years
The letting business was highly successful in the reporting period and led to a significant increase in WALT (average contractual lease term) from 2.9 to 6.4 years. The total asset value of the property portfolio, which still comprises six properties, was CHF 225.1 million as at 31 March 2024 (previous year: CHF 227.1 million).
Contract extensions with long-standing regular tenants helped to further stabilise the portfolio. The tenancy agreements with two of our long-standing top 5 tenants were extended until 2029 and at least 2035 respectively. It is also pleasing to note that 10-year rental agreements already signed for an entire floor at the property in Bern and for our newly designed space in Egg will take effect in the second quarter of the 2024/25 financial year. These lettings will help to reduce the vacancy rate from the current 9.3% (previous year: 9.3%) to below 6%. These positive developments emphasise our efforts to safeguard the intrinsic value of our portfolio.
Sound balance sheet – Loan-to-Value Ratio at 31.0%
Thanks to a solid equity ratio of 59.5% (previous year: 59.5%), Züblinʼs total assets amounted to CHF 229.4 million as at 31 March 2024 (previous year: CHF 232.6 million). At CHF 41.19, the net asset value (NAV) per share was slightly below the figure of CHF 41.77 as at 31 March 2023.
The real estate portfolio was valued at CHF 225.1 million at the end of the financial year, compared to CHF 227.1 million in the previous year. Five of our six investment properties are still financed via a framework loan of CHF 100.0 million until 2029. As at the balance sheet date, CHF 63.0 million of this had been utilised (previous year CHF 65.0 million). Accordingly, the EPRA loan-to-value ratio (LTV) is 31.0%, compared to 30.7% in the previous year.
Continued dividend policy
The earnings before changes in market value and deferred taxes of CHF 4.6 million (previous year: CHF 5.1 million) will enable the company to continue its stable dividend policy and allow shareholders to continue to participate in the companyʼs success. By distributing CHF 1.00 per registered share entitled to dividends, Züblin aims to ensure that sufficient funds remain available for property investments in the company in the now more attractive market environment.
The Board of Directors will propose to the 2024 Annual General Meeting that a tax-free distribution of CHF 1.00 per dividend-bearing registered share be made from the statutory capital contribution reserves. Based on the share price on the balance sheet date, this corresponds to a tax-free distribution yield of 3.9%. Since the decision to start paying dividends again in 2018, returns have remained stable at between 3.7% and 4.3%.
Changes in the Executive Management
After 15 years of successful work for the Züblin Group, Roland Friederich has informed the Board of Directors of his decision to step down as CEO/CFO of Züblin with effect from 30 September 2024.
CEO/CFO Roland Friederich: «I look back fondly on my 15 years at Züblin, during which I was able to support the company in many exciting projects. After a challenging restructuring and consistently pursued consolidation phase, Züblin is now a lean and efficient organisation. We succeeded in stabilising the portfolio, securing our rental income in the long term, and continuously reducing vacancy rates. With the shift from a seller-driven to a more buyer-driven market, it is now time for Züblin to focus more on growth. With a new CEO who has local knowledge and a strong network, Züblin can write a new chapter in the companyʼs history. I wish my successor every success and all the good experiences that I have been able to take with me from my time at Züblin. I would like to thank the Board of Directors and especially my employees, colleagues and partners for their unparalleled commitment, their valuable support, and the great cooperation. I would also like to thank our stakeholders for the trust they have always placed in me».
The Board of Directors has appointed Mr Philippe Brändle as his successor. Mr Brändle holds a Masterʼs degree in Architecture and Business Administration. After working in property consulting, he took on management responsibility at two leading Swiss property companies from 2016 as CEO and from 2021 as CFO.
Chairman of the Board of Directors Dr Markus Wesnitzer comments on the nomination: «As part of a carefully conducted recruitment process, the Board of Directors placed particular emphasis on market-oriented real estate expertise and a broad network in Switzerland for Züblinʼs future development. The Board of Directors is looking forward to working with Mr Brändle. I would also like to thank Mr Friederich for the long and trusting cooperation».
Outlook
The close partnership with our tenants has continued to prove its worth in the last few challenging months. With regard to the 2023/24 financial year that has just ended, Züblin has a good operational starting position in all areas for the coming financial year. The focus remains unchanged on the sustainable, qualitative development of the portfolio and the continuous reduction of vacancies. Our goal of substantially expanding the portfolio through the targeted acquisition of properties in line with our strategy remains unchanged.
Dr. Markus Wesnitzer
Chairman of the Board of Directors
Roland Friederich
CEO / CFO
