EQS-News

Instone Real Estate Group SE achieves good result in a difficult environment with a largely stable earnings outlook for 2023 - Seite 2

Supply shortages of key building materials as a result of the COVID-19 pandemic and the war in Ukraine, as well as rising energy costs resulted in a sharp increase in material costs and, therefore, construction costs. The continued high gross margin shows that Instone was able to significantly mitigate the negative effects, thanks to a high proportion of fixed price contracts, a high level of vertical integration and price adjustments in the first quarter. At present, however, there are signs of receding inflation.

Instone continues to maintain leading margin

Adjusted revenues in 2022 were EUR 621.0 million, below the previous year's level (2021: EUR 783.6 million) but in line with the adjusted forecast. Instone is benefiting from the high proportion of projects currently under construction that have already been pre-sold and have a volume of around EUR 3.2 billion. At the reporting date, 91.0 percent of these projects currently under construction had already been sold, thus largely securing the expected cash flows from these projects.

The adjusted gross margin was 25.3 percent (2021: 28.3 percent), still an attractive and industry-leading level despite the more difficult operating environment. The company is benefiting from fixed price contracts and scaling in purchasing, a high level of vertical integration and many years of expertise, as well as the positive price trend at the start of the year, which has mitigated the effects of the sharp rise in construction costs.

As a result of lower revenues and the lower adjusted gross margin, adjusted operating earnings (adjusted EBIT) decreased accordingly, despite reduced platform expenses, to EUR 88.6 million (2021: EUR 155.7 million). Adjusted earnings after tax (EAT) reached EUR 50.0 million (2021: EUR 96.9 million) and have thus fallen slightly disproportionately. A slightly lower interest expense is offset by a normalisation of the tax rate.

Highly predictable cash flows from pre-sold projects under construction

Instone continues to have a strong balance sheet, which is a particular competitive advantage in the current macroeconomic environment. The ratio of net debt to contract assets plus balance sheet inventories valued at cost (LTC) as of reporting date amounts to only 20.8 percent (31 December 2021: 20.1 percent). At 2.8x, the ratio of net debt to adjusted operating profit before depreciation and amortisation (adjusted EBITDA) also remained at a low level, despite the current lower profitability (31 December 2021: 1.5x). Cash, including unused credit lines, amounted to around EUR 425 million as of 31 December 2022. In addition, the company has unused project financing lines of more than EUR 300 million. The measures initiated by the Management Board to further strengthen the balance sheet, such as temporarily refraining from the acquisition of land have had a positive effect here.