Annual Report for the financial year 2017
Swiss Prime Site closed out the financial year 2017 with favourable results. Operating income reached a new record high of CHF 1 154.8 million, climbing by 10.0% versus the figure of 2016.The Real Estate segment (core business) (+14.6%) as well as the real estate-related group companies (+7.2%) contributed to the performance.The value of the real estate portfolio increased to CHF 10.6 billion [CHF 10.1 billion] as at the balance sheet date.The net yield on the real estate portfolio amounted to 3.7% [3.7%].The vacancy rate declined to a level of 5.2% [6.1%], thus improving by roughly one percentage point. Overall, Swiss Prime Site realised profit of CHF 305.5 million [CHF 311.1 million] or CHF 307.4 million [CHF 275.6 million] excluding revaluations and deferred taxes. Earnings per share (EPS) excluding revaluations and deferred taxes amounted to CHF 4.30 [CHF 3.91].
Swiss Prime Site reported its results according to Swiss GAAP FER accounting standards for the first time in 2017 (IFRS to 31 December 2016). The previous year’s results were adjusted (i.e. restated) according to the new standards. The changeover was carried out in line with the accounting principles applied to date according to IFRS.The degree of transparency in the disclosure was maintained for the most part. The most significant differences in the balance sheet are reclassification of owner-occupied properties to investment properties, offsetting goodwill from acquisitions against shareholders’ equity, and elimination of net defined benefit obligations from the application to date of IAS 19 «Employee benefits». The switch in accounting standards resulted in a reduction in shareholders’ equity amounting to CHF 430.3 million. The equity ratio as at 31 December 2016 consequently edged down slightly from 46.6% to 45.0%. The income statement is particularly affected by the elimination of amortisation on the customer base from acquisitions, other accounting standards applicable to pension plans and the new standard stipulating that all value changes to properties are to be fully recorded in the results of the relevant reporting period. With the changeover to Swiss GAAP FER, Swiss Prime Site also newly defined the group’s segment structure and consequently adjusted its segment reporting. Swiss Prime Site now comprises the two segments Real Estate (core business) and Services (real estate-related group companies).
Swiss Prime Site’s core Real Estate business once again turned in a positive performance in the financial year 2017. Amid a competitive overall market, Swiss Prime Site Immobilien invested in significant development and new building projects as well as initiated future-oriented conversions of existing properties. Key new leasing activities or contract renewals exhibited a favourable trend amounting to floor space of roughly 200 000 square metres (12% of the portfolio), most of which were carried out at the same or better conditions. These activities resulted in a reduction in vacancies by 15% or 25 000 square metres. The pro rata proceeds from the partial divestment of the «Espace Tourbillon» project in Geneva were booked according to the percentage of completion (POC) method in the second half-year 2017. With the acquisition of the three buildings in Winterthur situated in close proximity to the «Roter Turm» investment property, Swiss Prime Site now owns the entire real estate site. The respective construction phases were initiated for important projects such as «YOND» in Zurich, «Stücki Park» in Basel, «Schönburg» in Berne and «Espace Tourbillon» in Geneva. Reorganisation within the core Real Estate business enhanced the market profile significantly and stepped-up the focus on customers.
The real estate-related group companies Wincasa, Jelmoli – The House of Brands, Tertianum and Swiss Prime Site Solutions that together form the Services segment also succeeded in turning in an impressive performance in the past financial year 2017. Wincasa implemented new services individually tailored to its clients. Jelmoli enhanced the attractiveness of its retail assortment. Tertianum harmonised its market presence and further expanded its network of locations according to plan. All these initiatives paved the way for better results at the top as well as bottom line.
|in CHF m||01.01.– 31.12.2016||01.01.– 31.12.2017||Change in %|
|Real Estate segment||417.4||478.4||14.6|
|Rental income from properties||416.0||424.4||2.0|
|Income from real estate developments||–||51.7||n.a.|
|Other operating income||1.5||2.3||53.3|
|Rental income from properties||91.1||100.7||10.5|
|Income from real estate services||133.0||142.2||6.9|
|Income from retail||133.6||136.2||1.9|
|Income from assisted living||328.2||360.1||9.7|
|Income from asset management||13.2||9.9||– 25.2|
|Other operating income||5.1||5.6||11.0|
|Eliminations||– 72.1||– 78.2||8.4|
|Total Group||1 049.5||1 154.8||10.0|
Swiss Prime Site reported a 10.0% increase in operating income to CHF 1 154.8 million in 2017. The core Real Estate business as well as the real estate-related group companies that comprise the Services segment contributed to the positive performance.
The core Real Estate business continued to boost growth and pick up momentum in 2017. The Real Estate segment realised operating income of CHF 478.4 million (+14.6%). New leasing activities and contract renewals, acquisitions in the reporting period as well as prior year and successful vacancy management contributed to this earnings growth. The portfolio comprising a total of 188 properties (+4 versus the level at end-2016) showed a value of CHF 10.6 billion on the balance sheet date and realised an attractive net yield relative to the market of 3.7%. At 5.2%, the key vacancy rate was noticeably reduced versus the previous year’s level [6.1%].
Income from the real estate-related group companies in the Services segment also increased year-on-year. With operating income of CHF 754.6 million, the segment achieved significant growth of 7.2% versus the previous year’s mark. Leading real estate services provider Wincasa realised growth of 6.9% to CHF 142.2 million. The introduction of various new services paved the way for Wincasa to more solidly establish its position as an innovative leader in the sector in 2017. The company launched its new «Mixed-Use Site Management» service in 2017. Significant market demand looms for managing and marketing mixed-use property sites. Wincasa posted renewed growth in assets under management, achieving a new record-high level of CHF 66 billion. Jelmoli – The House of Brands was able to achieve growth in 2017 – despite fewer shopping days versus the previous year – realising revenues of CHF 136.2 million (+1.9%). Investments in the retail assortment such as men’s fashion, new sales formats and in the building are exhibiting the desired positive effects. Continuation of the online strategy has picked up momentum and will provide impetus in 2018 and beyond. Tests with delivery robots and Click&Collect services resonated favourably with clients.Tertianum succeeded in taking significant steps in the promising assisted living business field on the path toward further establishing its market position as the largest private provider in this sector. Tertianum achieved the intended expansion of its network of residences and geriatric care centres according to plan, which accordingly was also reflected in the income it realised in 2017, climbing to CHF 360.1 million (+9.7%). Execution of the harmonised branding strategy for the 76 operating businesses located throughout Switzerland was successfully concluded. Swiss Prime Site Solutions realised operating income of CHF 9.9 million [CHF 13.2 million].The real estate assets of Swiss Prime Investment Foundation managed by Swiss Prime Site Solutions increased to roughly CHF 1.4 billion in 2017.
Operating result (EBIT)
|in CHF m||01.01.– 31.12.2016||01.01.– 31.12.2017||Change in %|
|Real Estate segment||420.8||422.0||0.3|
Swiss Prime Site Group reported an operating result (EBIT) amounting to CHF 470.6 million [CHF 459.4 million] in 2017. The core Real Estate business as well as Services segment contributed to the favourable results. The performance at the operating level in addition to the partial divestment of the «Espace Tourbillon» project provided a significant contribution to earnings in the Real Estate segment.
With an operating result (EBIT) of CHF 422.0 million [CHF 420.8 million], the core Real Estate segment still remains Swiss Prime Site’s most significant earnings driver. The EBIT figure includes revaluation gains of CHF 65.9 million [CHF 69.6 million]. The rising value of the real estate portfolio once again demonstrates that Swiss Prime Site is pursuing the right strategy, aimed at focusing exclusively on first-class properties and sites. The positive trend in revaluations was attributable primarily to properties under construction and development sites as well as to rental agreements that were renewed early and for long-term durations. Rental income improved significantly in some cases. Particularly noteworthy is the fact that newly concluded rental agreements primarily focused on retail floor space situated in central locations. The weighted average real discount rate of 3.35% decreased by 12 basis points versus the rate at end-2016. The pro rata pre-tax profit booked according to the percentage of completion (POC) method resulting from the partial divestment of the «Espace Tourbillon» project amounted to CHF 27.5 million (result from investment property sales in 2016: CHF 24.9 million). The increase in operating expenses in the Real Estate segment of CHF 124.6 million [CHF 99.8 million] was attributable to the aforementioned divestment of real estate developments.
The Services segment posted a significant increase in EBIT, generating a total of CHF 48.6 million (+25.7%). Within the Services segment,Tertianum in particular exhibited a favourable trend, as anticipated. Expansion of the network and integration of the acquired locations showed the intended economies of scale. The favourable and stable results reported by real estate services provider Wincasa were attributable to rising revenues as well as investments in the workforce and improvements in efficiency by means of more streamlined and digitalised processes. Jelmoli – The House of Brands reaped rewards from consistently positive customer reactions to its new retail assortment, closing 2017 with a significantly better performance versus the previous year. The increase in operating expenses in the Services segment of CHF 705.7 million [CHF 665.3 million] was attributable primarily to rising personnel costs relating to the BOAS Senior Care acquisition carried out in the previous year.
Swiss Prime Site Group employed a workforce totalling 5910 persons  on the balance sheet date.
The financial result improved by 6.5% in 2017 versus the previous year’s figure. Financial expenses declined to CHF 77.8 million [CHF 86.0 million] as result of the persistent execution of the prudent financing strategy. Swiss Prime Site forecasts a renewed improvement in the cost of borrowed capital due to further refinancing activities in 2017 and beyond. Profit amounted to CHF 305.5 million [CHF 311.1 million] or CHF 307.4 million [CHF 275.6 million] excluding revaluations and deferred taxes. Earnings per share (EPS) excluding revaluations and deferred taxes rose to CHF 4.30 [CHF 3.91], thus forming a solid foundation for an attractive dividend distribution.
|in CHF m||01.01.– 31.12.2016||01.01.– 31.12.2017||Change in %|
|Operating result (EBIT)||459.4||470.6||2.4|
|Financial expenses||– 86.0||– 77.8||– 9.4|
|Financial income||4.9||2.0||– 58.4|
|Income tax expenses||– 67.2||– 89.3||32.9|
|Profit excluding revaluations and deferred taxes||275.6||307.4||11.5|
Balance sheet figures
Swiss Prime Site Group issued a nine-year bond amounting to CHF 250.0 million with a coupon of 0.825% in May 2017. The launch enabled the Company to successfully continue pursuing its long-term strategy aimed at extending the term to maturity of financial liabilities as well as benefiting from the current attractive market situation. The weighted average residual term to maturity of interest-bearing financial liabilities increased as a result to 4.7 [4.5] years. The weighted average interest rate on financial liabilities declined to 1.5% [1.8%] in 2017. Swiss Prime Site realised a better interest rate spread of 2.2% [1.9%] relative to the realised net yield of 3.7% on the real estate portfolio.
|in||31.12.2016||31.12.2017||Change in %|
|Equity ratio||%||45.0||43.1||– 4.2|
|Return on equity (ROE)||%||6.6||6.4||– 3.0|
|Net property yield||%||3.7||3.7||–|
|Weighted average interest rate on financial liabilities||%||1.8||1.5||–16.7|
|Weighted average residual term to maturity of interest-bearing financial liabilities||years||4.5||4.7||4.4|
|Loan-to-value ratio of property portfolio (LTV)||%||44.4||45.6||2.7|
|NAV before deferred taxes per share1||CHF||81.32||82.87||1.9|
|NAV after deferred taxes per share1||CHF||66.41||66.85||0.7|
1 Services segment (real estate-related business fields) included at book values only
Swiss Prime Site Group’s financial strength is solid. The equity ratio amounted to 43.1% as at year-end 2017, thus hovering in the forecast target corridor of roughly 45.0%.The loan-to-value (LTV) ratio of the real estate portfolio remained nearly unchanged at 45.6%. NAV after deferred taxes climbed to CHF 66.85 per share [CHF 66.41], exceeding the previous year’s mark by 0.7%. The return on equity (ROE) amounted to 6.4% [6.6%] and is therefore also hovering in the desired long-term target range.
Swiss Prime Site successfully closed out the financial year 2017. The course has been set for a prevailing positive performance. The targets set for the financial year 2018 include boosting operating income and EBIT before revaluations. Successful leasing activities and a renewed reduction in the vacancy rate will lead to a significant surge in rental income. Income from real estate development will once again provide a significant contribution to EBIT. Swiss Prime Site anticipates a further boost in income from the real estate-related services business. And finally, further growth of the real estate portfolio and a well-filled development project pipeline valued at CHF 2.1 billion will pave the way for a stable and attractive distribution to the shareholders.