FIRST QUARTER OPERATING RESULTS NEGATIVE ONCE AGAIN BUT IMPROVED COMPARED WITH LAST QUARTER OF 2008
- TOTAL REAL ESTATE SALES: 174.8 MLN/€ (199.8 MLN IN FIRST QUARTER OF 2008)
- EBIT INCLUDING INCOME FROM INVESTMENTS: -14.7 MLN/€ (+22.5 MLN/€ IN
- MARCH 2008, INCLUDING INDEMNITY OF 17 MLN/€ FOR THE BERENICE FUND)
- NET INCOME: -15.8 MLN/€ (+11.6 MLN IN MARCH 2008)
- NET FINANCIAL POSITION: NEGATIVE FOR 309.3 MLN/€ (-289.5 MLN/€ AS OF 31/12/2008)
IMPLEMENTATION OF 2009-2011 INDUSTRIAL PLAN CONTINUES
The Board of Directors of Pirelli & C. Real Estate met today and reviewed and approved the intermediate financial statements as of 31 March 2009.
Again in the first quarter of 2009, the real estate industry felt the effects of the serious international crisis that began in the previous year. Comparisons with data referring to the first quarter of 2008 must therefore be read in this light.
Performance in the first quarter of 2009
Economic performance in the first quarter of 2009, although still negative, markedly improved compared with the last quarter of 2008, saw the following results. Total rents as of 31 March 2009 amounted to 201.5 million euros, in line with expectations (143.1 million euros in the first quarter of 2008, with a perimeter that did not include the Highstreet portfolio). The Pirelli RE pro-quota share of rents equaled 47.3 million euros (compared with 38.1 million euros in 2008).
Real estate sales amounted to 174.8 million euros (199.8 million euros in the first quarter of 2008): the Pirelli RE pro-quota share of sales equaled 50.5 million euros (compared with 66.9 million euros in 2008). The sales margin was 17% (in the first quarter of 2008 it was 26%).
Consolidated revenues stood at 53.8 million euros, compared with 74.7 million euros as of 31 March 2008.
EBIT including income from investments amounted to -14.7 million euros, compared with 22.5 million euros in the first quarter of 2008. In terms of EBIT, the decline with respect to 2008 (24.9 million euros) was composed of savings obtained on the structure (10.0 million euros), more than compensated for by main negative components such as: the presence in 2008 of an indemnity received vis a vis the commitment to cede management of the Berenice fund (17.0 million euros); the presence in 2008 of extraordinary items (3.5 million euros); worse results of consolidated vehicle companies mainly due to a decline in sales (5.6 million euros); a lower result of the Non Performing Loans services platform (5.8 million euros).
In terms of income from investments, the decline (equal to 12.3 million euros) was attributable for 10.0 million euros to results of the vehicles and funds linked mainly to lower sales margins, and for about 2.3 million euros for adjustment to fair value of interest rate hedging instruments. Consolidated net income stood at -15.8 million euros (+11.6 million euros in the first quarter of 2008, when discontinued operations had brought a benefit of 0.7 million euros).
Attributable net equity as of 31 March 2009 amounted to 317.1 million euros compared with 361.7 million euros as of 31 December 2008. The decrease of 44.6 million euros can be mainly linked to the attributable net result (-15.8 million euros) and to the variation in reserves for interest rate hedging (-25.1 million euros).
The net financial position as of 31 March 2009 was negative for 309.3 million euros, compared with 289.5 million euros as of 31 December 2008 (negative for 300.3 million euros as of 31 March 2008). The financial position excluding shareholder loans credits was negative for 898.4 million euros, compared with 861.8 million euros at 31 December 2008 (negative for 807.8 million euros on 31 March 2008).
Total net capital invested by Pirelli RE amounted to 1.3 billion euros of which 0.2 billion for NPLs and 1.1 billion for real estate (of which 73% in Italy and 27% in Germany).
Performance of the business divisions
Real estate sales as of 31 March 2009 amounted to 144.8 million euros, compared with 155.7 million euros in the first quarter of last year. In Italy the sales margin was about 16% (in the first quarter of 2008 it stood at around 28%). Rents totaled 79.6 million euros (89.1 million euros in the analogous period of 2008).
EBIT including income from investments as of 31 March 2009 stood at -5.7 million euros compared with 15.4 million euros as of 31 March 2008. EBIT was composed of 4.9 million euros in earnings from services (18.4 million euros in 2008) and -10.7 million euros in results from vehicles and property funds (-3 million euros in 2008).
Real estate sales as of 31 March 2009 amounted to 15.3 million euros compared with 33.4 million euros in the first quarter of last year. In Germany the sales margin was about 18% (in the first quarter of 2008 it stood at about 19%). Total rents stood at 121.7 million euros (53.7 million euros in the analogous period in 2008).
EBIT including income from investments as of 31 March 2009 amounted to -4.8 million euros compared with -2.0 million euros as of 31 March 2008. EBIT was composed of 1.3 million euros in earnings from services (-0.1 million euros in 2008) and -6.1 million euros in results from property vehicles (-2 million euros in 2008).
Collections of non performing loans as of 31 March 2009 amounted to 81.7 million euros, compared with 111.4 million euros in the first quarter of last year.
EBIT including income from investments, as of 31 March 2009, was 0.3 million euros compared with 10.2 million euros as of 31 March 2008, a figure which was also roughly equivalent for the full year 2008. EBIT was composed of -2.9 million euros in losses from services (+2.9 million euros in 2008) and 3.2 million euros in results from vehicles (7.3 million euros in 2008).
Events subsequent to 31 March 2009
The Board of Directors of Pirelli & C. Real Estate, in its meeting of last 8 April, took note of the resignation of Carlo Puri Negri from his role as a Director of the Company, and consequently from the position of Executive Vice President, ahead of the natural term of the director’s mandate, fixed for April 2011, at the time of approval of the 2010 financial statements.
The Company indicated terms and conditions for the economic treatment of Carlo Puri Negri in a press release issued to the market last 17 April and during the Shareholders’ meeting held on the same day.
Strengthening of equity structure and corporate turnaround
In support of the new business model, and in order to allow the Company to express within the time period covered by the 2009-2011 three-year plan the real implicit value of its assets, last 17 April the extraordinary Shareholders’ meeting approved a capital increase of 400 million euros. The Shareholders’ meeting gave a mandate to the Board of Directors to set the issue
price for the new shares, and the other conditions for the capital increase.
As anticipated, Pirelli & C. will fulfill its commitment by converting into shares part of its financial credit vis a vis Pirelli RE, which as of 31 March 2009 amounted to approximately 500 million euros.
Pirelli & C in any case made itself available to underwrite any shares not underwritten at the end of the offer procedure, bearing witness to the strong commitment of the parent company to the turnaround project, and to its belief in the quality of Pirelli RE assets.
In order to give all shareholders the most complete information possible regarding the performance of the real estate market, the market value of assets under management, the net asset value of the Company and portfolio yield, in view of the planned capital increase transaction Pirelli RE has asked the independent experts charged with valuing the assets managed for an extraordinary update of their valuations.
The valuations are currently being completed and are expected to be completed in the first 10 days of May and to be therefore reflected in information prospectus which will be published at the time of the offer.
It is estimated as of today that the changes with respect to values on 31 December 2008 of indicators will be non material compared with the net equity of Pirelli RE: in fact a reduction of net equity, for the portion attributable to Pirelli RE, of between 4 and 7 million euros, or between approx.1% and approx. 2% of the net equity, is estimated.
Categories: Pirelli RE