Semi-Annual Report 2013-2014

Other notes

1. Rental income

Rental income
in CHF thousandSwitzerlandFranceGermanyNetherlandsTotal
      
1st half-year 2012/2013     
Rental income in reporting currency6 8296 12510 8075 37329 134
Rental income in local currency6 8295 0938 9854 468 
      
1st half-year 2013/2014     
Rental income in presentation currency5 2775 0048 7854 14823 214
Rental income in local currency5 2774 0597 1253 364 
Change to previous year in local currency–1 552–1 034–1 860–1 104 
arising from:     
– Purchases0000 
– Disposals–1 491–529–1 653–806 
– Vacancy and indexation–61–505–207–298 

The reduction in rental income by CHF 5.9 million (previous year decrease of CHF 10.5 million) resulted mainly from the sales of investment properties and the temporary loss of rent due to the renovation projects in Berne and Paris.

2. Result from the sale of investment properties

Result from the sale of investment properties
in CHF thousand1.4.2013
to 30.9.2013
reviewed
1.4.2012
to 30.9.2012
reviewed
Investment properties strategic  
Sales proceeds227 13788 073
Market value as of the last valuation–216 391–81 474
Result from the sale of investment properties strategic10 7466 599
   
Investment properties non-strategic  
Sales proceeds25 22467 808
Market value as of the last valuation–26 007–69 396
Result from the sale of investment properties non-strategic–783–1 588

3. Real estate expense

In the first half of the financial year 2013/2014 eight investment properties were sold (previous year six sales), of which four were non-strategic (two one each in Germany and in the Netherlands) and four were strategic (three in Switzerland, one in France). For three of the investment properties the selling price was equal to or slightly above market value. Three were sold at a profit of CHF 16.6 million, two at a loss of CHF 6.6 million. Net of all selling costs there was a profit of CHF 10.0 million on the sales.

in CHF thousand1.4.2013
to 30.9.2013
reviewed
1.4.2012
to 30.9.2012
reviewed
   
Property taxes–143–177
Legal fees–80–144
Bad debts–199–358
External property management fees–149–106
Non recoverable service charges–2 397–3 038
Temporary relocation cost–1 0560
Other property-related expense–722–602
Total real estate expense–4 746–4 425

The increase in real estate expenses stems mainly from non-recurring expenses relating to various renovations in France.

4. Administrative expense

Administrative expense
in CHF thousand1.4.2013
to 30.9.2013
reviewed
1.4.2012
to 30.9.2012
reviewed
   
Salaries and Board of Directors' fees–2 922–2 842
Valuation–90–119
Audit–257–276
Legal and tax advisory–94–105
Other taxes–176–298
Depreciation–102–177
Bookkeeping and IT–426–459
Other advisory and investor relations–239–405
Other administrative expense–249–439
Total administrative expense–4 555–5 120

As a result of the reduced portfolio and other savings, the administrative expense declined.

5. Financial expense and income

Financial expense and income
in CHF thousand1.4.2013
to 30.9.2013
reviewed
1.4.2012
to 30.9.2012
reviewed
   
Financial expense  
Mortgage 1 and swaps interest expense 2–15 519–16 803
Interest expense and other financial charges 1–151–892
Interest expense 4% bond Züblin Immobilien Holding AG 1–1 397–1 337
Interest expense mandatory convertible securities Züblin France 1–87–101
Total financial expense–17 154–19 133
   
Swaps disqualified from hedge accounting–4 140–3 809
   
Financial income  
Interest income 328151
Currency translation adjustments283713
Total financial income311864
Net financial expense–20 983–22 078

1The respective liabilities belong to the category “Financial liabilities at amortized cost”.

2The liabilities from interest swaps belong to the category “Financial liabilities at fair value”.

3The assets to which this income relates belong to the category “Loans and receivables at amortized cost”.

Financial expense

Total financial expenses declined by CHF 1.9 million to CHF 17.2 million (previous year CHF 19.1 million). The decrease in mortgage loans as a result of the sale of investment properties had a positive impact.

Swaps disqualified from hedge accounting

In addition the disqualification of four swaps as a result of investment property disposals led to a charge of CHF 4.1 million through the income statement (previous year CHF 3.8 million).

Financial income

The Züblin Group recorded financial income of CHF 0.3 million (previous year CHF 0.9 million). The decline was primarily due to the absence of one-off positive currency effects earned in the same period last year.

6. Investment properties

1st half-year 2013/2014

in CHF thousandSwitzerlandFranceGermany strategicTotal strategicGermany non-strategicNetherlands non-strategicTotal non-strategicTotal
         
Balance as of 31.3.2013321 260436 557161 831919 64868 48676 658145 1441 064 792
Purchases00000000
Value-enhancing investments13 12123 3151 43837 8747416023438 108
Sales–149 298–67 0920–216 390–11 643–14 365–26 008–242 398
Positive change in market value1 7512 8202824 8530004 853
Negative change in market value–814–1 149–1 578–3 541–13 058–2 626–15 684–19 225
Currency translation adjustments01 4313961 8273803327122 539
Balance as of 30.9.2013186 020395 882162 369744 27144 23960 159104 398848 669
– of which strategic186 020395 882162 369744 271000744 271
– of which strategic held for sale00000000
– of which non-strategic held for sale000044 23960 159104 398104 398
Reconciliation of market value to book value 30.9.2013        
Valuation by external appraiser 1186 020395 882162 369744 27147 50863 704111 212855 483
Valuation adjustment property held for sale 20000–3 269–3 545–6 814–6 814
Balance as of 30.9.2013186 020395 882162 369744 27144 23960 159104 398848 669

1The report of the independent appraisers (Wüest & Partner [CH + GER], BNP Paribas [FR] and Troostwijk [NL] as of 30 September 2013 may be found on pages 62 to 67.

2In certain cases, the Company has made adjustments to the valuations from the external appraisers. These reflect results from ongoing sales negotiations.

The reduction in the value of the investment properties from CHF 1 064.8 million to CHF 848.7 million stems from the following factors:

  • The value of the portfolio was increased by investments of CHF 38.1 million (full previous year CHF 92.9 million) which the Company made in the reporting period. Around two-thirds of these investments related to renovations in Paris, with the remainder accounted for by investment properties in Berne and Zollikofen.
  • At the same time the Company sold investment properties for CHF 242.4 million (full previous year CHF 162.7 million). The sales took place in Switzerland, France, Germany and the Netherlands. The selling price for each of the investment properties sold in Zurich, Talstrasse 82, Zollikofen and Lyon exceeded 5% of the overall portfolio as at 31 March 2013.
  • The net downward revaluation of CHF 14.4 million across the portfolio as a whole (full previous year CHF 81.1 million). While values rose by 0.5% in both Switzerland and France, there were downward revaluations in Germany of 0.8% on the strategic porfolio, 22.7% on the non-strategic portfolio and 4.2% in the Netherlands.
  • Movements in the CHF/EUR exchange had a positive impact of CHF 2.5 million on the value of the investment properties (full previous year negative impact of CHF 9.6 million).

The fire insurance value of the investment properties amounts to CHF 579.1 million (previous year CHF 803.1 million).

Financial year 2012/2013

in CHF thousandSwitzerlandFranceGermany strategicTotal strategicGermany non-strategicNetherlands non-strategicTotal non-strategicTotal
         
Balance as of 31.3.2012370 360382 730160 291913 381170 541122 221292 7621 206 143
Purchases00000000
Value-enhancing investments24 02663 8103 29691 1326921 0771 76992 901
Sales–66 346–15 2980–81 644–75 130–5 966–81 096–162 740
Positive change in market value6 9399 73953517 213264026417 477
Negative change in market value–13 719–9 565–4 282–27 566–29 212–41 836–71 048–98 614
Currency translation adjustments05 1411 9917 1321 3311 1622 4939 625
Balance as of 31.3.2013321 260436 557161 831919 64868 48676 658145 1441 064 792
– of which strategic321 260371 204161 831854 295000854 295
– of which strategic held for sale065 353065 35300065 353
– of which non-strategic held for sale000068 48676 658145 144145 144
Reconciliation of market value to book value 31.3.2013        
Valuation by external appraiser 1321 260436 557161 831919 64871 97181 524153 4951 073 143
Valuation adjustment property held for sale 20000–3 485–4 866–8 351–8 351
Balance as of 31.3.2013321 260436 557161 831919 64868 48676 658145 1441 064 792

1The report of the independent appraisers (Wüest & Partner [CH + GER], BNP Paribas [FR] and Troostwijk [NL] as of 31 March 2013 may be found in the annual report 2012/2013.

2In certain cases, the Company has made adjustments to the valuations from the external appraisers. These reflect results from ongoing sales negotiations.

7. Share capital

Share capital

 Number of sharesin CHF thousand
   
Issued shares at a nominal value CHF 1.00 as of 31.3.201259 724 48659 724
No changes in capital structure in financial year 2012/2013
Issued shares at a nominal value CHF 1.00 as of 31.3.201359 724 48659 724
No changes in capital structure in 1st half-year 2013/2014
Issued shares at a nominal value CHF 1.00 as of 30.9.201359 724 48659 724

Treasury shares

 Number of sharesin CHF thousand
   
Balance as of 31.3.2012749 8772 632
Purchase of treasury shares150 000450
Sale of treasury shares–270 000–900
Result from treasury shares –48
Balance as of 31.3.2013629 8772 134
Purchase of treasury shares50 000109
Sale of treasury shares00
Result from treasury shares 0
Balance as of 30.9.2013679 8772 243

8. Future contractual maturities

Future contractual maturities
 Carrying value< 1 year1 to 3 years3 to 5 years> 5 years
in CHF thousand interestamortisationinterestamortisationinterestamortisationinterestamortisation
          
As of 30.9.2013         
Mortgages540 53711 298294 3026 311139 0391 822107 19600
Bond57 7862 40002 40058 2800000
Mandatory convertible security3 08986801 7360868000
Trade accounts payable4 40104 401000000
Derivative financial instruments36 60716 391013 33203 90801 4650
Other short-term liabilities14 830013 338000001 492
Total as of 30.9.2013657 25030 957312 04123 779197 3196 598107 1961 4651 492
          
As of 31.3.2013         
Mortgages699 83714 172222 31513 670250 5854 408226 93700
Bond59 3692 40004 80060 0000000
Mandatory convertible security3 77585501 71001 710000
Trade accounts payable14 022014 022000000
Derivative financial instruments49 42317 725019 08105 86302 7670
Other short-term liabilities20 119018 082000002 037
Total as of 31.3.2013846 54535 152254 41939 261310 58511 981226 9372 7672 037

9. Derivative financial instruments

Cash flow hedges

In the next twelve months CHF 312.0 million (previous year CHF 254.4 million) of the liabilities reported above are due to mature. Of this amount, CHF 294.3 million (previous year CHF 222.3 million) relates to mortgages; CHF 93.3 million of these mortgages are held for sale. The remainder consists of normal loan repayments and three maturing mortgages of CHF 199.0 million in France. This is to be rolled over in the normal course of business. Trade accounts payable and the other short-term liabilities are incurred in the course of the Company's operating activities and are covered by the short-term assets.

in CHF thousandNotional amounts 30.9.2013Notional amounts 31.3.2013Fair value 30.9.2013Fair value 31.3.2013
     
1 to 12 months119 46317 683–3 532–323
1 to 3 years324 158420 973–19 850–28 354
3 to 5 years132 543154 267–5 791–9 792
More than 5 years116 675116 585–7 434–10 954
Total cash flow hedges692 838709 508–36 607–49 423
– of which liabilities  –36 607–49 423

Cash flow hedges in equity

in CHF thousand1.4.2013
to 30.9.2013
1.4.2012
to 31.3.2013
   
Reserve cash flow hedges shareholders of Züblin Immobilien Holding AG–29 686–40 579
Reserve cash flow hedges non-controlling interests–10 025–12 808
Total reserve for cash flow hedges as of 1.4.–39 711–53 387
Fair value change1 172–12 926
Recognized in income statement as interest expense9 13417 549
Swaps disqualified from hedge accounting4 14010 726
Change in current and deferred taxes–1 355–1 673
Total reserve for cash flow hedges as of 30.9. / 31.3.–26 620–39 711
– of which shareholders of Züblin Immobilien Holding AG–18 615–29 686
– of which non-controlling interests–8 005–10 025

The Züblin Group uses interest rate swaps to reduce the cash flow risks arising from its exposure to movements in interest rates.

As a result of the investment property sales additonal swaps with a combined contract value of CHF 59.2 million (previous year CHF 202.8 million) were disqualified from hedge accounting. All the other swaps are designated as effective under the criteria of IAS 39. Changes in the fair value of effective swaps are recognized in the statement of comprehensive income. The change in fair value of the ineffective portion of CHF –0.1 million (previous year CHF 0.0 million) and the disqualified cash flow hedges of CHF –4.1 million (previous year CHF –3.8 million) were recognized in the income statement.

Currency options

in CHF thousandNotional amounts 30.9.2013Notional amounts 31.3.2013Fair value 30.9.2013Fair value 31.3.2013
     
1 to 12 months0000
1 to 3 years14 00014 00043138
3 to 5 years0000
Total foreign currency put-options14 00014 00043138
– of which assets  43138

The Züblin Group hedges part of its future cash flows in connection with intercompany loans in a currency other than the functional currency. The corresponding positive fair values are reported in the balance sheet under derivative financial instruments. The gains and losses from revaluation are recognized through profit and loss.

Total Derivative financial instruments

in CHF thousandNotional amounts 30.9.2013Notional amounts 31.3.2013Fair value 30.9.2013Fair value 31.3.2013
     
Cash flow hedges692 838709 508–36 607–49 423
Foreign currency put-options14 00014 00043138
Total derivative financial instruments706 838723 508–36 564–49 285
– of which liabilities  –36 607–49 423
– of which assets  43138

10. Mortgages

Overview mortgages as of 30.9.2013

In CHF thousandSwitzerlandFranceGermanyNetherlandsTotal%
       
Interest term structure, including swaps      
1 to 12 months068 96283142 580112 37321%
1 to 3 years058 680142 2390200 91937%
3 to 5 years37 19692 54300129 73924%
More than 5 years70 000027 506097 50618%
Total107 196220 185170 57642 580540 537100%
Average interest rates2.89%3.89%5.18%2.54%3.99% 
Average duration9.42.32.01.73.6 
       
Contractual maturity dates of mortgages      
1 to 12 months0198 18000198 18036%
1 to 3 years022 005170 57642 580235 16144%
3 to 5 years107 196000107 19620%
More than 5 years000000%
Total107 196220 185170 57642 580540 537100%
Average duration4.00.91.41.71.8 
of which:      
– Non-current mortgages strategic107 19621 177117 8620246 235 
– Current mortgages strategic0199 0081 9610200 969 
– Mortgages non-strategic held for sale0050 75342 58093 333 
       
Fair value of mortgages      
Fixed rate mortgages00147 8660147 86627%
Variable rate mortgages108 156219 80628 30842 691398 96173%
Total108 156219 806176 17442 691546 827100%

Overview mortgages as of 31.3.2013

In CHF thousandSwitzerlandFranceGermanyNetherlandsTotal%
       
Interest term structure, including swaps      
1 to 12 months28 92046 337013 46388 72013%
1 to 3 years40 000103 643184 42748 780376 85054%
3 to 5 years40 000114 26700154 26722%
More than 5 years80 00000080 00011%
Total188 920264 247184 42762 243699 837100%
Average interest rates3.29%4.12%5.30%5.77%4.35% 
Average duration7.12.42.80.53.6 
       
Contractual maturity dates of mortgages      
1 to 12 months048 7300048 7307%
1 to 3 years0193 656184 42747 131425 21461%
3 to 5 years188 92021 861015 112225 89332%
More than 5 years000000%
Total188 920264 247184 42762 243699 837100%
Average duration4.51.51.92.12.5 
of which:      
– Non-current mortgages strategic188 920170 345118 2570477 522 
– Current mortgages strategic048 7801 369050 149 
– Mortgages strategic held for sale045 1220045 122 
– Mortgages non-strategic held for sale0064 80162 243127 044 
       
Fair value of mortgages      
Fixed rate mortgages00160 8770160 87723%
Variable rate mortgages190 000258 79132 18262 306543 27977%
Total190 000258 791193 05962 306704 156100%

In the first half of the financial year 2013/2014, the Company repaid mortgages of CHF 162.1 million. The mortgage portfolio of the Züblin Group includes both variable-rate and fixed-rate loans. As of 30 September 2013, fixed-rate mortgages amounted to CHF 142.4 million (previous year 152.4 million). The figure for mortgages includes closing fees of CHF 2.0 million (previous year CHF 2.9 million).

Some of the mortgages include financial covenants which specify, among other things, adherence to certain financial indicators (total debt/EBITDA, level of interest cover, loan-to-value ratio and equity ratio). The financial covenants vary by country and loan contract, as summarized in the table below:

 SwitzerlandFranceGermanyNetherlands
     
30.9.2013    
Debt/EBITDA13.75
Interest coverage ratio1.61.01.4> 1.5 – 2.0
Loan to value65%70%60% – 75%
Equity %32.5%25%

The Company monitors these covenants every quarter and performs sensitivity analyses to changes in earnings, interest rate movements and investment property valuations. The breach of a covenant may have a variety of consequences depending upon the individual contract, but in the first instance typically leads to a higher interest rate and/or an accelerated repayment schedule. The Company then normally has a certain period in which to correct the breach. If the breach has not been corrected at the end of this period, the bank normally demands a faster repayment schedule or a (partial) repayment of the loan. Some contracts contain a change in ownership clause which stipulates certain consequences, such as declaring the loan to be immediately due and repayable if Züblin Immobilien Holding AG's stake in the borrowing subsidiary declines below 50%. The mortgage agreement for the Swiss portfolio contains the same clause in the event that a single shareholder acquires more than 50% of Züblin Immobilien Holding AG.

The table below summarizes the value of investment properties pledged as security for mortgages:

in CHF thousand30.9.201331.3.2013
   
Book value of assets pledged (investment properties)848 6691 064 792
Credit drawn (debt secured)540 537699 837

Future rental fee receivables for investment properties, insurance policies for investment properties, and shares in subsidiary companies have been pledged as security over and above the mortgage liens.

11. 4% bond 11/15

4% bond 11/15
in CHF thousandNominal valuePrice in %Fair valueEffective interest rate in % 1
     
As of 30.9.201358 280105.00%61 1944.42%
     
As of 31.3.201360 000103.50%62 1004.42%

1The effective interest rate is made up of the coupon of 4% and the amortisation of the transaction costs.In the first half of the financial year 2013/2014 Züblin reduced the amount outstanding on the bond by CHF 1.7 million to CHF 58.3 million by making advance repurchases on the market.

Events after the balance sheet date

In October 2013 the investment property in Arnsberg was sold slightly above the market value as at 30 September 2013.

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Semi-Annual Report 2013-2014

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