The earnings situation of the domestic real estate developer UBM Development AG continued to deteriorate at the end of the third quarter of 2022. Earnings before taxes (EBT) fell by 64 percent from 46.2 to 16.6 million euros and net profit by 60 percent from 35.9 to 14.3 million euros, as the company announced on Thursday. Earnings per share (EPS) fell by 74 percent to EUR 1 (previous year: EUR 3.86).
In the third quarter, however, UBM “made progress on the acquisition side and was able to land another project development in timber-hybrid construction with more than 10,000 square meters of gross floor area in the booming Düsseldorf Medienhafen”. The investment market, on the other hand, is “continued to be in a state of shock.” Therefore, the pre-tax result in the first three quarters of 2022 “without significant sales” of EUR 16.6 million was roughly at the level of the half-year.
Financial position strengthened
“For UBM, which is in a good financial position, you should never miss a good crisis,” said CEO Thomas Winkler, adding: “The first competitors have already gotten into trouble – and more will follow.” In contrast to these companies, UBM was able to further strengthen its solid financial position and was even able to increase its liquidity slightly compared to the half-year.
As of September 30, 2022, the company reportedly had over EUR 358 million in cash – that was around 6 percent less than on the same date the previous year (EUR 524 million). The equity ratio fell from 35.7 to 33.4 percent.
At the end of September, UBM significantly reduced its workforce – by 16 percent from 345 to 289 employees.
Between January and September this year, sales revenues fell noticeably by 47 percent to EUR 115.4 million compared to the same period in 2021. Total output fell from EUR 340.4 million to EUR 318.9 million – a drop of 6.3 percent. The service includes the sales of both the fully consolidated and at-equity consolidated companies as well as the sales proceeds from share deals according to the size of the UBM stake.
The dividend as of September 30 was 2.3 percent higher than on the previous year’s reporting date at EUR 2.25 per share (previous year: EUR 2.20). The payment was made in the respective financial year, the distribution relates to the balance sheet profit of the previous year.
When announcing the results, the real estate developer referred to an error finding by the Austrian Financial Reporting Enforcement Panel (OePR), which – regarding the 2020 balance sheet – led to a correction of equity of EUR 27 million. The error correction has no effect on the income statement or the cash flow statement of the group.
According to its own statements, UBM acquired a commercial property as a development project in 2018 and valued it at a fair value of around EUR 69 million at the end of December 2019. In the second quarter of 2020, 40 percent was sold to a third party, so that in the course of this transaction and the resulting at-equity valuation, the property was revalued at fair value by around EUR 141 million. As part of a regular audit, the OePR has now come to an error finding for the 2020 annual financial statements, according to which the risk of the building permit that is still to be expected was insufficiently taken into account in the fair value. A lower fair value of around EUR 39 million should have been applied, which affects the acquisition costs for the first-time recognition of the investment valued at equity and leads to a correction of equity of EUR 27 million.
Management is cautious about the outlook for the financial year as a whole: Due to the current situation on the real estate market, planned transactions would also have to be withdrawn. The success of the 2022 financial year will be a “photo finish” after the expected positive effects do not depend solely on UBM, according to today’s company announcement. “In the absence of better insights and the equally unclear market development, UBM is sticking to the guidance issued at the half-year point and remains cautiously optimistic for the coming, difficult quarters,” it said.