Following the posting of property impairments and currency losses, this led to a loss of EUR 21.7 million for the first half of 2020, including a result of minus EUR 3 million for the second quarter of 2020.
Warimpex has changed its business strategy and therefore its property portfolio in recent years. As a result, the hotel segment, which is currently heavily impacted by the health crisis, now makes up only 12 per cent of the total portfolio while office properties with long-term leases account for 75 per cent. In the office segment, we are benefitting from the attractive locations and high quality of the assets. All of our office properties have been newly built or extensively refurbished in recent years and satisfy the latest tenant requirements, ensuring long-term rentability. The decision to focus on office developments and assets is increasingly proving to be the right strategy, as all of our office properties are enjoying a very stable development compared to the few remaining hotel properties in the portfolio, which are currently suffering due to the global market situation.
Current development projects well on track
In 2020, Warimpex focused on the development of current projects in Poland, Germany, and Russia as well as on continuing with construction permit procedures. Despite the challenging market conditions, progress was made on material plans with no delays.
Construction work for Avior Tower 1 with around 16,000 square metres of space at AIRPORTCITY St. Petersburg began last year. The construction is continuing according to plan at present.
The “Hotel Darmstadt – soon to be greet” that was opened in Darmstadt last September was closed in April due to the COVID-19 pandemic. This situation is being used to push forward with the refurbishment work that was originally scheduled to take place while the hotel remained open for business. In the course of the refurbishment programme, the hotel will be converted to the new Accor brand “greet” and will then be repositioned on the market in the first quarter of 2021 due to the market situation.
In Poland, Warimpex will continue to move forward with the next office property development projects (Mogilska Phase III, Białystok Offices, and Chopin Office). We expect construction permits to be issued for at least two of our three properties listed in the second half of the year.
A detailed look at the first half of 2020
Warimpex increased its revenues from the rental of office properties by 15 per cent, with the figure rising from EUR 9.2 million to EUR 10.6 million. This can be attributed primarily to the completion of Mogilska 43 Office in May of last year. Due to the effects of the COVID-19 pandemic, revenues from the hotel segment declined by 51 per cent year-on-year to reach EUR 2.4 million in the first half of 2020. This led to a decline in total revenues to EUR 13.6 million. Expenses directly attributable to revenues rose from EUR 6 million to EUR 6.5 million, yielding gross income from revenues of EUR 7.1 million (2019: EUR 9.2 million). While Warimpex sold an office property and the operating company for the Dvořák Hotel in Karlovy Vary in the first half of 2019, no property transactions were completed in the first half of 2020.
EBITDA retreated from EUR 9.9 million in the prior-year period to EUR 0.3 million, and EBIT fell from EUR 16.6 million to minus EUR 9.2 million. This can be attributed to a lack of property sales, negative effects from property valuation, and the negative earnings contribution from hotel operations. The financial result (including earnings from joint ventures) declined from EUR 4.1 million to minus EUR 10.6 million. This includes non-cash losses from currency translation in the amount of EUR 4.7 million (2019: gain of EUR 7.3 million) and losses from joint ventures of EUR 2.5 million (2019: gain of EUR 0.4 million). These can also be attributed in part to negative hotel results and in part to losses from currency translation.
Due to these effects, the result for the period decreased from a gain of EUR 17.9 million in the first half of 2019 to a loss of EUR 21.7 million.
Outlook for the second half of 2020
Based on our experiences during the global financial and economic crisis of 2007, we have set our strategic focus on expanding the property portfolio, engaging in active asset management, and creating new offerings, and will continue to consistently pursue this strategy. Warimpex expects the solid trend in the office segment to continue due to the attractive locations and high quality of the assets. However, the long-term effects of the health crisis are still difficult to predict and depend on how the pandemic progresses.
The fact that the equity ratio increased from 31 per cent as of 30 June 2019 to 38 per cent as of 30 June 2020 underscores Warimpex’s solid financial foundation. The highly successful 2019 financial year made a major contribution here. With a crisis-tested team, deep roots in our core markets, excellent relationships with strong partners, and economic and financial strength, Warimpex remains optimally equipped to overcome the current and coming challenges.