Eik fasteignafélag hf.: Interim results for the first six months of 2024

The Interim Consolidated Financial Statements of Eik fasteignafélag hf. for the period 1 January to 30 June 2024 were approved by the Company’s Board of Directors and CEO on 15 August 2024.

The main results are as follows:

Income from operations amounted to ISK 5,527 million
- Thereof, rental income amounted to ISK 4,809 million
EBITDA amount to 3,519 million
Total comprehensive profit amounted to ISK 2,798 million.
Net cash from operations amounted to ISK 1,762 million.
The book value of investment properties amounted to ISK 147,753 million.
The book value of assets for own use amounted to ISK 5,931 million
Change in value of investment properties amounted to ISK 4,084 million.
Cash and cash equivalents amounted to ISK 782 million.
Interest-bearing debt amounted to ISK 81,027 million
Equity ratio was 33.4%.
Earnings per share was ISK 0.82.
Economic occupancy rate was 93.6%
Weighted indexed interest was 3.39%.
Weighted unindexed interest was 6.6%.

In case of any discrepancy in the English and the Icelandic versions of this announcement or the Financial Statements, the Icelandic version shall prevail.

Attached is the Interim Consolidated Financial Statements for the first six months of the year 2024.

Operations of the period

Despite the Company's operating profit being slightly below plan, primarily due to lower utilization of Hotel 1919 and incidental impairment of trade receivables, revenues from rental income performed better than expected, as well as the development of assets. The Company's operating income for the first six months of 2024 amounted to ISK 5.527 million. Of this, rental income was ISK 4.809 million. Operating expenses amounted to ISK 1.958 million ISK and impairment of trade receivables was ISK 50 million.

Operating profit before changes in fair value change and depreciation amounted to ISK 3,519 million compared to ISK 3,827 for the same period last year. Profit before income tax amounted to ISK 3,497 million and Other comprehensive income for the first six months of the year amounted to ISK 2,798 million.

The NOI Ratio (i.e. operating profit before changes in value and depreciation as a ratio of lease income) was 69.8% for the first six months of the year 2024, compared to 78.4% for the same period in 2023. The NOI Ratio in the first half of 2023 was unusually high, partly due to one-off items related to reversal of impairment of trade receivables. Adjusted for that entry, the NOI ratio in the first half of 2023 was 74.4%.

The Group's investment properties are valued at fair value in accordance with International Financial Reporting Standards (IFRS), which is based on, among other, discounted future cash flows of individual assets. Changes in fair value are recognized and classified within changes in value of investment properties and amounted to ISK 4,084 million in the first six months of the year 2024. The main assumptions driving the change are inflation, new agreements and lower return on equity. The main factors contributing to a decrease are an increase in financial cost and an increase in property valuation.

Financial Position

The Group's total assets amounted to ISK 147,753 million at the end of the period, whereof investment properties amounted to ISK 138,2972 million which consist of real estate leased to tenants amounting to ISK 127,440 million, investment properties under development ISK 4,543 million, building rights and land ISK 3,666 million and pre-paid street construction tax ISK 13 million and leased assets amounted to ISK 2,636. Assets for own use amounted to ISK 5,931 million and assets under development ISK 1,089 million. The Group's equity amounted to ISK 49,281 million at the end of the period and its equity ratio was 33.4%. At the Group’s Annual General Meeting on 11 April 2024 a dividend payment to shareholders due to the year 2023 amounting to ISK 2,540 million was approved, which was subsequently paid on 30 April 2024.

The total liabilities of the Company amounted to ISK 98,472 million on 30th June 2024. Of this, interest-bearing liabilities were ISK 81,027 million, and deferred tax liabilities were ISK 13,203 million. The Company's loan-to-value ratio, i.e. the net position of interest-bearing debts against the value of real estate, building permits, and plots, was 56.4%. In the first six months of the year, the Company refinanced ISK 8,800 million of unindexed loans at variable rates and instead took out indexed loans at variable rates. The Company also took out two indexed bank loans at variable rates totaling ISK 1,350 million with maturity date in 18 months. Additionally, the Company issued bonds in the amount of ISK 1,300 million at a fixed interest rate of 3.75% with a maturity date in 2049, with repayment authorization after four years.

In early July 2024, the Company issued a new series of bonds, EIK 050734, in the amount of ISK 5,000 million at a fixed interest rate of 3.95%. Concurrently, the Company prepaid some of its existing loans, and part of the issuance will be used to repay EIK 24 1, which matures in September of the current year and amounts to ISK 3,000 million. Therefore, the Company has completed the refinancing of the debts maturing this year.

Company‘s Portfolio

The Company purchased a nursery school located at Réttarheiði 45 in Hveragerði, and it is estimated that it will be put into use in the latter part of the year. The building is an extension to the current nursery school in Hveragerði, and a long-term lease agreement has been negotiated with Hveragerði Municipality for the nursery school.

The Company received back the lease of Rauðarárstíg 27 at the end of June, where the Ministry for Foreign Affairs was housed, and the property has subsequently been put up for sale.

Economic occupancy rate

The Company's occupancy rate was 93.6% at the end of the period, decreasing by 0.7% from the year-end. At the beginning of the year, the Company anticipated an occupancy rate of 92.5% at the end of the second quarter, so the rental has performed better than expected. Additionally, the Company has leased out approximately one-third of the development square meters that the Company expects to become income-generating by the end of 2025. As these square meters were classified as development square meters, they have little impact on the occupancy rate.

Outlook

The Company has updated its outlook for the year 2024 and expects the EBITDA for the year to be in the range of ISK 7,280 – 7,580 million at a fixed price, based on the consumer price index for inflation adjustment in September 2024.

The updated outlook takes into account, among other things, the expectations of the Radisson Hotel Group for lower performance than initially anticipated.

Although cash from operations is a somewhat lower than at same time last year, the Company estimates that cash from operations for 2024 will be higher than in 2023.

Freedom of action

The board of Regin (now Heimar hf.) announced on April 29th last year the withdrawal of its merger notification to the Competition Authority regarding the voluntary takeover bid to the shareholders of the Company, which was submitted on July 6th, 2023. Additionally, the Financial Supervisory Authority of the Central Bank of Iceland approved the withdrawal of the offer on May 10th, 2024. The Company, following the withdrawal of the offer, has freedom of action and is now exploring opportunities within its portfolio, further developments in its capital structure, and the potential for increased revenue growth.

Online meeting

An online open meeting will be held on Friday the 16^th of August 2024, at 8:30. Garðar Hannes Friðjónsson, CEO and Lýður H. Gunnarsson, CFO, will present the results and respond to questions following the presentation.

Registration of the meeting is through the following link:

https://vimeo.com/event/4505368/cf0b257ea0

Following registration, participants will receive an e-mail with further information.

Market participants can submit questions for or at the meeting to the email address fjarfestatengsl@eik.is. The directors encourage market participants to submit questions for the meeting so that answers can be prepared, if necessary. Questions will be answered after the presentation.

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