- Consolidated sales revenues reduced to EUR 23.9 million (previous year: EUR 36.8 million)
- Consolidated EBIT declines to EUR -4.8 million (previous year: EUR 3.4 million)
- Consolidated balance sheet total increases by around EUR 9.0 million to EUR 147.8 million (previous year: EUR 138.3 million)
- Planning for 2024 assumes significantly higher sales and balanced Group EBIT
Berlin, 29 April 2024 – The business performance of The Grounds Real Estate Development AG (The Grounds / ISIN: DE000A2GSVV5) during 2023 was characterised by declining sales revenues in a challenging market environment. At around EUR 23.9 million, consolidated sales revenues in the reporting year were around EUR 12.9 million, or 35%, lower than in the previous year, in which sales totalled EUR 36.8 million. However, a significant portion of the EUR 4.9 million decline in sales revenues is attributable to a single event, the cancellation of the contract concluded in 2022 for the sale of the Terra Homes project. This was carried out by mutual agreement at the end of December 2023 at the buyer’s request. Overall, The Grounds was unable to escape the general market trend in Germany during 2023, which was characterised by strong reluctance on the part of institutional and private buyers. This was reflected in massive declines in transaction volumes in almost all property market segments.
The majority of The Grounds’ consolidated sales revenues totalling EUR 19.1 million resulted from construction progress of the development projects, which is accounted for using the percentage-of-completion method. Specifically, this related to the “Maggie” project in Berlin-Lichtenberg and the “LennéQuartier” and “Property Garden” projects in Magdeburg. The two other sources of revenue, privatisation and letting, contributed EUR 2.3 million and EUR 2.0 million respectively to consolidated sales revenues. Other factors that reduced earnings were impairment losses on investment property, totalling around EUR 1.3 million, and other operating expenses, which include risk provisions for a company investment accounted for using the equity method that was sold after the reporting date – the end of January 2024.
Ultimately, EBIT in 2023 totalled EUR -4.8 million, compared to EBIT of EUR 3.4 million in the previous year. Consolidated earnings after taxes totalled EUR -7.6 million (previous year: EUR 1.3 million). This corresponds to earnings per share of EUR -0.39 (previous year: EUR 0.07).
In a year-on-year comparison, the Grounds’ total assets increased by around EUR 9 million to EUR 147.8 million, although this was also linked to changes in the balance sheet structure. Non-current assets remained almost unchanged at EUR 43.4 million (previous year: EUR 43.2 million). Impairment losses on investment property totalling EUR 1.0 million were offset by an increase in deferred income tax assets of EUR 1.4 million. The increase in current assets by EUR 9.3 million to EUR 104.4 million is mainly due to the increase in inventories by EUR 8.6 million to EUR 91.5 million. The majority of the increase is attributable to properties under construction, which together with work in progress, properties ready for sale and prepayments made, comprise the inventories. The company’s cash and cash equivalents totalled EUR 3.0 million as at the balance sheet date on 31 December 2023, and were therefore around EUR 0.7 million higher than at the end of the previous year.
Financial liabilities and bonds increased by EUR 19.8 million, in particular due to the expansion-related increase in liabilities to banks and the financing provided by H.I.G. in the amount of EUR 10.0 million. The increase in current liabilities with a simultaneous decrease in non-current liabilities is partly due to the fact that the liabilities from the convertible bond in the amount of EUR 16.8 million were reclassified from non-current to current liabilities. This item also includes the financing of EUR 10.0 million concluded with H.I.G. in the fourth quarter of 2023.
Commenting on the 2023 Annual Financial Statements, Jacopo Mingazzini, Management Board of The Grounds, says: “Our expectations at the beginning of 2023 were not fulfilled in a market environment characterised by rising interest rates, high construction prices and considerable uncertainty. Nevertheless, there were some positive developments that will continue to strengthen in the current financial year and should then lead to a significant improvement in sales and earnings again. Our owner-occupied residential units in Meppen have now been completely sold, the purchase agreement for the last available flat in our new construction and re-densification project in Margaretenstrasse in Berlin-Lichtenberg was notarised a few days ago, and there were also increased sales in Dallgow-Döberitz. On the other hand, there were delays in promising negotiations for the sale of an office project and the postponement of the realisation of the debtor warrant in connection with a sold property in Hangelsberg. We were particularly pleased that we were able to gain a new investor in the shape of the UK’s H.I.G. Realty, which not only provided short-term bridge financing but also secured an option to acquire a majority stake in the company via a capital increase. This gives The Grounds a solid starting point for the 2024 financial year, the first weeks of which have already seen a significant improvement in the market environment.”
The Management Board expects that The Grounds 2024 will again be able to match the success of 2022 and generate sales revenues of between EUR 48 million and EUR 52 million and a balanced Group EBIT. The sales of the Börde Bogen neighbourhood development in Magdeburg and the terraced house project in Erkner are key to achieving these targets. In addition, The Grounds plans to generate initial sales revenues from the sale of owner-occupied residential units from properties in the Berlin area.
The Annual Report for the 2023 financial year is now available for download here.
