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EQS-Ad-hoc News vom 10.03.2017

Zug Estates heading for further growth

Zug Estates Holding AG / Key word(s): Final Results

10-March-2017 / 06:55 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 KR


The Zug Estates Group successfully consolidated the growth achieved in the past few years. Net income excluding revaluation amounted to CHF 24.0 million, thus remaining on a par with the prior-year figure. Despite a drop in revenue, the margin was increased from 38.2% to 39.2%. Property income rose by 2.3% to CHF 40.1 million. The vacancy rate was held at 1.8%, a record low level. Development projects worth CHF 440 million are under construction or at the planning stage, and will generate a substantial increase in income as of 2018. A 12.2% increase in the distribution to shareholders (to CHF 23.00 per series B registered share) will be proposed to the general meeting.

The Zug Estates Group generated operating income of CHF 61.2 million in 2016, representing a year-on-year decrease of 2.7%. Property income rose by 2.3% to CHF 40.1 million despite the sale of two sizable properties in the previous year. Like for-like, income from hotel and catering activities was down by CHF 2.6 million to 16.5 million, owing mainly to the absence of catering revenue from the Theater Casino Zug following non-renewal of the lease at the end of 2015. The gross operating profit (GOP) of the hotel & catering business unit rose from 37.9% to 41.5%. Additional income from ordinary business activities, and other operating income were on a par with the previous year's level. Operating expenses were 3.9% lower year-on-year. Operating income before depreciation and revaluation decreased by 1.9% to CHF 38.4 million (previous year: CHF 39.2 million).

In 2016, the Group invested a total of CHF 76.2 million in the further development, expansion and consolidation of its sites, in particular Suurstoffi in Risch Rotkreuz. In addition, the book value of investment properties increased by CHF 28.1 million net following revaluation.

As a result of the fall in income from the revaluation of investment properties (net), EBIT and net income were down on the previous year's figures at CHF 63.8 million and CHF 48.4 million respectively. Net income excluding revaluation amounted to CHF 24.0 million (previous year: CHF 24.1 million), thus remaining on par year-on-year. The corresponding margin was increased from 38.2% to 39.2%.

Total return per share at 15.8%
The Zug Estates share closed at CHF 1 653.00 on December 31, 2016, 14.4% higher than at the beginning of the year. Factoring in the payout of CHF 20.50 per series B registered share made in April 2016 from the reserves from capital contributions and, as such, exempted from withholding tax, total return per share came to 15.8% in the 2016 financial year (previous year: 17.6%).

Fair value of portfolio up by 8.5% to CHF 1.3 billion
The Group continued its growth strategy in 2016, investing CHF 76.2 million in further developing, expanding and consolidating its portfolio. In addition, expenses in the amount of CHF 16.9 million for the Aglaya promotional property were reported.

The book value of the entire portfolio stood at CHF 1 211.0 million at the end of the year, up 8.8% on the previous year. Properties used for operational purposes are stated at cost less write-downs. The fair value of these properties was CHF 116.0 million (previous year: CHF 113.7 million), with the fair value of the entire portfolio thus amounting to CHF 1 290.5 million (previous year: CHF 1 188.9 million).

Equity ratio at 61.2%
The Zug Estates Group can build on a solid equity base offering long-term stability. In spite of continuing investment activity, equity capital totaled CHF 774.5 million as at December 31, 2016, equivalent to a solid equity ratio of 61.2% (previous year: 60.8%).

Portfolio vacancy rate down to 1.8%
The main usable floor area at the Suurstoffi site is fully let. The Lucerne University of Applied Sciences and Arts and catering supplier CreaBeck commenced operations in the second half of 2016. A rental agreement for the remaining 1 000 m2 of office space was concluded with a technology firm that will move in in the first half of 2017. The only remaining vacant area is for pre-invested sublevel parking spaces earmarked for further development.

The retail mix in the Zug City Center site has been enhanced by new brands, including Rituals and The Butcher. In addition, rental agreements for over 1 000 m2 of office and retail space were extended or renewed. This will generate higher rental revenue in the retail segment in particular.

As at December 31, 2016 (reference date), the vacancy rate was 1.8%, representing a decrease of 3.6 percentage points compared with last year's figure of 5.4%.

Development projects worth CHF 440 million under construction or at planning stage
2016 was another year of intensive construction and development activity. The project pipeline is bulging. Specific development projects worth a total of CHF 440 million are under construction or at the planning stage at the Suurstoffi site. These projects will generate a substantial increase in income as of 2018.

The year under review saw some major marketing successes: long-term rental agreements for service business space were concluded with car sharing provider Mobility and biotechnology company Amgen. At the beginning of 2018, Mobility will relocate with some 130 staff to a newbuild in the third development phase. This means that long-term tenants have been found for 70% of the commercial space in this development phase. In summer 2018, Amgen is scheduled to take up occupancy in newbuild Suurstoffi 22, where the company will be renting around one third of the space. A long-term agreement for the operation of student housing units was concluded with Zurich-based youth housing network JUWO. JUWO will take over the first 52 housing units in mid-2017, followed by a further 48 in 2019 at the latest.

In November 2016, Zug Estates began selling the 85 condominiums in the Aglaya tower block. At the same time, this marked the successful launch of the online housing configurator developed specifically for Zug Estates. As at end-2016, a total of 22 apartments had been reserved. The initial notarizations took place in early 2017.

Business hotel segment sees improvement in profitability
Hotelbusiness Zug AG maintained occupancy rates at its establishments virtually at the previous year's level despite a slight increase in room prices, while accommodation revenue was down CHF 0.3 million year-on-year at CHF 10.9 million. Catering income decreased by CHF 2.3 million, due mainly to the absence of revenue from the Theater Casino Zug following the decision at the end of 2015 not to extend the lease. Other revenue for the business area was stable at CHF 0.6 million, but overall income decreased to CHF 17.1 million (previous year: CHF 19.8 million). The strategic focus on the core segment of business hotels with catering facilities resulted in an improvement in the GOP (gross operating profit) margin from 37.9% to 41.5%.

Events after the balance sheet date
In order to finance the further expansion of the portfolio, a CHF 100 million 0.7% bond with a term from 2017 to 2022 was issued on January 24, 2017. Otherwise, no significant events occurred after the balance sheet date.

Outlook for 2017
On the strength of the space rented by Lucerne University of Applied Sciences and Arts (taken to income over the full year) and the envisaged occupancy of newbuilds under the third development phase at the Suurstoffi site in the second half of the year, Zug Estates anticipates higher rental income in the real estate segment. At the same time, costs will increase due both to the measures taken in the previous year to strengthen the organizational structure as well as to higher maintenance expenditure.

A consolidation of revenue and gross operating profit at the previous year's level is predicted in the hotel & catering business unit. The rooms at the Parkhotel Zug are to be renovated in the summer. 
Overall, Zug Estates expects operating income before depreciation and revaluation to match the previous year's level. However, due to the predicted slowdown in market momentum, the Group anticipates that income from the revaluation of investment properties (net) will be down on the previous year, and that this will similarly impact net income. We are expecting a year-on-year increase in net income excluding income from revaluation.

Prudent continued development of the Suurstoffi site will remain a priority. The third development phase is scheduled for completion in the fall and will be handed over to users in stages. Construction work on the Suurstoffi 22 office building and the Aglaya residential tower block is progressing according to plan, along with the development of the western section of the plot. In 2017, Zug Estates is projecting a total investment volume of approximately CHF 150 million, including promotional property.

Proposals to the general meeting 2017
Net income excluding income from revaluation, which is relevant for the payout to shareholders, amounted to CHF 48.73 per series B registered share (previous year: CHF 48.97). The solid result and intact future prospects allow the board of directors to propose that the payout be increased by 12.2% to CHF 23.00 per series B registered share. This is equivalent to a payout of 47.2%.

The election of Beat Schwab as chairman of the board of directors is to be proposed to the general meeting on April 11, 2017. He will succeed Hannes Wüest, who is to step down from the board of directors for reasons of age.

Furthermore, Heinz Stübi will not stand for reelection. All other members will stand for reelection. The board of directors will therefore reduce from seven to five members.

Further information
Heinz M. Buhofer has notified Zug Estates of his intention to remain a member of the board of directors only until the 2018 general meeting of shareholders.

Furthermore, he has proposed considering a voluntary offer for the conversion of series A registered shares (voting shares) into listed series B registered shares, provided that this still fulfills the Lex Koller restrictions and that it enables a future-oriented successor solution from within the family. Subject to these conditions being met, Heinz M. Buhofer would be prepared to convert his stake in Zug Estates into series B registered shares either in part or in full at the time of his departure from the board of directors.

Over the coming months, the board of directors of Zug Estates Holding AG will consider the possibilities and conditions of a voluntary offer to convert non-listed series A registered shares into listed series B registered shares, and will be able to provide more details by the 2018 general meeting of shareholders.

Reporting
The detailed report on the financial year can be found on our website www.zugestates.ch under
Investor Relations/Reports.

An analysts' and media conference (in German) will be taking place today at 11:00 a.m. in
Rotkreuz. Hannes Wüest (Chairman), Tobias Achermann (CEO) and Gabriela Theus (CFO) will be
presenting the results for 2016. If you wish to attend, please mail ir@zugestates.ch (by 9:00 a.m.).

We will be holding a webcast in English at 2:30 p.m. CET.  Following the presentation, Tobias Achermann (CEO) and Gabriela Theus (CFO) will be available to answer any questions. Registration is not necessary.
Dial in: +41 225 80 59 70 / Pin Code: 86485636#
The presentation can be viewed on our website www.zugestates.ch.

Upcoming events:
April 11, 2017 | General meeting of shareholders
April 19, 2017 | Cash distribution to shareholders (Payment Date)
September 1, 2017 | Publication of the 2017 half-year report

For further information, please contact:
Tobias Achermann, CEO, tobias.achermann@zugestates.ch, T +41 41 729 10 10
Gabriela Theus, CFO, gabriela.theus@zugestates.ch, T +41 41 729 10 10

About Zug Estates 
The Zug Estates Group conceives, develops, markets and manages properties in the Zug region. It focuses on centrally located sites suitable for a wide range of uses and with potential for sustainable development. A large part of the real estate portfolio is located at two sites in Zug and Risch Rotkreuz and is broadly diversified by type of use. The Group also runs a city resort in Zug incorporating the two leading business hotels Parkhotel Zug and City Garden, augmented by a range of restaurant outlets. As at December 31, 2016, the total portfolio value was CHF 1.3 bn.
Zug Estates Holding AG is listed on the SIX Swiss Exchange, Zurich, (ticker symbol: ZUGN; securities number: 14 805 212).
 


End of ad hoc announcement

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