In Q3 2023, Equinox recorded revenue growth of 1% YoY, an EBITDA increase of 12%, and a net income of EUR 802k, an increase of 168% YoY.
Starting off with the macroeconomic environment, the Company noted that several trends happening: firstly, there has been a cooling of economic activity. The inflation rate is still high, and as such a longer period of higher interest rates could be expected. Financing conditions continue to tighten, as the higher interest rates directly translate into higher financing costs, for companies and households alike. On the other hand, commercial banks also started to increase deposit interest rates, which somewhat offsets the growth in the loan interest rate, albeit to a much lesser degree as the spread between loan and deposit rates is still quite high. All taken together, this has led to a fall in real estate transactions, which affected Equinox.
For the Q3 2023 highlights, the variable rent contracts, signed with several companies for several different real estate (mostly commercial) have had their variable part of rent paid for the first time. Equinox also signed first contracts for renovations of the 3rd and 4th floors of the Grand Hotel Union. Also, the Company signed a contract for the purchase of five apartments, with the price of EUR 1.2k per sqm. Lastly, the renovation of the additional business premises in the Delo high-rise building for the existing tenant continues.
Moving on to the financials, in Q3 2023, the Company recorded net revenue of EUR 2.04m, representing an increase of 1% YoY. This came as a result of higher rent income, which grew by 2% YoY to EUR 1.9m, while income from the sale of products and services decreased by 11%, to EUR 142k. In terms of expenses, the cost of goods, materials, and services amounted to EUR 355.6k, which is a decrease of 30% YoY. This came due to a decrease in both the cost of services (-35% YoY, to EUR 227.4k), as well as the cost of consumables and energy (-19% YoY, to EUR 128.2k).
Due to the reduction in costs while the revenue remained roughly the same, the EBITDA amounted to EUR 1.62m, an increase of 12% YoY. This would also mean that the EBITDA margin amounted to 79.5%, an increase of 7.7 p.p. YoY. Besides real estate, Equinox as a company also invests in different asset classes, including stocks and bonds. This brought the Company significant financial income in Q3, as the financial income from shares amounted to EUR 84.1k (Q3 2022: EUR -287.8k). On the other hand, financial expenses increased by 20% YoY to EUR 107.5k. All taken together, this resulted in a net income of EUR 802k, representing an increase of 168% YoY, and implying a net income margin of 39.3%, an increase of 24.5 p.p. YoY. One other indicator that is worth mentioning in the real estate business is the so-called funds from operations, FFO. This is calculated as a company’s net profit to which depreciation is added, as well as the one-off effects. This amounted to EUR 1.62m, an increase of 19% YoY.
Equinox key financial indicators (Q3 2023 vs. Q3 2022, EUR ‘000)
Source: Equinox, InterCapital Research
As compared to the SBITOP index, Equinox recorded a 3% increase YTD, while the SBITOP index grew by 12% YTD.
Equinox, SBITOP share price performance (2023 YTD, %)
Source: Bloomberg, InterCapital Research