A BB rating for the Adler group indicates a sufficient stability from Scope’s point of view, but also highlights some existing vulnerability with regards to the economic and internal environment of the company. The rating outlook is positive. The rating consists of quantitative and qualitative criteria based on Scope’s rating methodology for corporations.

Rating Rationale
An important factor for the assessment of the creditworthiness of Adler AG from the quantitative point of view are the losses accumulated in the past in conjunction with a strong equity base. From the qualitative point of view a fundamental shift in strategy of the group in 2012 impacts the rating of Adler.

The quantitative analysis assesses the consolidated annual financial statements of the years 2009-2011, which were available at the time of the rating analysis. The assessment is based on a weak earning capacity on the one hand and on a solid equity base on the other hand. In 2010, the company could not generate any income, only in 2011 profits could be made thanks to the sale of assets. Based on Scope’s initial assessment the sustainability of the earning power of Adler could not be maintained in 2012 on a comparable basis. However, management of the company expects a positive net income for 2012.

With a strong equity ratio, which is not below 70% in the time period of assessment and which has increased permanently in 2011 to 78%, Adler has a stabilizing effect in this part of the analysis.

From the qualitative point of view the company is in a phase of reorientation at the time of analysis, as a result of a fundamental strategic shift of the company in 2012. This shift has been initiated by a change in the shareholder structure of Adler. As management of the company has just recently taken these decisions in 2012, Scope sees execution risks of the new company’s strategy, which have yet to be implemented on a sustainable basis.

In the future focus should lie in investments and not any longer in project development of properties. Today, the company is strategically focused on investments in rental properties in secondary investments, which generate rental income and therefore contribute to a continuous cashflow. The stability of the entire group should be reinforced and the dependence on project-based pre-financing without any cashflows should be reduced and in the medium-term even abolished.

Scope sees in the new strategic orientation a general market risk from two perspectives:
i) The identification of suitable objects with a potential for restructuring poses an execution risk
ii) The use of a possible leverage effect is supported by the current level of interest rates, but cannot be necessarily maintained in the medium-term

With the implementation of the new strategy Scope expects a lower equity base in favour of a leverage effect. Another risk factor lies in the „key man risk“ of the personal structure and size of Adler.

The current developments and initiation of new businesses, as well as the analysis of the medium-term planning of the company show positive signs towards economic stability of the group. As a result, Scope assigns a positive outlook to the company.