Vonovia SE: Vonovia off to good start in new financial year - Focus on transition to sustainable energy
/ Key word(s): Quarter Results
Results as of March 31, 2022
- EBITDA Total grows by 44.2% – Group FFO per share increases by 12.3%
- Guidance of at least 20% growth confirmed for revenue, EBITDA and Group FFO
- Further rise in customer satisfaction, positive development of Sustainability Performance Index (SPI); guidance confirmed
- Focus on energy-efficient modernisation and renewable energies
- Large numbers of new builds: 777 flats completed in first quarter
- Integration of Deutsche Wohnen on track – Refinancing concluded
“The 24 February changed Europe, as the war has brought unimaginable suffering to the people of Ukraine. It is our responsibility to offer them a refuge and a safe home,” says CEO Rolf Buch. Despite Vonovia’s low vacancy rate, more than 420 flats have so far been rented out to Ukrainians via the Housing Map platform and through close networking with local councils. “In particular, we have many women seeking shelter with their children. They are especially vulnerable and urgently in need of their own homes as places of refuge,” says Buch.
The consequences of the war can also be felt at the macro-economic level. “Prices are rising rapidly,” says Rolf Buch, “not just for energy, and inflation has never been so high since the 1970s, while interest rates are also rising.”
According to the German Federal Statistical Office, by the end of 2021, the construction price index for residential buildings had already risen significantly by 14.4%. The war in Ukraine and economic sanctions against Russia have fuelled persistent price increases during the first quarter of 2022. Materials are getting more expensive, and supply chains are getting longer. Also, the shortage of skilled workers has meant that projects are progressing more slowly than planned. At the same time, the German government is imposing more and more requirements on the energy efficiency of buildings.
“The political demands are moving further and further away from reality. We need new housing, our energy-efficient upgrading needs to proceed at high speed, and we need to succeed in our transition to sustainable energy. At the same time, there is a lack of materials, labour and mandatory parameters. The capital market is reacting to the situation in Europe, and rising interest rates are dampening the investment climate. We can't just ignore these things,” says Buch.
At the same time, the megatrends on the housing market – specifically, climate change, demographic change and urbanization – are pushing ahead. "Our stable business model gives us the economic strength to keep our efforts,” complements Buch.
Year started with robust operating result
The Adjusted EBITDA Rental was €406.8 million (January to March 2021: €403.1 million). The three business segments Recurring Sales, Development and Value-added contributed €150.6 million to the Adjusted EBITDA (January to March 2021: €103.0 million). The Development segment, in particular, recorded a noticeable increase to €61.6 million (January to March 2021: €10.1 million). During the first three months of 2022, Deutsche Wohnen contributed €172.3 million to the Adjusted EBITDA, which therefore increased by 44.2%, from €506.1 million to €729.7 million.
The rise in the EBITDA also led to a higher Group FFO. “Vonovia is continuing to grow in its own strength and is therefore in a powerful position for its response to the current market situation,” says Rolf Buch. Excluding Deutsche Wohnen, Vonovia’s Group FFO - its indicator for operational profitability – rose by 7.7% compared with same period in the previous year, from €390.5 million to €420.5 million; including Deutsche Wohnen, it rose by 44.4% to €564.0 million. Vonovia’s FFO of €0.73 per share represents an increase of 12.3% (Q1 2021: €0.65).
Contrary to the guidance issued in mid-March, Vonovia is forecasting an investment volume of €1.3 to €1.5 billion in modernisation and new builds. “We are continuing to pursue our climate roadmap, focusing above all on energy-efficient modernisation in our building stock for the rest of the year, and we’ve earmarked €1.0 to €1.1 billion for this purpose. However, macro-economic developments have prompted us to refocus our construction investments,” says Buch. Vonovia is planning to spend €0.3 billion to €0.4 billion on new builds within its own stock. Additionally Vonovia has planned development to sell projects with a value of around €900 million. Vonovia will therefore continue to pursue its planned volume of new builds, but will make a larger proportion available to the market than in previous years.
This shows that Vonovia is continuing to focus on a transition to sustainable energy in its existing buildings. As the company continues to pursue its climate roadmap, its existing stock will apparently be nearly climate-neutral by 2045. During the first three months of this year, the company already carried out energy-efficient modernisation on more than 1,500 flats.
At the same time, energy sources in Vonovia’s neighbourhoods are being converted to local green electricity at high speed. Its solar panel offensive – whereby nearly all 30,000 suitable roofs in its own portfolio will have their own solar panels by 2050 – is proceeding as planned.
“Moving to sustainable energy is not just a matter of climate protection. It also means achieving the important goal of independence from the international energy market. The truth is, however, that with the current price development, energy-efficient modernisation and conversion will also become more expensive. This mustn’t be allowed to stifle landlords, but – above all – it mustn’t have an unacceptable impact on tenants. It’s important that they shouldn’t be overburdened financially. Tenants are already facing major supplementary payments on heat and electricity right now. Moreover, we’ll be seeing a deferred impact of inflation on rental fees,” says Buch.
The use of sustainable building materials is becoming more and more relevant. At the end of March, Vonovia held a conference entitled “Perspectives on the Future of Construction”. The aim of this initial conference was to provide a platform where all stakeholders from industry, research and government could enter into dialogue, work together, contribute their ideas and jointly develop some potential solutions. “A climate-neutral building stock can only be achieved if we build responsibly and use sustainable, resource-friendly construction materials. The entire housing and property industry has a major social responsibility on this issue. Vonovia is determined to make an active contribution to sustainable construction and housing,” stresses Rolf Buch. The concluding conference, i.e. the presentation of the results, will be taking place on 23 November 2022.
High-speed construction work – 777 flats completed so far
Continued increase in customer satisfaction – SPI exceeds expectations
In the first quarter of 2022, Vonovia’s Customer Satisfaction Index (CSI) was 1.8 percentage points higher than in the first quarter of 2021. The CSI is a key factor with a positive impact on the Sustainability Performance Index, while the SPI is the most important non-financial performance indicator as a reflection of Vonovia’s sustainability strategy. The reduction of carbon emissions as another SPI aspect is working better than expected. Also a large number of senior-friendly building upgrades has a positive impact. Between January and March 2022, Vonovia partially or fully upgraded more than 1,800 flats, making them barrier-free.
Integration of Deutsche Wohnen continues to be on target – Refinancing has been successfully concluded
“We are now focused on bringing the two companies together under one roof, and we’re nicely on track. We’re not considering further acquisitions right now,” says Buch, “and this also goes for Adler.”
On 16 February 2022, Vonovia successfully concluded a promissory note transaction totalling €1 billion. The tranches have a maturity of 5 to 30 years with a weighted average maturity of 7.65 years and a weighted average interest rate of 1.13%. Vonovia’s Loan to Value (LTV) is at 43.7%, thus remaining in the target corridor of 40 to 45%.
Following its sustainability strategy, Vonovia issued its first social bonds in March with maturities of 3.85 and 6.25 years as well as a further green bond with a maturity of ten years. For the first time in the property industry, these bonds are fully compliant with the new EU taxonomy. The total volume is €2.5 billion with a 1.875% coupon. The financing requirements for 2022 are largely covered.
Net asset value increases – Vacancy rate remains low
Owing to market conditions, rental fees rose by 1.6%. Investments in housing improvements (modernisation) led to a 1.6% rent increase, while investments in new builds and the creation of additional floors produced an increase of 0.7%. The average effective monthly rent across the Group was €7.40 per square metre as at 31 March 2022. In the German portfolio this figure was €7.26 per square metre (including Deutsche Wohnen in all cases).
The full Quarterly Report can be found at the following web addresses:
* Based on the new 2022 definition, therefore without elimination of IFRS 16 effect, line “thereof attributable to non-controlling interests” includes non-controlling interests of Deutsche Wohnen, Group FFO per share based on the shares carrying dividend rights on the reporting date, 3M 2021 prior-year values TERP-adjusted (1.067).
** Based on the new 2022 definition, therefore excluding real estate transfer tax and taking into account the total deferred taxes on investment properties of Deutsche Wohnen, EPRA NTA per share based on the shares carrying dividend rights on the reporting date.
The company, which is based in Bochum, has been listed on the stock exchange since 2013. Since September 2015 Vonovia has been a constituent in the DAX 30 (today DAX 40) and since September 2020 in the EURO STOXX 50. Vonovia SE is also a constituent of additional national and international indices, including DAX 50 ESG, Dow Jones Sustainability Index Europe, STOXX Global ESG Leaders, EURO STOXX ESG Leaders 50, STOXX Europe ESG Leaders 50, FTSE EPRA/NAREIT Developed Europe, and GPR 250 World. Vonovia has a workforce of approximately 15,900 employees.
This press release has been issued by Vonovia SE and/or its subsidiaries solely for information purposes. This press release may contain statements, assumptions, opinions and predictions about the anticipated future development of Vonovia (“forward-looking statements”) that reproduce various assumptions regarding, e.g., results derived from Vonovia’s current business or from publicly available sources that have not been subject to an independent audit or in-depth evaluation by Vonovia and that may turn out to be incorrect at a later stage. All forward-looking statements express current expectations based on the current business plan and various other assumptions and therefore come with risks and uncertainties that are not insignificant. All forward-looking statements should not therefore be taken as a guarantee for future performance or results and, furthermore, do not necessarily constitute exact indicators that the forecast results will be achieved. All forward-looking statements relate solely to the day on which this press release was issued to its recipients. It is the responsibility of the recipients of this press release to conduct a more detailed analysis of the validity of forward-looking statements and the underlying assumptions. Vonovia accepts no responsibility for any direct or indirect damages or losses or subsequent damages or losses, as well as penalties that the recipients may incur by using the press release, its contents and, in particular, all forward-looking statements or in any other way, as far as this is legally permissible. Vonovia does not provide any guarantees or assurances (either explicitly or implicitly) in respect of the information contained in this press release. Vonovia is not obliged to update or correct the information, forward-looking statements or conclusions drawn in this press release or to include subsequent events or circumstances or to report inaccuracies that become known after the date of this press release.
05.05.2022 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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