Vonovia off to good start in new financial year – Focus on transition to sustainable energy
- 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
Bochum, 5 May 2022 – Vonovia SE (“Vonovia”) got off to a good start in the 2022 financial year. The integration of Deutsche Wohnen is proceeding as planned, and all financial and non-financial indicators are meeting positive expectations. The numbers of new builds are continuing to rise, while energy-efficient modernisations and senior-friendly housing upgrades are moving ahead at a good speed. One major priority, in particular, is the conversion to sustainable energy sources – both to protect the climate and to achieve independence from international energy markets. In the long run, this is the only way to ensure that utility costs (i.e. heating and hot water) will remain affordable. At the same time, there has been a steady increase in the supply of locally generated solar power – straight from the rooftop.
“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 macroeconomic 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
Economically, Vonovia got off to a good start in the new financial year. Its Segment Revenue Total rose by 42.6%, from €1,145.5 million in the first quarter of 2021 to €1,633.4 million in the first quarter of 2022. The increase was largely due to Deutsche Wohnen, which contributed a volume of €286.3 million in 2022.
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).
Guidance 2022: expected growth of at least 20% confirmed – Investments now refocusing on new builds
Vonovia has confirmed its guidance for revenue, EBITDA and Group FFO for the 2022 financial year. These indicators are projected to be at least 20% higher than in 2021. Segment Revenue Total is likely to be between €6.2 and 6.4 billion, and Vonovia is expecting its Adjusted EBITDA Total to range between €2.75 and €2.85 billion. This will also cause an increase in its Group FFO within a range of €2.0 and €2.1 billion. Based on the very good development at the start of the year, Vonovia expects to achieve all targets of the Sustainability Performance Index (SPI).
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.
Focus on energy-efficient upgrades and on a transition to sustainable energy in each neighbourhood
During the first quarter of 2022, Vonovia invested €519.3 million in maintenance, modernisation and new builds (January to March 2021: €379.9 million). At €137.4 million, maintenance work during the first three months of 2022 was higher than in the previous year (January to March 2021: €135.7 million). The modernisation volume dropped to €158.6 million (January to March 2021: €165.1 million), and the Deutsche Wohnen share of this figure was €114.3 million.
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.
Highspeed construction work – 777 flats completed so far
Throughout the first quarter of 2022, Vonovia continued to help ease the pressure on the property market. By the end of March 2022, the Bochum-based company had completed 777 flats – twice as many as the year before (January to March 2021: 379). Every fourth newly built flat in Vonovia’s own portfolio is receiving public subsidies.
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
During the first quarter of 2022, Vonovia continued to integrate Deutsche Wohnen as planned. The refinancing of the merger was completed by the end of March 2022. In the same month, Vonovia fully repaid the bridging loan of around €20 billion, of which it had drawn down around €11.5 billion.
“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
Compared with 31 December 2021, Vonovia’s EPRA NTA (net tangible assets) – the key performance indicator for its net asset value – rose from €48.7488 billion to €49.3507 billion, i.e. €63.55 on a per-share basis. The vacancy rate at the end of March 2022 remained at a very low level of 2.4%.
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).
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2022 Financial Calendar:
3 August 2022: Interim Statement for the First Half of 2022
4 November 2022: Interim Statement for the First Nine Months of 2022