Vonovia SE · XETR:VNA
Vonovia — Q1 2017 Earnings Presentation
50 slides from Vonovia's earnings presentation, May 24, 2017
Slide 1: Q1 2017 Earnings Call
Q1 2017 Earnings Call May 24, 2017 Rolf Buch, CEO Dr. A. Stefan Kirsten, CFO
Slide 2: Q1 2017 Highlights
Q1 2017 Highlights Built-in organic growth momentum will continue Accelerated organic rent growth of 3.4% y-o-y. Adj. EBITDA Operations up 8.7% y-o-y. FFO 1 per share up 17.5% y-o-y. Execution of 2017 investment program well underway Majority of projects already kicked off; target investment volume
Slide 3: 17.5% FFO growth on Stable Portfolio Size
17.5% FFO growth on Stable Portfolio Size While the average portfolio size was similar in Q1 2017 vs. the prior-year period, the Adj. EBITDA Rental grew by 6.4% and the Adj. EBITDA Extension more than doubled for a combined Adj. EBITDA Operations growth of 8.7%. Further supported by 10.7% lower inte
Slide 4: Accelerating Rent Growth Momentum
Accelerating Rent Growth Momentum Organic rent growth of 3.4% y-o-y with a first-time contribution from space creation. Positive momentum for rent growth leads to increased guidance of 3.8% - 4.0% for organic rent growth in 2017. In-place rent (€/month/sqm, eop) Q1 2017 Q1 2016 Delta In-place rent 6
Slide 5: Investment Program well on Track
Investment Program well on Track Well underway to execute 2017 investment program at an average yield of ~7%. Majority of projects already started. Investment program includes Optimize Apartments, Upgrade Buildings, New Initiatives and Space Creation. Investment program calendar year 2017 (€m) 730 5
Slide 6: Continued EBITDA Expansion
Continued EBITDA Expansion Rental income growth of 6.4% comes with similar increase in maintenance and operating expenses in the first quarter that fully includes conwert but no synergies yet, resulting in 6.2% Adj. EBITDA Rental growth. Adj. EBITDA Operations up by 8.7%, driven by 6.2% Adj. EBITDA
Slide 7: Smooth Maturity Profile with Diverse Funding Mix
Smooth Maturity Profile with Diverse Funding Mix Debt maturity profile (€ m) 3,000 Mortgages Structured Loans Bond Debt Hybrid Equity Hybrid conwert Bank Loans conwert Bond avg. financing cost 4.0% 2,500 3.0% 2,000 1,500 2.0% 1,000 Current unsecured reoffer yield (7-8 years) 1.0% 500 2017 2018 2019
Slide 8: LTV Well within Target Range, Debt/EBITDA Multiple of 11.1x
LTV Well within Target Range Debt/EBITDA Multiple of 11.1x LTV temporarily up by 280 bps towards upper end of low to mid forties target range as a result of cash settlement of conwert acquisition. Portfolio valuation as of Q2 is expected to positively impact the LTV. Debt/EBITDA multiple of 11.1x1 €
Slide 9: FFO 1 per Share +17.5%
FFO 1 per Share +17.5% Adj. EBITDA Operations growth combined with lower interest expenses translates into 17.5% FFO per share growth. €m Q1 2017 Q1 2016 Delta (unless indicated otherwise) Adj. EBITDA Operations 300.1 276.1 8.7% FFO interest expense -76.8 -86.0 -10.7% Current income taxes FFO 1 -5.1
Slide 10: Pro-active Portfolio Management Clustering
Pro-active Portfolio Management Clustering Strategic units of conwert portfolio have initially all been included in Operate and will be reclassified to UB and OA in the context of the annual portfolio clustering in the fall. 96% of total fair value in Strategic and Privatize Clusters. Mar. 31, 2017
Slide 11: All Strategic Markets Show Upward Potential
All Strategic Markets Show Upward Potential Fair Value In-place rent Average annual Average rent Change Multiple Residential Living area Vacancy Total Residential rent growth growth (%) from Regional Market (€m) (€/sqm) units ('000 sqm) (%) (p.a., €m) (p.a., €m) (€/sqm) like-for-like (in-place forec
Slide 12: NAV
NAV Adj. NAV up 1.4% driven by Q1 results plus first-time consolidation of conwert. Valuation update with Q2 2017 numbers. €m Mar. 31, 2017 Dec. 31, 2016 Delta (unless indicated otherwise) Equity attributable to Vonovia's shareholders 12,706.5 12,467.8 +1.9% Deferred taxes on investment properties a
Slide 13: Additional Value from Extension Business
Additional Value from Extension Business NAV does not account for Vonovia’s Extension Segment. Cash flows generated in Extension Segment have the same stability as the rental business, as they are directly linked to the apartment or tenant. Applying the impairment test WACC1 to the 2017E Adj. EBITDA
Slide 14: Sales Continue to Provide Steady Cash Flow at Attractive Margins
Sales Continue to Provide Steady Cash Flow at Attractive Margins Overall sales volume lower than in Q1 2016, largely because the prior year included the portfolio sale to LEG, which also included privatization units. Adjusted for this effect the sales volume is broadly stable. Slightly improved priv
Slide 15: Conwert Meets All Acquisition Criteria
Conwert Meets All Acquisition Criteria Acquisition criteria Strategic fit 84% of portfolio in top 25 locations of combined entity with majority in Dresden, Leipzig, Berlin and Potsdam FFO/share accretive ~€0.03 per share in Q1 2017 NAV/share non-dilutive €0.12 per share in Q1 2017 BBB+ Ratin
Slide 16: Guidance Update incl. conwert
Guidance Update incl. conwert 2017 2017 2016 Guidance Guidance Actuals (March 2017, (May 2017, excl. conwert) incl. conwert) Organic rent growth (eop) 3.3% 3.5%-3.7% 3.8%-4.0% Vacancy (eop) 2.4% <2.5% <2.5% Rental Income (€m) 1,538.1 1,530-1,550 1,660-1,680 FFO1 (€m) 760.8 830-850 900-920 FFO1 (€/sh
Slide 17: Attractive Dividend Policy
Attractive Dividend Policy Number of months until costs are earned by recurring Sustainable and growing cash flow with attractive pay-out income1 ratio ~1.882 12 1.63 Dividend 10 (ca. 70%) 70 % 1.30 of FFO FFO 1.12 8 1.00 number of months Other 0.95 0.94 (ca. 30%) Taxes 0.74 6 0.67 Interest expenses
Slide 18: Capital Markets Day June 19 and 20 in Bochum
Capital Markets Day June 19 and 20 in Bochum We invite capital market participants from the buy-side investment and sell-side research communities for an extensive view into Vonovia’s machine room and a better understanding on how we run our operating platform. Schedule: Monday, June 19: Welcome din
Slide 19: Wrap-up
Wrap-up Built-in organic growth momentum will continue High degree of visibility on investment program 2017 including space creation conwert integration fully on track Compelling guidance for 2017 Valuation update with Q2 reporting on August 2 Q1 2017 Earnings Call page 19
Slide 20: IR Contact & Financial Calendar
IR Contact & Financial Calendar Contact Financial Calendar 2017 May 29 Management Roadshow, Frankfurt Rene Hoffmann May 30 Management Roadshow, London Head of Investor Relations Jun 1 Kepler Cheuvreux German Property Day (Paris) Vonovia SE Jun 7 Kepler Cheuvreux European One Stop Shop Tour (Dublin)
Slide 21: Appendix
Appendix Q1 2017 Earnings Call page 21
Slide 22: Proven and Unchanged Strategy since IPO
Proven and Unchanged Strategy since IPO Reputation & Customer Satisfaction Systematic optimization of operating performance and core business productivity Traditional through leveraging scaling effects 1 Property Management High degree of standardization and industrialization throughout the entire o
Slide 23: Improvements Across All KPIs
Improvements Across All KPIs Q1 2017 Q1 2016 Delta Average number of residential sqm `000 22,276 22.203 +0.3% In-place rent (eop) €/month/sqm 6.06 5.84 +3.8% Organic rent growth % 3.4% 2.9% + 50 bps Vacancy rate (eop) % 2.7% 2.8% - 10 bps +8.6% Rental income €m 417.2 392.0 +6.4% per avg. unit (€842
Slide 24: Maintenance
Maintenance Nominal increase as a result of larger portfolio Maintenance (€m) Stable maintenance on a per-sqm basis 3.47 €/sqm 3.31 €/sqm €m Q1 2017 Q1 2016 Delta (unless indicated otherwise) 77.2 73.5 14.1 14.9 Expenses for maintenance 63.1 58.6 7.7% 63.1 58.6 Capitalized maintenance 14.1 14.9 -5.4
Slide 25: Reconciliation IFRS Profit to FFO
Reconciliation IFRS Profit to FFO €m (unless indicated otherwise) Q1 2017 Q1 2016 Delta PROFIT FOR THE PERIOD 130.7 79.2 +65.0% Financial result 83.0 131.3 -36.8% Income taxes 83.0 42.8 +93.9% Depreciation and amortization 7.1 4.4 +61.4% = EBITDA IFRS 303.8 257.7 +17.9% Non-recurring items 13.9 26.7
Slide 26: IFRS P&L
IFRS P&L €m (unless indicated otherwise) Q1 2017 Q1 2016 Delta 0 Income from property letting 586.7 556.6 5.4% Other income from property management 10.0 9.3 7.5% Income from property management 596.7 565.9 5.4% Income from disposal of properties 492.2 690.5 -28.7% Carrying amount of properties sold
Slide 27: IFRS Balance Sheet (1/2 – Total Assets)
IFRS Balance Sheet (1/2 – Total Assets) €m (unless indicated otherwise) Mar 31, 2017 Dec. 31, 2016 Delta Assets Intangible assets 2,958.8 2,743.1 7.9% Property, plant and equipment 129.2 115.7 11.7% Investment properties 29,463.0 26,980.3 9.2% Financial assets 618.0 585.9 5.5% Other assets 14.9 15.2
Slide 28: IFRS Balance Sheet (2/2 – Total Equity and Liabilities)
IFRS Balance Sheet (2/2 – Total Equity and Liabilities) €m (unless indicated otherwise) Mar 31, 2017 Dec. 31, 2016 Delta Equity and liabilities Subscribed capital 468.8 466.0 0.6% Capital reserves 5,421.9 5,334.9 1.6% Retained earnings 6,784.8 6,665.4 1.8% Other reserves 31.0 1.5 >100% Total equity
Slide 29: Substantial Reduction of Portfolio Locations
Substantial Reduction of Portfolio Locations 03/2015 (incl. Südewo) 12/2016 Strategic Portfolio 818 locations 665 locations ~400 locations Vonovia location High-influx cities (“Schwarmstädte”). For more information: http://investoren.vonovia.de/websites/vonovia/English/4050/financial-reports-_-prese
Slide 30: Bonds / Rating
Bonds / Rating Corporate Investment grade rating Rating agency Rating Outlook Last Update Standard & Poor’s BBB+ Stable 06. Sep 16 Bond ratings Name Tenor & Coupon ISIN Amount Issue price Coupon Final Maturity Date Rating Bond 002 (EUR-Bond) 6 years 3.125% DE000A1HNW52 € 600m 99.935% 3.125% 25 July
Slide 31: Covenants and KPIs (March 31, 2017)
Covenants and KPIs (March 31, 2017) Bond KPIs Covenant Level Mar. 31, 2016 LTV <60% 41% Total Debt / Total Assets Secured LTV <45% 11% Secured Debt / Total Assets ICR >1.80x 3.81x Last 12M EBITDA / Last 12M Interest Expense Unencumbered Assets >125% 219% Unencumbered Assets / Unsecured Debt Rating K
Slide 32: Conservative Valuation
Conservative Valuation In-place valuations are still only half of replacement values, in spite of accelerating valuation growth in recent years. Vonovia – fair value per sqm (€) ~2,500 ~1,800 1,264 1,054 901 964 792 812 839 2010 2011 2012 2013 2014 2015 2016 VNA modular Market costs construction for
Slide 33: Acquisitions – Opportunistic but Disciplined
Acquisitions – Opportunistic but Disciplined Acquisition pipeline (‘000 units) – excl. Gagfah 120 114 100 80 68 60 55 50 50 45 40 34 33 20 16 3 3 1 0 0 0 0 Examined Analyzed in more detail Due Diligence, partly ongoing Bids Signed Q1 2015 Q1 2016 Q1 2017 . . Q1 2017 Earnings Call page 33
Slide 34: Historical Key Figures (1/2)
Historical Key Figures (1/2) Financial Key Figures in € million 2016 2015 2014 2013 1,538.1 1,414.6 789.3 728.0 Rental income 1,094.0 957.6 503.4 442.4 Adjusted EBITDA Operations 1,046.2 924.4 482.6 433.0 Adjusted EBITDA Rental 57.0 37.6 23.6 10.5 Adjusted EBITDA Extension -9.2 -4.4 -2.8 -1.1 Adjust
Slide 35: Historical Key Figures (2/2)
Historical Key Figures (2/2) Key Balance Sheet Figures in € million Dec. 31, 2016 Dec. 31, 2015 Dec 31, 2014 Dec 31, 2013 Fair value of the real estate portfolio 27,115.6 24,157.7 12,759.1 10,326.7 Adjusted NAV 14,328.2 11,273.5 6,472.0 5,123.4 Adjusted NAV per share in € 30.75 24.19 22.67 21.74 LTV
Slide 36: Vonovia at a Glance
Vonovia at a Glance Germany’s largest residential landlord with national footprint in urban regional markets Residential real estate company with B-to-C characteristics. Industrialized approach leverages economies of scale in a highly homogeneous asset class. Strong internal growth profile via susta
Slide 37: If You Want to Know Where Germans Live - Follow the Light
If You Want to Know Where Germans Live - Follow the Light Illustration of Germany at Night Source: www.bundeswahlleiter.de Q1 2017 Earnings Call page 37
Slide 38: Strong Overlap with Vonovia Portfolio
Strong Overlap with Vonovia Portfolio Illustration of Germany at Night Source: www.bundeswahlleiter.de Q1 2017 Earnings Call page 38
Slide 39: Scalable Organization
Scalable Organization Asset Management Property Management ~333,000 apartments 38 Business Units 6 Business Units 5 Business Units 4 Business Units 8 Business Units 7 Business Units 8 Business Units Local Local property management, letting, care-taking North East South-East South Middle West 6 Regio
Slide 40: Vonovia History
Vonovia History Seed portfolios of today‘s Vonovia have origin in public housing provided by government, large employers and similar landlords with a view towards offering affordable housing. At beginning of last decade, private equity invested in German residential on a large scale including into w
Slide 41: Liquid Large-cap Stock
Liquid Large-cap Stock Shareholder structure (as of March 31, 2017) Share information First day of trading July 11, 2013 7.7% Number of shares outstanding 468.8 million 7.6% Blackrock Free float based on Deutsche 92.4% Börse definition 7.0% Norges ISIN DE000A1ML7J1 Deutsche Bank Ticker symbol VNA 5.
Slide 42: Innovation as Growth Driver
Innovation as Growth Driver Continuous flow of innovative projects that are all immediately linked to the apartment or customer/rental contract. Digital access Upgrade buildings (energetic modernization) Safety Floor Parking additions E- Curb Energy mobili Heating appeal generation ty system moderni
Slide 43: German Residential – Safe Harbor and Low Risk
German Residential – Safe Harbor and Low Risk German residential market: important pillar of the German economy With a GDP contribution of more than €500bn the German residential real estate industry represents more than 18% of Germany’s GDP. Germany and its resilient economy provide a comparatively
Slide 44: German Residential – Favorable Fundamentals
German Residential – Favorable Fundamentals New Supply falls short of demand After record construction volumes in the 1990s, new volumes have plummeted as Germany has reduced its building capacity. While volumes have been recovering from all-time lows in 2009 and 2010, the current levels are still s
Slide 45: German Residential – Favorable Fundamentals
German Residential – Favorable Fundamentals Low home ownership ratio – Germans prefer to rent Rental housing very affordable in Germany With the exception of Switzerland, Germany has the Affordability in Germany is higher than in the UK or lowest homeownership ratio in Europe. France. Rental regulat
Slide 46: German Residential – Favorable Fundamentals
German Residential – Favorable Fundamentals Fragmented ownership structure Growing number of smaller households Germany is the largest housing market in Europe with While the overall population in Germany is expected to ~42m housing units, of which ~23m are rental units. slightly decline, the number
Slide 47: No Correlation between Interest Rates and Property Values
No Correlation between Interest Rates and Property Values Valuation methodology for German residential properties is primarily based on market prices for assets – not on interest rates While market prices are affected by the general interest levels there is no significant correlation. Other factors
Slide 48: Three Valuation Layers with Different Volatilities
Three Valuation Layers with Different Volatilities High degree of stability and predictability of underlying business (layer 1) and portfolio valuation (layer 2) is not reflected in share price development (layer 3), as equity markets appear to apply valuation parameters that are substantially less
Slide 49: Disclaimer
Disclaimer This presentation has been specifically prepared by Vonovia SE and/or its affiliates (together, “Vonovia”) for internal use. Consequently, it may not be sufficient or appropriate for the purpose for which a third party might use it. This presentation has been provided for information purp
Slide 50: For Your Notes
For Your Notes Q1 2017 Earnings Call page 50