Vonovia Se · XETR:VNA
Vonovia — 9M 2022 Earnings Presentation
51 slides from Vonovia's earnings presentation, Nov 4, 2022
Slide 1: 9M 2022 Earnings Call
9M 2022 Earnings Call. November 4, 2022
Slide 2: Agenda
Agenda 1. 9M 2022 Results & Business Update pages 3-22 2. Appendix pages 23-51
Slide 3: Agenda 9M 2022 Results & Business Update
Agenda 9M 2022 Results & Business Update 4 Highlights 5-12 Segment Reporting, Mietspiegel Updates, DW Synergies 13-14 EPRA NTA & Valuation 15-17 Debt Structure, LTV and Net Debt/EBITDA, Maturity Schedule 18 Estimated Free Cash Flow Generation 2023 19 Investment Program 20 Final Guidance 2022 21 Init
Slide 4: Highlights
Highlights 9M 2022 Results Appendix & Business Update Operating performance fully in line with pre-crisis No larger value loss expected. expectations. Q3 stronger than Q2 & Q1. • No valuation uplift in Q3 as values moved largely sideways 1. • 3.3% organic rent growth. on limited transaction evidence
Slide 5: Segment Overview
Segment Overview Absolute Growth Driven by DWNI Contribution and Development 9M 2022 Results Appendix & Business Update €m (unless indicated otherwise) 9M 2022 9M 20212 Delta Absolute growth largely driven by DWNI contribution. Vonovia stand- Total Segment Revenue 4,619.7 3,517.0 +31.4% alone +5.6%.
Slide 6: Rental Segment
Rental Segment Stable Rental Performance with Slightly Smaller Portfolio 9M 2022 Results Appendix & Business Update excl. DWNI Rental revenue by geography • Portfolio ca. 4k units smaller in 9M 2022 compared to prior year. Austria • Organic growth supported by new construction and modernization. 5
Slide 7: Rental Segment
Rental Segment Operating KPIs Fully In Line with Expectations 9M 2022 Results Appendix & Business Update excl. DWNI Organic rent growth (y-o-y, %) • Stable organic rent growth. 3.5 3.3 0,6 • Very low vacancy levels as a result of increasingly high demand. 0,7 • Remaining vacancy largely driven by
Slide 8: Positive Mietspiegel Updates Continue
Positive Mietspiegel Updates Continue Updates in Q3 2022 9M 2022 Results Appendix & Business Update Positive trend seen in Q1 and Q2 continued in Q3 Mietspiegel • Most relevant Mietspiegel published in Q3 resulted in higher • Define the benchmark for the local comparable rental outcomes compared to
Slide 9: Deutsche Wohnen Integration Completed by YE2022
Deutsche Wohnen Integration Completed by YE2022 Synergy Realization Fully On Track with Additional Synergies Beyond 2024 9M 2022 Results Appendix & Business Update Estimated synergy phasing (€m) • Financial and operational integration far advanced with final steps to be completed by year-end. 150 13
Slide 10: Value-add Segment
Value-add Segment Higher Expenses Continued to Absorb Revenue Growth 9M 2022 Results Appendix & Business Update excl. DWNI Value-add Segment (€m) 9M 2022 9M 2021 Delta Internal and external revenue growth continues to be absorbed by additional costs resulting from a challenging environment: Revenu
Slide 11: Recurring Sales Segment
Recurring Sales Segment Lower Volumes But Continuously High Fair Value Step-up 9M 2022 Results Appendix & Business Update excl. DWNI • Q3 margin of 44.4% indicative of pricing sustainability but on lighter Recurring Sales Segment (€m) 9M 2022 9M 2021 Delta volume. • Total Recurring Sales portfolio
Slide 12: Development Segment
Development Segment Increased Volume and Healthy Gross Margins 9M 2022 Results Appendix & Business Update excl. DWNI • Development less linear than other segments due to project nature of Development Segment (€m) 9M 2022 9M 2021 Delta the business. • Q3 gross margin of 22.9% for development to sel
Slide 13: EPRA NTA
EPRA NTA 9M 2022 Results Appendix & Business Update • Deferred taxes relate to Hold Portfolio only. Lower deferred tax volume as a result of increased sales portfolio. ### would be €65.06 (+3.9%). • Adjusting for this technical effect, the NTA per share as of Sep. 30, 2022, NTA (€m) (unless indicate
Slide 14: Valuation
Valuation 9M 2022 Results Appendix & Business Update • No valuation uplift in Q3 as values moved largely sideways on limited Main particularities that provide stability for German resi market transaction evidence. • Conservative financing inherent in the German mortgage system • Condo market more st
Slide 15: Debt Structure
Debt Structure Well-balanced and Long-term Maturity Profile with Diverse Funding Mix 9M 2022 Results Appendix & Business Update €m • Diverse funding mix with no more than 11% of debt maturing 5.000 annually. 4.000 • Combination of LTV, ND/EBITDA, ICR, fixed/hedged debt ratio and 3.000 maturity profi
Slide 16: Net Debt/EBITDA Multiple, LTV & ICR
Net Debt/EBITDA Multiple, LTV & ICR 9M 2022 Results Appendix & Business Update LTV Sep. 30, Dec. 31, • LTV target: towards lower end of 40-45% range. €m (unless indicated otherwise) 2022 20211 Delta • Net debt/EBITDA target: ca. 14-15x. Non-derivative financial liabilities 45,644.2 47,229.5 -3.4% •
Slide 17: Debt Maturity Schedule 2023 & 2024
Debt Maturity Schedule 2023 & 2024 9M 2022 Results Appendix & Business Update • Secured financing expected to be rolled over. Secured Bonds • Bonds expected to be mostly retired with available liquidity and free cash flow generation from operating business and disposal proceeds. 2023 €1.5bn €2.7bn •
Slide 18: Estimated Free Cash Flow Generation
Estimated Free Cash Flow Generation Ca. €2.8bn Free Cash Flow in 2023E 9M 2022 Results Appendix & Business Update • Business expected to be clearly cash flow positive in 2023. • Reduced portfolio investment program as a result of increased return hurdles for investments. • Liquidity position before
Slide 19: Investment Program
Investment Program Elevated Cost of Capital Lead to Slowdown in 2023E 9M 2022 Results Appendix & Business Update • Increased return hurdles for portfolio investments as a result of elevated cost of capital leads to significantly reduced portfolio investment program for 2023. • Rent growth impact is
Slide 20: Final Guidance 2022
Final Guidance 2022 9M 2022 Results Appendix & Business Update • Top line, rental income, Adj. EBITDA and Group FFO unchanged. • Slightly higher organic rent growth. • Reduced recurring sales volume but increased margin. • Reduced investment program. Previous Guidance Final Guidance Total Segment Re
Slide 21: Initial Guidance 2023
Initial Guidance 2023 9M 2022 Results Appendix & Business Update • Increased top line and Adj. EBITDA in spite of reduced portfolio volume (smaller portfolio going into 2023 plus 2023E disposals) reflect continued optimism around strong rent collection and limited inflation impact on earnings. • Gro
Slide 22: Wrap-up
Wrap-up 9M 2022 Results Appendix & Business Update Operating business fully on track for 2022. High level of confidence also for 2023. Operating environment in our markets remains very favorable, particularly in terms of supply/demand imbalance and market rent growth momentum. Financing conditions a
Slide 23: Agenda
Agenda 1. H1 2022 Results & Business Update pages 3-22 2. Appendix pages 23-51
Slide 24: Agenda Appendix
Agenda Appendix 25-26 Regional Markets & Portfolio Clustering 27 Illustrative Mietspiegel Mechanics 28 Evolution of Fluctuation 29 Disposal Track Record 30-35 ESG 36-37 Bond Overview & Covenants 38-46 Residential Market Data 47-48 Vonovia Shares 49 IR Contact & Financial Calendar 50 Disclaimer 2022-
Slide 25: Regional Markets
Regional Markets Balanced Exposure to Relevant Growth Regions 9M 2022 Results Appendix & Business Update Fair value1 In-place rent Average rent Regional Markets Residential Organic rent Multiple Purchase power Market rent growth (LTM, %) Residential Vacancy Total Residential (€/sqm/ growth (in-place
Slide 26: Portfolio Clustering
Portfolio Clustering Multiple Sales Channels - Proceeds Used for Organic Funding and Capital Reallocation 9M 2022 Results Appendix & Business Update In-place rent In-place rent Vacancy Fair value Fair value Recurring Sales: Proceeds used Sep. 30, 2022 Resi units Gross yield (€m p.a.) (€/sqm) rate (€
Slide 27: Illustrative Mietspiegel Mechanics (Simplified)
Illustrative Mietspiegel Mechanics (Simplified)1 Mietspiegel Growth Follows Market Rent Growth With A Delay 9M 2022 Results Appendix & Business Update Period -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Delta Market rent level 6.50 6.57 6.63 6.70 6.76 6.83 6.90 6.97 7.04
Slide 28: Evolution of Tenant Fluctuation
Evolution of Tenant Fluctuation 9M 2022 Results Appendix & Business Update • The fluctuation rate has been steadily declining since the IPO and is currently around 9%. • A lower fluctuation rate negatively impacts the overall rent growth as the contribution from new lettings is usually comparatively
Slide 29: Strong Disposal Track Record
Strong Disposal Track Record Vonovia Has Sold >110k apartments since the IPO 9M 2022 Results Appendix & Business Update • Mostly non-core assets in challenging locations. • Total disposal volume in a magnitude of ca. two-thirds of portfolio size at the IPO. Deutsche Wohnen acquisition 30,000 60 Gagf
Slide 30: Serving a Fundamental Need in a Highly Relevant Market
Serving a Fundamental Need in a Highly Relevant Market Our Business Is Deeply Rooted in ESG 9M 2022 Results Appendix & Business Update All of our actions have more than just an economic dimension and require adequate stakeholder reconciliation. • We provide a home to more than 1 million people from
Slide 31: Megatrends
Megatrends Three Dominant Megatrends in Residential Real Estate 9M 2022 Results Appendix & Business Update Urbanization Climate Change Demographic Change % of population living in cities % of modernized housing units % of population above/below 65 years 87% Germany W. Europe 84% 77% 79% 21% 20% 31%
Slide 32: Commitment to Sustainability
Commitment to Sustainability Science-based Decarbonization Roadmap with Measurable Interim Targets 9M 2022 Results Appendix & Business Update excl. DWNI • Accelerated decarbonization with near CO2 neutrality by 2045. • Following CRREM MFH 1.5 degree pathway. • Including Scope 1, 2 and 3.3. CO2 int
Slide 33: United Nations Sustainability Development Goals
United Nations Sustainability Development Goals Vonovia Has a Meaningful Impact on 8 SDGs 9M 2022 Results Appendix & Business Update We consider 8 of the 17 United Nations Sustainability Development Goals (SDG) to be material to our business activities and aligned with our sustainability strategy. W
Slide 34: Recognition of ESG Performance
Recognition of ESG Performance ESG Ratings and Indices 9M 2022 Results Appendix & Business Update ESG Ratings • Risk rating within 1st percentile of global rating 19,2 universe • Ranked 25 out of universe of 7,7 6,7 6,7* 14,849 companies globally 6.7 ESG Risk Rating • Ranked 2 out of 1,032 companies
Slide 35: Corporate Governance
Corporate Governance AGM, Supervisory Board, Management Board 9M 2022 Results Appendix & Business Update • The duties and authorities of the three governing bodies derive from the SE Regulation, Annual General Meeting (AGM) the German Stock Corporation Act and the Articles of Association. In additio
Slide 36: Bonds & Ratings
Bonds & Ratings 9M 2022 Results Appendix & Business Update Name Tenor & Coupon ISIN Amount Issue price Current Price3 Yield3 Coupon Final Maturity Date Moodys Scope S&P 4.75 years 3M Bond 018A (EMTN) DE000A19X793 EUR 600m 100.00% 99.960% 1.832% 0.793% hedged 22-Dec-22 NR A- BBB+ EURIBOR+0.450% Bond
Slide 37: Bond Covenants
Bond Covenants Substantial Headroom for All Covenants 9M 2022 Results Appendix & Business Update Current level Headroom1 Bond covenants Required level (Sep. 30, 2022) On the current total financial LTV debt level, fair values would <60% 43.0% (Total financial debt / total assets) have to drop >30% f
Slide 38: Long-term Support from Megatrends
Long-term Support from Megatrends Urban Areas with Long-term Supply/Demand Imbalance 9M 2022 Results Appendix & Business Update Market view – growing and shrinking regions1 • The German Federal Office for Construction and Urban Development (BBSR) has analyzed all cities and counties in Germany on th
Slide 39: House Prices & Construction Costs Correlation
House Prices & Construction Costs Correlation Resi Prices Have Been Moving Alongside Construction Prices for 50 Years 9M 2022 Results Appendix & Business Update House price and construction price indices (2015=100) 200 180 160 140 120 100 80 60 40 20 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 19
Slide 40: Comps & Implied Building Values
Comps & Implied Building Values Market Comps and Implied Land Values Suggest Vonovia Valuation Is Conservative 9M 2022 Results Appendix & Business Update Vonovia’s implied building values based on reported fair values and current equity valuation (€/sqm) 7,000 6,000 ~€1,400 implied ~€200 implied bui
Slide 41: Vonovia's Fair Values and Rents Are Substantially Below Market
Vonovia’s Fair Values and Rents Are Substantially Below Market Data Points on Prices for Condos & New Constructions and Rent Levels 9M 2022 Results Appendix & Business Update Price levels Rent levels Vonovia fair values versus prices for condos and new constructions Vonovia rental levels versus pric
Slide 42: Resi Prices Have Shown No Real Weakness in 50 Years
Resi Prices Have Shown No Real Weakness in 50 Years Only Period of Slight Decline Came During High Vacancy Phase 9M 2022 Results Appendix & Business Update OECD House Price Index Germany (2015=100) and vacancy rate 180 9% 160 8% 140 7% 120 6% 100 5% 80 4% 60 3% 40 Period of high vacancy following Pe
Slide 43: Residential Market Fundamentals (Germany)
Residential Market Fundamentals (Germany) Household Sizes and Ownership Structure 9M 2022 Results Appendix & Business Update Growing number of smaller households Fragmented ownership structure • While the overall population in Germany is expected to slightly decline, • Germany is the largest housing
Slide 44: Supply/Demand Imbalance
Supply/Demand Imbalance Gap May Become Even Larger 9M 2022 Results Appendix & Business Update • Vonovia considers the structural supply/demand imbalance in urban areas to Age group distribution in Germany (million)2 be the most relevant driver of residential property values. • A meaningful improveme
Slide 45: Long-term Structural Support (Germany)
Long-term Structural Support (Germany) Positive Fundamentals 9M 2022 Results Appendix & Business Update Urbanization1 • Long-term structural support from 100 80 84 75 • Insufficient levels of new construction 80 75 78 68 70 65 • Urbanization driving supply/demand imbalance in urban areas 60 60 40 55
Slide 46: Long-term Structural Support (Sweden)
Long-term Structural Support (Sweden) Positive Fundamentals 9M 2022 Results Appendix & Business Update Urbanization1 • Long-term structural support from 100 93 88 84 12 • Insufficient levels of new construction 80 66 10 • Urbanization driving supply/demand imbalance in urban areas 60 8 40 • High rep
Slide 47: Liquid Large-cap Stock
Liquid Large-cap Stock Total Performance since IPO 9M 2022 Results Appendix & Business Update EuroStoxx 50 35 Stoxx 600 M-DAX S-DAX DAX 30 380 25 Share price (rebased to 100) +111% Vonovia market cap (€bn) +62% 20 280 +35% 15 -2% 10 180 5 80 0 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
Slide 48: Vonovia Shares
Vonovia Shares Basic Data and NOSH Evolution 9M 2022 Results Appendix & Business Update Norges First day of trading July 11, 2013 11,1% No. of shares outstanding 795.8 million BlackRock Free float 88.9% 7,3% APG ISIN DE000A1ML7J1 4.0% Ticker symbol VNA 3.1% DWS Investment Share class Registered shar
Slide 49: IR Contact & Financial Calendar
IR Contact & Financial Calendar https://investors.vonovia.de 9M 2022 Results Appendix & Business Update Contact Financial Calendar 2023 Rene Hoffmann (Head of IR) Primary contact for Sell side, Buy side Jan 5 ODDO BHF Forum, Lyon (IR only) +49 234 314 1629 Jan 10-11 Commerzbank and ODDO German Inves
Slide 50: 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 51: For Your Notes
For Your Notes 2022-11-04 | 9M 2022 Earnings Call 51