Instone Real Estate Group Se · XETR:INS

Instone Real Estate — FY2018 Earnings Presentation

38 slides from Instone Real Estate's earnings presentation, Mar 28, 2019

  1. Slide 1: FY 2018 Results Presentation

    FY 2018 RESULTS PRESENTATION MARCH 28, 2019

  2. Slide 2: Disclaimer

    INSTONE REAL ESTATE Disclaimer BY VIEWING THIS PRESENTATION, YOU AGREE TO BE BOUND BY THE FOLLOWING TERMS AND CONDITIONS REGARDING THE INFORMATION DISCLOSED IN THIS PRESENTATION. THIS PRESENTATION HAS BEEN PREPARED BY INSTONE REAL ESTATE GROUP N.V. (THE "COMPANY", TOGETHER WITH ITS SUBSIDIARIES, "IN

  3. Slide 3: Table of Contents

    Table of Contents 01 | 2018 Key Achievements 02 | Portfolio Review 03 | Financial Performance 04 | Outlook 05 | Appendix 3 |

  4. Slide 4: 2018 Key Achievements

    2018 Key Achievements  Total pipeline of €4.8bn expected sales volume  €310m valuation uplift related to existing projects Operational  Aquired projects with €1.3 bn expected sales volume achievements  Construction launched for projects with ~€475m expected sales volume (~954 units)  Concluded

  5. Slide 5: FY 2018 Key Figures vs Outlook

    FY 2018 Key Figures vs Outlook € million 2018 Actual 2018 Outlook  Strong gross profit margin driven by better performance of individual projects Adjusted for ppa Adjusted for ppa* + extraordinary items of €5.1m  EBT driven by significant improvement of financing structure Revenues 372.8 372.8 370

  6. Slide 6: Table of Contents

    Table of Contents 01 | 2018 Key Achievements 02 | Portfolio Review 03 | Financial Performance 04 | Outlook 05 | Appendix 6 |

  7. Slide 7: €4.8bn Project Portfolio

    €4.8bn Project Portfolio  45 projects with 11,041 units; 21% of expected sales volume already sold; 24% of expected sales volume under construction  Avg. appartment size: 80 sqm / ASP per sqm: €5,336 incl. parking space (€5,090 excl.) / ASP per appartment: €427K Leipzig Inner circle: Inner circle:

  8. Slide 8: FY 2018 – Significant Increase of Project Portfolio

    FY 2018 – Significant Increase of Project Portfolio Project portfolio (expected sales volume) 2018 Project Acquisitions Project City Exp. sales Units Building volume (€m) right Semmelweisstrasse Leipzig 66 210 completed Sportplatz Bult Hannover 116 281 in progress Neckartalterassen Rottenburg 105 36

  9. Slide 9: Status Update on Project in German Metropolitan Region

    Status Update on Project in German Metropolitan Region  Large inner-city project in German metropolitan region  124K sqm gross floor area  1,347 units  Existing masterplan  Purchase contract signed1  Forward sale; LOI signed with institutional buyer  Investment volume >€500m  Expected gross

  10. Slide 10: Cost Price Inflation (CPI)

    Cost Price Inflation (CPI) Market: • Average cost price inflation in Germany in 2018 at ~5%; in years 2015-17 at ~3.5% • Mainly labour (65-70%), materials (30-35%) • Wide spread of CPI for different works Instone: • 2018 cost price inflation of ~2%; in the years 2015-2017 below1.5% • Total €380m pur

  11. Slide 11: House Price Inflation (HPI)

    House Price Inflation (HPI) Market: Earnings Before Tax Sensitivity • 2018 house price inflation in Germany‘s Top 8 cities of ~6-8% for FY 2021* (for comparable product with Instone) Cost Price Inflation p.a. Instone: in €m 0.0% 3.5% 7.0% 10.5% 14.0% • €310m increased sales volume of existing projec

  12. Slide 12: Table of Contents

    Table of Contents 01 | 2018 Key Achievements 02 | Portfolio Review 03 | Financial Performance 04 | Outlook 05 | Appendix 12 |

  13. Slide 13: Basis of Presentation

    Basis of Presentation  First full year results presentation based on new IFRS 15 „contracts with customers“  Revenues recognized over time (as opposed to at a point in time under previously applied completed contract method)  Aggregate achieved customer sales contracts and building progress of in

  14. Slide 14: FY 2018 Results of Operations

    FY 2018 Results of Operations FY 2018 Results of Operations (€m) Adjusted for Adjusted for ppa ppa + extraordinary • Revenues, EBIT and EBT include €12.0m adjustment for ppa effect items • Anticipated revenues related to lower margin projects over Revenues 372.8 372.8 compensated by high-margin proj

  15. Slide 15: Tax Consideration and Minorities

    Tax Consideration and Minorities €m • Recurring IFRS income tax of €11.6m (implied tax rate of 28%) EBT 41.5 • 9.8m non-cash amortization of deferred tax asset related to previously „Recurring“ IFRS income tax 11.6 recorded provision for IPO related management incentives (implied Recurring IFRS inco

  16. Slide 16: Moderate Leverage

    Moderate Leverage In € million FY 2018 FY 2017 Delta • Pre-IPO corporate debt redemption of €22m mezzanine loan for the acquisition of Corporate debt 69.8 151.6 - >100% Instone Real Estate Leipzig GmbH Project related debt 195.7 224.1 -12.7% • Significant decrease of 2018 net debt based Financial de

  17. Slide 17: Table of Contents

    Table of Contents 01 | 2018 Key Achievements 02 | Portfolio Review 03 | Financial Performance 04 | Outlook 05 | Appendix 17 |

  18. Slide 18: Positive Development Continues

    Positive Development Continues Outlook FY 2019 Revenue ramp-up* € million Outlook FY 2019 Revenues (adjusted) 500 - 550 Gross Profit Margin (adjusted) ~28% EBIT (adjusted) 85 - 100 Volume of concludes sales 450 - 550 contracts Thereof from projects with building right**: Thereof from existing projec

  19. Slide 19: Table of Contents

    Table of Contents 01 | 2018 Key Achievements 02 | Portfolio Review 03 | Financial Performance 04 | Outlook 05 | Appendix 19 |

  20. Slide 20: Project Cost Platform

    FY 2018 €k Cost of materials -320,353 Project + Changes in inventories +57,026 Cost - Indirect sales cost -1,870 - Capitalized interest on changes in inventories -1,133 Total project cost -266,330 FY 2018 €k Personnel expenses -33,563 + Other operating income +2,675 Platform - Other operating expens

  21. Slide 21: Income statement (reported)

    Income statement (reported), €m Commentary FY 2018 FY 2017 1 The change in total revenues of €161.1 million to €360.8 million (previous year: €199.7 1 Total revenue 360.8 199.7 million) includes €128.7 million from the period-related revenue recognition for apartments Changes in inventories 57.0 120

  22. Slide 22: Condensed balance sheet

    Condensed balance sheet, €m Commentary FY 2018 FY 2017 5 The decrease in inventories by €255 million is essentially the result of the first-time adoption Non-current assets 2.8 4.0 of IFRS 15 for the reporting period. Taking this new standard into account, the previously as inventories reported proj

  23. Slide 23: Condensed cash flow statement

    Condensed cash flow statement, €m Commentary FY 2018 FY 2017 10 The cash flow from Instone Group operations of €-40.4 million in the financial year Consolidated earnings 9.0 -31.0 (previous year: €-34.5 million), resulted from the increase in cash outflows due to new Other non-cash income and expens

  24. Slide 24: Project Portfolio Key Figures

    Project Portfolio Key Figures In € million Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Volume of sales contracts 206.2 104.2 120.0 30,0 58.4 88.5 120.4 90.8 Project Portfolio (as of) 4,763.2 3,620.3 3,589.1 3,408.5 3,410.0 3,374.8 3,039.8 n.a. In units Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q

  25. Slide 25: FY 2018 – Revenue Contribution (Top 10 Projects)

    FY 2018 – Revenue Contribution (Top 10 Projects) Project City Revenues (€m) Quartier Stallschreiber Strasse / Luisenpark Berlin 74.7 Heeresbäckerei Leipzig 61.5 Therese Munich 29.5 Wohnen am Kurpark / Wilhelm IX Wiesbaden 28.5 Marienkrankenhaus Frankfurt 25.0 west.side Bonn 22.9 Franklin Mannheim 21

  26. Slide 26: FY 2018 – Volume of Concluded Sales Contracts (Top 10 Projects)

    FY 2018 – Volume of Concludes Sales Contracts (Top 10 Projects) Project City Volume (€m) Units City Prag – Wohnen im Theaterviertel Berlin 109.3 251 west.side Bonn 102.2 276 Quartier Stallschreiber Strasse / Luisenpark Berlin 69.6 139 Marienkrankenhaus Frankfurt 41.6 48 Wohnen am Kurpark / Wilhelms

  27. Slide 27: FY 2018 – Construction Launches

    FY 2018 – Construction Launches Project City Exp. Sales Units Volume (€m) Franklin Mannheim ~65 ~200 Heeresbäckerei (final secton) Leipzig ~10 ~30 Quartier Stallschreiber Strasse / Luisenpark Berlin ~125 ~235 Marienkrankenhaus Frankfurt ~200 ~235 T. Kontor Leipzig ~25 ~96 west.side Bonn ~50 ~158 Tot

  28. Slide 28: Sales Offer per 31 Dec 2018 (Top 5 Projects)

    Sales Offer per 31 Dec 2018 (Top 5 Projects) Project City Sales volume (€m) Units Marienkrankenhaus Frankfurt 149.9 134 Quartier Stallschreiber Strasse / Luisenpark Berlin 85.6 140 Sebastianstrasse / Schumanns Höhe Bonn 54.8 146 Wohnen am Kurpark / Wilhelms IX Wiesbaden 35 50 Theaterfabrik Leipzig 1

  29. Slide 29: Project Portfolio (projects >€30m sales volume)

    Project Portfolio (projects >€30m sales volume, representing total: >€4.6bn) Building Sales volume Land plot right Sales Construction Project Location (expected) acquired started started obtained Hamburg Essener Straße Hamburg 94 Mio. € Schulterblatt Hamburg 83 Mio. € Kösliner Weg Norderstedt-Garste

  30. Slide 30: Project Portfolio (projects >€30m sales volume)

    Project Portfolio (projects >€30m sales volume, representing total: >€4.6bn) Building Sales volume Land plot right Sales Construction Project Location (expected) acquired started started obtained Rhine-Main Wiesbaden-Delkenheim, Lange Seegewann Wiesbaden 92 Mio. € Siemens-Areal Frankfurt 551 Mio. €

  31. Slide 31: Project Portfolio (projects >€30m sales volume)

    Project Portfolio (projects >€30m sales volume, representing total: >€4.6bn) Building Sales volume Land plot right Sales Construction Project Location (expected) acquired started started obtained Baden-Wurttemberg City-Prag - Wohnen im Theaterviertel Stuttgart 126 Mio. € Wohnen am Safranberg Ulm 49

  32. Slide 32: Achieved Gross Margins of Projects Completed in 2018

    Achieved Gross Margins of Projects Completed in 2018 Source: Company information as of 31 December 2018. (1) Weighted average by expected sales volume. 32 |

  33. Slide 33: Typical Project Cash Flow Profile

    Typical Project Cash Flow Profile 33 | Source: Company information. Project cash flows driven by pre sales and the MaBV framework

  34. Slide 34: Strict Approach to Corporate M&A

    Strict Approach to Corporate M&A  German residential developer market still highly fragmented with mostly strong local / regional developer s  Significant potential for consolidation over the next years (e.g. several companies with unsolved corporate succession)  Instone will selectively engage i

  35. Slide 35: Steady High Demand for New Construction in Top German Cities

    Steady High Demand for New Construction in Top 8 German Cities Construction completion ~6.1% Population growth / apartment needs Units Units ~24,500 12000 25000 10000 20000 8000 ~3.3% ~2.7% 15000 ~12,300 6000 ~8.2% ~12.4% ~10,500 10000 ~7,800 4000 ~6,500 ~1.0% ~3.9% ~6.3% 2000 5000 ~2,500 ~3,200 ~3,

  36. Slide 36: Favourable Regulatory Framework Leading to Attractive Cash Flow Profile

    Favourable Regulatory Framework Leading to Attractive Cash Flow Profile Significant amount of construction costs covered by customers’ regular payments 36 | (1) MaBV - Real estate agent and commercial construction industry ordinance (“Makler- und Bauträgerverordnung”). (2) Unless significant delays

  37. Slide 37: Instone Shareholders / Financial Calendar / Events

    Instone Shareholders: Financial Calendar / Events: 8.47% 28 Mar 19 Publication of Annual Financial Report 2018 6.10% 29 Mar 19 Capital Markets Day, London 5.24% 1 April 19 Roadshow Frankfurt 36,988,336 2-3 April 19 Roadshow London shares outstanding 5.38% 4 April 19 Roadshow Paris 100% Free Float 3.

  38. Slide 38: Contact

    Contact Thomas Eisenlohr Head of Investor Relations Instone Real Estate Group AG Grugaplatz 2-4, 45131 Essen T +49 201 45355-365 | F +49 201 45355-904 thomas.eisenlohr@instone.de investorrelations@instone.de www.instone.de 38 |

Instone Real Estate Group — FY2018 Earnings Presentation on 6ix