Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vonovia SE (VNNVF, Financial) has largely completed its balance sheet stabilization phase and is moving into a more positive environment.
- The company is on track to achieve its EUR3 billion disposal target for the year, having already signed around EUR1.5 billion in disposals.
- Rent growth continues to show positive momentum, with an expected annual growth rate of around 4% per year.
- The company has raised its guidance for rent growth, adjusted EBITDA, and EBT to the upper end of its guidance range for 2024.
- Vonovia SE (VNNVF) has a strong cash position with EUR4 billion, sufficient to cover near-term maturities and maintain a comfortable funding situation.
Negative Points
- The valuation of the company's portfolio saw a 1.4% decline in the first half of the year, continuing a trend of value declines.
- Adjusted EBITDA total is down 2.6% year-on-year due to lower profitability in the disposal segments.
- EBT is down 6.2% year-on-year, driven by higher interest costs and lower profitability in certain segments.
- The company's ICR has dropped from 4 times to 3.6, getting close to its target range of at least 3.5 times.
- The development sector in Germany remains in a deep crisis, with new construction rates expected to decline further, impacting smaller developers.
Q & A Highlights
Q: Are you considering new growth opportunities apart from your rental business?
A: Yes, we are evaluating both existing and new growth opportunities. However, we will provide a detailed update on our strategy during our nine-month earnings call on November 6.
Q: Can you provide an update on the status of the nursing home disposal?
A: We are likely to announce further transactions before the end of the summer. We will provide more details as they become available.
Q: What has been the valuation change for the portfolios sold recently?
A: The portfolios sold were in line with their fair values. The buyers were a mix of institutional investors and private individuals. The employee count increase is mainly in our craftsmen organization, which is a positive sign as it indicates higher in-house profitability.
Q: How do you plan to manage your debt KPIs, especially the ICR, in a higher interest environment?
A: Our focus will shift towards increasing EBITDA, particularly outside the rental business, to improve net debt to EBITDA and ICR. We will provide more details on this strategy in November.
Q: Why are you still committed to the EUR3 billion disposal target if values are stabilizing?
A: We are committed to our promises and have ongoing negotiations that we intend to complete. Stopping these negotiations would harm our reputation.
Q: Can you clarify if any subsidies apply to you in terms of energy and new builds?
A: We benefit from subsidies for heat pumps and other energy-efficient installations. Additionally, private investors buying our apartments can depreciate 5% of the assets, which is a subsidy for our customers.
Q: What is the contribution of solar energy to your business?
A: We are focusing on integrating solar panels and heat pumps. However, the biggest challenge is finding enough electricians to install these systems.
Q: How do you envisage your leverage profile when you return to growth?
A: We aim to maintain a balanced approach, focusing on less capital-intensive activities to increase EBITDA and manage our debt KPIs effectively.
Q: What are the lessons learned from the recent downturn?
A: We have learned the importance of not leveraging up to the maximum and maintaining a balanced approach to debt KPIs, including LTV, net debt to EBITDA, and ICR.
Q: How do you plan to manage the ICR, given the recent drop?
A: We expect the ICR to recover slightly in the second half of the year, driven by proportionate contributions on the EBITDA side.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
