- FFO I climbs 7.1% year-on-year to EUR 341.3 million
- NAV rises to EUR 105.39 per share
- Like-for-like rent per square metre up 2.9 % in line with plan
- Dividend proposal of EUR 3.60 per share translates into 11.4% increase in total distribution
- Loan-to-value ratio of just 37.7% opens up growth options
- FFO I forecast for 2020 confirmed: EUR 370 to EUR 380 million
- Enhanced focus on ESG (environmental, social and corporate governance) criteria
LEG Immobilien’s positive business performance continued in January 2019 as well. The main drivers behind the earnings increase are the ongoing structural growth in rents, cost discipline in administrative expenses, acquisitions and a further reduction in average financing costs. Income from additional services business also developed well. This was countered by the successful disposal of around 3,400 residential units over the second half of 2019. The prospects for earnings growth and the appreciation of the portfolio remain positive for the 2020 financial year as well. 2019’s high external growth rate is set to be retained. In terms of increasing its rental income, LEG is relying on sustainable, responsible growth and long-term customer loyalty.
“Our clear positioning as a provider of affordable housing in NRW and other regions of Germany is paying off. Our average rent is EUR 5.82 per square metre – an attractive level by market standards – and we are stepping up our commitment to social and environmental issues. At the same time, we achieved all our financial targets for 2019. A key driver for the positive business performance is the acquisition of around 5,700 units in the 2019 financial year on the basis of our strong balance sheet. Our growth has made it possible for our investors to receive a dividend of EUR 3.60 per share for the past financial year – a further increase despite the rise in the number of shares. Overall, we feel that we have struck a good balance between profitability, customer orientation and sustainability in this challenging environment,” said Lars von Lackum, CEO of LEG Immobilien AG.
FFO I can rise further
Funds from operations (FFO I), a key performance indicator for the company, rose by 7.1% year-on-year to EUR 341.3 million in 2019 (2018: EUR 318.6 million). Based on the weighted average number of shares, FFO is EUR 5.27 per share, up 4.6% on the figure for the previous year (EUR 5.04). The negative effects of cost increases for craftsmen services were offset by efficiency enhancement measures. Accordingly, the operating EBITDA margin improved once again to 72.8% (previous year: 72.3%). A further increase in the operating margin to 74% is planned for 2020.
In-place like-for-like rent rose by 2.9% as against the previous year to an average of
EUR 5.82 per square metre in the reporting period. Rents for privately financed properties climbed by 3.6%, while for rent-restricted apartments they were up 0.5% on the figure for previous year at EUR 4.79 per square metre. LEG therefore still provides good, appropriately priced housing for broad sections of society. The like-for-like vacancy rate was down slightly on the previous year at 3.0% (3.1%).
Further significant increase in NAV
Pro forma NAV (not including goodwill) amounted to EUR 105.39 per share as at 31 December 2019, an increase of 12.8% compared to 31 December 2018 (EUR 93.40 per share). Including the planned dividend of EUR 3.60, the total return for shareholders in 2019 is more than 16%. The main driver for the increase was the revaluation of the property portfolio in the amount of EUR 923.4 million (up 8.3%). The value of the property portfolio corresponds to a gross rental yield of 5.1% and a value of EUR 1,353 per square metre. Given the high level of demand for German residential property and the good operating performance, a positive development in value is forecast in all market segments in 2020 as well.
Acceleration of external growth
In a challenging market environment with supply still limited overall, LEG acquired around 5,700 residential units in total in the past financial year. Thus, despite a major streamlining of its portfolio with around 3,400 residential units sold in total, LEG continued to be a net buyer in 2019 while at the same time improving the quality of its portfolio. LEG acquired 1,500 residential units at the start of 2020, and the acquisition of a further approximately 1,200 units is already at an advanced stage.
Strong balance sheet highlights low risk profile
LEG improved its financing profile substantially year-on-year as at 31 December 2019: While the term of financing grew longer from 7.6 to 8.1 years, the average interest rate was reduced from 1.58% to 1.43%. This was mostly thanks to the successful early refinancing of loans of around EUR 300 million and the successful issue of two bonds with a volume of EUR 800 million in the fourth quarter.
Net debt in relation to property assets (loan-to-value, LTV) was 37.7% as at the end of the year, its lowest year-end level since the company went public. This once again highlights LEG’s low risk profile and still leaves room to finance future portfolio growth.
Higher dividend proposed despite significant increase in number of shares
The Management Board and the Supervisory Board will propose further raising the dividend to EUR 3.60 (previous year: EUR 3.53) per share for the 2019 financial year at the Annual General Meeting on 20 May 2020. As a result of the higher number of shares following the early conversion of the 2014/2021 convertible bond in October 2019, the planned distribution amount is therefore up 11.4% compared to the previous year.
ESG commitment extended
As a company that operates sustainably, LEG pays special attention to its social responsibility, to environmental and climate protection, and to good corporate governance. The company has significantly stepped up its social commitment once again by creating the “Your Home Helps” foundation with capital of EUR 16 million at the end of 2019. The foundation organises and finances sustainable and long-term social projects, in particular through cooperation with professional charity partners. As part of our investment drive, we invested around EUR 295 million or EUR 33.90 per square metre (previous year: around EUR 253 million or EUR 29.40 per square metre) in the maintenance and modernisation of our portfolio in 2019 with a focus on energy efficiency improvements. This will allow us to save around 5.400 tonnes of CO2 per year. We are reiterating our goal of the energy efficiency modernisation of at least 3% of our apartments per year.
LEG signed the Diversity Charter in 2019 and supports women in management positions. More than a third of LEG’s managers are currently women. At the Annual General Meeting, LEG also intends to propose a new remuneration system for the Management Board that will take ESG criteria into account for the first time. Comprehensive information on LEG’s ESG commitment can be found in our separate non-financial report. (http://leg.ag/sustainability-report)
Confirmation of earnings forecast for 2020 raised in November 2019
Including the planned positive effects of the acquisitions already secured and its refinancing activities, the company is forecasting FFO I of between EUR 370 and EUR 380 million for 2020. Based on the average figure for this range, this corresponds to an increase of 9.8% as against the FFO achieved in the 2019 financial year.
With around 136,000 rental properties and more than 365,000 residents, LEG is one of Germany’s leading listed housing companies. The company has eight branch offices in North Rhine-Westphalia, providing personal local contact. LEG generated income of around EUR 809 million from its core rental and lease business in the 2019 financial year. As part of the new construction campaign it launched in 2018, LEG wishes to make a social contribution towards creating both privately financed and publicly subsidised housing, and to build or acquire at least 500 new apartments per year from 2023 onwards.
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This publication constitutes neither a solicitation to buy nor an offer to sell securities. To the extent that we express forecasts or expectations or make forward-looking statements in this document, these statements can entail known and unknown risks and uncertainties. These statements reflect the intentions, opinions or current expectations and assumptions of LEG Immobilien AG. The forward-looking statements are based on current planning, estimates and forecasts, which LEG Immobilien AG has made to the best of its knowledge, but that are not a statement on their future accuracy. Actual results and developments can therefore differ materially from the expectations and assumptions expressed.