44 Segment Reporting

Vonovia is an integrated real estate company. The company’s strategy remains focused on sustainably increasing the value of the company. This is aided by a value-enhancing property management strategy for the company’s own properties, value-enhancing investment, active portfolio management and a property-related service business. Since the reorganization measures implemented in the fourth quarter of 2015, Vonovia has made a distinction between three business segments: Rental, Extension and Sales. These segments were still managed independently in the 2016 fiscal year.

The Rental segment pools all business activities for active management as well as investments in the company’s own properties. The expenses shown include the services of the Group’s own craftsmen’s organization measured at the market price. Only ancillary costs that cannot be passed on to the tenants are included in the operating expenses of the Rental segment. Other income from property management that cannot be allocated to the Extension segment is offset against the operating expenses of the Rental segment.

The Extension segment combines all business activities relating to the expansion of the core business to include additional property-related services. These include the company’s own craftsmen’s organization, which performs maintenance and modernization services for the Group, the organization for the upkeep and maintenance of the residential environment, the provision of cable TV services to our tenants, condominium administration for third-party apartments and for those Vonovia apartments managed in homeowners associations, metering services for measuring the consumption of water and heating (smart metering) and insurance services for own properties and for third parties.

The Sales segment covers all business activities relating to the sale of single units as well as the sale of entire buildings or plots of land.

A Group-wide planning and controlling system ensures that resources for all three segments are efficiently allocated and their successful use is monitored.

Reporting to the chief decision-makers and thus the assessment of business performance as well as the allocation of resources are performed on the basis of this segmentation. Accordingly, segment reporting is presented in accordance with IFRS 8.22. No segmentation by region is performed. Assets and liabilities are not viewed separately by segment.

Internal reporting is generally based on the IFRS reporting standards.

The Management Board as chief decision-makers of Vonovia assess the contribution of the business segments against the company’s performance on the basis of their income as well as the . The adjusted segment EBITDA represents earnings before interest, taxes, depreciation and amortization adjusted for items that are not related to the period, recur irregularly or that are atypical for business operation and excluding effects from adjustments in value in accordance with IAS 40.

In contrast to the presentation in the statements from December 31, 2015, services in the Extension segment that are performed by third parties are reported as internal income in 2016, provided that Group companies are responsible for managing these services.

Furthermore, we are reporting the financial income from investments in other real estate companies outside of adjusted EBITDA for the first time in the 2016 reporting period. During the previous year from January 1 to December 31, 2015, financial income from investments in other real estate companies amounting to € 0.4 million was taken out of . The financial income from investments in other real estate companies came to € 9.6 million in the reporting period from January 1 to December 31, 2016.

The following table shows the segment information for the reporting period:

in € million

 

Rental

 

Extension

 

Sales

 

Other*

 

Group

*

The income for the segments Rental, Extension and Sales constitutes income that is regularly reported to the Management Board as chief operating decision-maker. The income in the column “Other” results from the onward charging of ancillary costs amounting to € 627.5 million, as well as consolidation effects. These are not part of the regular reporting to the Management Board and have thus been presented in the “Other” column. The cost side is also part of the reporting to the Management Board in order to ensure efficient property management.

 

 

 

 

 

 

 

 

 

 

 

Jan. 1 – Dec. 31, 2016

 

 

 

 

 

 

 

 

 

 

Segment income

 

1,538.1

 

851.2

 

1,227.9

 

-180.0

 

3,437.2

thereof external income

 

1,538.1

 

108.1

 

1,227.9

 

563.1

 

3,437.2

thereof internal income

 

 

 

743.1

 

 

 

-743.1

 

 

Carrying amount of assets sold

 

 

 

 

 

-1,177.7

 

 

 

 

Revaluation from disposal of assets held for sale

 

 

 

 

 

70.0

 

 

 

 

Expenses for maintenance

 

-247.4

 

 

 

 

 

 

 

 

Operating expenses

 

-244.5

 

-794.2

 

-27.7

 

170.8

 

 

Adjusted EBITDA

 

1,046.2

 

57.0

 

92.5

 

-9.2

 

1,186.5

 

 

 

 

 

 

 

 

 

 

 

Non-recurring items

 

 

 

 

 

 

 

 

 

-94.5

Period adjustments from assets held for sale

 

 

 

 

 

 

 

 

 

-17.9

Income from investments in other real estate companies

 

 

 

 

 

 

 

 

 

9.6

EBITDA IFRS

 

 

 

 

 

 

 

 

 

1,083.7

 

 

 

 

 

 

 

 

 

 

 

Net income from fair value adjustments of investment properties

 

 

 

 

 

 

 

 

 

3,236.1

Depreciation and amortization

 

 

 

 

 

 

 

 

 

-27.0

Income from other investments

 

 

 

 

 

 

 

 

 

-11.1

Financial income

 

 

 

 

 

 

 

 

 

27.1

Financial expenses

 

 

 

 

 

 

 

 

 

-449.0

EBT

 

 

 

 

 

 

 

 

 

3,859.8

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

-1,346.9

Profit for the period

 

 

 

 

 

 

 

 

 

2,512.9

in € million

 

Rental

 

Extension

 

Sales

 

Other*

 

Group

*

The income for the segments Rental, Extension and Sales constitutes income that is regularly reported to the Management Board as chief operating decision-maker. The income in the column “Other” results from the onward charging of ancillary costs amounting to € 620.7 million as well as consolidation effects. These are not part of the regular reporting to the Management Board and have thus been presented in the “Other” column. The cost side is also part of the reporting to the Management Board in order to ensure efficient property management. Unlike in the previous year, the income and expenses from property management that are attributable to the Extension segment is now reported in the Extension segment.

 

 

 

 

 

 

 

 

 

 

 

Jan. 1 – Dec. 31, 2015

 

 

 

 

 

 

 

 

 

 

Segment income

 

1,414.6

 

428.7

 

726.0

 

220.2

 

2,789.5

thereof external income

 

1,414.6

 

59.3

 

726.0

 

589.6

 

2,789.5

thereof internal income

 

 

 

369.4

 

 

 

-369.4

 

 

Carrying amount of assets sold

 

 

 

 

 

-658.7

 

 

 

 

Revaluation from disposal of assets held for sale

 

 

 

 

 

33.0

 

 

 

 

Expenses for maintenance

 

-242.2

 

 

 

 

 

 

 

 

Operating expenses

 

-248.0

 

-391.1

 

-29.2

 

-224.6

 

 

Adjusted EBITDA

 

924.4

 

37.6

 

71.1

 

-4.4

 

1,028.7

 

 

 

 

 

 

 

 

 

 

 

Non-recurring items

 

 

 

 

 

 

 

 

 

-209.4

Period adjustments from assets held for sale

 

 

 

 

 

 

 

 

 

18.7

Income from investments in other real estate companies

 

 

 

 

 

 

 

 

 

0.4

EBITDA IFRS

 

 

 

 

 

 

 

 

 

838.4

 

 

 

 

 

 

 

 

 

 

 

Net income from fair value adjustments of investment properties

 

 

 

 

 

 

 

 

 

1,323.5

Depreciation and amortization

 

 

 

 

 

 

 

 

 

-13.4

Income from other investments

 

 

 

 

 

 

 

 

 

-3.6

Financial income

 

 

 

 

 

 

 

 

 

8.0

Financial expenses

 

 

 

 

 

 

 

 

 

-418.4

EBT

 

 

 

 

 

 

 

 

 

1,734.5

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

-739.8

Profit for the period

 

 

 

 

 

 

 

 

 

994.7

To show the development of operating performance and to ensure comparability with previous periods, we calculate adjusted EBITDA for our Rental, Extension and Sales segments, as mentioned above. The total of these key figures, taking consolidation effects into account ( Other), produces the adjusted EBITDA for the Group as a whole. The adjustments made include items that are not related to the period, items that recur irregularly and items that are atypical for business operation. The non-recurring items include the development of new fields of business and business processes, acquisition projects including integration costs, expenses for refinancing and equity increases (where not treated as capital procurement costs), as well as expenses for pre-retirement part-time work arrangements and severance payments.

The following table gives a detailed list of the non-recurring items for the reporting period:

in € million

 

Jan. 1 – Dec. 31, 2016

 

Jan. 1 – Dec. 31, 2015

*

including takeover costs and one-time expenses in connection with acquisitions, such as HR measures relating to the integration process

 

 

 

 

 

Business model optimization/Development of new fields of business

 

21.0

 

11.3

Acquisition costs incl. integration costs*

 

46.8

 

179.8

Refinancing and equity measures

 

3.2

 

0.7

Severance payments/Preretirement part-time work arrangements

 

23.5

 

17.6

Total non-recurring Items

 

94.5

 

209.4

In the 2016 fiscal year, non-recurring items came to € 94.5 million, down by 54.9% on the figure for the previous year (€ 209.4 million). In the 2016 fiscal year, the non-recurring items related primarily to acquisition costs of € 46.8 million (including integration costs in 2015: € 179.8 million), mainly due to the costs incurred in connection with the public takeover offer made to the shareholders of Deutsche Wohnen and costs associated with the integration of GAGFAH.

Maintenance
Maintenance covers the measures that are necessary to ensure that the property can continue to be used as intended over its useful life and that eliminate structural and other defects caused by wear and tear, age and weathering effects.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
Adjusted EBITDA is the result before interest, taxes, depreciation and amortization (including income from other operational investments) adjusted for effects that do not relate to the period, recur irregularly or that are atypical for business operation, and for net income from fair value adjustments to investment properties. These non-recurring items include the development of new fields of business and business processes, acquisition projects, expenses for refinancing and equity increases (where not treated as capital procurement costs), IPO preparation costs and expenses for pre-retirement part-time work arrangements and severance payments.
Adjusted EBITDA Rental
The adjusted EBITDA Rental is calculated by subtracting the operating expenses of the Rental segment and the expenses for maintenance in the Rental segment from the Group’s rental income.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
Adjusted EBITDA is the result before interest, taxes, depreciation and amortization (including income from other operational investments) adjusted for effects that do not relate to the period, recur irregularly or that are atypical for business operation, and for net income from fair value adjustments to investment properties. These non-recurring items include the development of new fields of business and business processes, acquisition projects, expenses for refinancing and equity increases (where not treated as capital procurement costs), IPO preparation costs and expenses for pre-retirement part-time work arrangements and severance payments.