Annual Report 2020

23 Segment Reporting

Vonovia is an integrated residential real estate company with operations across Europe. The company’s strategy is focused on sustainably increasing the value of the company. This is achieved by managing the company’s own portfolio sustainably and with a view to enhancing its value, investing in existing residential properties in order to create value, building new residential buildings and selling individual apartments as well as by engaging in active portfolio management and offering property-related services. For the purposes of managing the company, we make a distinction between four segments Rental, Value-add, Recurring Sales and Development. We also report the Other segment, which is not relevant from a corporate management perspective, in our segment reporting. This includes the sale, only as and when the right opportunities present themselves, of entire buildings or land (Non-core Disposals) that are likely to have below-average development potential in terms of rent growth in the medium term and are located in areas that can be described as peripheral compared with Vonovia’s overall portfolio and in view of future acquisitions. Ancillary costs are also reported under “Other.”

The Rental segment combines all of the business activities that are aimed at the value-enhancing management of our own residential real estate. It includes our property management activities in Germany, Austria and Sweden. The consolidation of our property management activities in Germany, Austria and Sweden to form one single reporting segment is based on the similarities that we see in the property management business in these three countries. This applies to the way in which services are provided and the individual service processes that form part of the property management business as well as to the customers in the residential rental market and the type of customer acquisition used. Overall, the residential rental market in all three countries is characterized by a shortage of housing and is regulated by statutory requirements, resulting in return expectations that are similar in the long term.

The Value-add segment bundles all of the housing-related services that we have expanded our core rental business to include. These services include both the maintenance and modernization work on our residential properties and services that are closely related to the rental business. We allocate the activities relating to the craftsmen’s and residential environment organization, the condominium administration business, the cable TV business, metering services, energy supplies and our insurance services to the Value-add segment.

The Recurring Sales segment includes the regular and sustainable disposals of individual condominiums and single-family houses from our portfolio. The consolidation of our sales activities in Germany and Austria to form one single reporting segment is based on the similarities that we see in the property management business in these two countries. It does not include the sale of entire buildings or land (Non-core Disposals). These properties are only sold as and when the right opportunities present themselves, meaning that the sales do not form part of the Recurring Sales segment. We report these opportunistic sales in the Other column of the segment report.

The Development segment combines cross-country development activities and includes the project development of new residential buildings. The consolidation of our development activities in Germany, Austria and Sweden to form one single reporting segment is based on the similarities that we see in the business in these three countries. The business covers the value chain starting with the purchase of land without any development plan/dedicated purpose and ending with the completion of new buildings and new construction measures on our own properties. These properties are either incorporated into our own portfolio or sold to third parties. The Development segment deals with projects in selected attractive locations. Project development work is currently focusing on Berlin, Hamburg and Vienna. The adjusted EBITDA of the Development segment includes the fair value step-up for properties that were completed in the reporting period and have been added to our own portfolio.

A Group-wide planning and controlling system ensures that resources are efficiently allocated and their successful use is monitored on a regular basis. 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. Asset and liability items are not reported separately by segment. Internal reporting is based on the IFRS reporting standards in general.

The Management Board as chief decision-makers of Vonovia monitor the contribution made by the segments to the company’s performance on the basis of the segment revenue as well as the adjusted EBITDA.

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

in € million

Rental

Value-add

Recurring Sales

Develop­ment

Segments total

Other*

Consolida­tion*

Group

 

 

 

 

 

 

 

 

 

Jan. 1–Dec. 31, 2020

 

 

 

 

 

 

 

 

Segment revenue

2,285.9

1,104.6

382.4

597.1

4,370.0

984.8

–1,323.7

4,031.1

thereof external revenue

2,285.9

51.6

382.4

298.9

3,018.8

984.8

27.5

4,031.1

thereof internal revenue

 

1,053.0

 

298.2

1,351.2

–1,351.2

Carrying amount of assets sold

 

 

–308.9

 

–308.9

–173.5

 

 

Revaluation from disposal of assets held for sale

 

 

34.9

 

34.9

27.9

 

 

Expenses for maintenance

–321.1

 

 

 

–321.1

 

 

 

Cost of development to sell

 

 

 

–235.9

–235.9

 

 

 

Cost of development to hold**

 

 

 

–235.4

–235.4

 

235.4

 

Operating expenses

–410.6

–952.3

–16.0

–14.9

–1,393.8

–5.6

992.0

 

Ancillary costs

 

 

 

 

 

–780.9

 

 

Adjusted EBITDA Total

1,554.2

152.3

92.4

110.9

1,909.8

52.7

–96.3

1,866.2

 

 

 

 

 

 

 

 

 

Non-recurring items

 

 

 

 

 

 

 

–61.5

Period adjustments from assets held for sale

 

 

 

 

 

 

 

15.3

Income from investments in other real estate companies

 

 

 

 

 

 

 

2.4

EBITDA IFRS

 

 

 

 

 

 

 

1,822.4

 

 

 

 

 

 

 

 

 

Net income from fair value adjustments of investment properties

 

 

 

 

 

 

 

3,719.8

Depreciation and amortization

 

 

 

 

 

 

 

–92.3

Income from other investments

 

 

 

 

 

 

 

–13.4

Interest income

 

 

 

 

 

 

 

21.9

Interest expenses

 

 

 

 

 

 

 

–411.4

Other financial result

 

 

 

 

 

 

 

–32.6

EBT

 

 

 

 

 

 

 

5,014.4

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

–1,674.4

Profit for the period

 

 

 

 

 

 

 

3,340.0

*

The revenue for the Rental, Value-add, Recurring Sales and Development segments constitutes income that is regularly reported to the Management Board as the chief operating decision-maker and that reflects Vonovia’s sustainable business. The revenue/costs in the “Other” and “Consolidation” columns are not part of the Management Board’s segment management.

**

Excluding capitalized interest on borrowed capital in 2020 of € 0.8 million (2019 € 0.0 million).

in € million

Rental

Value-add

Recurring Sales

Develop­ment

Segments total

Other*

Consolida­tion*

Group

 

 

 

 

 

 

 

 

 

Jan. 1–Dec. 31, 2019

 

 

 

 

 

 

 

 

Segment revenue**

2,074.9

1,154.8

365.1

516.9

4,111.7

908.5

–1,349.3

3,670.9

thereof external revenue

2,074.9

50.6

365.1

250.6

2,741.2

908.5

21.2

3,670.9

thereof internal revenue

 

1,104.2

 

266.3

1,370.5

–1,370.5

Carrying amount of assets sold

 

 

–302.9

 

–302.9

–138.7

 

 

Revaluation from disposal of assets held for sale

 

 

44.5

 

44.5

13.0

 

 

Expenses for maintenance

–308.9

 

 

 

–308.9

 

 

 

Cost of development to sell

 

 

 

–197.3

–197.3

 

 

 

Cost of development to hold

 

 

 

–207.4

–207.4

 

207.4

 

Operating expenses

–328.6

–1,008.5

–14.8

–27.7

–1,379.6

–8.4

1,039.1

 

Ancillary costs

 

 

 

 

 

–762.9

 

 

Adjusted EBITDA Total

1,437.4

146.3

91.9

84.5

1,760.1

11.5

–102.8

1,668.8

 

 

 

 

 

 

 

 

 

Non-recurring items

 

 

 

 

 

 

 

–93.1

Period adjustments from assets held for sale

 

 

 

 

 

 

 

2.2

Income from investments in other real estate companies

 

 

 

 

 

 

 

1.7

EBITDA IFRS

 

 

 

 

 

 

 

1,579.6

 

 

 

 

 

 

 

 

 

Net income from fair value adjustments of investment properties

 

 

 

 

 

 

 

4,131.5

Depreciation and amortization

 

 

 

 

 

 

 

–2,175.8

Income from other investments

 

 

 

 

 

 

 

–11.8

Interest income

 

 

 

 

 

 

 

8.9

Interest expenses

 

 

 

 

 

 

 

–417.5

Other financial result

 

 

 

 

 

 

 

24.0

EBT

 

 

 

 

 

 

 

3,138.9

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

–1,844.6

Profit for the period

 

 

 

 

 

 

 

1,294.3

*

The revenue for the Rental, Value-add, Recurring Sales and Development segments constitutes income that is regularly reported to the Management Board as the chief operating decision-maker and that reflects Vonovia’s sustainable business. The revenue/costs in the “Other” and “Consolidation” columns are not part of the Management Board’s segment management.

**

Adjusted (see note [A2] Adjustment to Prior-year Figures).

The reporting of segment revenue was adjusted with the switch to the new internal reporting system. The corresponding prior-year figures have been adjusted. The main adjustments compared with the previous year were as follows:

  • The amount disclosed for external Value-add revenue (previously € 248.4 million) has been reduced by income charged to the Rental segment in connection with services and passed on to tenants there in the ancillary costs bills (€ 185.8 million).
  • Ancillary cost revenue is shown under external income in the Other category in full. Previously, these amounts were reported under Value-add (€ 185.8 million) and Consolidation (€ 577.1 million).
  • The internal Value-add income has been reduced by the revenue from the management of subcontractors in the amount of € 509.8 million, and increased by income charged to the Rental segment in connection with services and passed on to tenants there in the ancillary costs bills (€ 185.8 million).
  • In the Development segment, the fair value (€ 266.3 million) for completed new buildings is shown as internal income. The corresponding production costs are reported under costs of development to hold (€ 207.4 million).
  • The internal income is completely eliminated in the Consolidation column. The ancillary cost income is matched by an identical value under costs, as the ancillary costs balance is allocated to operating expenses in the Rental segment.

The operating expenses of the segments have been adjusted in line with the changes to the reporting of revenue in each case. This means that the changes in revenue reporting do not result in any changes to the Adjusted EBITDA reported for each segment in general.

To show the development of operating performance and to ensure comparability with previous periods, we calculate adjusted EBITDA for each of our segments: Rental, Value-add, Recurring Sales and Development. The sum of these key figures produces the Group’s Adjusted EBITDA Total. 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 expenses for pre-retirement part-time work arrangements and severance payments, the development of new fields of business and business processes, acquisition projects including integration costs and expenses for refinancing and equity increases (where not treated as capital procurement costs).

In the 2020 fiscal year, the non-recurring items eliminated in the Adjusted EBITDA Total came to € 61.5 million (2019: € 93.1 million). In the third quarter of 2020, income of € 18.1 million was recognized following the reassessment of a compensation entitlement for non-controlling interests. The following table gives a detailed list of the non-recurring items:

in € million

2019

2020

 

 

 

Transactions*

48.2

24.0

Personnel matters

13.2

27.5

Business model optimization

27.6

13.9

Refinancing and equity measures

4.1

–3.9

Total non-recurring items

93.1

61.5

* Including one-time expenses in connection with acquisitions, such as HR measures relating to the integration process and other follow-up costs.

The breakdown of non-Group revenue from contracts with customers (pursuant to IFRS 15.114f.) and its allocation to the segments referred to above is as follows:

in € million

Rental

Value-add

Recurring Sales

Develop­ment

Other

Consoli­dation

Total

 

 

 

 

 

 

 

 

Jan. 1–Dec. 31, 2020

 

 

 

 

 

 

 

Revenue from ancillary costs (IFRS 15)

645.7

645.7

Income from the disposal of investment properties

234.9

86.4

321.3

Income from disposal of real estate inventories (Development)

297.7

297.7

Other revenue from contracts with customers

 

50.2

 

 

 

27.5

77.7

Revenue from contracts with customers

50.2

234.9

297.7

732.1

27.5

1,342.4

thereof period-related

194.4

194.4

thereof time-related

50.2

234.9

103.3

732.1

1,120.5

Income from rental income (IFRS 16)

2,285.9

1.4

1.2

 

2,288.5

Revenue from ancillary costs (IFRS 16)*

135.2

135.2

Income from sale of assets held for sale (IFRS 5)

147.5

117.5

265.0

Other revenue

2,285.9

1.4

147.5

1.2

252.7

2,688.7

Revenues

2,285.9

51.6

382.4

298.9

984.8

27.5

4,031.1

* Includes land tax and buildings insurance.

in € million

Rental

Value-add

Recurring Sales

Develop­ment

Other

Consoli­dation

Total

 

 

 

 

 

 

 

 

Jan. 1–Dec. 31, 2019

 

 

 

 

 

 

 

Revenue from ancillary costs (IFRS 15)

627.3

627.3

Income from the disposal of investment properties

184.9

42.2

227.1

Income from disposal of real estate inventories (Development)

249.5

249.5

Other revenue from contracts with customers

48.7

 

21.2

69.9

Revenue from contracts with customers

48.7

184.9

249.5

669.5

21.2

1,173.8

thereof period-related

183.6

183.6

thereof time-related

48.7

184.9

65.9

669.5

990.2

Income from rental income (IFRS 16)

2,074.9

1.9

1.1

2,077.9

Revenue from ancillary costs (IFRS 16)*

135.6

135.6

Income from sale of assets held for sale (IFRS 5)

180.2

103.4

283.6

Other revenue

2,074.9

1.9

180.2

1.1

239.0

2,497.1

Revenues

2,074.9

50.6

365.1

250.6

908.5

21.2

3,670.9

* Includes land tax and buildings insurance.

External income and non-current assets, excluding financial instruments, deferred tax assets, post-employment benefits and rights under insurance contracts, are distributed among Vonovia’s country of origin and other countries as follows. The revenue and the assets are allocated based on the registered office of the unit providing the service.

 

External income

Assets

in € million

Jan. 1–Dec. 31, 2019

Jan. 1–Dec. 31, 2020

Dec. 31, 2019

Dec. 31, 2020

 

 

 

 

 

Germany

3,087.0

3,299.0

44,969.4

49,902.9

Austria

415.6

393.4

3,067.9

3,189.9

Sweden

168.1

338.7

6,777.8

7,294.5

France

0.0

0.0

104.1

110.7

Other countries

0.2

0.0

88.1

117.5

Total

3,670.9

4,031.1

55,007.3

60,615.5

 

 

 

 

Adjusted EBITDA Total (Earnings Before Interest, Taxes, Depreciation and Amortization)
Adjusted EBITDA Total is the result before interest, taxes, depreciation and amortization (including income from other operational investments and intragroup profits) adjusted for effects that do not relate to the period, recur irregularly and 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. The Adjusted EBITDA Total is derived from the sum of the Adjusted EBITDA Rental, Adjusted EBITDA Value-add, Adjusted EBITDA Recurring Sales and Adjusted EBITDA Development.
Fair Value
Fair value is particularly relevant with regard to valuation in accordance with IAS 40 in conjunction with IFRS 13. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
Fair Value Step-up
Fair value step-up is the difference between the income from selling a unit and its current fair value in relation to its fair value. It shows the percentage increase in value for the company on the sale of a unit before further costs of sale.
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.
Non-core Disposals
We also report on the Other segment, which is not relevant from a corporate management perspective, in our segment reporting. This includes the sale, only as and when the right opportunities present themselves, of entire buildings or land (Non-core Disposals) that are likely to have below-average development potential in terms of rent growth in the medium term and are located in areas that can be described as peripheral compared with Vonovia’s overall portfolio and in view of future acquisitions.
Recurring Sales
The Recurring Sales segment includes the regular and sustainable disposals of individual condominiums from our portfolio. It does not include the sale of entire buildings or land (Non-core Disposals). These properties are only sold as and when the right opportunities present themselves, meaning that the sales do not form part of our operating business within the narrower sense of the term. Therefore, these sales will be reported under “Other” in our segment reporting.