Annual Report 2020

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Group’s Business Development

Business Development in 2020 – An Overview

Despite the coronavirus pandemic, 2020 was a successful fiscal year for Vonovia overall. We acted as a reliable partner for all interest groups, but in particular for our customers. In many areas, our business processes have continued virtually unhindered thanks to employees working from home. All in all, the coronavirus pandemic did not have any significant impact on Vonovia’s corporate strategy, nor did it have any considerable impact on the company’s operational and financial performance. Vonovia only experienced a low level of rent losses. After being temporarily interrupted due to coronavirus restrictions, modernization and/or new construction measures, as well as sales activities, were resumed and continued in full.

In the 2020 fiscal year, we observed stable demand for rental apartments and no negative impact on market values as a result of the coronavirus pandemic.

We invested around € 1.3 billion (2019: € 1.5 billion) in our own portfolio for new construction and modernization measures and around € 0.6 billion for maintenance (2019: € 0.5 billion). We completed 1,442 apartments (2019: 1,301) as part of our new construction measures. We also completed 646 apartments that are intended for sale (2019: 791).

The table below provides an overview of the development of our most recently forecast performance indicators and the target achievement level for these indicators in the 2020 fiscal year. When comparing the current key figures with the previous year, it is important to note that the figures for 2019 include Hembla, which was acquired in November 2019, with an earnings contribution of two months, and that the figures for 2020 include Bien-Ries GmbH, which was acquired in early April 2020, with an earnings contribution of nine months as well as the earnings contribution made by the minority stake in the Dutch company Vesteda Residential Fund, which was acquired in 2020.

 

2019

Forecast for 2020 in the 2019 Q3 report

2020

 

 

 

 

Total Segment Revenue

€ 4.1 billion

€ 4.4 billion

€ 4.4 billion

EPRA NTA per share*

€ 54.88

 

€ 62.71

Adjusted NAV per share*

€ 52.00

suspended

€ 59.47

Adjusted EBITDA Total

€ 1,760.1 million

€ 1,875–1,925 million

€ 1,909.8 million

Group FFO

€ 1,218.6 million

At the upper end of € 1,275–1,325 million

€ 1,348.2 million

Group FFO per share*

€ 2.25

suspended

€ 2.38

Customer Satisfaction Index (CSI)

Decrease of 8.0%

Scale significantly above previous year

Increase of 8.6%

* Based on the current number of shares outstanding.

The Total Segment Revenue came to around € 4.4 billion, up by 6.3% on the prior-year figure of around € 4.1 billion. This increase was due primarily to the acquisition of Hembla and to organic growth thanks to new construction and modernization.

The new net asset value figure EPRA NTA per share came to € 62.71 in 2020, up 14.3% on the value of € 54.88 reported in the previous year. The Adjusted NAV per share came in at € 59.47 in 2020, up by 14.4% on the prior-year value of € 52.00. This increase in the net asset value figure was due primarily to the net income from fair value adjustments of investment properties of € 3,719.8 million in 2020 (2019: € 4,131.5 million).

The Adjusted EBITDA Total came to € 1,909.8 million in 2020, an increase of 8.5% as against the 2019 figure of € 1,760.1 million. This increase was largely due to Hembla, which made an earnings contribution of € 92.5 million (2019: a total of € 9.6 million for the months of November and December). All segments saw their Adjusted EBITDA increase.

Group FFO rose by 10.6% in 2020. to € 1,348.2 million (2019: € 1,218.6 million). This corresponds to a Group FFO per share of € 2.38 (2019: € 2.25). The improvement in adjusted EBITDA Rental was the main factor behind the increase in Group FFO. It rose from € 1,437.4 million in 2019 to € 1,554.2 million in 2020. The Group FFO interest expense came to € 380.1 million in 2020, up by 6.0% on the prior-year value of € 358.6 million. Current income taxes FFO came in at € 52.4 million in 2020, around 4.6% higher than in the previous year (€ 50.1 million). At € 129.1 million, consolidation effects in 2020 were down by 2.8% on the prior-year value of € 132.8 million. This was driven primarily by the drop in intragroup profits from € 43.9 million to € 33.5 million.

The CSI was up by 8.6% on the average value for the previous year. This was largely due to the fact that our customers gave us a better score regarding the timely preparation of ancillary cost bills and in matters relating to the handling of renovation measures and repair work. In 2021, the CSI will be taken into account when calculating the Sustainability Performance Index. Details can be found in the chapter Management System.

Statement of the Management Board on the Economic Situation

The net assets, financial position and results of operations of the Group are extremely positive, particularly given the solid financing, the resulting balanced maturity profile and the financing flexibility gained through the rating-backed bond financings with a view to both organic and external growth. The ongoing improvements to the property management processes, the use of new digital software solutions, the expansion of the Value-add segment, the steady Recurring Sales and a successful development business promote ongoing improvement in profitability.

Adjusted EBITDA Rental
The Adjusted EBITDA Rental is calculated by deducting the operating expenses of the Rental segment and the expenses for maintenance in the Rental segment from the Group’s rental income.
CSI (Customer Satisfaction Index)
The CSI is determined at regular intervals by means of systematic customer surveys and reflects how our services are perceived and accepted by our customers. The CSI is determined on the basis of points given by the customers for our properties and their neighborhood, customer service and commercial and technical support as well as maintenance and modernization management.
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.
Group FFO
Group FFO reflects the recurring earnings from the operating business. In addition to the adjusted EBITDA for the Rental, Value-add, Recurring Sales and Development segments, Group FFO allows for recurring current net interest expenses from non-derivative financial instruments as well as current income taxes. This key figure is not determined on the basis of any specific international reporting standard but is to be regarded as a supplement to other performance indicators determined in accordance with IFRS.
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.
Modernization Measures
Modernization measures are long-term and sustainable value-enhancing investments in housing and building stocks. Energy-efficient refurbishments generally involve improvements to the building shell and communal areas as well as the heat and electricity supply systems. Typical examples are the installation of heating systems, the renovation of balconies and the retrofitting of prefabricated balconies as well as the implementation of energy-saving projects, such as the installation of double-glazed windows and heat insulation, e. g., facade insulation, insulation of the top story ceilings and basement ceilings. In addition to modernization of the apartment electrics, the refurbishment work upgrades the apartments, typically through the installation of modern and/or accessible bathrooms, the installation of new doors and the laying of high-quality and non-slip flooring. Where required, the floor plans are altered to meet changed housing needs.
Rating
Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.
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.
Sustainability Performance Index (SPI)
Index to measure non-financial performance. A performance indicator introduced at Vonovia in January 2021 consisting of key figures on the CO2 intensity of the portfolio, primary energy requirements in new buildings, (partial) modernization measures to make apartments fully accessible, customer and employee satisfaction, and diversity within the management ranks.