LEG Immobilien AG: Dynamic earnings and capital growth continued in 2017

  • FFO I improved significantly in 2017 by 10.1% to EUR 295.3 million
  • EPRA NAV per share (not including goodwill) rose by 24.8% to EUR 83.81
  • Rent growth per square metre accelerated by 3.3%, (like-for-like) vacancy rate again down slightly
  • Dividend (proposal) per share increased by 10.1% to EUR 3.04
  • Outlook for 2018 and 2019 confirmed - FFO I 2018: EUR 315 to EUR 323 million; FFO I 2019: EUR 338 to EUR 344 million

In the 2017 financial year, LEG Immobilien AG continued its dynamic profit growth, at the same time considerably increasing the value of its property portfolio. In addition to positive revenue development, the main reason for the strong rise in earnings was a further expansion of the operating margin due to a rigorous alignment to internal process optimisation. In addition, a further reduction in financing costs had a positive effect on earnings.

"Our focussed growth strategy is paying off. We deliver what we promise. We fully achieved our financial targets for 2017. We can reaffirm our guidance for 2018 and 2019. We are looking into the future with confidence and are continuing to focus on a positive revenue trend and above-average improvement in earnings and dividends over the next few years," commented Thomas Hegel, CEO of LEG Immobilien AG.

Dynamic profit growth in 2017; proposal for significant dividend increase

Funds from operations (FFO I), as key performance indicator, increased significantly by 10.1% year-on-year to EUR 295.3 million (previous year: EUR 268.3 million). FFO I per share climbed by 9.6% to EUR 4.67. The main drivers behind this development were the 4.5% rise in net cold rent including the initial effects of acquisitions, a parallel decline in operating costs, the expansion of service activities and lower cash interest expenses. The EBITDA margin, the major KPI for operating efficiency, was expanded year-on-year to 72.1% (previous year: 69.5%). Over the next few years, a further increase of the operating margin is anticipated.

In-place rent per square metre rose by 3.3% year-on-year on a like-for-like basis to an average of EUR 5.46 per square metre. The rent in the free-financed portfolio, which is the better indicator of the actual rent development, increased by as much as 4.1% on a like-for-like basis. At the same time, the like-for-like vacancy rate was again reduced slightly to 2.8%.

EPRA net asset value (not including goodwill) was EUR 83.81 per share at the end of the year, a significant increase of 24.8% against the previous year figure of EUR 67.15 per share. The LEG portfolio was also positively impacted in terms of capital growth by the high exposure to growth markets and the adjoining commuter regions. The rental yield on the portfolio in the current market environment remains at an attractive level of 5.9%. This ensures a high cash flow return and offers the potential for further NAV growth moving ahead.

On the basis of the pleasing business performance, the Management Board will propose a significant increase in the dividend of 10.1% to EUR 3.04 per share at the Annual General Meeting.

Increasing investments increase portfolio quality for tenants and shareholders

In the past financial year, investments in the portfolio were increased further, while at the same time strictly maintaining capital discipline. In this way, the quality of the residential portfolio was improved further, a positive contribution made to achieve climate objectives, at the same time leveraging growth opportunities in a targeted fashion. Overall investments were increased to EUR 22.40 per square metre (previous year: EUR 18.20 per square metre). In implementing the strategic investment programme, it is planned to increase the investment volume further to approximately EUR 29 per square metre in 2018.

Long-term financing with attractive terms secured; LTV ratio further reduced

With its long-term and balanced financing, LEG is well positioned for sustainably stable earnings and dividend growth. To the reporting date, average financing costs at LEG were reduced further to 1.74% (previous year: 2.04%). Despite early repayment of part of the subsidised loans with long maturities, an average remaining term of financial liabilities of 8.1 years was secured as of the reporting date. This contributes to a high degree of security for stable medium-term earnings and dividend growth, even in a scenario of rising market interest rates.

Loan-to-value ratio (LTV) remained at a low level of 42.3% (previous year: 44.9%) as at the end of 2017, thus underscoring the low risk profile LEG has.

Positive business development expected to continue in 2018 and 2019

The forecast FFO I for 2018 and 2019 is confirmed. For 2018 an earnings increase to between EUR 315 and EUR 323 million is anticipated and for 2019 between EUR 338 million and EUR 344 million. The guidance expects the operating EBITDA margin to expand to around 74% by 2019. This outlook is based on the assumption of a stable residential property portfolio and does not take into account the effects of planned acquisitions.


About LEG

With around 130,000 rental properties and approximately 350,000 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 rental and lease income of around EUR 796 million in the 2017 financial year.


Investor Relations contact:

Burkhard Sawazki

Tel. +49 211 45 68-204
e-mail: burkhard.sawazki[at]­leg.ag

Press contact:

Sabine Jeschke

Tel. +49 211 45 68-325
e-mail: sabine.jeschke[at]­leg-wohnen.de

The annual report is available for download at: http://www.leg.ag/AR-2017-en


Disclaimer

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.

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