LEG Immobilien AG: Satisfactory start to the new financial year - Outlook confirmed - Future payout ratio raised to 70% of FFO I

  • Like-for-like rent per sqm up +2.3% as planned; growth expected to accelerate significantly over the course of the year
  • First quarter of 2018 sees considerably higher maintenance than same quarter of previous year, with FFO I declining slightly to EUR 74.2 million as a result
  • EPRA NAV per share rises to EUR 84.34; portfolio appreciation of around 4.0% (EUR 370-390 million) expected in second quarter of 2018
  • With financial flexibility strengthened further, the payout ratio for the 2018 financial year has been raised from 65% to 70% of FFO I
  • FFO I forecast confirmed for 2018 (EUR 315-323 million) and 2019 (EUR 338-344 million)

LEG Immobilien AG is on track to achieve its full-year forecast. The first quarter was characterised by a high level of maintenance work, with earnings declining slightly against the same period of the previous year as a result. In terms of the target for the year as a whole, the proportion of rent increases implemented in the first quarter was below-average, meaning that organic rental growth can be expected to return to normal levels as the year progresses. LEG’s portfolio is ideally positioned within the current property cycle and the next revaluation in the second quarter of 2018 is expected to see appreciation in the region of EUR 370-390 million. With its financial flexibility strengthened further, the company also intends to increase the payout ratio from 65% to 70% of FFO I starting with the dividend payment for the 2018 financial year. 

“We are satisfied with the first quarter. All in all, we are on track to achieve our ambitious full-year targets. The increase in the payout ratio is intended to allow our shareholders to participate in our leading FFO profitability to an even greater extent in future. The prospects for portfolio appreciation remain very positive,” commented Thomas Hegel, CEO of LEG Immobilien AG.  

FFO I down slightly year-on-year due to increased maintenance

Funds from operations (FFO I), as a key performance indicator of the company, declined slightly year-on-year to EUR 74.2 million (previous year: EUR 75.2 million). This was due to the higher proportion of maintenance expenses realised in the first quarter compared with the same period of the previous year. Adjusted for this earnings effect of EUR 6.8 million, FFO I again increased significantly. FFO I per share saw the same development, declining by 1.3% year-on-year to EUR 1.17 on a reported basis.

In the reporting period, in-place rent rose by 2.3% year-on-year on a like-for-like basis to an average of EUR 5.49 per square metre. The rent in the free-financed portfolio increased by 3.1% on a like-for-like basis. Organic rental growth is expected to accelerate significantly as the year progresses, as the rent increases implemented in the first quarter of 2018 were below-average compared with the full-year target as planned. Like-for-like rental growth is still expected to amount to around 3.0% for 2018 as a whole. The like-for-like vacancy rate was unchanged year-on-year at 3.3%. This figure is also expected to improve further over the coming quarters, accompanied by an increase in the occupancy rate.

Further significant NAV growth anticipated

EPRA net asset value (excluding goodwill) amounted to EUR 84.34 per share as of 31 March 2018 (31 December 2017: EUR 83.81 per share). Based on the positive rent development and rising valuation multipliers on the property market, the next revaluation of the portfolio in Q2 2018 is expected to see appreciation of around 4.0% (EUR 370-390 million). The property portfolio is also set to enjoy further positive value development in the second half of the year. The gross rental yield on the portfolio was an attractive 5.9% as at the end of the quarter. 

Increase in payout ratio to 70% reflects strong financial flexibility

The company intends to increase the payout ratio from 65% to 70% of FFO I starting with the dividend for the 2018 financial year. With greater financial scope available, thanks to factors such as the change in the financing structure and a further reduction in the loan-to-value ratio, LEG is enabling its shareholders to participate directly in the company's leading FFO profitability to an even greater extent. 

Long-term financing with attractive terms secure

The average remaining term of liabilities was still 8.1 years as at the end of the quarter. Average interest costs are at a low 1.76%. This contributes to a high degree of security for stable medium-term earnings and dividend growth, particularly in a scenario of rising market interest rates.

Net debt in relation to property assets (loan-to-value/LTV) continued to decline to 42.0% as at the end of the quarter, with a further reduction expected on the basis on the anticipated valuation gains. This underpins LEG’s low risk profile and offers scope for financing the company's future growth. 

Earnings forecast for 2018 and 2019 confirmed

Based on its satisfactory business development, LEG is confirming its forecast for FFO I of between EUR 315 million and EUR 323 million in 2018 and between EUR 338 million and EUR 344 million in 2019. This earnings forecast does not yet include the effects of future 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 quarterly report is available to download at: http://leg.ag/Q1-2018-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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