LEG Immobilien AG: Significant increase in profit in first quarter, further value appreciation in sight

  • FFO I rises significantly by 14.4% to EUR 84.9 million in Q1
  • Positive development of like-for-like rent per square metre, up 3.1% as planned
  • Pro forma NAV rises to EUR 94.37 per share
  • Portfolio expected to see a valuation gain of around 5% in second quarter of 2019 (EUR 520-550 million)
  • LEG reviews expansion of development activities aimed at meeting societal need for living space in urban areas
  • FFO I forecast confirmed at EUR 338-344 million for 2019 and EUR 356-364 million for 2020

LEG Immobilien AG made a good start to the 2019 financial year. Key drivers of the positive earnings performance remain structural organic rental growth, effects from acquisitions in core markets, a further increase in operating efficiency and an ongoing decline in current interest expenses. LEG’s portfolio is excellently positioned within the current property cycle and so the next revaluation in the second quarter of 2019 is expected to see a valuation uplift of around 5%, in the region of EUR 520-550 million. Additional prospects for the full year also remain positive.

“We are well on track to achieve our targets. Prospects for profit growth and value appreciation remain very positive. At the same time, we want to build urgently needed new housing and we encourage improving the general conditions required to do so,” said Thomas Hegel, CEO of LEG Immobilien AG. 

Substantial growth in FFO I continues

Funds from operations (FFO I), a key performance indicator for the company, amounted to EUR 84.9 million in the first quarter of 2019, thereby increasing by a substantial 14.4% year-on-year (Q1 2018: EUR 74.2 million). FFO I per share saw similar development, also rising by 14.4% year-on-year to EUR 1.34 on an unadjusted basis (previous year: EUR 1.17). 

The operating EBITDA margin improved substantially to 73.0% (previous year: 68.4%). This ratio of net cold rent to EBITDA is a strong indicator of the company‘s operating performance. Comparatively high maintenance expenses in the previous year must be taken into account here (Q1 2019: EUR 20.1 million; Q1 2018: EUR 19.8 million). All told, the first quarter results confirm the positive trend in operating efficiency. Targets for increasing the EBITDA margin in 2019 (around 73.0%) and 2020 (around 74.0%) are confirmed despite cost inflation. 

In the reporting period, in-place rent rose by 3.1% year-on-year on a like-for-like basis to an average of EUR 5.71 per square metre. The rent in the free-financed portfolio increased by 3.9% on a like-for-like basis. Despite slightly higher fluctuation due to modernisation, the like-for-like vacancy rate remained largely stable year-on-year at 3.8%. 

Further significant NAV growth anticipated

Pro forma NAV (not including goodwill) amounted to EUR 94.37 per share as at 31 March 2019 (31 December 2018: EUR 93.40 per share). The value of the property portfolio corresponds to a gross rental yield of 5.5% and a value of EUR 1,206 per square metre. 

On the basis of high demand for German residential property and good operating performance, the next revaluation of the portfolio in Q2 2019 is expected to see a value uplift of around 5.0% (EUR 520-550 million). The LEG portfolio particularly benefits from positive catch-up effects observed in many B cities.

Strategy outlook: Expansion of development activities and growth outside NRW reviewed

As part of an ongoing review of corporate strategy, an expansion of new construction activities is currently being examined. By expanding its development activities, LEG aims to make a contribution to society as a whole by helping meet demand for affordable housing in metropolitan regions. As well as using its own space, this may also include acquiring land. Nonetheless, like the sector as a whole, LEG relies on the availability of land at reasonable prices, improved general conditions and swifter approval procedures.

LEG anticipates good micro-locations in B and C cities in commuter regions to continue to perform particularly well. A sharper focus on these locations, including outside NRW, is another key element of the company’s current strategic aims.

Strong balance sheet secures low risk profile

As at 31 March 2019, the average remaining term of the company’s liabilities was 7.5 years. Average interest costs are at a low 1.62%. This contributes to a high degree of security for stable medium-term earnings and dividend growth. 

Net debt in relation to property assets (LTV) amounted to a low level of 40.1% at the end of the quarter. This serves to underline LEG’s low risk profile and continues to offer scope for financing the company’s future growth. 

Earnings forecast for 2019 and 2020 confirmed

In light of the good fundamental conditions it continues to enjoy, LEG is confirming its forecast for FFO I of between EUR 338 million and EUR 344 million in 2019 and between EUR 356 million and EUR 364 million in 2020. This does not take account of any effects from potential acquisitions and disposals. 


About LEG

With around 134,000 rental properties and approximately 360,000 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 767 million in the 2018 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 press release is available to download at http://www.leg.ag/Q1-2019-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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