VNNVF - Vonovia SE (VONOY) Q4 2023 Earnings Call Transcript
2024-03-15 16:09:02 ET
Vonovia SE (VONOY)
Q4 2023 Earnings Conference Call
March 15, 2024 9:00 AM ET
Company Participants
Rene Hoffmann - Head-Investor Relations
Rolf Buch - Chief Executive Officer
Philip Grosse - Chief Financial Officer
Conference Call Participants
Charles Veasey - UBS
Jonathan Kownator - Goldman Sachs
Bart Gysens - Morgan Stanley
Rob Jones - BNP Paribas
Marc Mozzi - Bank of America
Paul May - Barclays
Marios Pastou - Societe General
Pierre-Emmanuel Clouard - Jefferies
Manuel Martin - ODDO
Denese Newton - Stifel
Kumar Neeraj - Barclays
Simon Stippig - Warburg Research
Presentation
Operator
Ladies and gentlemen, welcome to the Vonovia SE Full Year Results 2023 Analyst and Investor Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Rene. Please go ahead.
Rene Hoffmann
Welcome everybody to our call. You will all have had a chance to download the presentation. If not, you'll find it as always on our website. Rolf and Philip will now present the results and, of course, will allow for enough Q&A at the end of the call. There's a few things to unpack, but I'm confident that after this call, you will agree that it is not complicated only more transparent and all the ingredients are there.
With that, let me hand you over to Rolf.
Rolf Buch
So thank you very much, Rene. Welcome also from my side. And before we jump into the presentation, I would like to start with a preface on Page 4 to frame the discussion and to put things into context. As you probably remember, in our earnings call in May '22, at the beginning of a different time for our sector and for Vonovia, we made several adjustments and they all had a common theme. We would prioritize cash generation over profitability to strengthen our balance sheet. Of course, this decision does not come for free. The decision was to sell assets and develop -- for example, develop and sell activity without a margin. So now we cannot complain that the margin is missing.
We have been successful with our cash generation for a total amount of €5 billion in 2023, but this cash generation has come under the expenses of earning growth. It was the right decision to take even though it was clear that the non-rental segment, the value add, recurring sales and the development to sell would be underperforming as a consequence of our preference for liquidity over profitability.
So it should not come to you and to us as a surprise that the total adjusted EBITDA and the group FFO are below prior year numbers. The largest segment by far, the rental segment, continues to perform strongly and is increasingly supported by the relevant long-term mega trends. Given the rule based nature of our markets, stronger rents take some time to materialize, but it is obvious that the rental segment has a rock solid and a visible upward trajectory.
The gross value decline since peak values in June '22 is more than 21%. This has been mitigated by accretive modernization projects and rent growth to a net effect of 14%. This magnitude of losses puts pressure on our LTV, but thanks to our disposal efforts, our pro-form a LTV stands at 46.7% instead of almost 51% which would be the number if you would assume no disposals in '23.
Don't get me wrong, 46.7% is still too high and our work is not yet done. But it should be evident that we are willing and able to fight in a meaningful way against the trend. So, '23 was not easy and the financial results will not be ranked high in Vonovia's history book. But we did faithfully execute on the key priorities which we have set in summer 2022 and we will continue on this path until our debt KPIs are safely back in the right ranges to protect our current rating and for us to be able to think about playing offense again.
And with this, let me start with the actual presentation and that begins with the highlights on Page 5. First, the '23 result. Organic rent growth was 3.8% and there is an additional irrevocable rent increase claim of 1.8% that will be implemented after '23. There will be more color on this number later in the presentation. So, all going well in the rental segment.
Impacted by the underperformance of the other segments, total adjusted EBITDA was down 4% and group FFO was down 9.3%. The total value decline in '23 was 10.8% of which 6.6% came in H1 and another 4.2% in H2 negatively of course impacting the apparent NTA. The total sales volume in '23 was €4 billion and of €3.3 billion of them are already recorded in the 2023 accounts. We will propose a dividend of €0.90 for the financial year 2023 to our AGM in May. As was the case in the last 7 years, we will offer your shareholders the choice between cash and scrip.
Second, leverage and financing. Our LTV pro-forma of all disposal signs in '23 was 46.7%. The pro-form a net debt to EBITDA was 15.3x and the ICR was 4x. We rolled a total of €900 million secured loans last year and raised €2.5 billion in new secured and unsecured bank loans. We also extended our recurring cash flow facility in unchanged terms.
And finally to wrap up the 2023 highlights, we are excited to report that the internal investigation into the fraud allegations against former employees has been completed. It confirms our initial assessment that this had no material impact on Vonovia and that there are no indication that tenants suffered any damage. We are now examining to take legal actions for damages against involved party and we will be very resolute about it, believe me. ...
Vonovia SE (VONOY) Q4 2023 Earnings Call Transcript