Vonovia plans further growth and consolidation in 2022, Adler plans unclear

It's been an adventurous business year for DAX-listed Vonovia, Germany (and Europe's) largest residential housing company, with action on all fronts. The company announced this week that it grew significantly in 2021 and plans further growth this year - albeit without any major acquisition in its plans.

Last year the company's group FFO increased notably from 1.3 to 1.67 billion euros. The acquisition of Deutsche Wohnen last year also contributed to the growth, with its figures contributing to the last three months of the year. Shareholders are in line for a slightly increased full-year dividend of €1.66.

The merger made Vonovia Europe's largest housing group, with more than 568,000 flats in numerous cities and regions in Germany, Sweden and Austria. In addition,the company manages around 71,500 apartments for third parties. In Germany, Vonovia has a market share of 2.1% with more than 505,000 apartment. The overall portfolio value is €95.4bn.

Presenting the figures at company HQ in Bochum, CEO Rolf Buch said, "In 2021, we achieved our targets and even exceeded them in some cases. Our 2022 guidance also shows significant growth."

For 2022 Vonovia's operating results are expected to rise to €2.0 to 2.1bn, with turnover expected to increase to between €6.2 and€6.4bn. Last year, operating profit rose 24% year-on-year to €1.67bn, while revenues climbed 19% to just under €5.2bn. "We're anticipating to increase our turnover, EBITDA and Group FFO by more than 20%," said Buch.

Rents rose on average to €7.33 euros per square metre - 2.4% more than a year earlier. Modernised apartments were the main contributors to the increase. Companies like Vonovia can pass on some of the costs for energy-saving renovations, such as thermal insulation and the replacement of old heating systems and windows, to the tenant.

Buch acknowledged that rising energy prices in the wake of the war in Ukraine would be an additional burden on tenants, and would lead to increased social imbalance. However, he warned that it wasn't simply a matter of turning off the heating and pulling on extra clothing instead. Any absence of heating would negatively affect buildings, he said, leading to mould and other structural deficiencies. Germany still needs imported energy, but needs to wean its off it as soon as possible, he said.

Vonovia itself plans to achieve climate neutrality in all its buildings by 2045 - five years earlier than originally planned - through building renovation and the use of renewable energies in its housing clusters.

Larger acquisitions are not planned for this year, said Buch, adding that the company first wants to complete the integration of the two companies. However, it is quite possible that smaller residential portfolios, for example in Sweden, will be acquired.

Buch had nothing to say in his statement about Vonovia's recently-acquired shareholding in Adler Group, which is currently the subject of a short-selling onslaught by UK-based short-seller Fraser Perring, which is accusing the company of fraud, manipulation and deception - accusations that Adler denies.

Vonovia now owns 20.5% of the shares in Adler almost by default, as a result of a prior share-package options deal underwriting a loan with Aggregate Holdings, who now become a small 6%-shareholder. Last November, Buch said he would not rule out the possibility of making a majority takeover, depending on how things developed.

A special audit by KPMG has so far been "unable to refute the allegations" against Adler Group (normally not a good sign), and has asked for more time to pursue its investigations. It's not quite clear what Vonovia plans to do with its Adler holdings, but in the meantime the company can take comfort in the fact that its ex-CFO has now moved to Adler as chairman of the Supervisory Board, which should help Vonovia to keep an eye on things.

Buch himself, who joined Vonovia in 2013 and brought it onto the stock market and into the DAX, recently signed a five-year extension to his contract until 2028.