Economic Development in the First Half-Year of 2022
Key Events During the Reporting Period
Rising interest and inflation rates, partly due to the war in Ukraine, coupled with uncertainty in the commodity markets and supply chains that remain disrupted, create a highly complex environment for corporate management. The ongoing monitoring of the factors currently prevailing requires a regular reassessment of the raising of capital, capital allocation, the portfolio structure and the operating cost situation in the value chain processes. In addition, uncertainty remains as to how the coronavirus pandemic will develop going forward. These analyses therefore allow measures to be developed for short, medium and long-term action, with the merger with Deutsche Wohnen presenting the opportunity to analyze the portfolio in its entirety with regard to value and yield development.
We remain convinced that the challenges associated with megatrends affecting the housing industry can best be solved by thinking and acting in terms of neighborhoods. As a result, the lion’s share of the portfolio in Germany consists of neighborhoods that we have grouped together as urban quarters. The remaining existing buildings largely comprise smaller clusters of buildings and solitary properties that we have grouped together as urban clusters. Even though, unlike urban quarters, urban clusters do not relate to entire neighborhoods, they are also managed using the same long-term asset and property management strategies based on our operating platform.
In addition, the latest portfolio analysis led to the creation of a further sales portfolio for less profitable strategic holdings alongside the sales portfolio for non-strategic holdings (Non-core Disposals) and Recurring Sales within the strategic cluster. In the future, the corresponding income will be reported as part of the Recurring Sales segment and will be used primarily for internal financing.
In February 2022, control of 20.5% of the shares in the Adler Group, which were previously held by Aggregate Holdings Invest S.A., had passed to Vonovia as part of a debt recovery action. The shares originally served to secure one of Vonovia’s loan exposures. The exercise of the voting rights attached to the shares by Vonovia was approved by the Federal Cartel Office. Vonovia also retains all options for action, including the sale of some or all of the shares. In the current market environment, however, the company has ruled out any further purchases, let alone a full takeover.
Due to the lower price of the Adler Group’s shares, an impairment loss on the investment amounting to € 160.6 million was recognized on the fair value of the shares in accordance with IFRS, irrespective of the hidden reserves in the investment with regard to the pro rata equity.
As a result of the higher interest rates, there was a further increase in the cost of capital, meaning that goodwill and the trademark rights in the nursing and assisted living sector were written down by € 121.0 million, with the investment in QBI accounted for using the equity method being written down by € 120.8 million. On the other hand, the increase in the discount rate for the measurement of pension provisions translated into actuarial gains.
The operating business was stable as expected, with moderate effects resulting from the war in Ukraine and the coronavirus pandemic in some areas. These effects related primarily to the procurement of raw materials and to energy costs.
The Customer Satisfaction Index (CSI) was stable in both a quarter-on-quarter and year-on-year comparison in the second quarter of 2022. This means that customers confirm Vonovia’s consistently good quality of service.
In the second quarter of 2022, two bonds worth € 500 million each were repaid early before their maturity date of July 9, 2022. Commercial papers in the amount of a further € 500 million were repaid as planned.
In September 2021, Vonovia and Deutsche Wohnen sold residential and commercial units to public housing companies in Berlin based on an agreement reached with the Berlin State Government. The transaction with a volume of € 2,339.0 million was completed in 2022.
In June 2022, Vonovia signed the agreement of the Alliance for New Housing Construction and Affordable Housing in Berlin (Bündnis für Wohnungsneubau und bezahlbares Wohnen in Berlin). As part of the alliance, Vonovia supports the stated objectives and implementation steps to find a constructive solution to the tense situation on the Berlin housing market together with all of the players involved and, in doing so, to create a basis for reliable construction, renovation and rental.
The work on integrating Deutsche Wohnen was continued as scheduled in the second quarter of the year. The focus was on ensuring that the measures were consistent with the company law requirements and on planning the details of the actual integration work.
The Annual General Meeting held on April 29, 2022, resolved to pay a dividend for the 2021 fiscal year in the amount of € 1.66 per share. In a year-on-year comparison, this corresponds to an increase of € 0.08 – taking into account the increased number of shares due to the capital increase following the takeover of Deutsche Wohnen. As in previous years, shareholders were offered the option of choosing between being paid the dividend in cash or being granted new shares. During the subscription period, shareholders holding a total of 47.85% of the shares carrying dividend rights opted for the scrip dividend as opposed to the cash dividend. As a result, 19,252,608 new shares were issued using the company’s authorized capital for a total of € 616,815,055.10. The total amount of the dividend distributed in cash therefore came to € 672,336,610.64.