Dear ladies and gentlemen, welcome to the interim results H1 2021 analyst and investor call of Vonovia SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Rene, who will lead you through this conference. Please go ahead.
Thank you, Kai, and welcome to our H1 2021 earnings call. Your hosts today are once again Chief Executive Officer Rolf Buch and Chief Financial Officer Helene von Roeder. We're in different locations today, so bear with us in case we have a slight delay here and there. I assume you've all had a chance to download the presentation. In case you have not, please go to our website where you'll find it under latest publications. Rolf and Helene will lead you through the first part of the slide deck, so pages four through 20, and of course, we'll be happy to answer any questions afterwards. Let me now hand you over to Rolf.
Thank you, Rene. Also warm welcome from my side. I hope nobody will be surprised that we have continued our good start into 2021. Our operating business and market fundamentals are fully intact, and we are following our path in managing the residential megatrends with a view toward sustainability and adequate shareholder reconciliation. COVID-19 is still a reality, which affects us in our day-to-day operational business. By now, I think it is well understood why there is hardly any impact on our financials. Our top line total segment revenue was up by 10%, adjusted EBITDA grew by 8.4%, and FFO by 13.1% or 6.6% on a per share basis. We have seen a high positive valuation momentum in H2. With a valuation cost of EUR 4.2 billion, which is well within the indicated range we have given you before.
As of June 30th, our EPRA NTA was EUR 68.44 per share, and our EPRA NRV was EUR 82.45 per share. The LTV at the end of H1 was 42% if we look at the perpetual hybrid as debt, and the net debt- to- EBITDA multiple was 12.3x. You probably all saw our last issuance in June, which were 5 bonds with a total volume of EUR 4 billion, an average tenor of 9.5 years and an average coupon of only 6.875%. Finally, before I hand over to Helene, a word on our guidance. The strong performance across all segments leads to an increase in our guidance for 2021. The guidance range of adjusted EBITDA total increases by EUR 80 million to EUR 2,055 million to EUR 2,105 million, and the range of our group FFO rise by EUR 50 million.
Improved CO2 savings, continued positive development in our customer satisfaction increase, and increased gender diversity has been the main drivers for the SPI, which we are now guiding to 104% of the relevant KPI. Our good performance on sustainability was also recognized again by Sustainalytics, where we managed to improve from 7.7 to now 6.7, which means we are ranked number 18 out of the global universe of more than 13,000 companies of all industries. With this, I hand over to Helene.
Hi, good morning from my side. On page five, we saw earnings growth across all segments, with the minor exception of development, where the project nature of this business means it is by definition a bit less linear than the other three segments. Nonetheless, we do see ourselves fully on track to deliver performance growth, not just in the overall top line, but also for all four segment EBITDAs also, hence, including development. With the exception of minor changes at the margins, we had a stable portfolio of around 415,000 apartments, so similar to last year. On that basis, rental EBITDA was up 5.4%. Supported by strong year-on-year growth in value add and recurring sales, we delivered an overall EBITDA growth of 8.4%. Accounting for lower interest expenses and higher taxes, the FFO growth was 13.1% or up 6.6% on a per share basis.
The interest expenses were, of course, lower from our refinancings. The same time, current income taxes were higher, largely as the result of increased disposals. With that, onto page six. For a change, this is a pretty clean half- year to half- year comparison, and we also do not have distortions from the season effect with warm rents more in one period than the other like we did all throughout last year. On that basis, our similar portfolio volume delivered 3.3% rental revenue growth and 5.4% EBITDA growth. Maintenance expenses were slightly higher than last year, and operating expenses continued trending down because of operational improvements, but also because of fewer COVID-related precautionary measures compared to last year. While the adjusted EBITDA operations margin of 80.4% is probably a bit elevated, the trajectory of increasing that margin, even on a stable portfolio, is clearly intact.
On page seven, we show the main operating KPIs for the rental segment. Organic rent growth was 3.4% year-on-year, of which 0.9% came from the market, 2% from modernization, and 0.5% from new construction. Our vacancy rate was 2.7%, very much in line with our expectations. Clearly, it is mostly impacted by modernization work, not by demand. The list of people interested in an apartment is getting actually longer, not shorter. Maintenance expenses were a bit higher than last year, as we continue to err on the side of caution and keep our assets in very good condition. Finally, our rent receivables in Germany were at an all-time low at the end of the reporting period. We had seen a temporary increase during the Corona pandemic, this has been overcompensated by now, and we are actually below pre-COVID levels. Back to Rolf.
Let's go on page eight, on the value-add segment. It's not a lot to report there. We have continued our good start here as well. Both external and internal revenue is up compared to previous year and helped to achieve a 17% EBITDA increase. As expected, we are getting better step by step, keeping rolling out what works and try to come up with new ideas. On the next page nine, we are talking about our recurring sales. We have completed the sale of 1,865 apartments in our recurring sales segment in the first half. This is relatively high volume can be explained by two effects. First of all, a bit of spillover from the strong demand already in Q4 last year that had got pushed into 2021, and some harder-to-sell units, which we managed to sell as a block.
In spite of the elevated volumes and in spite of the block sale, average fair value step up were almost fully in line and well above of our initial target of approximately 30%. This gives you later a very good sense also, which Helene will talk about the valuation. With this, back to you, Helene.
Let's look at the development segment on page 10. This segment includes all new constructions of apartments by way of entirely new buildings, but it does exclude additions of floors on existing buildings. In H1 2021, you see how this segment is actually a bit less linear overall compared to the other segments, especially rental and value add. Development to sell was quite a bit higher than last year. Development to hold was lower, and combined with more normalized operating expenses, the overall EBITDA does fall short of H1 2020. This level of volatility can probably be expected, but if I do look at the remainder of the year, where we also expect the sale of a larger project in H2, I am very optimistic that we will deliver more EBITDA in the development segment than last year.
If we go to page 11, we can see that including the floor additions, we completed 841 apartments, over which overall, of which 389 apartments were to hold and 452 apartments to sell. Again, this business is not exactly linear, we continue to aim to complete around 1,500 apartments to hold and another approximately 800 apartments to sell. For the overall pipeline, we are looking at a long-term potential of 38,000 apartments for our own portfolio and another 9,000 apartments that we will be selling to third parties. Page 12 does show the H1 valuation result. As in prior years, we took a pragmatic approach to the H1 valuation, did not value the entire portfolio, only about three-quarter. This includes the 30 largest and most dynamic cities in Germany, plus Vienna, plus Sweden. The rest of the portfolio was not revalued, only adjusted for EUR 109 million capitalized investments.
On this basis, values are up by a total of EUR 4.2 billion. In the table on the bottom right of this page, we show the like for like valuation result of the revalued portfolio with 9.2% for H1 2021, and on the right-hand side, the comparable for H1 last year, where we had 5.6%. Clearly, a stronger dynamic compared to last year. The new valuation puts the overall portfolio at a 25.6x in place rent multiple and EUR 2,215 fair value per sq m. Page 13 shows a bit more detail across our 15 regional markets in Germany, plus Sweden and Austria. As I said, we did a valuation of our 30 largest and most dynamic cities in Germany, but not for the rest. How much of a regional market was revalued is indicated by the pie charts.
For some regional markets, like Dresden, Berlin, Kiel, Bremen, or the Southern Ruhr area, almost the entire asset base was revalued. For others, such as Stuttgart or the North Ruhr area, only a small part was revalued. The table gives you the breakdown of the total value uplift between performance and yield compression on the one hand, and investment on the other. The map on the right-hand side shows the total value growth, including investments. One word of the valuation in Berlin on page 14. As you can see in the chart, Deutsche Wohnen's fair value in Berlin was somewhat lagging compared to Vonovia's value as of June last year. With the H2 valuation, Deutsche Wohnen then saw a large uplift of 10% that resulted in a fair value level that Vonovia reaches only now on the basis of this H1 2021 valuation.
This suggests that there's little room for Deutsche Wohnen for a material valuation uplift at the half year mark, which we understand is the very reason why Deutsche Wohnen plans not to do a half year valuation this half year. Let's go to page 15 for our investment program. We are very much on track for our guidance between EUR 1.3 billion and EUR 1.6 billion for 2021, and most important, continue on that level that is sufficient in light of our CO₂ reduction goals. By now, almost all of the work to be completed this year has at least been kicked off. We have a pretty good visibility in spite of some weather and COVID related delays that we had seen at the beginning of the year. Let's move on to page 16 for the NTA and the NRV.
The strong valuation uplift in H1 helped increase the EPRA NTA to EUR 68.44 per share or 9.1% compared to year end. The EPRA NRV rose to EUR 82.45 per share. Please note that for the NRV, we are using the same value for the intangibles that we have showed for Q4 2020, as this is only updated once a year. As a reminder, the NTA does include deferred taxes and purchases costs for our hold portfolio, but not for our sales portfolio. The ratio hold/sell for NTA purposes is 88%- 12%.
We know that some of you adjust our NTA for purchases cost, and if you were to do that leads to an EPRA NTA of EUR 62.09 per share. On page 17, we have the LTV and the net debt to EBITDA multiple. Based on our standard definition, the LTV was 40.5% at the end of H1 2021.
In light of the call date for the perpetual hybrid at the end of this year, it makes probably sense to look at the LTV, including the hybrid, and that is 42%, because we are now in a position to repay it with straight debt. Either way, the LTV is well within our target range, which continues to be between 40%- 45%. The main changes are the increased liabilities from our June bond issuance and the revaluation effect, plus obviously the Deutsche Wohnen stake at the fair value. The net debt to EBITDA multiple was 12.3x, hence similar to year end 2020. There have been some discussions in the past, let me reiterate our definition of the net debt to EBITDA multiple.
In order to mitigate distortions by comparing an accumulated number like EBITDA with a spot number like net debt, we are using the average net debt of the preceding five quarters in relation to the EBITDA of the last 12 months. Please do note that our EBITDA number is reduced by the IFRS 16 effect and does not include any positive impacts from our non-core sales. Page 18 has all the relevant financial KPIs. You have heard me say on many occasions before that I do think that LTV alone is not a very meaningful indicator for the resilience of a company's balance sheet. Very surprisingly, I still haven't changed my mind. I like to look at it at least together with the fixed or hedged debt ratio and the maturity profile. We clearly continue to be in very good shape here.
You have all seen it, I'm sure. In the context of interest rate discussions or concerns, it is still interesting to note our bond issuance in June. We issued five bonds with maturities between 3.25 years- 20 years, with an average maturity of 9.5 years. The average coupon was 0.6875%. To be honest, if I look at these terms, I am not really worried as it looks like refinancing will remain an opportunity. On page 19, we show the guidance for the current year. We see a strong performance across all segments, which leads to an increase of our guidance for several KPIs. Compared to our previous guidance, we have increased the range of the adjusted EBITDA total by EUR 80 million. The guidance range of the group FFO has also been adjusted upwards by EUR 50 million. Why is that?
In our recurring sales segment, we see an increased sales volume of approximately 2,800 units and high price levels with an expected fair value step up above the 35%. In the development segment, we expect the sale of a larger project in H2. Higher sales volumes come with higher tax payments, and together with some consolidation effects, this is why the increased adjusted EBITDA total cannot be fully passed on to the group's FFO. We also expect a strong development of our sustainability performance index, the SPI, mainly driven by CO₂ reduction, the customer satisfaction index, and gender diversity. With that, back to Rolf.
For me, it just is one slide left, which is the summary of today's call. One, the first is the high resilience on our operating performance continues. The market fundamental and long-term outlook remain favorable. This makes our stock perfect for investors who like the boring nature of our business and the predictability of our business. I know that the Deutsche Wohnen transaction has taken up a lot of airtime over the last weeks. However, you can clearly see in our numbers that it has not impacted our performance. Two, we remain confident that we continue to deliver earnings and value growth for this year and beyond. Three, ESG focus and stakeholder reconciliation are more crucial these days than ever. As we have said before, most of our actions have more than just an economic dimension.
Expect us to continue and try to strike the right balance going forward. To us, that is not a conflict. We have built a business that can deliver the kind of returns that you expect from us and still make sure that we do it in a way that treats other stakeholders fairly as well. In the end, finding relevant solutions to ESG challenges will be rewarding in multiple ways, financially, for our future, and also beyond. With this, thank you very much, and back to Rene.
Thanks, Rolf. I'm going to give it right back to Kai for the Q&A, please.
Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your questions answered before it's your turn to speak, you can dial zero two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question we received is from Marc Mozzi of Bank of America. The line is now open, sir. Please go ahead.
Thank you very much. Very good afternoon to all. I have three questions on my side. The number 1 is, did you book any acquisition of Deutsche Wohnen shares in your balance sheet as of June 30th? Shall I go one by one, or you would like me to ask the three questions in one go?
Yes, one by one is better. Helene, can you do it?
Yeah, of course. You can see it in the financial assets on our account.
Can you give us an absolute number? Is it EUR 1 billion, EUR 2 billion? Just trying to figure out how big it was at June, just to understand how the leverage has moved accordingly.
If you give me a few minutes, I'll deliver that question quickly.
Only Marc Mozzi can-
I need to find the account. Hold on. I've got it. EUR 3.3 billion.
EUR 3.3 billion. Okay. That's your entire 18% that you disclosed at the time of the first offer, if I understand correctly?
Yeah.
My second question is about your FFO full-year guidance. Does it include the benefit of refinancing your current perpetual bond or hybrid bond?
Yeah. That is included in the FFO guidance. We are assuming that we're replacing that with senior debt, and obviously you've seen the spread level. De facto, as we pay the hybrid, we will have a lower interest rate. What you need to keep in mind is that it's actually only for two to three months, so the effect is de minimis.
Okay. That's excellent. Thank you very much. Very precise. Do you have any sense of how much you're going to have to spend to help your tenants, which have been suffering from the flood in Germany recently?
No. Actually, the amount of money which you will not recognize in our balance sheet. It's actually 3,000 apartments which were considered, but mainly because they have water in the cellar. It was no massive damage. No destroyed buildings. Still, 3,000 cellars with water is not nice for the people. We were able to manage all our technicians to get in this zone. We were relatively quick by getting electricity back because the firemen shut down the electricity and then we have to get up the electricity and this normally takes time. We were a little bit faster because we put people from Frankfurt and surrounding regions to help there. In the balance sheet you don't find any impact.
Okay. Thank you very much. Thank you. That's it for me.
The next question received is from Kai Klose of Berenberg. Your line is now open, sir. Please go ahead.
Yes, hello. Good afternoon. I've got two quick questions, if I may. The first one is on page 10 of the presentation regarding the operating expenses in the development segment. You mentioned that in H1 this year, that was back at a normalized level. Maybe you could give a bit more details what this means and why it was lower in the first half of last year. Second question related to that, on page 11, you intend to complete around 1,500 units after around 400 units in the develop to hold segment being completed in H1. Could you indicate what is the current pipeline of units under construction to a bit better, let's say, feeling if this target can be reached?
Yeah. Okay. The normalized operating expenses are mainly because we sort of ramped up our development business a bit. We've purchased Bien-Ries, and ultimately we sort of ran through the numbers to sort of include all of the expenses associated with the purchases. Also we were able to, in H1 2020, we had booked some reserves which we were allowed to release in H1, which shows the combination between the two. Yeah. I'm not sure I've got the full pipeline, but normally when we guide, it means that the rest of the pipeline actually comes across. I don't have the exact number on top of my head.
Thank you.
The next question we received is from Thomas Neuhold of Kepler Cheuvreux. Your line is now open, sir. Please go ahead.
Good afternoon. Thank you very much for the presentation. I have 3 questions, and I think it's best to take them one by one. The first is on the investment market environment. You booked decent revaluation gains in H1, yet you increased the fair value step up from 30%-35%. Does this mean that the investment market evolved stronger than you were expecting six to nine months ago? Can you provide us some color what you see in investment market?
I think this is probably the normal volatility of the market. You should not over-interpret it.
Okay. Good. The next two questions are regarding the next Deutsche Wohnen offer. Firstly, we have read that some investors think the offer for Deutsche Wohnen is too low. If the new offer would also be rejected, do you see theoretically additional headroom to increase the offer again, or is the increased price already fully maxed out in your view?
To be very clear, in the business combination agreement, we agreed with Deutsche Wohnen that this last offer, which we can do it, will be the last offer, which we will do. Second, of course, there is a standstill agreed in the BCA on the purchases of shares that we are not coming into a mandatory offer. This offer will be the last offer Deutsche Wohnen shareholders will receive from Vonovia for the next year at least.
Okay. The next question is related to the combination agreement. Is it thinkable that if the tax changes that you might install any combination agreement before the end of the three-year grace period you implemented or will implement with the next offer?
I'm sorry. I'm hearing so much bullshit about the DPLTA agreements. The DPL agreements, and this has been discussed even five years ago, is not needed to capture synergies. To speculate, it's really full speculation. Vonovia's business models allow us to realize the synergies via service contracts. We have often explained it. In fact, most real estate companies, and you know it as specialists, do not conclude such a DPLTA as negative tax implications may arise. This is also the reason why it's highly unlikely that Vonovia would enter into DPLTA even after those years, which we have made the binding commitment. Of course, Vonovia is standing to its binding commitment.
Okay. Thank you much.
It's just-
Also, thank you.
Ladies and gentlemen, before we take the next question, just a reminder, if you would like to ask a question, please press zero one on your telephone keypad. The next question is from Jonathan Kownator of Goldman Sachs. Your line is now open, sir. Please go ahead.
Good afternoon. Thank you for taking my question. Two question, if I may. The first one to follow up from Thomas' one. If you can help us understand how the investment market is further developing and if you expect further revaluation gains at H2. I think you've said so in the report without necessarily quantifying that. Just wanted to have your thoughts there. Second question, to come back to the GEG law and just wanted to check if you have further progress in your analysis of the impact on your investment capacity and on the returns that you can generate on modernization. Thank you.
I think the second, no, we don't have. We will come up as promised in our probably year-end, then we will get a guidance for the 2022. This will then hopefully also be a combined guidance for Deutsche Wohnen and Vonovia in this respect as well. The first one for the valuation, I think we have done the H1 valuation. There is a momentum, which is surprisingly, but it is too early to talk about the H2. Give us a little bit time and we will come back to this also again in the year-end where we have more clarity.
Okay, thank you.
Ladies and gentlemen, as we received no further questions, I hand back to the speakers.
Okay. Thank you very much, Kai, and thank you everybody on the call for dialing in. This concludes today's call. Our Q3 results, as Rolf said, will be out in November. Until then, I'm sure there's a few events we'll be talking about. If you have any questions, as always, let me know, let the team know, and we're happy to connect. That's it from us for today. Have a good day, everyone. Bye-bye.
Dear ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.