LEG Immobilien SE specifies 2022 earnings forecast
LEG Immobilien SE confirms its profit expectations for 2022 following a good business performance to date despite the difficult operating environment and specifies the full-year forecast for FFO I, previously the most important earnings indicator in LEG's management model, within a range of 475 to €485 million (formerly 475 to €490 million). Investments in the housing stock are expected to amount to around 42€/sqm and thus remain below the original forecast (46 to €48), as already announced when the half-year report was published. LEG will publish the full set of figures for the third quarter of 2022 and the outlook for 2022 and 2023 on November 10, 2022.
At the same time, the company is aligning its strategy to the changed market environment. This is because the Ukraine and energy crises, high inflation and rising interest rates are also presenting LEG with new challenges – despite the continued high demand for its "affordable housing" product. This relates particularly to increased financing costs. For 2023, the Executive Board has therefore decided, with the approval of the Supervisory Board, to focus the business strategy even stronger on the highest possible capital efficiency. Therefore, the company's performance for 2023 is linked to the AFFO in order to better reflect the earned and freely available cash flow.
"In 2023, we will reduce investments per square meter, which we have greatly expanded in recent years, to roughly the same nominal level as in 2019. This is a scale that will enable us to continue offering good, contemporary, and affordable housing," explains Lars von Lackum, CEO of LEG Immobilien SE. To further strengthen liquidity, the company has decided, as previously reported, not to make any further purchases and to discontinue its project development business.
Consequently, the company no longer guides the key figure FFO I in the future – since this is significantly influenced by the capitalisation rate of investments – but instead reports the FFO I adjusted for capitalised CapEx measures, the AFFO. For 2023, the company expects AFFO in the range of 110 to €125 million (expectation for 2022: 70 to €80 million). For rental growth in the comparable portfolio (like-for-like), which also continues to be reported as part of the guidance, we expect 3.3 to 3.7% and confirm close to 3.0% for fiscal year 2022.
In particular, the increased focus of the business strategy on maximising potential capital efficiency is expected to lead to a development of FFO I – now no longer relevant – below the current market expectation in 2023. Based on the economic planning, the calculated FFO I of LEG Immobilien SE for 2023 is in a range of €425 – €440 million.
In addition, the dividend distribution for fiscal year 2023 will also be based on the new cash-oriented key performance indicator system. The plan is to measure the dividend payout based on two components: Depending on the market environment, 100% of AFFO is to be distributed on the one hand and a part of the net proceeds generated from real estate sales on the other. As in previous years, the dividend proposal for fiscal year 2022 will be based on FFO I. Nonetheless, the payout ratio of 70% is subject to further market developments.
CEO Lars von Lackum says: "Our product – good housing at fair prices – enjoys more demand than ever and stands for stability even in difficult times. Our clear focus enables us to adapt our business strategy quickly and precisely to the volatile economic environment. This is how we are steering LEG safely into the future."
A full overview of the 2022 outlook can be found here: