Instone Real Estate Group SE · XETR:INS
Instone Real Estate — FY2017 Earnings Presentation
50 slides from Instone Real Estate's earnings presentation, May 2018
Slide 1: FY 2017 Results Presentation
FY 2017 RESULTS PRESENTATION MAY 2018
Slide 2: Today's Speakers
Today‘s Speakers Kruno Crepulja Oliver Schmitt Chief Executive Officer Chief Financial Officer since 2008 since 2010 Joined Instone’s predecessor in 2008 Joined Instone’s predecessor in 1984 CEO since 2008 CFO since 2010 21 years experience in real estate 33 years experience in construct
Slide 3: Highlights
Highlights We are fully in line with market consensus for FY 2017 Adjusted revenues of €201m Gross profit margin(1) of 39.6% Adjusted(2) EBIT of €45m Adjusted(2) ROCE of 14.3% Post money net financial debt of €215m We are positive for FY 2018 and confirm our medium-term plan Our proj
Slide 4: Reconciliation of reported and adjusted results FY-17A
Reconciliation of reported and adjusted results FY-17A Commentary In €m ■ PPA for the acquisition of formart in 2014 resulted in a write-up of current assets Reported PPA Transaction Adjusted Results amortization costs Results of €36.4m, an increase of liabilities of €7.8m and deferred tax liabiliti
Slide 5: We are positive for FY 2018
We are positive for FY 2018 ... Revenues of €320-330m (with sales recognition being largely back-ended during the year) Operative performance of >€500m Gross profit margin(1) of approximately 28% Adjusted(2) EBIT of €42-48m Adjusted(2) EBT of €25-30m Stable tax rate of approximately 30%
Slide 6: ...and confirm our Medium Term Plan
...and confirm our Medium Term Plan Target annual delivery volume >2,000 units Target annual sales volume €900 – 1,000m Target gross margin (including sales commissions) (1) ~25% Target platform costs (includes all overheads between gross profit and adj. EBITDA pre PPA) ~€50m (2) Cost of debt as % o
Slide 7: Our project portfolio remains strong
Our project portfolio remains strong €3.4bn expected sales volume 8,390 units 45 projects ~45% of portfolio in Frankfurt and NRW 24% of portfolio under construction (Project portfolio as of 31.12.2017) Unit sales agreed No unit sales agreement 7 |
Slide 8: Project execution well on track
Project execution well on track 8 | Source: Company information.
Slide 9: Identified acquisition potential of >€13.0bn GDV
Identified aquisition potential of >€13.0bn(1) GDV is the fundament for sustainable profitable growth 9 |
Slide 10: We are filling up the pipeline, ensuring future growth
We are filling up the pipeline, ensuring future growth Close to signing of 4 new projects Total expected sales volume of ~€470m Total units of ~1,340 Total living space of ~103,000 sqm 10 | Localization acquistion project
Slide 11: To summarize
To summarize Fully delivered on FY17 in line with market consensus Profitable Our well-located €3.4bn(1) project portfolio is the basis for our profitable growth Growth Strong acquisition potential >€13.0bn(2) and continue to fill up our pipeline Leading nationwide platform with potential for scalab
Slide 12: Appendix
APPENDIX ADDITIONAL FINANCIAL INFORMATION (PAGES 13-18) ADDITIONAL COMPANY INFORMATION (PAGES 20-47)
Slide 13: Income statement
Income statement Commentary In €m 2016A 2017A 1 Operating performance consists of booked revenues from realized projects as well Total revenue 203.6 199.7 as change in inventories due to projects currently ramping up Changes in inventories 158.9 120.2 Only when a project is completed 4-5 years follo
Slide 14: Summary historical financials
Summary historical financials 14 | Source: (1) Company information, audited historical financials Operating performance defined as revenue plus net change in inventories. (2) Based on reported EBIT pre PPA amortization and revenue pre PPA amortization. (3) Percentage of completion, completed contrac
Slide 15: Source: Audited historical financials, Company information.
Source: Audited historical financials, Company information. 15 | .
Slide 16: Balance sheet (1/2)
Balance sheet (1/2) Commentary In €m 8 Inventories partially comprised of unfinished products from ongoing development 2016A 2017A projects. Due to the first-time consolidation of Instone Real Estate Development Intangible assets 0.0 0.0 GmbH in 2014 and Instone Real Estate Leipzig GmbH in 2015, inv
Slide 17: Balance sheet (2/2)
Balance sheet (2/2) Commentary In €m 2016A 2017A 10 Non-current financial liabilities for the financial year 2017 were reduced to €241.0 Share capital 0.0 0.0 million (2016: €300.9 million). €48.0 million of the liabilities towards the shareholders Capital reserve 37.4 85.4 of Instone Real Estate Gr
Slide 18: Net financial debt computation
Net financial debt computation Source: Company information based on balance sheet as of 31 December 2017. 18 | Note: Primary issuance costs were estimated on basis of 31 March 2018
Slide 19: Additional Company Information
ADDITIONAL COMPANY INFORMATON
Slide 20: The Instone opportunity
The Instone opportunity: Note: Key metropolitan regions include Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Leipzig, Munich, Stuttgart. (1) For Germany’s key metropolitan regions, based on average purchase prices for new units as reported by Bulwiengesa. (2) Bulwiengesa, Potential Analysis Germ
Slide 21: Instone is a leading residential developer in Germany
Instone is a leading residential developer in Germany 21 |
Slide 22: Leading and scalable real estate development platform
Instone has successfully positioned itself as a leading and scalable real estate development platform with rapid growth prospects Source: Company information. (1) Based on expected sales volume for fully developed projects as of 31 December 2014. 22 | (2) Based on expected sales volume for fully dev
Slide 23: Fast-growing German metropolitan housing market
Fast-growing German metropolitan housing market (1) Bulwiengesa, Potential Analysis German Housing Market, compiled for Instone as of 24 October 2017. 23 | (2) Bertelsmann population report. (3) Deloitte, Property Index July 2017. (4) CBRE Germany Real Estate Market Outlook 2017.
Slide 24: Structural housing need with material unmatched demand
Structural housing need with material unmatched demand Unmatched demand of 90,000 units through 2020 in Instone's core markets further fuelled by urbanisation and immigration trends (1) Bulwiengesa, Potential Analysis German Housing Market, compiled for Instone as of 24 October 2017 (Berlin, Dusseld
Slide 25: Favourable regulatory framework leading to attractive cash flow profile
Favourable regulatory framework leading to attractive cash flow profile Significant amount of construction costs covered by customers’ regular payments 25 | (1) MaBV - Real estate agent and commercial construction industry ordinance (“Makler- und Bauträgerverordnung”). (2) Unless significant delays
Slide 26: Leading nationwide platform in a fragmented market
Leading nationwide platform in a fragmented market Source: Bulwiengesa, Potential Analysis German Housing Market, compiled for Instone as of 24 October 2017 based on companies’ own declarations and Bulwiengesa estimates for Leipzig. 26 | (1) Includes projects in Berlin, Cologne, Dusseldorf, Frankfur
Slide 27: Rigorous control over the entire development process
Rigorous control over the entire development process Diligent risk management at every step of the development process Source: Company information. 27 | Note: Statistics refer to projects completed in 2015, 2016 and 2017 unless otherwise stated. (2) Excluding €1.8m (less than 0.1% of total number) f
Slide 28: Consistent project-level returns and margins
Instone has achieved consistent project-level returns and margins… Strong and consistent gross margin performance Source: Company information as of 30 September 2017. 28 | (1) Weighted average by expected sales volume. (2) Lower initially planned margin due to general contracting, rather than usuall
Slide 29: Continued efficiency improvements
… enabled by continued efficiency improvements Scaling effects and cost improvements are paired with favourable market conditions 29 | Source: Company information. Note: Projects approved since 2011 but completed between 2015 and September 2017, weighted by sales volume. (1) Analysis conducted for I
Slide 30: Products well priced according to local markets
Instone’s products are well priced according to local markets Micro locations and build quality drive differences between single projects and market averages 30 | Source: Bulwiengesa, Potential Analysis German Housing Market, compiled for Instone as of 24 October 2017.
Slide 31: Visibility driven by well-located €3.4bn project portfolio
Visibility driven by well-located €3.4bn(1) project portfolio 31 |
Slide 32: Core competency in acquiring top priority projects
Core competency in successfully acquiring top priority projects from wide range of market opportunities 32 | p.a. average of 1bn in acquired project volume over the last 3 years
Slide 33: Solution provider to sellers of land
Solution provider to sellers of land Strong access to land due to master planning expertise and deep local networks Source: Company information. 33 | Note: Breakdown based on 2015-2016 acquisitions.
Slide 34: Leading nationwide platform with scalability potential
Leading nationwide platform with scalability potential Low-risk scale-up strategy by adding modular project teams at branch level 34 | (1) As of 30 September 2017. (2) Management estimate. (3) Includes staff costs of approx. €25m, professional costs of approx. €4m, property costs of €3m and transpor
Slide 35: Short-term financial outlook
Short-term financial outlook Source: Preliminary BNPP Real Estate independent appraisal, management estimates. 35 | Note: Financial outlook prepared excluding impact of PPA amortization. (1) BNPP Real Estate shows total sales volume in 2019 of €489m. Difference to €507m shown is due to a condominium
Slide 36: Strong target project level and group returns
Strong target project level and group returns 36 | Source: Management estimates. Note: Financial outlook prepared excluding impact of PPA amortization. (1) ROCE defined as EBIT pre PPA / (2-year average GAV) with GAV defined as equity (NAV) + net debt.
Slide 37: Attractive newbuild economics in key German metropolitan regions
Attractive newbuild economics in key German metropolitan regions 37 | Source: Bulwiengesa, Destatis. (1) Note: Housing price index and rental index represent new units and are calculated as averages of Germany's key metropolitan regions. Key metropolitan regions includes city-level data for Berlin,
Slide 38: BNPP RE independent appraisal report methodology
BNPP RE independent appraisal report methodology Source: BNPP Real Estate. 38 |
Slide 39: Typical project cash flow profile
Typical project cash flow profile 39 | Project cash flows driven by pre sales and the MaBV framework
Slide 40: Operating performance under CC method
Operating performance under CC method CC method applied to all projects started after August 2015 Source: Company information. 40 | (1) Partially capitalized.
Slide 41: Attractive funding terms
Attractive funding terms 41 | Debt funding requirement limited in terms of quantum and duration
Slide 42: Summary independent appraisal report of project portfolio
Summary independent appraisal report of project portfolio Acquisition costs of €82m for land plots not valued by BNPP RE (project volume €409m) lead to a GAV of €955m 42 |
Slide 43: Source: Immobilienmanager.
Source: Immobilienmanager. 43 |
Slide 44: Favorable fundamentals for German residential development vs. other European markets
Favorable fundamentals for the German residential development sector vs. other European markets (1) Management assessment. (2) Management estimate. 44 | (3) Deloitte Property Index 2017. (4) CBRE Research EMEA Investment Guide 2016. (5) KPMG Property Lending Barometer 2017.
Slide 45: Deep and committed bench of management professionals
Deep and committed bench of management professionals who will continue delivering top quality development projects 45 |
Slide 46: Supervisory Board
REAL ESTATE Supervisory Board Se Comments Stefan Brendgen (German netionalty) 1 Current experience/ board mandates = ING Immobilion AG — board member (until Sep 2017) —TRIUVA Kapitalanlagogesellschaft_ mbH — chairman of tho supervisory board HAHN Immobilion Betolligungs-AG — board member — CLIMEON A
Slide 47: Remuneration and incentive structure
Remuneration and incentive structure 47 |
Slide 48: Disclaimer
INSTONE REAL ESTATE Disclaimer BY VIEWING THIS PRESENTATION, YOU AGREE TO BE BOUND BY THE FOLLOWING TERMS AND CONDITIONS REGARDING THE INFORMATION DISCLOSED IN THIS PRESENTATION. THIS PRESENTATION HAS BEEN PREPARED BY INSTONE REAL ESTATE GROUP N.V. (THE "COMPANY", TOGETHER WITH ITS SUBSIDIARIES, "IN
Slide 49: Investor Relations contact
For any questions please contact Investor Relations: Thomas Eisenlohr Head of Investor Relations Instone Real Estate Group N.V. Baumstraße 25, 45128 Essen T +49 201 45355-365 | F +49 201 45355-904 [email protected] 49 |
Slide 50: INSTONE
INSTONE REAL ESTATE
Instone Real Estate Group — FY2017 Earnings Presentation on 6ix