German property company Aroundtown decides against dividend

Aroundtown reported a 1% increase in Q1 2025 net rental income to €295 million and a 211% rise in net profit to €319 million, but will not recommend a dividend for 2024 to maintain a conservative financial position. The company's loan-to-value ratio decreased to 41%, and it issued a €750 million bond at a 3.5% coupon following the quarter, while reaffirming its full-year 2025 guidance.

Analysis

Aroundtown's decision to forgo a 2024 dividend, aimed at preserving a conservative financial position, is set against a backdrop of solid Q1 2025 operational performance. The company reported a 1% year-on-year increase in net rental income to €295 million, with like-for-like rental income growing 3%, effectively mitigating the impact of asset disposals. Adjusted EBITDA rose 1% to €251 million, while FFO I remained stable at €76 million, or €0.07 per share. A significant highlight was the 211% surge in net profit to €319 million, boosting basic earnings per share to €0.20 from €0.04 in Q1 2024. Balance sheet metrics improved, with the loan-to-value ratio declining to 41% from 42% and the interest coverage ratio increasing to 4.3x. The company's financial standing was further reinforced by a positive revaluation of 0.8% on 15% of its portfolio, contributing to an EPRA NTA increase to €7.6 per share. Post-quarter, Aroundtown successfully issued a €750 million bond at a 3.5% coupon, which was three times oversubscribed and has already repaid €1.3 billion in debt year-to-date, while also confirming its full-year 2025 guidance.

Key Decisions for Investors

• Investors should weigh the strategic dividend omission for balance sheet conservatism against the robust Q1 2025 operational performance and access to capital evidenced by the oversubscribed bond issue.
• Consider the improved credit metrics, including a lower loan-to-value ratio and higher interest coverage, alongside reaffirmed full-year guidance, as indicators of financial stability.
• Monitor the company's continued asset disposal program and debt repayment progress as key factors for future value creation and potential resumption of dividends.