Hypoport Ag

to the HyperPort SE 2024 preliminary results of HyperPort. I have to start this recording here by myself for now. Jan Pahl, you all know him, has some technical issue, so he can't introduce me, but well, we will handle this together here. Okay. As you are aware already, because you read already our communication from the morning, HyperPort had a strong year 2024. We had a double-digit growth again, as we are all used to be, and closed with solid numbers. Core reason for this positive development where the real estate and mortgage business, where we saw a significant recovery of the market. So the trend has turned and after the worst mortgage years for decades, 2024 was a sudden uplift again. And we used this, added our market share gains and used our new cost level for an outperformance on the profitability side. financial platform and insurance platforms as well distributed positive impact to the group level on their level. Okay, so let's start right away with the most important area, real estate and mortgages. The segment is linked to the German housing market. Just to memorize it, German housing is linked to net migration to Germany, to a high demand from the existing population to acquire their first home when they are triggered. Triggered means typically when they expect children and want to create their nest. Germans buy once in a lifetime and they still do this. Nothing changed in this pandemic in 2024. What changed in 2024 is that historically 58% of Germans are living in the renting market. Only 42 choose to acquire their own home. In our current environment of regulation for rents, we are in a locked situation of the renting market. People have pretty old, low renting contracts, don't leave their apartments anymore. So new families can't move in because nothing comes to the market. This leads to the fact that more and more middle class families, when they are triggered, need to choose to go for the homeowner market. They can't rent again. So this closed renting market is a massive change in the environment here in Germany and going forward will influence the size of the mortgage market significantly. And we saw this in 2024 for the first time that it had an impact. Will the renting market stay closed? This is a pretty certain guess for the upcoming years. It would create massive social tensions if we would lift the rent regulations here. And the just newly voted government of CDU and SPD announced already that they will keep the rent regulation as it is for the next years. So there is no chance of a deregulation in this area in the current year. This leads as well to the withdrawal of private landlords from this market because of the unattractiveness compared to the yields that you get in other areas of investment. So a significant amount of properties which come to the market is from small landlords not re-renting anymore. From the consumer side, the environment regarding the affordability of home ownership improved in 2024. We saw a slightly lower interest level compared to 2023 and a pretty stable environment here. This was helpful. On the other side, incomes improved, increased because of the the inflation in 2022 and 2023, and with a certain time lag, it comes to the income level. So people have higher incomes, interest rates are lower, real estate prices are stable or trickling up just so the affordability of houses, homes, condos have been significantly improved in 2024. And with this, the number of transactions. Last but not least, the regulatory environment for homeownership in Germany didn't change in 2024. It stayed as worse as it was in 2023. We have then absurd high tax on acquiring your first home or any other additional later home. You pay 6.5% property acquisition tax. This is ridiculous. We don't, we haven't had any significant support programs for the government for households with an affordability issue. This was all limited to really to nice markets which didn't fit the demand of the consumer side. So no support as it was before. And regarding the regulation of building efficiency, we saw a halt in 2024, but this after terrible discussion in 2023, so as well on the low level stability. And with all this, it's actually remarkable how the market recover in 2024 already in the buying area. later more about this. So, just on the chart and the numbers, just to visualize what it means, stable interest rate in 2023, it was more around 3.5%, the best rate here in Germany for 10 years more, which is in 2024, it was around 3%. Still more than in the extremely low interest rate environment of 2022 and earlier, but it was taking some burden and people as well got used to the new reality that their interest rates are back. It's not interest free anymore, this environment. And with the pressure on the renting market, on the lower right side, you see all time low in renting units available to the market. the attractiveness of the properties for sales, which had a new high in numbers, is just there. So when you got triggered and you have the choice, staying where you are, no solution in the lending market, you consider more and more to realize your dream, to have your own property, and you have a wide choice right now, something which was not there three years ago. As a positive for the market, the prices trickle up, especially in metropolitan areas. We saw an uplift in average of 5% for conduits, which are usually in metropolitan areas. While single-family homes increased in price just roughly 3%, so below this in the rural areas. But all in all, stable price environment. If you buy, you are not risking for sharp price declines, which may come something which delays the market or slows down the market in 2023. What you can see as well, new building, so new construction of homes, prices for this still high, even in the last six months trickling up again. So it's still a huge step between the existing homes and new homes to be built, which let people who usually would build something new still buy something old because of the discount they get for existing properties. when you see the development here in the last three years. There is a significant spread of 15%, you can say, and this means a room more for the children or not. So how the market performance is. We closed with 21% increase in market volume reported by Bundesbank, 189 billion, 50 billion per quarter. And you see in this chart since the last five years, index and inflation adjusted that we are still below everything which we saw since 2019. So we are roughly on the level of 2017 when you look on the market. On the other side, EuroPace grew last year by 27%, so outperformed the market significant again. And on the long range for the last five years, you can see that outperformance. So we are the EuroPace on the transaction volume of the year 2020 now. So we recovered significant better than the overall market. So how we recovered significant better as well? The total volume plus of 37% is distributed by three major sales channels. Our own franchise network under the brand Dr. Klein grew by 30%. Second best recognized independent mortgage brand here in Germany and keeps taking market share from traditional banking branches. While the banking branches, especially as the regional banks, savings and corporate banks, they still migrate. And we are successful in both of the sectors to onboard sales structures to your pace in both roughly plus 50% and new record high volumes for both of them. So when you see this, you can add up and say, okay, who lost? And you can say the major weak point of the year 2024 was our traditionally large cooperative partner, Deutsche Bank, who still struggles to reenter the mortgage broker market. Thanks to a technical issue in the summer of 2023, they left the market and still they are not back. And so this is the reason why Europace only grew by 27%. Without this issue, we would be above the 30% of Dr. Klein as well. So when we look on the side for what the mortgages are used for, what we fund or finance actually, It's remarkable to see that the purchase area of the market is from the volume on EuroPace already back to the pre-crisis level. So with these two quarters of 13 billion in the second half of this year, we are in line with the record levels before this crisis. So why is it? In general, you can say in the market, the number of transactions is still below the pre-crisis level, significant, roughly 20%. The prices are as well below. You saw the price chart, something 10, 15% in average prices are still lower than in the pre-crisis environment. What changed is the structure of the purchase market. While before the crisis, a lot of investors German small landlords or international investors bought as well properties and increased the transaction volume of this market. In 2024, the investment part, especially of foreigners, is heavily distressed. So foreigners buying in Germany is a very untypical moment right now in this market. so that the domestic demand for housing in this purchase market is relatively higher and this has a much higher probability to be transacted by a Europe based than foreigners. So the mortgage market, our part of the mortgage market profits from this change. And when we are looking forward, we expect this to soon outperform the pre-crisis level because, as I said earlier, family can't rent anymore, they need to buy. So it's not a foreigner buying to let, it's a domestic living family which buy their own property now. And this shift in the market will improve the volume of the market in the purchase area. So now to the three other ones. Still distressed is the new construction area. We saw a healing process of single family homes being built in the second half of 2024, but still we are 50% below pre-crisis level. And especially in the area of conduits, so new construction of multi-family homes, which are sold separately in conduits, is on a historical level right now. There was no recovery in 2024 for this part of the market because of... Actually, the lack of international investors as well. So the demand side is still too weak on the current price level. And you saw the construction costs, 15% outperformed the market price. So they still need to close that land plus construction is affordable compared to the existing stock of property. It will trickle up in 2025 by sure, but we still need a long recovery process until we are back to the pre-crisis level. And the pre-crisis level was not sufficient for the market. We need 500,000 units finished every year in Germany. The goal of the last government was 400,000 units. They reached in 2022, so on this record high level, if you want to say so, 300,000 units are financed and later built per year. And right now we finance 150,000 units. So we are lacking massively in... financing of construction and what we are not financing right now, what we didn't finance in 2024 will not be built in 2025 or 2026. So with this in mind, We are pretty certain that the price pressure on the existing property stock will increase and the 5% which we saw this year in uplifting prices will be the lower end of our expectation for 2025. And this is lifting up the mortgage volume per mortgage as well. So next still distressed area of the market is the refinancing area. You are aware of this already, I think, that in the years 2020-2012, until 2020-2015, people usually already closed 15 years mortgages in Germany, not the typical 10, because it was pretty cheap already at this time. And people with this 15 years mortgage don't need to refinance right now. They can still wait a couple of years until 2027 for the 2012 mortgage. And with this in mind, it's actually pretty logical why people don't refinance right now when they still have time. So this may change, this will change in 2027, probably if we don't see a lower interest rate earlier, and then we will recover to the pre-crisis level of refinancing volume, plus higher volumes because market moves into them. And last area, modernization for the decarbonization of our home ownership stock. Something where we would need 20 billion in investments per quarter and with our market share, five, six billion we should see on the platform. We don't see this. It was a massive goal of the last government. They failed, terrible. They, as you can see, even reduced their investments done in this area with their actions. And it's not really on the agenda of the new government right now for the next four years. So I would not expect in recovery in the upcoming years of the modernization and the investments in our household stock. This will come later. So we need to decarbonize until 2045, maybe 2050 if we go back to the EU goal. But this is a massive investment that in some moment needs to be done. And we need a reduction from... the dependency of gas and petrol and well something to wait for as an improvement of the market in the upcoming years faster okay last structural view um our position in the sales side of the market and in the comparison to the moment eight years ago um The market was overall a little bit bigger at this time. So you see not inflation adjusted. There we are. Inflation adjusted, they are pretty similar then. You see that our market share in the broker area improved slightly. What was more relevant for the total numbers is that the brokers grew massively in this time from roughly 20 to now close to 30% market share. So they outperform the bank branches. We are their backbone. We profit from this trend. This trend is going to continue in the upcoming years. Brands like Dr. Klein will take market share from the banks. The other two major achievement that we had in the last eight years now is our significant role in the cooperative banking sector and in the savings bank sector up from close to nothing to now a quarter in eight years and with a strong performance last year 50% so we plan to continue this and to get the whole sectors both of both of these sectors together with our venture partners on the platform. So now after all this good news from 2024, a little bit mixed review on our performance in the property valuation area. You are aware of this. We entered this to integrate this in the mortgage process. And we still believe that this is the best solution for the market when we integrate the mortgage process and the property valuation process in one seamlessly integrated digital process. So we made huge steps forward in 2024 to integrate this. Still a long way to go. Unfortunately, it's a very regulated process in Germany. Second, we choose to enter its market labor intensive. And this was under the assumption that we have a stable market environment. a pretty secure approach. We hadn't had a stable environment. We got a crisis 50% down in the market with a lot of labor in Germany, nothing to deal easy with. And the strategic goal to play a role here and to integrate these processes, we had to stay and we had to restructure. So 2023 was painful. 2024, we improved significant. Still, we are and will not be will not be neutral from the profitability perspective in this year. But we progressed significantly. We see that we can make this business profitable, plus with the integration, Europace provides a solution for partners where even Europace is profiting from a better process thanks to the integration. So we will keep going forward here. We will again massively reduce the losses in 2025. And we can be sure about this already because the projects for this are already finished. So it's a certain thing that is going to happen. And this further digitalization of the process and integration, we are sure that in 2026, we can reach break even. So for the segment in total, it was a well positioned year in the transition. Double-digit growth, including the losses in revenue and gross profit in value, we grew by 26%, outperforming the market. We massively increased profitability. You see our new cost structure here. The market is still on the level of 2016, 2017. At this time, we didn't earn this amount of money in this unit. If you exclude the cost of the value AG, we had 35 million in 2024, and with an expected dynamic in this market, which is similar this year to last year, so a double digit growth again, we expect that this is going to fast have a positive impact on the total group level as well, and distribute the major uplift in profitability, which we expect for the group. More about this later. Okay, financing platform. First part is the housing association industry, an industry which is responsible for social housing. Normally for the last years, you should expect massive investments in social housing. Didn't happen because of the regulatory environment of rent and the lack of subsidies. So this industry, even when it's needed, is not investing right now. And so in 2024, even the lower investment year than already in 2023, which was a crisis. So the total investment declined in this industry. We kept our our transaction volume stable, 1.2 billion. This is already a success. It means we took market share in the sector again. We had a core broker there. The other options were just going directly to banks. All other broker offerings are small and more or less irrelevant. Parallel, we develop and scale up the system for managing rent deposits for housing associations in close cooperation with the banks. the amount of rent, which are rent deposits, which are within our platform increased again. So we take market share in small steps, but in a steady process, we roll this out in the industry. And it will be especially interesting in combination with our ERP system, which is pretty new to the market. and a huge success right now. So we could lift the numbers of units under contract to 460,000 last year. This was a speed uplift compared to the previous years again. So a net gain in 120,000 units. And this is already a big achievement. And we had a core in this market with a lot of outdated ERP systems all belonging to the same group now. And housing associations feel great about our offering. We have the most modern system. It's an open system. You can freely integrate it with a lot of third-party solutions, which gets a seamless experience for your client, high efficiency in usage, and all this out-of-the-internet working around the globe. This is something which is just appealing, and already all migration slots for 2025 and already the beginning of 2026 are sold out to clients. Even more successful, you will see this unit when you know that we announced just two weeks ago that we cost 500, 1000 units now. So the speed of migration, the speed of signing up for our ERP platform is high and it's a huge success. We still invest here. So this is last year, 2024. We still recognize the loss of 4 million here because it's a business model where you generate long-term recurring revenue and we build this up. And with this in mind, we are happy about this investment. And right now we are scaling up the speed of ramping this up to conquer as much as possible of a market of 6 million units in Germany. Second part of the segment is our financing for small and now German Mittelstand, corporate finance, corporate here in Germany. distressed market environment, you can say. German industry, German companies were really angry with the regulatory environment the German government and EU created during the last years. And since three quarters in 2024, we were in a recession because of a lack of investments done. The government response was weak, not there you can say, and in the end led to the new voting which we saw at the end of 2024. So all government is gone. We feel a positive sentiment now, but for the last year we have to report terrible numbers. They're already not very... A strong market environment of 2023 was even more distressed in 2024, more than you can see even in these numbers. But yeah, our project volume declined by 24% on a long-term low. And normally we are in a growth path here and acquire more. Outlook, as soon as the government, the new government is established, it's clear that we invest $500 billion in infrastructure. A lot of these projects, which we acquired here already and are on the pipeline, we go for. There is a huge potential of uplift here when we're coming back to an industry, a politics which is in favor of the industry and not tries to regulate the way. Last product segment, the personal business. As well, the stress market environment, three quarters of recession doesn't give consumers confidence to borrow something. And banks are as well more critical about the quality of borrowers with a recession environment, even here in Germany. So it's a great success that we, in a stagnating market environment, grew by 12% in the transaction volume. We lost some of this thanks to a version in the transition. Too many loans were not approved finally of Bankstem because of their change of credit criteria. But in overall, it delivered a revenue growth and a profit growth this segment. Potential is great with our approach to use banks and offer them a third party solution for their networks, for their sales structure to meet all their demand, not just with their own product. In total, the financing segment provided the And this is all in this market environment which was really worsen compared to 2023. A small growth and a significant uplift in profitability thanks to a very intensive cost management program which the whole segment want to outperform the previous year. So last segment, insurance business. You are aware of this three product areas we are addressing. The main, from the volume side, typical personal insurance, where we see a growth path in migration, still far below this what we expect, but we continue double-digit growth to bring a contract on our platform, typically still from our on-premise solution, which migrates to the system. Validation, the share of validation is well improving and this is the link not just to the sales side but as well to the insurer side so that the data are validated and with this automation is possible. Otherwise you are operating on non-validated data which is just crap. Second offering of the segment in the market is occasional insurance business, where we see a strong growth, 34% in volume. It's a market where we are right now in a dual pole. Two platforms are offering this service in this sector, and we see us well positioned to be one of the two survivors in the end. The other is a startup. Let's see if they get the next funding, which they soon will need. Corrify is our industrial insurance business. Everything that doesn't go in standardized policies, which is auctions, auctions with special risk of special industry groups. Here we established a new platform, 2003, we started it in a better. We expected it to bake through in 2024. It's still not broke through. We have four large companies. corporate partners, industrial insurance brokers on the system now for the first module, but it's still a too slow process to see this already as a full success. So success is delayed, but we are still on track of signing up more of them and we expect 2025 now to be the breakthrough year for this unit. In total insurance business, slightly optimized probability, left some business behind which doesn't fit in our long-term strategy. Growth delivered so that revenue and gross profit are more or less stable. So for 2025, we expect a positive trend here, slightly improvement in the growth speed and as well as profitability, again, an uplift in the contribution to our general improvement of profitability for the group. Total group level, a better year than 2023, but yeah, 2023 was the worst year in our history. We are back on track growing and using all opportunities in the market, which we already invested in. We are still very conservative doing something new. We want to see new record high levels in profitability before we start investing in new innovations in these three industries. So for now, we will keep doing what we did in 2024 successful and bring this in 2025. With this in mind, in a historic context, so 2024 got close to the record high cost profit in 2021 already, but you see our massive investments since then and inflation in the end as well. And this cost base for our employee base. So for the profitability side, we are still significantly away from the record high level. For 2025, cross-profit, we will see a new record. For EBIT, it will take us to until 2026. Yeah, how we will achieve this in 2025 and 2026? First of all, the major support we will get from the market. We expect for 2025 an uplift to 220 billion in mortgage volume here in Germany, up from 189. in 2024, so plus 10%, you can say. This is less than the 21, which we saw last year, but the 10% uplift is, under all circumstances and all risks on the political side and geopolitical side, a solid number for the general market. Generally, Bundesbank reported 19.7 billion, so in line with our expectations for 220 this year. After this, we are certain that we will see a recovery of the market back to the old growth trend. Thanks to increasing prices in the market, thanks to the migration of previously renters to the home ownership market here in Germany, thanks to an delayed But coming recovery of the construction site, so new homes need to be built with a constant net migration to our metropolitan areas. And thanks to a recovery of the refinancing market. Just with this, we will reach the 75 to 100 billion area which we are coming from inflation adjusted already. And the uplift, the potential uplift of high investment in energy efficiency comes on top and would bring us faster in this area. But as it looks for now, the next four years will not be a time where we have to invest as a German society. So for the different platforms, this is a summary of what we expect. Strongest performance from real estate and mortgages to the group level and some support from financing platform and insurance in addition. In total, we expect a record 270 million in gross profit for this year. And this is the mortgage market, which is on the level of 2018. So you see the potential, I would say. We expect to double our EBIT to area of 30 to 36 million this year. And besides this, what comes from the market, there's a lot of projects which we across the group, we're driving forward to 2024. So we have a pretty solid expectation here. And yeah, 2026, expect us to return to double-digit growth, keep this. And I personally expect for 2026 a new record high for visibility level. But let's finalize this when we saw the 2025 numbers and hopefully everything globally and locally here in the world is going fine up until then. Yeah, I would start now the Q&A for you. For this I need to close this here. Okay. So Jan can't moderate us. I hope you know that you should please put your questions in the Q&A. Yeah, Jan wrote this. And I see here two questions. So first question is about the impact of the German infrastructure fund of 500 billion. which still needs to be confirmed on the real estate sector in Germany. In general, this should be infrastructure investments, public investments, but as well enabling, enhancing private investments. So we expect a massive impact on the corporate finance side because there is the major potential for the uplift. We expect as well as support for the housing construction sector with a certain level of delay, let's say. The focus there should be home ownership. So single family houses, families to support families to build a new home and as well social housing, both markets we address. So in the end you can say everything what is not going into bridges and schools, will be investments in areas where we are active in the German market. So second question is about if we saw any negative impact on the mortgage lending volume because of the recent interest rate change. To be fair, it's too early to ask this question. In general, the uplift in Bund of 50 basis points resulted in roughly 35 basis points uplift in prices for mortgages. 35 is a significant uplift and was fast. So you can say it shocked the market. Every consumer who had an open offer and could accept it will have accepted it, which brings us to, for a couple of days, higher transaction volumes than usual. And this was just the last days, you can say. So going forward, mortgage rates are now again 35 basis points more expensive than they were a week ago. This may delay some demand. it's not so significant that it's really a massive change in the in the cost structure. When you look on the interest rate chart for 2023 and 2024, you see that we are still in a medium area with this 35 basis points. We were quite on the lower end before this interest rate hike happened. So I would expect a couple of days or weeks of some delay, but not a lasting impact on the mortgage volume this year. As well, let's say the increase in interest rate for whole Europe in this moment for all government bonds could, let's say, could be interpreted a little bit as an overreaction, taking into consideration that this is just a budget plan. It's not that the German government is going to lend to borrow this $900 billion right away. This is something which is going to happen in the next years. And with this in mind, I would say there is a certain chance as well that we see some normalization as well on the interest rate side. So next question is about our operational cost in the real estate segment, real estate and mortgage segment. In general, we keep focusing on the current activities. So we are not expanding into new areas. We are not starting new products right now. We first want to see a higher general profitability of our units, including real estate and mortgages. At this rate, there will be an inflation-based uplift in cost. And I would say as well a small number, a small percentage of uplift in cost because of the normalization of the market and some functions where we are linked to market volumes. But in general, we keep the cost pressure high, so expect a mid-single-digit increase in our cost side. If you have any further questions, you need to use the chat today. I will give you a moment. Someone is typing. And if not, right now, you can ask your question anytime to Jan-Pal. You will hear his voice on the phone. He is here as well, listening to me, but can't talk. There is the question. Okay, if Q4 profitability met our expectations for the group, if not, why? Actually, it met our expectation. It was a good final quarter. We saw a solid market in real estate and mortgage business. we could realize a lot of projects, value AG progress in their productivity level. So in general, we were fine with this, how we finished Q4. Okay, our strategic perspective on value AG and future synergies. we entered the property valuation market to integrate, to provide an integrated solution to banks. So we powered the whole mortgage process from first contact of the client. We established the touch point of the, to digitalize the touch point with the client for all mortgage advisors, brokers, and in banks here in Germany. We powered the, we powered the, We power the loan officer and Value AG has the goal to power as well the appraiser. We don't see any other feasible solution in the market with this perfect integration along the value chain. This is the strategic goal for Value AG. In small steps, under a massive regulatory framework, we progress here. And this will not just turn ValueLG cash flow positive, profitable, it will turn your place in a very powerful solution when you compete with the fragmented solution where the appraisers and evaluators are not integrated in the process where all the informations that are needed in the mortgage process are coming from third parties and you have a patchwork situation in your mortgage process. Europace will deliver this all out of one hand fully integrated in one solution. And this will make your pace stronger. And in the end, it will create a business model for ValueLG, which will be less labor intensive for us. We will outsource labor again in this process in a couple of years, but it will be profitable and contribute to the overall group level and to our strategy. Next question. Okay, why we don't expect the market volume to go more than 10%, especially after the strong January figures. Okay, let's say we issued our expectation for this year before Bundesbank issued the January numbers. We saw a strong January, so we agree with Bundesbank. But to be honest, there are certain uncertainties. So would I say right now that the chance for a larger growth in the mortgage market is higher than below our expectations? Yes. But with all what we see in geopolitics and as well as still uncertainty in forming a new government in Germany, am I certain about this, that this will talk 230 or 240 billion year this year? No. So we stay with our expectation for now. This is integrated and then we see a positive trend here in the upcoming months. First, we will see it with our quarterly results. Second, we will adjust our expectation for this year, if necessary. Okay. Market share growth of Europace this year and next year. So you saw our transaction volume growth outperforming the market in 2024. We expect this year to outperform the market again. So when market is up this 10%, which we for now guide, we expect the transaction volume growth of something around 20% in Germany. So 10% outperformance of the market is our goal every year. this is in the end the part of our current expectation for this year. On the long run, the outperformance of the market needs to slow down because our share is getting too significant. So even when you can't compare transaction volume and Bundesbank numbers perfectly because the transaction volume is pre-cancellation and Bundesbank volume integrates as well certain credit volume, which is not new mortgages. There is a link between these two, but you see that somehow something between 25 and 30% is already going through Europace and with this our outperforming track record is going to slow down when we get closer to 60, 70% of the market. But this is still far away. So for now we keep our 10% of performance as a goal. So now nobody is typing. Thanks for your questions in this English slot as well. Hopefully next time Jan is moderating again. If you have any questions, come back to us. For now, I thank you for your attention. We're here again in two months, hopefully with a new government here in Germany already, hopefully with no huge global events up under them so that we see a stable start, a solid start in 2025 and have a positive outlook for this year. Thank you, guys. See you then. Bye-bye.