Deutsche Wohnen SE continued to perform positively in the financial year of 2017 and once more improved key figures, benefiting from the consistently dynamic market environment in its Core+ and Core regions, in particular. This is also reflected in the best like-for-like rental growth in the company’s history.
Consolidated group profit increased to EUR 1.8 billion, driven, in particular, by the appreciation of the portfolio with its focus on metropolitan areas and conurbations. At the same time, the Group’s financing structure was optimised further, with its debt, ratio falling to less than 35% as a result of the company’s conservative financing policy.
The positive share price development and the good ratings from Standard & Poors and Moody’s are confirmation of the company’s sustainable success strategy.
The conversion of the Company into a European public limited company (Societas Europaea, SE) which was decided upon by the Annual General Meeting on 2 June 2017, was entered into the commercial register on 31 July 2017.
Trusting cooperation with the Management Board
In the financial year 2017, as in previous years, the Supervisory Board exercised great care in carrying out the tasks incumbent upon it pursuant to the law, the company’s Articles of Association, the German Corporate Governance Code and the Rules of Procedure. It regularly advised the Management Board on the management of the company and monitored its activities. In addition, it was directly and promptly included in all decisions of fundamental importance to the company.
The Management Board informed the Supervisory Board regularly, promptly and fully, both orally and in writing, of all matters of relevance to the company relating to its business policy, its business plan and strategy, its situation including any opportunities and risks, the course of the business, and its endeavours with regard to risk management and compliance. Any discrepancies between actual and planned developments were explained in full. The Management Board agreed upon major business transactions with the Supervisory Board.
The Chairman of the Supervisory Board and other members of the Supervisory Board were in regular contact with the Management Board and also discussed important issues outside of the meetings of the Supervisory Board and its committees. These concerned, for example, the strategic direction of the company, its performance and its risk management activities.
Meetings of the Supervisory Board
In the financial year 2017, the Supervisory Board discussed the company’s current performance, individual significant events and transactions requiring the Board’s approval in the context of 11 meetings, four of which took the form of a telephone conference.
At each of the meetings, the Supervisory Board granted the requested approvals to the necessary extent and in each case after careful consideration and extensive discussion of the matter at hand. The resolution to amend the Articles of Association in light of the issuance in 2016 of shares of the Company to external shareholders of GSW Immobilien AG was also passed on 23 January 2017 by way of being circulated in writing. The average attendance rate for the meetings of the Supervisory Board was 96.1%. In the year under review, Mr Hünlein attended two meetings and Mr Wisser attended one; apart from these cases, all of the members of the Supervisory Board were present at all Board meetings. In addition, the members who were unable to attend in some cases nonetheless took part in the adoption of resolutions by way of proxy voting.
In the year under review, the Supervisory Board’s activities focused on the business plan and performance of Deutsche Wohnen SE, (re-) financing measures, the company’s corporate strategy, its SE conversion, its acquisition plans and the integration of acquired companies.
The performance of the Residential Property Management, Disposals and Nursing and Assisted Living segments, as well as the financial and liquidity position of the Group, were the subject of regular and intense discussion. The Supervisory Board’s activities additionally focused on the review and discussion of the internal control and risk management system of the Deutsche Wohnen Group.
At the meeting held on 26 January 2017 (telephone conference), the Supervisory Board primarily addressed the acquisition project Epicure (approximately 4,000 residential units in Berlin) and approved the proposed acquisition and financing structure. The Audit Committee reported on the status and progress of the audit of the financial statements for the financial year 2016.
At the meeting held on 16 February 2017 (telephone conference), the Supervisory Board addressed financing issues, in particular a capital increase, the issue of a convertible bond and the buyback offer for the convertible bond issued in 2013.
At the meeting held on 13 March 2017, the Supervisory Board primarily addressed the reports prepared on the basis of the meetings of the committees, the 2016 annual and consolidated financial statements and Management Board matters. Representatives of the auditor took part in the discussions relating to the 2016 annual financial statements, explaining items and approaches adopted in the annual financial statements of the company and the Group. Further core issues that were addressed were current projects, the proposed candidate for the position of auditor, the adoption of the report of the Supervisory Board and the Corporate Governance Report.
The focal points of the meeting held on 7 April 2017 (telephone conference) were the planned conversion of the company into a European public limited company (Societas Europaea, SE), changes to Supervisory Board compensation, Management Board matters and the approval of the agenda and the proposals for the resolutions to be adopted at the Annual General Meeting.
The focal points of the meeting of the Supervisory Board held on 5 May 2017 were the report from the Audit Committee and the report on the company’s performance in the first quarter of 2017.
At the meeting held on 2 June 2017, the Supervisory Board addressed, in particular, the proposed resolutions for the Annual General Meeting of 2 June 2017.
The core content of the meeting held on 14 July 2017 involved the discussion of the current performance of the company in the first half of 2017, financing issues, risk management, the setting of targets for the proportion of female members of the Supervisory Board and the Management Board as well as the SE conversion.
At the constituent meeting of the Supervisory Board of Deutsche Wohnen SE held on 14 July 2017 the Chairman and Deputy Chairman of the Supervisory Board were elected, the committees were formed and their chairmen elected, the Management Board was appointed, the internal rules of procedure for the Supervisory Board and the Management Board were adopted and a resolution was passed to amend the Articles of Association.
The focal point of the meeting held on 21 September 2017 (telephone conference) was to address financing issues, in particular a capital increase, the issue of a convertible bond and the buyback offer for the convertible a bond issued in 2014.
The meeting held on 8 November 2017 focused largely on reports prepared by the committees, the performance of the company on the basis of the report relating to the third quarter of 2017, matters relating to the Management Board (including revision of the compensation system, distribution of responsibilities within the Management Board) and current acquisition projects.
At the meeting held on 19 December 2017, the Supervisory Board addressed, in particular, the approval of the business plan for 2018, matters relating to the Management Board and Supervisory Board and the German Corporate Governance Code, and also adopted the declaration of conformity to be submitted jointly with the Management Board. Other topics included the Non-Financial Statement in the context of the reporting on the financial year 2017 and the engagement of KPMG AG, Wirtschaftsprüfungsgesellschaft, with the business audit of the Non-Financial Statement as well as acquisition projects in the nursing properties segment.
Efficient work by four Supervisory Board committees
In order to be able to perform its duties efficiently, the Supervisory Board has established a number of committees, each composed of three members, the requirements and activities of which were subject to continuous evaluation in the year under review.
Specifically, the following four committees were convened in the year under review:
The tasks assigned to each are described in detail in the Corporate Governance Report from page 9 onwards.
In principle, the resolutions of the Supervisory Board and the topics to be discussed at the Supervisory Board plenary sessions are prepared by the committees. To the extent permitted by law, some of these committees have been granted decision-making powers in accordance with the Rules of Procedure or pursuant to resolutions of the Supervisory Board. The chairmen of the committees regularly and fully reported on the subject matter and outcome of committee meetings at the meetings of the Supervisory Board.
The Executive Committee was convened on six occasions in the year under review. The four meetings held as conference calls in February and September 2017 dealt with financing issues. The matters discussed at the meeting held in March 2017 involved, in particular, consultation, the adoption of resolutions and the making of recommendations with regard to matters relating to the Management Board (contractual matters, remuneration-related issues). In October 2017, the committee deliberated in particular on the revision of the Management Board compensation system and adopted the recommendation for a compensation adjustment.
The Nomination Committee was convened four times in the year under review. At these meetings, one was held in the form of a telephone conference. At these meetings, members consulted on prospective succession planning with regard to the Supervisory Board and the related job profiles. Moreover, proposals were drawn up for the nomination of candidates for election to the Supervisory Board and submitted to the Supervisory Board plenary with recommendation for its proposal to be put to the Annual General Meeting.
The Audit Committee met on five occasions during the year under review. At these meetings it dealt with those aspects of the Supervisory Board’s work which were of relevance to it. These included, in particular, the preliminary examination of the Annual Financial Statement, the Consolidated Financial Statement and Interim Reports of Deutsche Wohnen SE and a discussion of the risk management system. It submitted its recommendation for the appointment of the auditor for the financial year 2017 to the Supervisory Board, obtained a declaration of independence from the said auditor, monitored his activities and stipulated the main focal points of the audit.
The members of the Audit Committee have expertise and experience in the application of accounting principles and internal control procedures. The Chairman of the Committee, Dr. Andreas Kretschmer, is in full compliance with all of the requirements of section 100(5) of the German Stock Corporation Act [Aktiengesetz – AktG].
The Acquisition Committee was convened on one occasion during the year under review. This meeting was held in the form of a telephone conference and addressed, in particular, the project involving the acquisition of Pegasus (residential portfolio).
The Supervisory Board has continuously observed and discussed the further development of the company’s own Corporate Governance Standards. Comprehensive information on corporate governance matters within the company, including the components and amounts of the remuneration paid to the members of the Supervisory Board and the Management Board, can be found on pages 9 to14 of this annual report.
The Management Board and the Supervisory Board considered the requirements of the version of the German Corporate Governance Code which was applicable for the year under review and the implementation of these requirements. In December 2017, they adopted their updated joint Declaration of Compliance pursuant to section 161 of the German Stock Corporation Act (AktG), making it permanently accessible to the public on the company website. The Declaration of Conformity can be viewed at: declaration of compliance.
Annual and consolidated financial statements discussed in detail
The annual financial statements of Deutsche Wohnen SE as at 31 December 2017 and the consolidated financial statements prepared by the Management Board, together with the company's combined management report, were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, with the auditor having been appointed by the Annual General Meeting held on 2 June 2017 and commissioned by the Supervisory Board. KPMG issued an unqualified audit opinion with regard to the above.
The annual financial statements of Deutsche Wohnen SE and the consolidated financial statements, the combined management report for Deutsche Wohnen SE and the Group, and the audit reports were made available to all of the members of the Supervisory Board immediately upon their preparation. The auditor attended the preparatory meetings of the Audit Committee held on 21 February 2018 and also 08 March 2018 ahead of the meeting of the Supervisory Board for the approval of the balance sheet. He reported on the substantial results of the audit and provided additional information. After extensive discussion, the Audit Committee approved the results of the audit of the company's annual financial statements, the consolidated financial statements and the combined management report of the company.
The Chairman of the Audit Committee reported comprehensively to the Supervisory Board on the annual financial statements and the audit at the Board meeting held on 8 March 2018. In addition, the auditing company explained the main findings of its audit and was available to provide information and answers to further questions from the Supervisory Board. The Supervisory Board carefully reviewed the annual financial statements, the consolidated financial statements, the combined management report, the Non-Financial Statement, the proposal for the utilisation of the net profit and the audit reports and raised no objections. The Supervisory Board subsequently approved the recommendation of the Audit Committee with regard to the annual financial statements and consolidated financial statements as at 31 December 2017 as prepared by the Management Board, thereby adopting the annual financial statements.
The adopted annual financial statements indicate the realisation by the company of a net profit. The Supervisory Board endorses the Management Board’s proposal regarding the utilisation of the net profit. The agenda for the Annual General Meeting for 2018 will therefore provide for the adoption of a resolution in favour of the distribution of a dividend in the amount of EUR 0.80 per share conferring a right to receive dividends. Furthermore the Management Board and the Supervisory Board considered giving shareholders the opportunity to choose between receiving the dividend cash down and partly converting them into shares.Changes to the Supervisory Board and Management Board
As Mr. Wolfgang Clement’s term of office ended upon the conclusion of the Annual General Meeting held on 2 June 2017, Mr. Jürgen Fenk was appointed as a member of the Supervisory Board from 1 October 2017 by the aforementioned Annual General Meeting.
There were no personnel changes to the Management Board in the financial year 2017. Lars Wittan was appointed Deputy Chief Executive Officer in March. In addition, the distribution of responsibilities within the Management Board was adjusted as at 1 January 2018.
On behalf of the Supervisory Board, I would like to thank the members of the Management Board and the employees of Deutsche Wohnen SE and all of the Group companies for their dedicated work and efforts in the financial year 2017.
Berlin, March 2018
On behalf of the Supervisory Board
Uwe E. Flach