ARGO Properties (ARGO) Q2 2024 earnings summary

Executive summary

• German residential strategy centers on rent growth, refinancing and apartment conversion and sales through R2C; at June 30, the portfolio comprised 3,859 units in 372 buildings, with €668.2m book value.

• Q2 net profit was €7.0m despite a 13 bps QoQ increase in the weighted property discount rate; H1 net loss of €43.5m reflected fair-value reductions.

Financial highlights

• Q2 rental revenue rose 17% YoY to €6.2m; H1 rental revenue was €12.1m versus €10.1m in H1 2023.

• Q2 net income was €7.0m versus a €0.3m loss in Q2 2023; H1 net loss was €43.5m versus €13.2m a year earlier.

• H1 operating cash flow was €12.9m, investing cash outflow €65.9m and financing cash inflow €29.5m.

• Refinancing released €8.8m of net cash in Q2 and €15.8m in H1.

Outlook and guidance

• Target is to double owned housing units by 2030; R2C sales capacity is planned to increase materially from 2025, alongside efforts to improve gross margins.

• At least 3,246 apartments across 219,000 sq. m are R2C candidates; current accounting gross profit per sq. m implies a potential €214m profit pool, subject to execution and market conditions.

• R2C proceeds could fund two new units for each renovated unit sold, assuming 50% leverage and 2023 average acquisition costs.

• Structural undersupply and urban demand are expected to support rents and property values over the medium to long term; higher rates or capitalization yields could weigh on near-term values.