DÜSSELDORF (dpa-AFX) - The real estate group LEG is more optimistic about the year. Due to the tight housing market, the Düsseldorf-based company expects rents to rise more strongly than before and is also raising its profit forecasts. The Group expects a higher cash inflow and an improved profit margin for 2023. However, the brightening earnings outlook is also due to one-off effects resulting from high interest rates: LEG, for example, has cancelled further new construction projects. The news of the MDax group was well received on the stock market - the share, which had been hit hard the previous day, rose significantly on Friday morning.

According to a Group statement issued late the previous evening, the earnings before interest, taxes, depreciation and amortization (Ebitda) margin is now expected to be 80 percent, 2 percentage points higher than originally expected. Affo (cash inflow from operating activities adjusted for capitalized investments), an important indicator for the company, will be between 165 and 180 million euros in the current year, the company added. Previously, the company had targeted only 125 to 140 million.

Shortly after the start of trading, the share clearly took the lead in the MDax index of medium-sized companies with a price jump of up to seven and a half percent, but then came back somewhat. The most recent gain was around four percent to 52.44 euros. One trader saw the higher forecast for rental income in particular as positive - something that could not really be said of the one-off effects.

Despite the current price gains, there is still a minus of just under 14 percent since the beginning of the year, which, in line with the entire real estate sector, has been suffering for some time from the strict interest rate hike course of the central banks in the fight against inflation. Since its record high in the summer of 2021 at around 139 euros, the share has lost almost two-thirds of its value.

Rising interest rates are making the financing of housing projects more expensive. In addition, the sector is suffering from rapid cost growth and shortages of materials and craftsmen. Many real estate companies are therefore shelving plans for new buildings or divesting residential portfolios. LEG is doing both - according to earlier information, a total of 5,000 apartments are up for sale, some of which have already been sold. Back in November, the Group had also pulled the ripcord on new construction projects.

Most recently, the Group canceled plans for additional housing units, said a LEG spokeswoman on Friday when asked. These were projects at a very early stage that had remained in the pipeline for the time being after the decision at the end of 2022. For example, new units in the context of a redensification or new buildings on LEG-owned land were canceled.

According to the Group, another factor is also having a positive impact on the earnings outlook for the year: For example, the excess profit tax on LEG-owned electricity production is lower than expected. On the other hand, the equally tense demand situation in the real estate sector is beneficial for LEG. The company now expects rental growth of 3.8 to 4.0 percent instead of the previous 3.3 to 3.7 percent. However, LEG does not intend to invest more money in its portfolio. The investment forecast remains at 35 euros per square meter, it said.

LEG also expects to devalue its real estate portfolio by around seven percent in the first half of the year. Other industry representatives have also taken similar steps./he/tav/men/jha/