Aareon remains on a growth trajectory

In a year marked by the Covid-19 pandemic, Aareon’s business model revealed how robust it is, with the company able to post further growth in consolidated revenues. Revenue growth for digital solutions was especially strong at 19 percent. Adjusted EBITDA is expected to rise to € 135 million by 2025.

Mainz, 25.03.2021 – Aareon, the leading provider of ERP software and digital solutions for the European property industry and its partners, continued growing in 2020, increasing its consolidated revenues by 2 percent to € 258 million. “Even in a year made so challenging by the Covid-19 pandemic, we weren’t diverted from our growth strategy,” underscores Aareon CEO Dr. Manfred Alflen. “Building on a robust business model with a high percentage of recurring sales revenues, we will grow even faster going forward, also benefiting from the push towards digitalisation triggered by the pandemic.”

During the Covid-19 pandemic, the company has profited from its digital capabilities, with around 1,800 employees working from home. As announced, Aareon further expanded its portfolio of ERP and digital solutions. Further mergers and acquisitions – like the takeover of CalCon Deutschland GmbH or the purchase of Arthur Online Ltd. in the UK – contributed to non-organic growth. A line of credit of up to € 250 million has been taken out to fund future acquisitions. Private equity investor Advent International’s purchase of a minority stake of 30 percent in Aareon marked a special milestone in the company’s history. A Value Creation Program was launched with a view to accelerating growth, as a result of which adjusted EBITDA is expected to rise to € 135 million by 2025.

Consolidated revenues higher – digital-solutions revenues grow by 19 percent

Aareon increased its consolidated revenues by 2 percent to € 258 million (previous year: € 252 million). The Aareon Smart World portfolio comprises ERP systems for housing companies and the commercial property sector that can be enhanced with integrated digital solutions to automate processes and interconnect relevant stakeholders. Revenues from ERP products (excluding consulting) rose by 3 percent Owing to the Covid-19 pandemic, overall revenues in the ERP solutions product segment were down by 2 percent year on year (2020: € 197 million; 2019: € 201 million). The positive impact of Green Consulting – an online offering originally launched to reduce CO2 emissions – could not fully make up for the negative effects of the pandemic. Within Aareon’s business model, ERP systems ensure a stable flow of recurring revenues and are the starting point for cross-selling activities involving digital solutions. At 19 percent, the year-on-year growth rate in this product segment remained particularly dynamic. Despite the impact of the Covid-19 pandemic and planned accelerated future investments, Aareon’s adjusted EBITDA came in just short of the prior-year level at € 62 million (previous year:€ 64 million). 

Aareon’s growth is evident also in significantly higher employee numbers, which reached 1,795 as at 31 December 2020 (previous year: 1,631). The international subsidiaries accounted for 42 percent of the workforce (previous year: 44.0 percent).

Expanded portfolio of digital solutions – virtual assistant launched

Digital solutions are an important growth driver for Aareon and the company continues to expand this segment. A new product launched in this category was the AI-based virtual assistant known as Neela. Following the launch in Germany, marketing got under way in the UK, the Nordic countries and the Netherlands. The launch in France commenced in early 2021. Neela will initially be available as a chatbot, allowing property companies to respond automatically, especially to standard queries from their customers.

Mergers & acquisitions (M&A) – successful takeovers

Our acquisition of CalCon, Munich, Germany, took effect at the very beginning of 2020. It enabled Aareon to expand its building relationship management solutions and integrate them into the Aareon Smart World ecosystem. In December 2020, Aareon also signed a contract to purchase a 100 percent stake in Arthur Online Ltd. (“Arthur”), London, UK. Arthur offers a best-in-class SaaS solution for property management that brings together property managers, owners, tenants and contractors on a single platform. In particular, the deal will enable Aareon to develop the market for small and medium-sized property managers in the UK.

Target for 2025: adjusted EBITDA to rise to € 135 million

Aareon had previously planned to increase its adjusted EBITDA to € 110 million by 2025. Thanks to the newly launched Value Creation Program, that target has now been revised upwards to € 135 million (excluding mergers and acquisitions). Referring to the Aareon Group’s future growth, Dr. Alflen states: “The Value Creation Program will make us an even stronger partner for our customers as we forge ahead with ambitious plans for the technological refinement of our ERP systems and digital solutions, and expand our portfolio for their benefit. We will become an even more attractive employer, as our corporate growth will give rise to new fields of activity and development prospects. We have created a sound basis for making further acquisitions. All in all, we will achieve a significant increase in our growth rate, enhance our profitability and, in doing so, add value for our shareholders Aareal Bank and Advent International.”

The breakdown for growth is as follows:
Operating business: The ERP 2025 programme will drive the development of further new ERP product generations and help expand the customer base. What is more, the market penetration of ERP solutions for the commercial property market is to be actively increased and the portfolio of digital solutions expanded.
Value Creation Program: The programme focuses on optimising product launches, including the acquisition of new customers and cross-selling activities. The products Aareon offers are to be combined in value-added, process-oriented packages. Aareon wants to ramp up marketing of its software-as-a-service offerings, which it has been making available for years from its multi-certified Aareon Data Centre. That will further increase the share of recurring revenues in the portfolio. Additional measures are planned that simplify software implementation. 
M&A: Aareon takes a structured approach to mergers and acquisitions, and has an M&A pipeline that offers additional potential for achieving international scale. The company also benefits here from the M&A network and the expertise of Advent International. New M&A and Post-Merger Integration teams have been set up to pursue further mergers and acquisitions. To finance this growth, Aareon took out a line of credit of € 250 million in 2020. Guaranteed by Aareon’s parent, Aareal Bank, which holds a 70-percent stake in the company, the line of credit can be drawn down as needed. Future corporate acquisitions will have an impact on adjusted EBITDA on top of the € 135 million already mentioned.

In 2021, Aareon expects to post a significant increase in revenues, which will reach € 276–280 million (2020: € 258 million). Adjusted EBITDA should rise to € 63–65 million (2020: € 62 million). This forecast excludes any effects of future mergers and acquisitions.

Aareon Annual Report 2020 published

The Aareon Annual Report 2020, entitled "Pioneering Work", demonstrates Aareon's claim to pioneering work as a technology and industry leader. Through close, constructive exchange with clients and partners, Aareon develops user-oriented, innovative products - with modern working environments as the basis for creativity and inspiration.