Fibra Shop Portafolios Inmobiliarios SAPI de CV

BMV:FSHOP13

Earnings Call Transcript 2020-Q4

[Operator]

Good morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to FibraShop's Fourth Quarter 2020 Results Conference Call. FibraShop issued its earnings report yesterday. If you did not receive a copy via e-mail, please do not hesitate to contact us by e-mail in Mexico City at investor at fibrashop.mx.

Before we begin the call today, I would like to remind you that forward-looking statements made today during the conference call do not account for future economic circumstances, industry conditions and company's performance and financial results. These statements are subject to a number of risks and uncertainties, all figures included herein were prepared in accordance with International Financial Reporting Standards, IFRS, and are stated in nominal Mexican pesos unless otherwise noted.

Joining us today from FibraShop in Mexico City is Salvador Cayón, Chief Executive Officer; Gabriel Ramirez, Chief Financial Officer; and Irvin García, Controller and Investor Relations Officer. And now I will turn this call over to Mr. García. Please sir, you may begin.

[Irvin García Millán, executive]

Hello. Thank you. Hi, everyone. Good afternoon. My name is Irvin García. I'm the Controller and part of the Investor Relations team. Thank you for joining us on today's conference call. During our call today, I am going to start by talking about the financial highlights of the 2020 fourth quarter results. The 2020 year presents a huge challenge for humanity to say the less the pandemic enveloped the entire globe and changed it permanently, transforming our day-to-day how we work, the way how we learn and communicate. In the commercial sector, we found ourselves having to adapt of these major changes.

At FibraShop, we understood the situation and quickly developed the strategies and actions to deal with the challenges. Although the portfolio was impacted, results were better than we initially expected due to strategies implemented and the quality of FibraShop's asset. With reflections of 2020, we decided that the key to staying on course would be persistent, the capacity to adapt and change. The numbers in the fourth quarter were stable and trending towards recovery. Given the involvement in decision-making and the increased responsibilities in Sentura Tlalnepantla project, our external auditor determined that we have significant influence in this project and in accordance with IFRS, therefore, of this quarter, it will be consolidated for financial purposes.

Revenues in the quarter without the consolidation of Sentura Tlalnepantla rose MXN 334 million. This was 3.28% increase over the previous year and the consolidated revenues in the quarter amounted MXN 375 million, mainly due to the impact on the entertainment business that remained closed due to the operating restrictions imposed by the authorities. Viable rent and parking did not see the magnitude of previous years. Nevertheless, rent and maintenance remained stable compared with the previous quarter.

We keep a strict control on expenses. Since the beginning of the pandemic, we committed to reduce MXN 60 million in total expenses, and we reduced around MXN 67 million, most of the expenses costs will remain in place for the year 2021. Due to this, NOI margins were 66% (sic) [ 76% ]. The operating margin of the shopping center was 82% and EBITDA margin was 73%. This is to say, we remain at the highest level compared to the other international operators. The adjusted net income in the quarter was MXN 119 million. The adjusted net income for the quarter was MXN 26.13 per certificate, which represents an annual return of 14.93%.

We decided to take a new committed line of credit of 220 million with Scotiabank in Barnet to improve our liquidity profile. At the end of the year, we have MXN 450 million in credit committed lines to cover any liquidity requirements and to continue offering support programs to our tenants. The effects of COVID-19 in our financial statement continue in the fourth quarter as we explained below.

If we take a regular quarterly billing as the basis, we determined that the income from base rent and maintenance for the fourth quarter would have been on parking lots and viable rents were estimated by -- based on historical reports. The total revenues in the quarter were MXN 76 million less, which represents a decrease of about 18%. Base and variable rent decreased due to the effect of support provided mainly to the entertainment focused business such as movie theaters, arcades and casinos, which have remained closed, parking lots recorded significant drops, decrease in visitors to the properties.

Average occupancy of the portfolio closed at 92.57%. The first and second stage of the ESG program have concluded, which consisted on an initial ESG diagnostic, identification of interest group and development of the materiality matrix. In 2021, FibraShop will publish its first report of the results of its ESG sustainability program in which it includes its medium and long-term commitment, which will be included in the business strategy.

The technical committee of the Trust decided distribution for the fourth quarter, the distribution this quarter will be MXN 0.1639 per CBFI, which represents MXN 75 million payable fully in cash. We expect a complex first half of 2021 that will be an area of challenge and change. However, we have made the necessary decisions for the business to remain solid, and we hope that with each successive quarter, the economy will continue to improve and activities will return to normal. The Mexican culture is the need to associate with others, to go out, enjoy each other's company. This gives good future to our business of shopping centers, and we believe they will continue to be one of the places most often visited by coming.

We would like to thank our investors for their trust, and we will reiterate our commitment to keeping the company on a stable path. At this time, I would like to open the floor for questions. Operator, we are ready to take any questions.

[Operator]

[Operator Instructions] Our first question comes from the line of [indiscernible] with Summa Capital.

[Unknown Analyst]

I have 2 of them. The first one is related to this new presentation. Would it include this trust from [indiscernible] Group? So the question is, are you planning to reconciliate financial information from the past because it seems in this fourth quarter, the performance was good? And if you consolidate the information, maybe if I go back, it will be better just for the historical review reasons. And the second one is [indiscernible] tenants, despite of the fact that you are diversified, are you expecting department store to be closed permanently because you have exposure with Cinemex, Cinépolis and other stores that probably will not survive this second lockdown?

[Gabriel Ramirez Fernandez, executive]

Good day, and thank you for the questions. For the first question, the consolidation of the model Sentura -- the consolidation of the whole model Sentura, the reason was that you've been explaining in the introduction because in the past, we don't have control for the asset, only we have a minority part like 35% of the NOI of the revenues of the shopping center. And we don't participate activity in the decisions of the management of the mall. Because of the pandemic, we implemented in FibraShop some activities like crisis committee, and we have several meetings of the clinical committee sessions, ordinary and extraordinary sessions to take a decision to implement actions for the tenants and liquidity terms, such as the credit lines, for example. And we participate actively in the decision of Sentura because outside of the FibraShop that we see, the tenant is the same, the strategy was in line to same strategy with FibraShop. And that is the reason [indiscernible] that is we have the point that in the rules of accounting that we need to consolidate in this year.

We obviously put it only in this quarter because the historical press release already issued to the market. That is the reason we put in this press release the numbers without consolidated and consolidated to comparative purposes, but I can put in the next press release, for example, of the net results, some historical time series to compare the results if the investors think that is healthy. I don't now think and I don't understand some of the question or you have another comment about this point?

[Unknown Analyst]

No. Thank you, Gabriel. It was really helpful to clarify that. I guess probably the investors are willing to have that, that information will be helpful to compare. I know that 2020, it's a complicated year. But I mean, when normalized things happen, it will be great to compare period to period. But yes, on the second one, are you expecting a store to be closed or what about the tenants?

[Gabriel Ramirez Fernandez, executive]

Well, for the second question, obviously, there is some tenants that have more implications of the pandemic. For example, the entertainment tenants, such as cinemas. The cinemas is dependent not only for the people to go to the cinema theater. It depends on the movies, the new movies in the market. In the last year, there is not new movies in the market and the people decide to go to the cinema [indiscernible] not for seeing movies. The 2 biggest cinemas change proves to the market that we are in the process to know what is the specific complex that it will be closed.

The news for FibraShop and for you and the other investors, we don't have any news that any complex in the portfolio of FibraShop will be closed. The 2 Cinemex and Cinépolis say that we maintain the 100% of our cinemas in the portfolio, and we don't have planning to close. The same thing is, for example, Liverpool, Sears, Sanborns, something like these big boxes in the malls. We implement some aspects to solve the liquidity of FibraShop and have some discount for the rent and deferred rents and change in this kind of tenants.

For example, the cinemas changed the composition to fix rent for variable rent and increase the variable rent that is basically a deferred payment for the cinemas when they will have more shows and we have collected more rent when the [indiscernible] for the cinemas come back to the new stabilization. But we don't expect in the portfolio of FibraShop that big boxes go out. We see some small tenants, we see the occupancy rate that decreased after pandemic -- before pandemic and today, around 3 points of occupancy. We expect that. In last conference call, we explained that in our forecast in our numbers, we expect this between 3% or 4% of occupancy less. But we don't see in the big boxes up-to-date, we don't see some big changes.

[Unknown Analyst]

Gabriel, pretty helpful. Regarding on this part of the deferral, I got my attention that the NAFIN credit line from MXN 300 million. I think or I understood that, that is related to the deferral program that you implemented with the tenant and this counts with specific tenants. Is that correct? I think it's like a more -- likely to base credit line...

[Gabriel Ramirez Fernandez, executive]

It's more flexible, obviously, for corporate processes in general. Obviously, we announced and we discussed with the banks and for example, the great IMCs, the possibility to get these credit lines was [indiscernible] Scotiabank. It's for liquidity process and we see some requirements of liquidity for these discount program for the tenant. But in corporate purposes, it's a very flexible credit line like NAFIN and Scotia, and we have some resource for anything basically.

[Unknown Analyst]

Congrats for these results despite of the pandemic.

[Operator]

Our next question comes from the line of Gabriela Andrade with Columbus.

[Gabriela Andrade, analyst]

Could you talk a little bit more in detail about your debt profile and debt indicators, particularly some of the indicators that rating agencies follow in order for you to maintain your credit rating at the current level?

[Gabriel Ramirez Fernandez, executive]

Thank you, Gabriela, for the questions. If you see in the press release, we disclosed the covenants of our public and banking debt, public and nonpublic debt. We compliant 100% all of the covenants. We are -- obviously, the EBITDA reduced in the last year because of the pandemic, but we see that we have comfort of the space we do. We don't need to break some covenants with the conversations with credit ratings or the credit agency. Some of the points that we ask us and see about the indicator is basically the cover of the service of the debt and how many times EBITDA is your debt.

And obviously, the rating is more complex [indiscernible] rating explained to us. But these 2 indicators put good attention for this credit agency that explains basically the -- in the process of how we [indiscernible] in the process how we see the numbers, you are in the range of some levels of these 2 indicators explain basically part of the rating. We have in the last year and the beginning of this year, several meetings with the credit agency, both put the same rating, ratificated the rating for FibraShop and we don't have any news or some concern about the [indiscernible] today that it will change this opinion about our rating.

[Operator]

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Gabriel for closing remarks.

[Gabriel Ramirez Fernandez, executive]

Thank you for all of you for connecting with the conference. Obviously, the last year is a very challenging year, but the portfolio FibraShop shows it's strong, shows that the -- the management team shows the ability to manage the situation and implement actions to reduce the risk and minimize [indiscernible] possible the impact in our revenues and in our financial statements and stability of the company. This 2021 year is complex, too. We have some liquidity plans to cover some liquidity things for this year. The operation is there, maybe slowly [ that will do ] and our -- expected to recover the numbers prior COVID, but we are in the process to work to recover that numbers and implement actions to that. And when the process to the government implement the vaccine for the people, maybe the second semester will be better than the first semester.

Thank you for attending this conference. Take care and see you seen.

[Operator]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your evening.