JHSF Participacoes SA

BOVESPA:JHSF3

Earnings Call Transcript 2022-Q2

[Cleidiane Elias, executive]

And welcome to webcast JHSF Participações to disclose the results of the second quarter of 2022. Today with us are Mr. Thiago Alonso de Oliveira, CEO and CFO; and myself, Cleidiane Elias, IR coordinator. This presentation is being recorded and is being broadcast on YouTube and through webcast. [Operator Instructions]

Before proceeding, we would like to clarify that any forward-looking statements that may be made during this conference call relating to the company's business outlook or projections are based on premises on the part of the company's management and on information currently available.

They involve risks and uncertainties as they relate to future events, changes in macroeconomic policy or in legislation may affect the outlook and projections related in this presentation. I now turn the floor to Mr. Alonso for his presentation.

[Thiago de Oliveira, executive]

Good afternoon, Cleidiane. Good afternoon to all who are following this webcast. We divided this presentation in 2 parts. First, we present on the financial and operational results. And later, we will open for the Q&A session. I'll start by giving you an outlook about real estate development compared year-on-year, between the second quarter of 2021 and the second quarter of 2022, we had a decrease by 10.3%.

And since there was a difference in the breakout and in the mix of products from the Boa Vista Complex to Cidade Jardim Complex, this is a more balanced situation between sales of these 2 complexes. This is interesting because the profile of these developments, which now account for a greater share those from Cidade Jardim will have an impact on how we account for the sales derived from these sales.

So these are the effects of POC, which we are going to present a bit later. As regards the brake -- the breakdown. You can see that in Q2 '20, 17% were real estate products, whereas in the second quarter of 2022, it's 50%. These real estate products have the revenues recognized as the works progress.

So this is revenue to perform. And what we mean here is that we had the revenue which was performed throughout the last year. And then on the right-hand side, of the presentation, you see our receivables, we performed and to be performed, 11.6%. And when you look at the gross revenue, it's worth highlighting that in the second quarter of last year, we accounted for the sale of BRL 100 million of a plot, which was sold to XP Investimentos.

This was a one-off event. And when we look at the gross revenue, we have now 30% less than last year in Q2, but this includes the POC revenue, which has not been yet appropriated for those sales that were made throughout the quarter. And this accounting will be -- will happen in the next few quarters.

So this is going to impact on the sale of XP and the adjusted EBITDA. In this presentation, this hasn't been adjusted with the exclusion of the effects of XP and POC. Looking at the shopping malls for many years now, we have been monitoring the growth of shops in the shopping malls that we operate.

And this has to do with the income. And this gives you a little bit of the long-term view relative to sales. So in 2019, which is a benchmark for us prior to the pandemic, we sold BRL 621 million in the quarter, and now we sold BRL 1.2 billion. That is a 64% growth relative to Q2 2021, when we were still being affected by the pandemic, the growth was nearly 42%. And here, I would like to highlight Cidade Jardim and Catarina Fashion Outlet. These are the 2 main assets we operate within the segment.

And coincidentally, both are being expanded. Catarina halfway through the expansion and Cidade Jardims' expansion is practically completed. And as soon as we inaugurate this, we will see a growth in terms of sales on the part of the stores and also what we will derive as revenue for the company.

Relative to last year, our retail and digital division grew 53%, so very nice growth for our top line. In terms of operational indicators, all of them SSS, SAS, et cetera, are above 30% relative to Q2 2021. And if we compare them with 2019, they have grown above 40%.

The total indicator of sales and the S indicators are tracking each other. We closed the quarter with a rate of occupancy of 96.6% and in the main 2 shopping malls, practically, there are no vacant shops. On the other hand, also, the cost of occupation is very competitive, and it's at 8.9% in the quarter.

In terms of gross revenue from this division relative to last year, we grew virtually 61% or 104% relative to 2019. And and this has a positive impact on the adjusted EBITDA. We saw a growth of practically 37% relative to Q2 '21. Speaking of Hospitality and Gastronomy, all the operational indicators grew 99% in RevPAR, number of couvert sold 72% and average couvert 19% relative to Q2 2021. And we also have a benchmark in 2019.

And what we can say is that all the operational indicators of this division are way above the benchmark in the period prior to the pandemic. In terms of gross revenue, it grew 86% relative to Q2 '21, and we reached approximately BRL 94 million.

When we look at adjusted EBITDA and EBITDA margin, there was considerable growth in margin and in the nominal EBITDA. Looking to our last division, the international executive airport, the number of takeoffs and lendings grew practically 87% and this came not only from the airplanes, which are there in the hangars, but also in -- from other planes, which lands there and take off from there as the perception about the airport improves the number of non-hangared flights has been growing.

And when you look -- we look at the fuel supply, it grew about 310% relative to the same period last year. And here, the background is the increase in flights which require more fuel relative to domestic flights. The airport is today operating with 8 hangars. We should have 12 hangars.

There are 4 new hangers under construction, and we are also building a taxi way on ancillary runway for the movement of the planes within the airport. So this will interconnect the hangars and we facilitate the operation within the airport.

In terms of gross revenue, grews by 192% relative to Q2 '21, and the EBITDA grew by 645%. So the airport is gaining traction. It is a consequence of this business model. And as we continue to add capacity in terms of hangers, increasing the number of planes, which land and take off from there.

We can improve the fees, the airport fees, and we improve the generation or results from fuel. And these 2 activities, hangar and airport activities and fuel. These are vertical segments within JHSF and I conclude the first part of this presentation by giving you a summary of the main highlights in the quarter.

And when you see the variations in terms of percentages, they are all shown relative to Q2 2021. And with this, I finished the first part of the presentation, and I would now like to open for the Q&A session. You can direct your questions using the tools available in the webcast, and we will be able to answer your questions. If any questions are not answered during this webcast please do not hesitate to send a message to our IR department, and we will be more than pleased to answer any questions or provide any clarifications as may be necessary.

[Cleidiane Elias, executive]

We are first going to start with questions about the shopping malls. And there are many questions about the strong operational performance, especially sales in the shopping malls. Can we comment about that? And what do we see going forward in terms of growth in that segment?

[Thiago de Oliveira, executive]

That's a very good question. Thank you. When I made the presentation, I mentioned that for many years now, we see that the rate of growth in sales of our malls is above the medium or the average that the segment as a whole sees. And we relate that performance to the segment where we operate. We operate in a segment where whatever the macroeconomic scenario, the performance is above the market median. This performance is related to the niche.

In terms of growth, this is what we see. We have the 2 main malls which are now being expanded Cidade Jardim and Catarina Fashion Outlet. They have sold really well. So we see that there are more and more retailers, especially those who sell for high income portions of the population.

They want to have a space in our shopping malls so that they can be close to the high-income clients. And despite these 2 expansions, or in addition to that, we have a shopping mall for the Boa Vista Complex and the fourth shopping mall in the Faria Lima Avenue in São Paulo.

That is a very busy area of São Paulo, where these high-income clients circulate. And finally, we have the project of a shopping mall, which is integrated to a residential development. And this is going to be in Real Parque. And that's where we are going to have also the surf club, which will be integrated to that project. Still thinking about shopping malls.

[Cleidiane Elias, executive]

There is a question from Andrea from Citi about our positioning regarding digital.

Will it become a stand-alone business unit? Or will it be included within the shopping mall division? Or continue to be within the shopping mall division?

[Thiago de Oliveira, executive]

I don't know that I understand your holistic expression, but I'll explain to you how we see this going forward. Digital is an activity that is integrated to the brick-and-mortar to the physical activities, and it brings flexibility to our clients in terms of how they consume certain products. And on our side, we have been working to add services within that context, within the e-commerce context.

We have a vision where physical and digital coexist, and they will rely increasingly more one on another. We've mutual reliance. And moving to real estate development.

[Cleidiane Elias, executive]

We have some questions about cost pressures and inflation. Can you talk about the change in mix in terms of products and revenues.

[Thiago de Oliveira, executive]

I'll start with inflation and cost pressure.

There are some components of our costs and I will focus on the products that meet the profile in São Paulo rather than Boa Vista. We are seeing reduction in the price of cement and steel, but services as to on the cost pressure. That is in those stages of construction, when we are closer to the end of the works, there is more cost pressure.

This has not compromised the margins of these products. And therefore, this is well managed generally speaking. The second part of the question has to do with the change in the mix for us to have 2 or 3 poles where we generate real estate business, this is something positive.

It allows us to be flexible in terms of serving our clients. So this year, there is a greater inclination towards urban products rather than second homes. And with this, we transitioned and there was -- the sales were very strong at the Boa Vista Complex.

This went down a bit, but sales in the city of São Paulo picked up especially in Cidade Jardim. So this change happens because we have this land bank and we have products that have been launched or that are about to be completed, but we still have some inventory that allows us to serve this client base.

[Cleidiane Elias, executive]

Still speaking about real estate development, they want to know if we have a schedule for new launches in real estate, especially in the second half of the year. And in Catarina and in Bragança.

[Thiago de Oliveira, executive]

Yes, we are working with a schedule that is available in the fundamentals spreadsheet of the company. So I would urge you to consult with that spreadsheet, which is available in the IR section of the site. And there, you will find all the spreadsheets with the schedules for launches.

Speaking more specifically, we are in the prelaunch phase of Reserva Cidade Jardim. And in the beginning of next year or even in the second semester, we should launch the Bragança project.

[Cleidiane Elias, executive]

In terms of airports, we received a question about the potential for executive aviation in Brazil. How does it work here within Brazil? And what is our strategy to gain market share?

[Thiago de Oliveira, executive]

So first, I'll give you a bit of context. That is how much is Brazil relevant in terms of global executive aviation. We are the second largest market in the world in terms of executive aviation. 40% of the flights that across Brazil start or end in the metropolitan region of São Paulo.

So in addition to this flow of executive planes, São Paulo is also the city that has the 2 main commercial airports in operation. And I'm talking here about Congonhas and Guarulhos. So what happens is that at -- in the normal operation of the aviation sector, and we are in a situation of normal operation.

These airports have an overload of commercial flights and executive planes need space, slots between these commercial flights. And this becomes increasingly complex, given the demand of the airports in the commercial areas. So this is the scenario. This is the macroeconomic -- macro scenario that motivated our decision in terms of developing an airport for executive planes.

This airport is São Paulo, Catarina Executive Airport, an airport, which is 30 minutes away from the center of São Paulo. And it also provides a helicopter service to bring clients who operate their planes through Catarina. So they can be also taken to São Paulo through helicopter.

This vision became a reality in Q4 2019. And at that time, we opened the airport with 2 hangars. A while ago, I gave you some color about it. We are now building the 12 hangars in the airport. This airport which is not yet 3 years old, has the largest fleet of executive jets in Brazil.

We see a very robust pipeline, and this is why we have been offering hangars and the companies that manufacture and provide maintenance to the planes. They are also looking for space within the airport to provide their services while the planes are stationed in the hangars.

So large market, São Paulo has a large share in terms of that market. The location is fantastic, very close to São Paulo. And we provide safe operations, high standards, high-quality operations so that the users who come there once decide to use the airport to the detriment of the 2 other airports because of the experience we provide in terms of safety, speedy service and above all, because there is no competition with commercial planes in terms of slots.

[Cleidiane Elias, executive]

Now we are heading to the end of this webcast, and we have a question about Hospitality and Gastronomy. The question is what is the expansion plan for this sector, especially internationally? And also, could you comment on the recovery of this sector?

[Thiago de Oliveira, executive]

I'll start with the second part. Whenever we went through the processes of reopening activities as the restrictions were lifted, we saw restaurants and hotels with high occupancy. And this is a trend that has held, during this period, we won new clients. And in addition to winning new clients, we were able also to maintain our client base. So there was an expansion of the client base, which has allowed us to have the level of recovery that you saw in the last few quarters.

As regard our international experience, New York has been a very good experience for us, very encouraging and encouraged us to explore new cities, the next city where we are going to operate is Miami. And we have some leads for some opportunities in England and in Portugal. And as things progress, we will give you the news.

[Cleidiane Elias, executive]

So these were the main questions, Thiago.

[Thiago de Oliveira, executive]

I would like to thank you all. Thank you very much Cleidiane for collecting the questions, summarizing them. Once again, I would like to say how thankful I am to our team. Around 4,000 people, I'm proud to be part of the team to work with all of you every day so that we can provide quality and excellent services and goods to our customers.

And last but not least, I would like to give my condolences to the family of one of the people who were part of our Audit Committee, Mr. Francisco Montagner. He was a fantastic person, made a great contribution. And with this, I would like to end this webcast.

And any questions which were not answered, please send your questions to our IR team, and we'll see you very shortly. Thank you very much.