Centamin PLC
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Centamin PLC
Centamin PLC is an intriguing player in the global mining landscape, rooted in the historically rich soils of Egypt. The company, with its flagship asset, the Sukari Gold Mine, exemplifies a successful partnership between public resources and private enterprise. Located in the Nubian Desert, Sukari stands as Egypt's first modern large-scale mining operation, symbolizing the nation's re-entry into the global mining arena. Centamin's commitment to responsible mining practices ensures that while they extract the coveted gold, they do so with a keen eye on sustainability, maintaining a harmonious balance with the environment, and fostering thriving communities around their operations.
At the heart of Centamin's business model lies the extraction and processing of gold, a precious commodity that has enamored mankind for millennia. The company meticulously navigates the multifaceted processes of exploration, development, and extraction to produce high-grade gold. This gold is then sold at market prices, or through forward contracts, contributing to the company's revenue stream. Beyond the numbers on their balance sheets, Centamin leverages its strategic geographical positioning and robust infrastructure to maintain cost-effective operations, which in turn, ensures its profitability margins remain stable. Their business narrative is not just about the gold they mine but also about how they continue to optimize and expand their assets, promising sustained growth for stakeholders.
Earnings Calls
During Q1, Kojamo increased total revenue, net rental income, and profit before taxes. Occupancy saw a slight uptick, despite elevated maintenance costs due to a harsh winter. The company completed its last residential project, with no new developments planned, projecting a potential market shortage. The financial outlook remains solid with strong liquidity and maturing loans for 2024 and 2025 already covered. Kojamo revised its guidance to an annual revenue growth of 4%-7% and an FFO range of EUR 152-164 million, driven by improved rental prices and completion of existing apartments.
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Good afternoon, and welcome. This is Kojamo Q1 Results News Conference and I'm Niina Saarto from Investor Relations. Today, we have CEO, Jani Nieminen; and CFO, Erik Hjelt, presenting the first 3 months' figures. They will also update you on the market situation. [Operator's Instructions] But now let's kick off the presentation with Jani Nieminen.
Thank you, Niina, and good afternoon on my behalf as well. Yes, we will provide a summary concerning what's been going on during Q1. Then CEO, Eric Hjelt will provide a bit more detailed color concerning the financial development and our outlook. I will cover the operational environment and most important KPIs. Start with a summary. We were able to increase total revenue, net rental income and profit before taxes during the first quarter of the year. Occupancy increased slightly period and the tenant turnover remained at last year's level. Good to know that the -- at the same time that there are still a large number of previously started properties, which have been completed to the market that will continue still a bit. And that creates typical seasonality throughout the market. So in a typical seasonality, occupancies tend to go down towards the summer and then they pick up speed during the hectic summer period when we make most likely the highest number of new tenant agreements. That's throughout the market, and then occupancy start to improve towards the latter part of the year. At the same time, we do know that we've been pushing rents a bit more because we know that -- after this completion, there will be no more new supply coming to the market and the demand supply balance will be changing looking forward. FFO decrease due to financial expenses increase and maintenance expenses. One reason in maintenance expense is the extremely cold weather during last winter. Concerning the fair value of investment properties, no significant changes there. Basically, all the parameters remained the same. Our saving program is proceeding as planned. No surprises there. We are happy all the measures have been done, and we are achieving our targets there. And as -- prior said, our balance sheet has remained strong. Financing figures are good. The liquidity situation is very good and good to keep in mind that at the moment, all our maturing loans 2024, 2025 are already covered. Moving forward to the operational environment. There's the big picture, the global picture and then what's going on here in Finland. In the big picture, it's easy to say that the outlook for the global economy is improving. On the other hand, Finnish economy is not expected to grow this year. At the same time, inflation has slowed down in Finland. And yes, the estimates are that the growth will be existing here in Finland 2025 again. So looking forward a bit better. Outlook this year, not significant growth. The employment situation predicted to decrease slightly. One impact is construction business. We will see a very low number of new residential start-ups here in Finland and actually no science today that it would pick up speed. Market expects that EasyBwould start rate cuts in June and dinautumn remains to be seen what's going to happen. But as I said, inflation now slowed down here in Finland. So cost impact looking forward a lower housing market quiet, estimates are that the prices of old block of flats would stay flat. It looks that they are coming slowly down, but it's -- the transactions are on a low level there. Throughout the market estimates are that rents would pick up a bit more speed this year than 2023. The sure estimates are that they would be increased this year by 2%. We've been increasing the range on significantly higher level throughout the first period of this year. And most likely, it's been impacting the occupancy improvement. Big picture on the rental market is still the same that all the megatrends are still valid. Urbanization is continuing. All the big cities are growing, especially in Helsinki and Turku regions, the population growth has been more than double last year, seems to be continuing this year as well. And most of the population growth is due to immigration, and that typically increases especially the demand for rental housing. At the same time, this is backed by the data that still when era will receive new official data from all the big cities, what's the portion of households living in rental apartments. That portion is always increasing. And as prior said, in cities like Helsinki, Dunbar Turku, more than half of the households already live in rental apartments. And looking forward, population growth will continue in all the big cities. We will still have an increasing number of small households, and this put together will create long-term demand for rental homes. At the same time, as I said, the number of residential start-ups plummeted last year, and there's no turn for the better inside yet. Actually, I do believe that volumes will stay on quite low level next year as well. If we look at the paragraph on Page 7, on the bottom right-hand corner, this year, the estimate is that only 2,000 nonsubsidized block of flags would be started. And if we compare that figure to prior years, when it used to be 20,000 or about 20,000. So it's only a handful of project to be started. And when I talk with the construction company CEOs, it seems to be that even that number might be a bit optimistic. So looking forward, even still today, we do have a lot of supply in the market. It seems obvious that we are heading for a shortage in the housing market during the next couple of years. Moving to Page 8 and our key figures. As I said, we were able to increase our total revenue, still a combination of 3 angles. We have been able to increase the rents able to slightly improve the occupancy. And the third angle is the completions during last year and the first part of this year. So the number of apartments been increasing. The net rental income, EUR 60.6 million improvement, 1.9% a comparison period. There is good to keep in mind that, yes, there was a EUR 4.3 million increase in maintenance cost, basically -- two key elements there, a very hard winter, providing additional heating costs, a bit more than EUR 2 million. And then property taxes a bit more than EUR 1 million increase there. FFO, EUR 25.5 million was impacted by increased financial expenses and of course, this maintenance increase as well. Fair value of investment properties EUR 8.1 billion. No significant changes there. Of course, 2 projects has been completed. No changes in valuation parameters. Actually, if we look at the profit loss before taxes, it's good to keep in mind that this time, the change in fair value of investment properties was EUR 11 million positive comparison period, it was EUR 9 million negative. So only slight changes in valuation. As said, we did make a decision already 2022 that we are not starting new development projects, and we're still on that path. And that's very visible if we look at the gross investment figure. So saving program is proceeding as planned, not only EUR 8.4 million as total gross investments, new developments were EUR 5.3 million and organization investments, EUR 3.2 million. Profit, excluding changes in value, EUR 28.3 million. On Page 9, a couple of words concerning ongoing development projects. Actually, today, we should say, ongoing development project. So we do have only one ongoing project at the moment, which will be completed at the end of June, 113 apartments. It's kind of a historical moment -- if I look at my career here in the company. In July, we will have no apartments under construction. And that's not typical for a company like Kojamo, but the same applies throughout the market. So as I said, we will most likely be heading towards a shortage looking forward. The cost of completing this remaining project is EUR 5.3 million. And as such, the project is proceeding as planned, no surprises there. So basically, as we are completing the last project, we are focusing on existing portfolio. And our way to provide added value for Lumo customers is to combine apartments, common spaces and services, whether the services are physical or digital. It doesn't matter. It makes a combination. I'm happy to say that the net promoter score was 51. And today, already 87% of our customers use digital My Lumo services. So that number seems to be still increasing. And so some of the services are, we call it, basic functions, always included. There are some fixed customer benefits and the available services as options for the customer. They use them when they will. So that's how we create added value and that creates the possibility to have premium in rent levels. Kojamo has been always a company where we are proud to say that sustainability is a part of the company DNA. And we are committed to the carbon-neutral energy use in our properties by 2030. We are proceeding really nicely. Today, since we launched the program already half of the reduction done GAGR 14.4% during that period since 2019. This year, already, the reduction has been 13.2%. So we are still proceeding really nicely. We use only carbon-neutral electricity in all our buildings and how we like I think this issue, the sustainability and how to reach the target is a combination of 4 angles. Is the way we help to change the customer and consumer behavior. On the other hand, it sees that consumer behavior is changing throughout the world, but we will help our tenants, then how we utilize technology, for example, our AI system in how to optimize heating and sell that data to service providers like district heating companies. Then, of course, an important role is what are our partners capable to do and a significant impact, of course, comes from district heating service providers. and then our own measures, whether they are geothermal heating solutions, next 0 energy buildings or, for example, solar panels. So that's the combination of how we're going to reach our targets. At this point, I would let Eric continue with the financial details.
Thank you. Thank you, Jani, and good afternoon, everybody, from my side as well. So Page 13. The top line growth was EUR 5.1 million. And there, the like-for-like top line growth was 1.6%, and the increase in rents and water charges contributed 1%. The improving occupancy contributed and other topics, negative 0.1%. Completed apartments, so meaning 2023 and first half -- first quarter of 2024, complete apartments contributed EUR 4.2 million for the top line growth. Net rental income growth was EUR 1.1 million. Revenue growth, of course, EUR 5.1 million positive and maintenance expense is negative EUR 4.3 million. And the biggest negative item there was from a compare compression period was heating EUR 2.2 million because of the harsh winter here in Finland in first quarter this year. Property taxes grew EUR 1.1 million and growth of the portfolio was the one cost EUR 0.8 million growth in maintenance expenses and repairs down EUR 0.3 million. Page 14, if you look profit, excluding the change in fair value investment properties came down by EUR 4.7 million. And net rental income positive side, EUR 1.1 million. SG expenses decreased EUR 0.8 million. Finance expenses increased EUR 5.8 million, given the fact that the new financing is more expensive than the expired one. And then of course, the cost of financing is higher in general terms as well. On the right-hand side, if you look at FFO. So net rental income again contributed EUR 1.1 million. Expenses decreased 0.8%. Financial expenses calculations grew EUR 6.3 million. And the difference from -- compared to profit before taxes is explained by the unrealized change in fair value of derivatives and cash taxes decreased EUR 1.2 million. Page 15, I think Jani already covered this topic so a slight increase in occupancy from conversion period. And like-for-like rental income growth, we already covered. So Page 17. So as part of the saving program, for the time being, we are not starting any new developments or modernization investments ongoing process. So this one ongoing project will be completed by the end of June, EUR 5.3 million to be invested in order to complete that one. The investments during the first quarter of this year saw development EUR 7.5 million, modest investments, EUR 0.5 million and capitalized borrowing cost EUR 0.4 million, so down clearly by last year and previous years according to our savings plan. So the modernization investments first quarter 5 million and repairs EUR 6.0 million, both in line with our saving program. Page 18. The change in fair value investment properties, EUR 11.1 million the improved net rental income cost EUR 7.9 million positive impact for the values and other items, EUR 3.3 million. There are positive and negative size on a positive side, there was an restrictions, causing the uplift in the values. And then of course, on a negative basis money spent from monetation investments and impact of aging, but a net impact, positive EUR 3.3 million. We still have 737 apartments where we have restrictions regarding valuation, and those restrictions will end by the end of this year and an uplift in value will be between EUR 50 million and EUR 70 million. In Page 19, equity ratio, loan-to-value mood site base. And we still have a quite sizable buffer against this 50% loan-to-value level that is by Moody's hurdle for Baa2 rating. This buffer is actually around EUR 900 million, and that's if only value yield changes 55 basis points in yield requirements. Page 20. As Jani already mentioned, our loan maturities in 2024 and 2025, covered. So our CapEx need is very, very limited, in line with our saving program. So we don't need any additional financing. And then, of course, it's a question of refinancing maturing loans. And as I said, '24 and '25 mates are all covered. In January, we issued a EUR 200 million bond in private placement mode. And in March, EUR 250 million secured term road facility as well. EUR 425 million syndicated loan we made last year was undrawn at the end of Q1, so we had EUR 675 million undrawn loan facilities in place. We had EUR 94 million cash and cash equivalents and EUR 30 million financial assets. And given the fact that the CapEx need is quite limited, also FFO is used to pay back loans as well. So if you put all these together, that means that 2024 and 2025 maturing loans are covered. Our financial key figures, very strong hedging ratio, 94%. Average interest rate, 2.6%, and that's including the cost of derivatives. Then Page 23, our outlook slightly specified. Now we estimate that the top line growth is going to be between 4% and 7%. And that's due to the Q1 result and how we see the operating environment. Completed apartments will contribute 3% for top line growth compared to last year. Now we estimate that the FFO this year is going to be between EUR 152 million to EUR 164 million. Of course, this range for FFO guidance caused the range for top line growth. And we took slightly down both sides of the FFO guidance on back of the elevated maintenance expenses due to the cold winter during Q1, so roughly EUR 2 million. And then if you look what's background behind this FFO guidance, so we penciled in 4% inflation impact for all cost items. We penciled in the saving program. It's proceeding as planned and the impact of saving program in total. We penciled in that 24 and 25 mature loans are covered. And we penciled in the supply-demand balance is going to improve towards the year-end. So these are the background for slightly specified outlook. Page 24, our strategic targets. So top line growth, 4.7%, still quite strong in line with our target to grow top line, 4% to 5% annual investments, EUR 8.4 million. And that's, of course, the outcome of the decision earlier made that no new developments will be started for time being. FFO against total revenue, 22.5%. It's good to note that the whole year's property taxes are booked actual expense in Q1, EUR 15.2 million in total. That, of course, explains by the -- typically, the Q1 FFO cash total revenue is lower than the whole year figure. Loan-to-value equity ratio strong as already mentioned, a Net Promoter Score could result 51 there as well. And now back to Jani.
Thank you, Eric. Yes, a summary, total revenue, net income and profit before taxes increased. So in that sense, a solid Q1. No material changes in fair value of investment properties, all the perimeters stayed the same. We were able to slightly increase and improve the occupancy, the seasonal variation, as mentioned. In my eyes, it seems that during Fillant the data concerning residential start-ups is always estimates. And as we provided already information when it started to go down in our eyes that we don't believe in official estimates. This year, it seems that the estimates concerning 2022 started figures were quite correct and still that year, quite many projects were started, but it seems that more than anticipated project were started during the latter part of the year. And because of that, still now 2024 come supply to the market. a bit more than estimated last year. But as I said, the number of new resi start-ups has been now very low 2023 and 2024. So looking forward, we will see a very, very limited number of new complexes. The same phenomena will go through the market as now happening to Kojamo that the last project will be completed in June. So that will provide a situation still that there is a lot of supply in the market, some pressure towards the occupancies throughout the market, at least until the summer. But then things will change as there will be no more supply coming to the market, the urbanization and population growth in all the big cities will start to eat up the supply from the market, and we will be heading towards a housing shortage. Balance sheet and financial figures remain strong. As Eric provided details and the liquidity situation is very good. So in that sense, on a financial side, as all the loans 2023, 2024 are covered. We are in a good position and able to follow what's going to happen in the financial market. Thank you.
So now we can have some questions. [Operator's Instructions] So first, we have John Vuong from Kempen.
You mentioned that rent increases were at a higher level than in recent years. At the same time, vacancy is largely unchanged compared to Q1 last year, which I would say from a historical perspective is still a rather high number. So what gives you comfort to raise rents more than previously?
I would say that we based our pricing on the knowledge that there wouldn't be as much new completions coming to the market during the first part of the year. Now it seems that there has been a bit more than anticipated completions towards the market. And we do know that after these existing projects will be completed to the market, then there will be no new supply coming to the market, and the demand is growing. So the demand supply balance will change radically. So it's like an optimizing game. You can either focus during Q1 on increasing the occupancy without increasing the pricing or you can start increasing the pricing and get a slightly moderate improvement in the occupancy. So that's the balancing game. But then looking forward, we know that throughout the market, the supply will go down.
Okay. That's clear. And like I said, it's an optimization game of course. So at what point do you consider occupancy improvement more important than rental growth, for example? So do I read in your comments that essentially in H2, you're seeing less rent increases and more occupancy improvements driving like-for-like rents?
I would assume that latter part of the year, the bigger improvement will come throughout the occupancy. But during the same time, we will continue to increase the rents.
Okay. That's clear. And just on your last comment also on the development completions being higher than expected. Is there any risk that '23 development starts were underestimated as well, which would lead to more completions in '25 and delay recovery even further.
I don't believe in that because all the construction companies been providing quite challenging figures from year 2023. So it's quite a public knowledge today that a very, very limited number of projects have been started last year.
Thank you, John. So next, we'll take some chat questions.
There's a question about the saving program. Did you see any impact already in Q1 in the profit and loss statement?
They are already impact in Q1 P&L, thanks due to the saving program. Of course, if you look the whole year figure, the impact is compared to last year's figures, the impact is gone much bigger, but there's already impacting in Q1. The thing is that we penciled in the inflation, 4% for all the expense items. And during Q1, already post repairs and SGA expenses came down from last year. So yes, there is already impact in Q1.
Then there's a question about valuation. Can you remind us when your next time appraise the properties? Will it be the entire portfolio? And how valid do you think the current net initial yield is? Is it appropriate to see that the yields will decline when there's little to no transactions being done?
Yes, we do the valuation on a quarterly basis, always in the same manner, always throughout the whole portfolio. So it's always done in the same manner. So full valuation. And yes, we do believe that the valuation is done in a proper manner, and the yield requirements are solid. It seems that, yes, the transaction volumes have been muted. But on the other hand, there seems to be now a bit increasing number of appetite in the market. So let's see what's going to happen in the market moving forward. I think that in a way, market is waiting for the ECB decisions. But if they come out as estimated, it will have a positive impact.
Do you look at any divestments this year?
Remains to be seen. We are in a good position. We have all the loans covered. Our figures are solid. So we are not in a position that we must sell something. But as prior said, we may end up selling something if we feel that the pricing is rational.
There's a question about average funding cost, which was 2.6% at the end of the quarter. It increased a bit. So was it due to the new loans? Or was the June maturing bond still included in the calculation?
So it's because of the new financing, that's why it increases. So when we withdraw a new financing that increased the average cost of financing, that was the reason behind that.
And about liquidity. Have you been recently in dialogue with Moody's?
Not recently. Year-end, we had a discussion with Moody's and we update them for digit, for example, every quarter. And next one discussion will be after our Q1 results are released. So quite soon an update how figures look like.
Then have you analyzed the need to speed up renovation pace due to EU's Energy Performance Buildings Directive.
That's, of course, a topic we follow. And as we've been saying, energy angle has always been included in all our modernization investments. So in that sense, it's not going to change. We haven't found any like other reason to focus on the issue at the moment.
And the final question from here about trend increases. We touched about them already, but when do you expect bigger rent increases to be possible? What's the view?
I would estimate that if we think about the whole market, most likely 2025 because many landlords still apply such an approach that they increase the rent once a year in the beginning of the year. So most of the decisions for this year have been made in the market level. I think the market will improve during the summer and looking forward. So those players who have capabilities to adjust the rents on a monthly basis, start reacting already this year.
Okay, clear. So that was the final question. Thanks for sending the and thanks for joining us. So next report is out on August 15. And hope to see you then wish you all a lovely summer.