Metrovacesa SA
MAD:MVC

Watchlist Manager
Metrovacesa SA Logo
Metrovacesa SA
MAD:MVC
Watchlist
Price: 8.7 EUR -1.14% Market Closed
Market Cap: 1.3B EUR
Have any thoughts about
Metrovacesa SA?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2023-Q1

from 0
J
Juan Calvo
executive

Hello. Good morning, and welcome to the webcast from Metrovacesa on the first quarter results of 2023. My name is Juan Carlos Calvo. I'm Director of the Strategy and Investor Relations. We have today with us Jorge Perez de Leza, CEO of Metrovacesa; and Borja Tejada, CFO, who will be presenting an overview of our activity and key developments during the first quarter of the year.

The slides of this presentation have been released to the market this morning and, they are available through the CNMV website and in the company website. We have also send it by e-mail to our usual distribution list for analysts and investors.

[Operator Instructions] Now I hand it over to our CEO to start the presentation. Please, Jorge.

J
Jorge Perez de Leza Eguiguren
executive

Yes. Good morning, everyone, and welcome to our quarterly results presentation. I would like to start with briefly some highlights and somehow positive view. We started with a positive stand on the year. And I think somehow better than we all thought, with housing demand clearly holding up, having a good presales performance, as we will see later, compared to the 3 prior quarters and also confirming our high activity volumes in terms of units under construction and commercialization launches, both of them being about 2,000 units.

We also have a strong visibility for the next few years with the sales backlog now exceeding EUR 1 billion for the first time, with a sales coverage for deliveries in 2023 and 2024, which is quite high at 85% and 60%, respectively, and with a good construction progress as well, with 100% of the 2024 deliveries under construction and also a little bit more than 35% of 2025 deliveries already under construction.

Dividend update, as we already announced that would be proposed through the shareholders meeting. We will be distributing a dividend of EUR 0.33 per share to be paid on May 18 (sic) [ May 19 ]. And it was approved, as I mentioned, in the shareholders meeting, general shareholders meeting of yesterday. This represents an 85% payout on our full year 2022 cash flow generation, therefore, following our cash flow -- sorry, our dividend policy once again this year.

And with this, I will hand it over back to Juan Carlos, who will give us a brief comment about the sector dynamics.

J
Juan Calvo
executive

Yes. Thank you. We want to highlight a few ideas about the sectors, starting with housing transactions. We highlighted the figure of transactions. Both used and new homes is holding up pretty well according to the statistics. We have already figure reported for January and February, and it's fairly stable, as you can see in the chart. And actually, with a much more positive tone that we were perceiving at the end of last year. And we think that the outlook for new housing demand remains solid, particularly for new housing with a demand-supply dynamic, which is favorable. And therefore, we think that the reasonable expectation is to have some modest positive price appreciation in particularly new homes.

Switching to supply figures that contain -- continues to be very limited. And the volume of housing completions last year was clearly below 100,000. It was around 80,000 units. And it remains very low levels in the last few months. And with respect to construction costs, we see them stabilizing, certainly not as tight as it was about a year ago, and the situation is becoming much more normalized. And this is very much supported by the most recent macro data. If you look at the job creation, perhaps the statistics that is most relevant for the demand of housing, that continues to grow. Job creation continues to be positive in the last few months and quarters.

And we have seen actually some positive upward revisions in our GDP forecast for 2023. For instance, the expectation from the OECD is an increase of 1.7% for Spain compared to 0.5% for the average of the European Union. And perhaps one important piece of data is about the household finances, which are pretty solid. I mean, we can see that the volume of deposits and cash by the families -- owned by the families continues to rise, and it's up almost all-time highs, whereas the debt of household is decreasing. And this is a factor that probably explains the good performance for housing demand.

Back to Jorge?

J
Jorge Perez de Leza Eguiguren
executive

Yes. Moving on to the Metrovacesa's performance during the quarter, and I'm now moving to Page #9. In terms of presales, we had a net presale figure of 425 units. And I think it's important to highlight that this is a better figure than in the last 3 quarters. So again, demonstrating that demand is still solid and that the situation is not as great as some people out there put it. So we are also experiencing an increased number of visits throughout the quarter, which encourages us to see the situation holding up for the following quarter as well. The ASP for the first quarter was EUR 302,000 per unit, which represents a 4% increase compared to the last year. And this is not just a matter of mix of the products sold, but rather that we represent that we have had HPA across the last year.

In terms of operational activity, as I mentioned before, our presales backlog is about EUR 1 billion for the first time, with a total of 3,265 units now being presold with an average selling price of close to EUR 320,000 with a very healthy mix of 80% contracts and 20% reservation, and 82% of our clients being retail and 18% in institutional or BTR clients. In terms of construction starts, as I mentioned before, we are over the 2,000 unit figure, which longer term or midterm will represent that we will be above the 2000 figures in deliveries. And we started 470 construction units during the quarter and 2006 units in the last 12 months. 100% of our 2024 deliveries are under construction and a little bit more than 35% of 2025 as well.

In terms of construction costs, normalization and smooth execution, I would say, are the highlights of the quarter as well. In terms of units under commercialization, we started -- we did commercial launches of 600 units in the quarter and 2,100 -- close to 2,100 in the last 12 months, with an average selling price that keeps growing EUR 330,000 units per house, 7.5% year-on-year and with 50% already presold. The active -- total active units is now 7,824 units.

In terms of delivery, we've delivered according to our plan, exactly what was planned, which is 331 units, representing EUR 79.2 million. 134 of these units are a BTR (sic) [ BTS ] project, handed over in Valencia and another one in Madrid. The average selling price is lower than what we will see in the second part of the year with EUR 239,000 per unit, and mainly driven this lower figure by the BTR units, which have a selling price of EUR 208,000 is mainly, again, being one project in Valencia, in Quart de Poblet, where the average selling price both for BTR and BTS is lower than our average for the company. The gross margin stands at 21.5%, again, in line with our guidance for many quarters in the past where we said that we would be in the low 20s.

So just to reiterate, we are in line with the internal plans in terms of number of deliveries this quarter and on track to hit the full year target, expecting a higher ASP in the second part of the year. And as I mentioned in the highlights at the beginning as well, more than 85% of the deliveries for the year are already [ proceeded ].

In terms of land activity and progress on land management, I think we are very happy to announce that after a few years of managing this land, The 3 Chimneys sector in Barcelona, in the coast in Barcelona, finally, saw the approval of the master plan or the PDU, as it is called in Spain. This, as many of you already know, is a strategic location in the edge of Barcelona and [indiscernible]. I'm right in the front of the scene. The master plan in very broad figures represents 1,800 residential units and an additional 100,000 square meters of commercial uses, mainly offices. We still have to do the urbanization plan and the [indiscernible] or reallotment that will be done in the -- during 2023 and 2024.

Metrovacesa, as you know, holds close to 40% of a JV that we have with Endesa in this area. And according to that 40%, we would have land for over 400 residential units and somehow 25,000 square meters of commercial, depending on what the final distribution will be again when we do the reallotment.

In terms of land sales, we had a slow activity in the first quarter with just EUR 0.3 million of revenues, plus another in revenues, meaning [indiscernible] plus another EUR 2.6 million that we signed in private contracts. That seems to be a low figure. However, the sales pipeline is much stronger than that with EUR 21 million sales backlog that will be signing material deal in the next quarters, another EUR 20 million in advanced negotiation in due diligence. And I think, again, even if the figure for the first quarter seems low, I think our view is actually more positive than in the end of last year in terms of land activity and also in terms of commercial land activity. That's kind of becoming more active than what we saw in the last 2 quarters.

Okay. And this would be it for the operational update. And I'll now hand it over to Borja Tejada, CFO, for the financial overview.

B
Borja Tejada Rendón-Luna
executive

Thank you, Jorge, and good morning, everyone. There are some key figures about our profit and loss account. EUR 79 million of revenues from residential development with 21.5% of gross margin in line with our guidance. Positive EBITDA and close to breakeven in recurring pretax profit. Now concerning our net debt, very solid financial structure with 11.5% of loan-to-value that will reach 13.6% after dividend payment, distribution of EUR 50 million in May. In terms of gross debt, close to EUR 400 million, no relevant maturities up to 2026, with corporate debt hedged at fixed rates.

Now I will hand over Jorge with closing remarks.

J
Jorge Perez de Leza Eguiguren
executive

Thank you, Borja. And I think, again, I will be brief with the closing remarks as well as I was with the highlights and with, again, a positive tone. And what we see is an encouraging market in early 2023 with a resilient housing demand, increased interest in our land assets. And however, we still are in times of high uncertainty. And what I can say is that we remain as usual in the last uncertain times with a high degree of flexibility to adapt to the situation of the market in any time.

The outlook for the year is reiterated with our forecast of EUR 100 million to EUR 150 million cash flow generated still holds in place. And in terms of project launches and construction starts being consistent with our midterm target of more than 2,000 units per annum. That meaning that we are not in any way slowing activity or anything like that, but quite the opposite, just being in line with our clients.

And with that, I close it and hand it over back to Juan Carlos.

J
Juan Calvo
executive

Thank you, Jorge. We are now ready to start the question-and-answer session. We will be starting with our participants in the conference call. [Operator Instructions] We start with the first question coming from Ignacio Domínguez from JB Capital. Please, Ignacio.

I
Ignacio DomÃnguez Ruiz
analyst

Firstly, could you provide more color on the increase in number of visits in the first quarter? Is this because there are more units under commercialization? Has there been any change in the time it takes a customer to make a decision on the purchase? Secondly, with regards to land management, you said that you are perceiving an increased interest in the company's land assets. Could you provide more color on this? And what can we expect for 2023? And finally, why has the sales coverage for 2024 deliveries not increased during the quarter? Has there been more calculations or probably there are more macro headwinds?

J
Juan Calvo
executive

Excuse me, Ignacio, would you mind repeating that because the line was -- the sound of the line was not totally clear. Can you repeat questions number 1 and 2, please?

I
Ignacio DomÃnguez Ruiz
analyst

Yes. Firstly, could you provide more color on the increase in number of visits in the first quarter? Is this because there are more units under commercialization? Has there been any change in the time it takes a customer to make a decision on the purchase? And the second question was with regards to the land management. You said that you are perceiving an interest in the company's land asset. If you could provide more color on this? And what can we expect for the year?

J
Jorge Perez de Leza Eguiguren
executive

Okay. Thank you, Ignacio. Sorry about that. We had an incoming call, and that's why we didn't listen to your questions properly the first time. So in terms of number of visits, we measure visits not on an absolute term, but proportionately to the projects under commercialization. And what we see is -- when I say increasing number, it means that is in absolute terms, increasing more because also we are increasing the units under commercialization.

So compared to the last 2 quarters, it's a figure that is growing. It is true that the decision period is probably a little bit longer than what it used to be for the client to sign that what it used to be a year ago. But the contacts and visits is the first measure that we follow because that transforms into contact, sorry, into sales. So that's a sign, an encouraging sign again, that will result what we believe at least for the second quarter for now because to estimate a year from now it's difficult. The figures in the second quarter should continue to be strong.

Regarding your question about land management, I think separating between land management and then land sales, I think land management, we will continue working on the transformation on land. And for the next 2 years, we see about 5,000 units becoming transformed into fully permitted land in key locations that will allow us to improve the mix of our launches. And then in terms of land sales, is what I mentioned in the -- when I talked about that in the presentation, which is we have more than EUR 21 million to be closed shortly and another EUR 20 million in negotiations, and that will turn into -- some of them into private contract plus notarial deed this year and some of them into notarial -- sorry, private contract and notarial deed next year.

So we will give more clarity on that as the figures close. But what is important is that there is activity and there is interest. And then in terms of sales coverage for 2024, I think, yes, it is true that we mentioned in our prior presentation, more than 60%, and now that figure is repeated. The reality is that more than 60% in March is actually 65%, which is significantly or I would say, it compares -- it's higher than what it was in December. So it's 65% even though we put more than 60%.

J
Juan Calvo
executive

Thank you, Ignacio. The next question comes from Javier Beldarrain, analyst from Bestinver. Please, Javier.

J
Javier Beldarrain Pascual
analyst

Yes. The first one would be regarding the distribution of deliveries during the year. So if I'm not mistaken, you have a high concentration during the second half of the year and the high ticket deliveries in Málaga. But could you give us some color on the distribution for each quarter, if possible? And then the second one on the loan-to-value by year. And I understand this will depend on the final figure of land sales during the year and perhaps not any changes in valuation. But do you have a rough estimate or a range where you see the loan-to-value by year-end?

J
Jorge Perez de Leza Eguiguren
executive

Yes, Javier. So we -- in terms of deliveries, I think we disclosed figures for the full year, and we stick to our range just not to be measured on the deliveries for a minute, which I think that kind of puts pressure without needing it. That said, we're not going to deliver 1,000 units in the last month, okay? So it will not be as evenly distributed as 1/4 of the target every single -- sorry, every quarter. And it will be more back-ended, but again, not a high distribution, not a high figure in the last month, okay? So you will see it as it comes, the deliveries for this quarter of 320 units were actually the exact figure that we had in our budget. So again, we stick to our total figure for the year, and you will see it happening along the lines.

In terms of the LTV, that will depend on several things. First of all, the land sales, in which the more we sell, the V will decrease, obviously. And then on the CapEx and that we invest in both -- in work in progress and construction as well as in the urbanization. Our, let's say, targeted figure for the running rate is probably at around 20%, 22%. I think at the end of this year, we will get closer to that figure without being a 20% yet.

J
Juan Calvo
executive

Okay. We don't have more questions from the conference call, but we do have some questions from the webcast. We are turning to that now. We have the -- first question is coming from Gerardo Ibáñez Herrero, analyst from ODDO. He says, there's been no change in the sales coverage for the full year 2020 -- I mean -- from the full year figures to the first quarter if you look at 2024. Can you give us some color here? And what can we expect for year-end? And can you provide us some color on the absorption rate in the first quarter as there was no figure indicated?

J
Jorge Perez de Leza Eguiguren
executive

Yes. Gerardo, so I think the first one was already answered, in for 2024 in December, it was close to 60%, and now we stand at 65%. So it has definitely increased. And then in terms of the sales ratio and the way we measure it, which is net sales over total units under commercialization sold and then sold. This has also increased compared to the last quarter. So I think in second quarter of '22, it was 2.3%. Third quarter of '22, it was 2.1%. In the fourth quarter of '22, it was 1.8%, excluding BTR or 2.8% with BTR. And now in this quarter, we stand at 2.3%. So again, it has -- compared to the prior 3 quarters, we are better off.

J
Juan Calvo
executive

Okay. We have another question, that's from an investor. He is asking about the new housing law. According to the press, this doesn't look very encouraging for a [ B2-rent ] business. Is the retails as well as it seems? Do you have any feedback from investors that you are talking to on the BTR segment?

J
Jorge Perez de Leza Eguiguren
executive

So yes, Miguel, I think that we also expressed our opinion about the housing law yesterday at our shareholders meeting. In fact, our president talked about it during his speech. And we believe that this law will actually mean probably a decrease in the output of housing units, which is not very good news. In terms of BTR, I think we are right now in a kind of position in the sense that we have several drivers that are uncertain. And until they clarify, I don't think we will see many BTR transactions. So hopefully, in the second part of the year, these drivers, and I will mention what they are in a second, I think they will clarify. And then given that the equity searching for these kind of deals is high, we will hopefully see some transactions.

The uncertainty comes from, first of all, the interest rates. I mean that's not news about what is the financing cost and what is the yield on cost or net yield at the end, the exit that I can use. I think the analysts there from the investors are not yet fully confident on what to use in their models. Then I think -- and then that there has still been some lack of stability until we see interest rates holding more. Second part, I would say, our second driver is construction costs. And I would say that, that is more stable now. So if we compare to what we had last year that it was more difficult to estimate. I think now it's a little bit easier to estimate. Nevertheless, construction costs have gone up, and that obviously puts some pressure as well on the prices that we can sell for.

I think another driver is the strong BTS market. So right now, given that the output is quite small in the market, in general, I think developers, we are not feeling the pressure of having to sell a BTR project, but rather we can put it as BTS, selling to the client. And given that the sales performance is quite okay. We are seeing some price increases in -- still in some areas where demand is high. So therefore, we are not in a rush to close any BTR, but rather -- I think we've seen this in the market, some BTR projects actually turning into BTS.

So -- and then finally, the housing law and what it means in terms of what is the rent increases that -- the rental increase that the analysts can put in the model. And once we see the final law and how that is implemented in the different regional governments, then we will have more clarity. And again, transactions might come back to the table. So lots of uncertainty, in summary, that I think will be more clear in the next months and then probably in the second part of the year, we will see some transactions.

J
Juan Calvo
executive

Okay. We don't have any more questions in the webcast or in the conference call. So we can conclude here the results presentation for the first quarter of 2023 of Metrovacesa. As usual, the Investor Relations team will be available to take any follow-up questions that you may have. We thank you for your participation, and we hope to speak with you again in the next quarter. Thank you, and goodbye.

All Transcripts

Back to Top