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Good morning. I would like to welcome all of you to the summary of results for Q1 2022 for Atal Group. In today's conference, we will have our President, CEO, Zbigniew Juroszek and Andrzej Biedronka-Tetla, Financial Director.
We will present the slides with the results. And in the second part of the conference, we will invite the CEO to give his comment on the market situation, and then we'll ask you to post your questions in the Q&A section.
Let's start from presentation. From operating activities, as usual, investment in progress in the pipeline. I'm not going to talk a lot about that because you are well aware of our investments is in the 7 biggest cities in Poland. By the end of March, we had 38 undertakings, development undertaken in 7,590 flats. We're planning new investments. It's a continued process. We are planning 29 investments for almost 900,000 flats.
Sales of flats, in Q1 2022 we signed 754 development contracts, in April another 200, over 200. So if we compare it to the previous year, it's a drop by about 10% from 840 flats drop. But as you can see, the bars in red, that reflect the first quarter of consecutive years, it's a better result than in 2020 or 2019. I'm talking about Q1 in both these years, of course.
Sales of flat as compared to our competition, we have 754 such contracts in ranking 2 and flats in our offer at the end of March 2022 dropped to 2,733 flats. It's a level that we had in the previous years. And it's the result of increased contracting of flats that had -- that took place in the previous periods. This level is being recovered. We'll be working on that due to new investments and implementations all over this year.
And handovers in Q1 2022, it's the most important thing in our financial results because it translates directly to our revenues. It's 719 flats, mainly in Krakow and also in [indiscernible] of more than 200 flats and in the Silesian region that was third in the rank.
As compared to Q1 2021, we have a drop in numbers of handovers. We have a drop from 794 to 719 flats this year. But I will show you something different in the slide. There's a huge difference in the tendency as regards the usable area. So we handed over [ 445,000 ] square meters of flat space. So it's much more than in Q1 2021 when it was 41,000 square meters. We should also note at this point that in Q1 2022, the average flat was 62 square meters. And in the same period last year, it was about 52 meters, so 10 meters less.
New land, this is the value of land purchase in consecutive periods in Q1, we can say when we compare it with previous periods, it was only PLN 70 million, but we're not saying it's all for this year. So in Q1, it was PLN 70 million spent on new land. The average purchase price was still quite low, which was PLN 632 per square meter. Again, the land bank of Atal as of end of March 2022 allowed us to implement a huge number of projects with a usable area of almost PLN 500 per square meter.
Dividend as you are well aware, the Management Board has recommended to the meeting of shareholders, the payment of dividend for 2021 in the amount of PLN 232 million, which is about 70% of net profit of Atal S.A. as of 31 March, the rate, the dividend rate was 14.9%.
So since the stock exchange IPO and what we're planning to -- including what we're planning to pay as dividend this year will have paid out PLN 756 million in dividend altogether.
Handovers in 2022, these are finalized projects and in progress as of end of March 2022. The gray fields are the -- the first 3 investments have already have use permit -- have obtained use permit in 2022 in Q1. So we started handovers. In Q1 we handed over mainly flats that were finalized and that were received use permit in Q4 last year.
As you can see, we had more than 700 flats by the end of last year that had not been handed over yet. Another 4 positions items in gray are those that are finalized, but have not been granted the use permit. They will be handed over in Q3 this year. So if we have a global -- if we take a global perspective, we're planning to finalize investments on 385 flats and we have 86% of them are already covered by contracts. So it's 2,668 flats that are covered by contract.
And potentials of handover in 2023, this division of flat that we are planning to hand over for use in 2023 is almost 3,200 flats, more than 1,500 of them have been already contracted and the level of contracting is 48% for 2023. If we take a look at the total potential planned project after 2024, Atal has 37 projects that we are planning to implement. It's going to be almost 600,000 square meters of usable area. We're planning it to be about more than 10,700 flats.
And now the second part of the presentation, consolidated financial results. As you can see, the revenues have increased significantly as compared to Q1 last year. It's 41%, PLN 406 million that's revenue from sales of product, goods and materials, our core activity, the sale of an office building that we communicated, about PLN 50 million. The remaining part are flats. The gross profitability of sales was 32.7% gross margin in sales.
Now the financial revenues in the amount of PLN 20 million at the valuation of our liabilities regarding advanced payments from the customers that purchased flats that will be handed over next year, the company has obviously the discounted interest rate, it adopted -- adjusted it to the current market conditions. So there will be some higher amounts, which is correlated with the interest rates on the markets.
Now moving, so the result of that is PLN 109 million, A net result more than 41% to PLN 406 million. The revenues from sales, gross margin on sales, 9.9 percentage point increase as compared to Q1 last year, then it was 22.8% at present after Q1. This year, the margin -- gross margin on sales is 32.7%, a similar increase in net margin, 9.9 percentage point.
Let's see the gross margin on sales by quarters. As you can very well see, the margin quarter-by-quarter has been increasing since 2020. In Q4 last year, it was almost 30%. And in Q1 2022 it's more than -- it's almost 33%. Here, in consecutive years, we would like to range 25% margin. But for this year, we think it will be still good, but we will comment on that further after the presentation.
And consolidated financial results, here we can say it's quite constant. We will move on to details in a moment. But what I would like to pay your attention to is net debt ratio, where we exclude from the liabilities, the bonds and loans from the main shareholder, and we include the lease from 2016. So since we have not achieved such a good net debt ratio, it's negative 800.08. So it's very, very good.
Inventory is constant. Cash, it's almost PLN 200 million in cash more as compared to the end of last year. If we were to compare it in 2020, you can see this huge increase on the second -- on the other side of the balance sheet, the equity, it's a bit higher and liabilities on a similar level as before and consolidated financial results, inventory or products under construction, a slight increase. The finished products dropped from 312 to 203 as compared to the last year.
And debt maturity structure in 2022, the company should redeem actually early. In autumn we should redeem bonds, about PLN 200 million. And after the financial statements period, the company has purchased -- redeemed its bond of about PLN 15 million. So in autumn we'll be redeeming bonds worth PLN 150 million. And then consecutive redeem -- bonds will be redeemed in 2023. And so not all of it is used, not all of the loans that we've acquired have not been used so far.
Sources of financing the business, what mainly funds the business is equity, PLN 1.275 billion, but also prepayments from customers, PLN 842 million, corporate bonds and bonds acquired by the shareholders and bank loans, which are quite small.
So to summarize, we started 5 projects recently for 761 flats. We launched sales from 4 investments. We finalized 3 investments. The sales in Q1, it was 754 flats in April 2022. It was 214 flats. Now we have 38 ongoing investments and we have 2,733 flat.
And before we move on to questions, please, I would like to give the floor to our CEO on the situation on the development market.
Good morning once again, ladies and gentlemen. Thank you for joining us. From this presentation, prepared by Mr. Andrzej, it seems that the situation we have now is very comfortable, very safe because we mainly handover flats that were built with high profitability. We're obviously implementing new projects.
So as of today, the situation is very good, much better than we expected. All the assumptions regarding dividend and repurchase and all of that, we are really on the safe side. Obviously feel free to ask questions because you surely do have some questions about more details, but I would just like to give you a short comment on the market situation because you've always been interested in that. So there are some issues.
But there's a lot of information on the market concerning new problems that have emerged and the terrifying number of those problems are 3 of them. Obviously the cost of materials which is commonly in use, commonly known, difficulties with buying land and, third, acquiring funding for -- by the customers, getting simply mortgage loans, it's quite difficult for the customers now. So these are the 3 main issues that we can read about every day.
So one of them, it does not refer to us at all. It's land because you could see and you can see in our reports that we have accumulated a lot of land at low prices. So at least for 4 years, we are not affected by that. And those purchases at lower prices will generate, in long-term and medium-term, it should translate into good profitability above the market benchmark.
Another thing is the cost of materials. It's a commonly known situation. But today the prices are just very, very high. And they stopped at some point. We have a version adopted for our analysis that they will stop at the level as they are now, that they're not going to drop or increase further. That's what we assume in our budget. How does that translate into our results? Well, in a way that in 2022, it has some slight impact because only like final stages of development of construction are affected for now by these higher prices.
So second -- first, second quarter will generate high results, but 3, 4 -- the third and fourth quarter might be a little bit more affected. But we're assuming in our model that the profitability has been built up to have this buffer to decrease it towards 2025 because it's going to be quite difficult for everybody, the cost of materials, it will reduce our profitability. We're assuming it will reduce our profitability to about 25%.
Land will be a kind of buffer here because we have a lot of land and the cost of land is much higher now, and we already have our land purchase at lower prices. So we assume that in 2023, it should be a good level. And for now it's very good.
And the last thing is difficulty with getting mortgage loans by customers. We hear a lot about that. There are new ideas from the government. We've never commented on that, but we do see some difficulties from the customers. We have a broad offer, though. We have increased the standard, which is outside the mortgage loan, but we have a very diversified offer. And therefore we're assuming that these difficulties will cause about 20% less sales, lower sales. But please note that the scale of operations of Atal has been increased significantly. If from that we reduce even 20% from this increased sale, it should still be quite significant.
In all of these analyses we see on the market, something that we do not agree with is that some of analysts take into account that the scale of Atal has increased significantly. And therefore these projections they made were not very accurate because they do not take that into account. So the situation on the mortgage market and inflation, that's very dynamic. It's an assumption that we're making. Well, we are assuming it's going to affect our sales. We're reducing it by 20%. It's just an assumption. It's trying to make more accurate assumptions because we don't comment on government schemes and the situation is quite dynamic.
So this is all. I'm curious about your questions now, and I'll be happy to give you more details should you have any questions. Thank you.
[Operator Instructions]
First question. What is now the land market in various cities? Are there more available or do you have second land more available?
Yes, the situation has changed radically in favor of the buyers. There's a lot of offers. A lot of offers were launched investments and with project and also lots of land in the preliminary phase. We have not had such a situation for many years. Now prices vary. It's an element of negotiations. So for now, we see more supply. The problem with supply is that they are usually provided by developers with smaller scales of business. They are usually very, poorly unprofessionally prepared. There are some problems. We have designs, wrong assumptions are made regarding sales. So there's quite a lot of mistakes and problems with that. So it's the matter of always of possibility of adopting it to an appropriate level.
And after the first selection, we move on to the second phase, sometimes these are good locations, but the question is always whether we can remove all of those errors and mistakes made. The customers are open to negotiations, therefore a lot of developers, medium-sized developers stopped their operations. So the situation on the market has changed significantly. But we'll see further steps. It's Q1 of this new situation only. We analyze these projects, but the problem is that virtually 99% of these projects are poorly prepared.
Another question. The number of flats in the offer in Q1 was relatively low. Is the company planning to launch new projects in consecutive months or is it going to delay the launch due to lower demand?
Well, we always adapted to the possibility of selling. And obviously, sometimes we're ready with a project and still we postpone it, not to double our offer in a specific city, for instance. So we have these business kind of shifts. But there are no major changes in the approach that all the projects slowly or all the projects faster because of the market situation. It's all taken, it's all considered individually. And in some situations we postponed it by 1 or 2 quarters and then most cases we just implement them once the project is ready.
What percentage of sales are done in cash now?
They have increased recently. Normally it was 20% to 30% last year. At present it is about 30% to 40%. But it's hard to say if it's a trend or whether it's going to increase to 50%. It can happen. We don't know. But for now it's 30%, 40%.
What can be the geographical distribution of handovers in consecutive quarters in 2022? In which cities do you handover the biggest number of flats?
You can see it in the presentation, the potential of sales in 2023. And you can contact the Investor Relations Department because it's all there in these reports we have published.
To what extent are the construction costs higher in percentage terms?
It's a complicated question because it all depends on whether we start an investment today or whether we've already incurred some costs or not. If we have partly involved some costs, this increase of this share of increased costs will be lower. If we only start an investment today, this share of increased prices will be higher. If we start a new investment today, then the average cost or the mean cost of construction will be about 25% higher. But in our case, it's about 25%. But on the market, it's going to be about 35%.
What is it due to?
Well, the costs include overall costs, investment costs, margin and land costs and land costs that we have the historical -- historically lower cost of purchase. So even though there's an increase of materials, material prices, about 35%, the mean cost increase of investment will be about 25% higher. Therefore it all depends on what part of the cost has been already incurred in previous periods.
How do you evaluate the overall situation on the development market?
A small number of customers, higher costs of implementation and financing and some developers, specifically smaller ones, can actually not cope with the situation and close the business.
Are you planning to repurchase it?
Yes, I answered already, there's much smaller supply of flats and fewer flats are being sold. Decreased supply is generated by small developers and medium-sized developers. Some of them come, bring to the market an offer of launched projects that I already referred to, some of them postponed their projects for consecutives being used. So in total, there's fewer flats on the market available than generally. Obviously the sales rate is lower, but it mainly refers to the supply by other, it's going to be about 15%, 20% less perhaps, due to even though we have like 30%, 40% fewer customers. That's what we estimate.
What are the cost of construction per square meter?
The average price is about 6.5 per square meters. We have a general contractor of our own. The cost of production varies, about [ 5.5, 5.7 ], but obviously every project differs from others and the numbers provided by Mr. Andrzej are real.
Are you planning to change the price policy due to decreasing sales? Are you still planning to increase prices or more stability?
Well, it's hard to assume that prices of flats will drop in consecutive periods because we need to adjust to the market, but it's hard to expect that flat prices in consecutive periods will drop.
Another question. The offer is significantly lower. Is it possible to recover it in the 2 or 3 quarters?
Yes. Obviously it's possible as the CEO has mentioned, these constructions are implemented. We have projects in progress and are postponed. But when we take that global perspective, we have more projects than in human.
There is a request for detailed inventory breakout. Please contact the Investor Relations Department.
And now the question is about the gross margin on sales, taking into account this purchase of land and construction prices higher.
Like I said, we have lower cost of land and higher gross margin. But it's hard to say because the moment of handover is different. The sales process is different than it was before. So it's a little bit difficult. In our model, well, we can only speak about ourselves. We're assuming very good profitability for this year. Next year, it's going to be about 25%, so a bit lower. And this is what -- that's our target, but every situation is different.
What are the plans of sales for April and May?
April has been presented in the presentation, more than 200 flats sold in April and quite a high level of reservations flat. As for my -- its ongoing and it's confidential information. So we can only present it after the end of May. We can only make some estimates and our estimates are that we should have 20%, 25% lower sales this year. But remember that our sales last year were record high, 4,300 flats last year. So even if we sell less by 25%, it's going to be more than 300,000 flats. In April, it was 214 contracts and 210 reservations, so active reservations were 213 at the end of April.
What will be the prices of flats in 24 months due to lower supply of mortgage loans and higher cost of construction?
I think we've partly answered this question.
Are you expecting an increase in flat prices?
We've already answered that.
What's the historical situation with cash sales and will the customers have to increase their contribution?
Like I said, we have more sales by cash. And I think we'll see if this tendency is maintained.
Do you see on the development -- do you see some developers were deteriorating situation? Are you planning to acquire such developers?
Well, we're not acquiring other developer companies as a whole. We analyze specific projects that are created by those developers. And like I already said, out of 100 cases, 99 of them are badly and poorly designed in the business aspect. I'm thinking about the business aspect of the project. Usually the owners of the companies provide assumptions for the projects. It does not mean that they have bad designers, the assumptions -- business assumptions are poor. Some of them can be adjusted and some cannot. And it's quite dynamic on the market. So we're not planning any acquisitions. We're just developing our own business.
How will the Development Act affect the company's results?
This year it will not affect us because the permits are already acquired, but it's another new cost, which will generate some new pressure on pay -- on price rises or margin rises. We will see how it works on the market in particular companies. It's difficult to predict these -- all these new projects. We need to adapt to the market situation. As for the liquidity situation, the company is very well adjusted and prepared for some component of release of funds. So no problem here.
Are there any PRS talks carried out? Will Atal still be interested in this type of transactions?
You know our approach to the subject. We still think it's a scheme that supplements the market. Well, it's true that recently due to the war situation and a bigger number of new potential customers. I'm talking about refugees from Ukraine where we assume that some of them could lease or be the customers of PRS. This is possible, but our business model is not changing. So we provide flats for Polish investors, Polish customers and Polish average customer, mortgage customers. For now there's a shift towards cash transactions. There will be a shift on the overall market. But for now we're not planning an offer for PRS.
This was the last question. Some of the questions, I put them together if they were similar. So thank you very much for your attention. The presentation will be published on the company's website and feel free to ask our Investor Relations Department.
Thank you for your attention and see you next time. Thank you.