Metrovacesa S.A. (MVC) Earnings Call Transcript & Summary

Hello. Good morning, and welcome to the webcast of Metrovacesa trading update for the first quarter of 2024. My name is Juan Carlos Calvo. I'm Director of Strategy and Investor Relations. And in our session today, we also have Jorge de Leza, CEO of Metrovacesa; and Borja Tejada, Financial Director. We are going to present an overview of our operating activity for the first quarter of the year. The slides of this presentation have been released to the market earlier today, and they are available to the CNMV website and in the company website. We are also sending it by mail to our usual distribution list for analysts and investors. At the end of the presentation, there will be a question-and-answer session. [Operator Instructions] Now I hand it over to our CEO to start with the presentation. Please, Jorge.

Thank you, Juan Carlos, and good afternoon, everybody, and thank you for attending our first quarter results presentation. We'll begin with Page #5 with our first quarter highlights. In terms of the housing market, we see a strong demand at the start of the year. Our presales are 30% above last year in euros and 20% in Europe -- in units, sorry. And the expected levers to sustain future demand in the year are interest rate cuts as well as improved GDP growth expectations and a solid labor market. So a strong housing market, we see not only in the first quarter but also for the remaining of the year. In terms of financials, solid growth with improved margins for the quarter. 72% year-on-year revenues from deliveries; 23.7% gross margin, 2.2 percentage points increase; 12.8% EBITDA margin. And in terms of shareholder remuneration, as we announced, is, of course, having a dividend of EUR 0.36 per share in cash that was approved today, in the morning, in our shareholders' meeting, and the payment will be made on May 23, with an ex-dividend date on May 21. Now moving on to Page #8. I hand it back to Juan Carlos to give us a brief message about the housing context.

Yes. As we said, at the beginning of the year, we see relatively strong demand for housing. And we want to highlight what has changed in the last few months to reflect that. First about the economic forecast. We see that most of the analysts and observers are increasing their forecast for GDP growth for the year, following a period within the last year where most of the regions were down. And this confirms that Spain is going to grow ahead of the average of the European Union, both this year and next year, with growth of around 1.9% according to most of the forecasts. This translates into a relatively strong labor market. Employment creation continues to be relatively strong. And actually, unemployment rate is the lowest in Spain for the last 15 years. And this is one important driver for housing demand, obviously, together with demographics. And thirdly, the expectation of interest rates. With mortgage rates, mortgage costs, flattish over the last few months, this is no longer a concern in the mind of buyers of home regarding commitment to engage in a mortgage for a longer period. Now that the prospect for mortgage rate are flattish or eventually possibly then going a little likely lower if the interest rates are coming down. This obviously comes ahead on top of the backdrop on the supply and demand situation in Spain. And we have seen recent reports, for instance, from the Bank of Spain recently in their annual report, highlighting that there is a very strong shortage of supply of housing in Spain. Actually, they mentioned a figure of around 600,000 units shortage of new homes that should be on the market and they are not. So in this context, this is explaining part of the strong performance of the market. Back to Jorge.

Now moving on to Page #9. In terms of presales, as I mentioned at the beginning on the highlight, this is a strong quarter for us, in fact, the best since the first quarter of '22. Our presales volume of 509 units, a 20% increase year-on-year. And the average selling price of EUR 327,000, which is also 8.3% higher year-on-year. And also in the absorption rate, which is 2.7% in the quarter, above our 2.5% historical average. And as you know, we measure this absorption rate calculated as the net presales divided by the average number of units in commercialization including those sold and pre-sold. Moving on to next page, #10. The residential deliveries. We delivered 364 units. So 10% above the first quarter of last year, out of which 276 units are around BTS, with an average selling price of EUR 436,000. This is influenced by the mix of deliveries that we have [ expected ] in the quarter as well as one BTR project of 88 units in Seville [indiscernible], with an average selling price of EUR 185,000 per unit. The combined average selling prices is EUR 375,000. And as I mentioned, this is higher than normal, influenced by several high-end projects that we have delivered. The gross margin of 23.7% is also good news. And again, it's a little bit higher than what we know we give last guidance, which still stands at around 22%, and this is due to product mix that has higher ASP as well as increased selling prices that we see in different projects. All of this combined gives us a presales coverage that keeps on increasing compared to last quarter. And with very healthy numbers in our opinion, with 90% coverage for 2024, 64% of the units sold for estimated deliveries of '25 and 42% for 2026. In terms of additional numbers of our operational activity, we see continued progress and in terms of units in sales backlog, we are now close to 3,500 units, which represents EUR 1.1 billion in future revenues with a 7% increase year-on-year, and an average selling price of EUR 320,000 per unit. 4,450 units under construction, which is according to the plan, 100% of our 2025 deliveries are under construction and 40% of the 2026 deliveries as well. 408 units with construction finished and presold as of March 2024, so waiting for delivery. And then 297 units that have started construction in the quarter. And finally, 6,344 units under commercialization with EUR 2.2 billion in potential revenues for the next 3 to 4 years, and out of which 55% are already presold. In terms of land activity, Page #12. We see progress on land sales and investments in the quarter. In terms of land sales, we booked revenues of EUR 3.4 million for the quarter, but we also have binding contracts pending to be booked to revenue to be recognized in the P&L of EUR 45 million is coming from this quarter as well as from the previous years. As I mentioned, the EUR 3.4 million in our P&L, are coming from 4 residential projects located in Almería, Murcia and Barcelona, in which the gross margin is minus 8%. And the pipeline of binding contracts, EUR 45 million, of which EUR 5.2 million have been signed in the first quarter and that we expect most of them to be closed in the remaining part of the year. In terms of land investments, we made total investments for EUR 30 million, including purchases and urbanization CapEx. And the land urbanization CapEx in key districts like Palmas Altas as well as Los Cerros in Madrid plus acquisition of one project for 130 units in selected areas. The most significant acquisitions in the first quarter of '24 are one land located in Tenerife, the Canary Islands, a residential project for close to 130 units, which complements our current offering in the islands, with 600 homes in sales in our market as has been shown several times in the business and a very hot market right now that can [indiscernible]. Now in Page #13, I hand it over to Borja, our CFO.

Thank you, Jorge, and good afternoon, everyone. Just some key figures as a reminder about our operating results. In terms of revenues, 76% year-on-year, up to EUR 140 million with a gross development margin close to 24%. Concerning our EBITDA, EUR 18 million, that represents more than 300% year on year, well on track to meet our objectives for this year. Now I will hand over to Jorge with closing remarks.

Thank you. And Page #15 now, and I summarize our operating update with 3 messages. The first one being that I think it is a very encouraging start of the year, with a first quarter that shows solid absorption levels and above historical average and also significant growth in revenues, gross margins and EBITDA. And I think that places us on track to meet our 2024 targets and midterm targets with high visibility on future deliveries, not just for 2024, but also for '25 and '26. And also macro context that remains supportive for the housing sector. And finally, to reiterate, that today this morning, we approved a EUR 0.36 per share dividend that will be paid on May 23. And with this, we finished our operating -- trading update for the year, and I hand it back to Juan Carlos.

Yes. Thank you, Jorge. We are now ready to start the question-and-answer session. We can start with the participants in the conference call. [Operator Instructions] Okay. We don't have questions from the audio conference call. We do have questions in the webcast. We have a question from the analyst, Ignacio Domínguez from JB Capital. I will read it out. I have one on land investment. As for land investment, could you provide a breakdown of the EUR 30 million of total investments spend between the acquisitions and the urbanization CapEx?

Yes. Ignacio, Jorge taking the question here. So you are referring to Page #12. This EUR 30 million, approximately 50% is actually CapEx for those 2 projects in urbanization and the remaining 50% is an acquisition of 130 units in the Canary Islands.

Thank you. At this point, we don't have any more questions on the webcast. So unless there's a last minute one, I think we can end the conference call here. We thank you for your participation in the webcast and the conference call. Obviously, as usual, the Investor Relations will be available to take any follow-up questions that you may have. And we look forward to meeting you again in the next quarter update. Thank you, and good afternoon, and good evening to everyone.