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

Hello. Good morning. Welcome to the Metrovacesa 1H 2026 Results Webcast. My name is Juan Carlos Calvo, Director of Corporate Development and Investor Relations. And with me today, as usual, we have [ Jorge Perez de Leza ], Chief Executive Officer of Metrovacesa; and Borja Tejada, Chief Financial Officer. Together, we will present an overview of our operating activity and financial results for the first half of the year. The presentation materials were released this morning and are available on both the CNMV website and the company's website. We have also distributed them by e-mail to our usual list of analysts and investors. [Operator Instructions] Now Jorge, please go ahead.

Thank you, Juan Carlos, and good morning, everyone, and welcome to our First Half 2026 presentation. I will start with the highlights. I would catalog our results as solid in this first half of the year. Our total revenues are close to EUR 316 million, which is 2.4x what we had last year, mainly driven by 809 units delivered in this period. We are also confirming our gross margin improvement, which stands at 27.2%, boosting our EBITDA to close to EUR 50 million and also a positive net profit of close to EUR 18 million compared to negative figure last year. We've had a strong cash flow generation of close to EUR 130 million and also with a stable debt position despite the significant dividend that we already paid in May of almost EUR 1 per share. In the market context, we will see that the Spanish housing demand remains at healthy levels despite a moderation that we see in some transaction volumes, especially in secondhand and in some limited markets. I think I will skip Page #7 as we will touch upon the details later on in the presentation. I hand it back to Juan Carlos to give us a brief overview on the market, Page #8.

Yes, just briefly comment on the recent figures about demand. The number of transactions seems to be stabilizing above 700,000 units in the year. It's true that in the last few months, at the beginning of the year, we have seen some slowdown in the volume with a decline of around 3% year-on-year. But actually, the total figure stays above 700,000, which is, in our view, a very healthy and robust indication of demand. On the other hand, house prices continue to increase according to the [indiscernible] statistics, they're still growing at double digits year-on-year, driven by the imbalance between supply and demand. And construction costs are showing some volatility in the recent months, but they are growing by lower growth rates than prices, and this is supporting development margins. On the other hand, mortgages are growing slightly more than the volume of transactions. That means that the penetration of mortgages is rising slightly to around 72%. But overall, this pictures and overall quite a healthy situation of the housing market in Spain. Back to Jorge.

Yes. Thank you, Juan Carlos. So moving on to the operational figures. In terms of residential deliveries, we delivered a total of 809 units, which is almost double what we delivered last year and with an average selling price of EUR 343,000 per unit, which is an 11% increase. Basically, with the number of deliveries, we provide a more homogeneous distribution of the deliveries throughout the year and also gives us more clarity on our target to deliver around the same units as we delivered last year. As I mentioned before, our margin improvement consolidates and we stand at 27.2% gross margin compared to 22% last year. And our deliveries have been focused on key markets like Valencia, Seville, Barcelona, Malaga and Canary Islands. In terms of presales, we presold in total 607 units, which is an evolution consistent with our presales -- strong presales coverage for the coming years and for 2026 as well, obviously, and represents a 15% quarter-on-quarter increase as compared to the first quarter. The average selling price of these presales is above the figure we saw before and is close to EUR 380,000. Basically, we've also started commercialization during the quarter, at the end of part of the quarter in some key areas like Los Cerros in Madrid, which, as you know, is one of our strategic developments where we have close to 2,000 units to be constructed and delivered in the future. Also in Murcia, where we have -- it is an area which is functioning really well at the beginning, and we have around 550 units in total. And also in Lleida with a project of 240 units or 250 in total where we started selling Phase #1 also at the end of the period. In terms of other key operational figures, our sales backlog stands at 2,900 units in total, representing EUR 1.1 billion in future revenues with an average selling price of around -- with an average price of around EUR 370,000 per unit. Also, our future deliveries are well covered and the ratios keep improving, basically with 94% of the deliveries of 2026 already sold, close to 80% of 2027 and basically 40% of 2028. This also with a high reliability of close to 80% in private contracts with more than 10% down payment. We have around 3,400 units under construction. We've started 255 units in this first half of '26. And we plan to start around 1,800 units in the total of the year. So even if this figure may seem small, it is -- we are planning to basically start around the units that we've been delivering in the last couple of years by the end of the year. In commercialization, we have about 5,300 units with a potential revenue of EUR 2 billion and a price per unit of around EUR 380,000. So we still keep seeing that on the backlog figures and future commercialization units, the selling price keeps improving. 55% is already presold. And plus we have another 2,000 active units in the design phase that will come into commercialization in the coming months. In terms of land activity, we've had a strong land monetization period and the pipeline replenishment. In total, our P&L revenues in the first half of the year stands at EUR 38 million. The majority is corresponding to the authorization of a plot in Valdebebas in addition to other minor residential nonstrategic plots in non-core markets. Additionally, we've also sold, as you may have seen in our announcement and in the press, the Puerto de Somport building -- office building that we delivered that we -- sorry, co-developed with Tishman Speyer, which will have EUR 7 million cash flow impact, but doesn't show in the P&L in the revenue line because it's actually accounted for in the in the equity method. We also have EUR 134 million in binding contracts, which will come into the P&L in the coming years, part of it in 2026 and part of it in 2027. And additionally, the ongoing commercialization -- commercial development, sorry, in the Oria project with the new office that we are doing in a turnkey solution for the fund Atrea and the 2 projects of VITA that are not included in the above figures. In terms of land investment, on the other hand, we have signed 2 JVs with Santander Alternative Investments to develop 2 co-living projects in Valencia and in Seville with Metrovacesa holding 10% and the management of the project. And we will continue to explore new co-investment opportunities with other partners in the year. Additionally, we've acquired project with 367 units in total in Granada for social housing. Diving a bit deeper in our commercial portfolio, we continue reducing our gap in this segment with EUR 283 million now left, which is around 13% of the total Metrovacesa gross asset value. In the Oria Innovation Campus project, to give you an update, the PBSA building with 585 rooms will be delivered in this quarter, in the third quarter of 2026. The Flex-living building with 519 rooms, it's progressing adequately in construction and will be delivered in 2027. And finally, the office building -- buildings with 48,000 square meters of GLA in which we are doing a turnkey solution, initiated already the construction and we are already coming on -- coming up to the ground zero level in the structure. This represents our largest commercial development with over EUR 350 million in total investment. And also, as I mentioned before, we've sold the Puerto de Somport building to the GMP REIT in the Spanish market. Moving on to Page #14. In the ESG arena, we continue implementing our ESG plan 2025, 2027, which focuses on climate change mitigation and basically, in this area, measurement and improvement on the carbon footprint of our developments. Also on energy efficiency, environmental impact, very focused on waste management improvement in all our projects. And basically, you can read our 2025 annual sustainability report that has a lot of detail on what we do on this area. And now I'll finish with the operational highlights, and I hand it to Borja, our CFO, for the financial overview.

Thank you, Jorge. Turning to our profit and loss account. We delivered a very strong first half of the year with revenues reaching EUR 316 million, up to 138% year-on-year, driven by higher residential deliveries and land sales. Residential revenues grew to EUR 280 million, while land sales contributed EUR 38 million. Importantly, profitability continued to improve Residential gross margin increased from 22% to above 27%, driving gross profit to EUR 75.5 million and EBITDA to EUR 49 million with an EBITDA margin of 15.6%. Despite EUR 80 million of mainly noncash impairments in certain conventional assets, we reported EUR 80 million of net profit and EUR 42 million recurring pretax profit, clearly reflecting the strength of the underlying residential business. In terms of operating cash flow, cash generation was another key highlight. Gross operating cash flow reached around EUR 130 million in the first half, demonstrating a strong cash conversion of earnings into cash. Beyond EBITDA, cash generation benefits from land monetization, including approximately EUR 51 million from land embedded in deliveries and EUR 45 million of cash proceeds from land sales, while maintaining disciplined investment levels. The strong performance underpins our confidence in reiterating our guidance of more than EUR 200 million of gross operating cash flow for the year-end. In the Slide 18, -- despite paying approximately EUR 137 million in dividends during the semester, our balance sheet remains exceptionally strong. Net debt stood at EUR 308 million, broadly stable versus year-end 2025. We ended June with EUR 160 million of cash, while gross debt decreased to EUR 393 million. Our LTV remained at 14.4%, comfortably below long-term target range to -- from 15% to 20%. In addition, we continue to enjoy significant financial flexibility with more than EUR 300 million of undrawn financing capacity and a syndicated facility with maturity at the end of 2029. In Slide 19, finally, our asset base continues to create value. Gross asset value increased by 3.2% like-for-like, up to EUR 2.14 billion, supported by the performance of the residential portfolio. NAV stood at EUR 11.55 per share, importantly, after adjusting around EUR 1 per share dividend paid during the period. NAV increased by 2.6% compared with December 2025, demonstrating continued value creation despite significant shareholder remuneration. Overall, our portfolio remains highly resilient with a strong residential structure and NAV that continues to highlight the underlying value of the company. With that, let me hand over to Jorge for the closing remarks.

Thank you, Borja. So let me finish talking about the market. We see the market stabilizing at high levels with transactions remaining very healthy, over 700,000 total transactions in the last months despite a slower beginning of the year. Some volatility in construction costs, but still outpaced by house price increase, which in public figures has been quoted as 13% year-on-year on March 2026. A very solid performance on our side for the first half of the year with a more homogeneous kind of distribution of deliveries. We confirm our gross margin expansion, boosting EBITDA and net profit and with a solid presales coverage that provides the visibility not only for the deliveries of 2026, but also for the coming 2 other years, 2027 and 2028. And finally, we reiterate our 2026 guidance that if you remember, was a gross cash flow generation of above EUR 200 million with housing development deliveries in line with what we delivered in 2025 and with significant growth in land sales. And that would be all for today. Thank you very much.

Thank you, Jorge. We are now ready to begin the Q&A session.[Operator Instructions] -- our first question comes from Ignacio Dominguez, JB Capital.

Just one from my side on gross development margins. With gross development margin reaching 27% in the first half, could you provide more color on the sustainability of these margin levels? As we move into the second half, should we expect some normalization in margins due to product mix? Or do you believe full year '26 margins can remain close to current levels?

Ignacio, Jorge here. As I said, we stick to our guidance of mid-20s. Now mid-20s, you can either take it as 25% or a range of between 24% and 26%. If we take the range, I think we should be on the higher part of the range.

Okay. The next question is coming from the line of Christophe Chaput From ODDO BHF.