Earnings call transcript: Metro Basesa Q4 2024 shows strong growth

Metro Basesa, a prominent player in the Spanish housing market with a market capitalization of $1.58 billion, reported a robust performance for Q4 2024, driven by a significant increase in revenue and strategic operational advancements. The company achieved record revenues of nearly €590 million, marking a 12% year-on-year growth, building on its impressive 50.86% revenue growth over the last twelve months. According to InvestingPro analysis, the company’s financial health score of 3.16 is rated as "GREAT," suggesting strong operational efficiency. Despite the absence of specific earnings forecasts, the company’s financial and operational metrics indicate a positive trajectory.

Key Takeaways

• Total (EPA:TTEF) revenue increased by 12% year-on-year, reaching nearly €590 million.
• The company delivered 2,000 residential units in 2024, surpassing expectations.
• Presales grew by 12% to €411 million, with strong coverage for future deliveries.
• The Spanish housing market remains undersupplied, supporting price stability.
• Metro Basesa raised its gross margin guidance to the mid-20s, reflecting operational efficiency.

Company Performance

Metro Basesa’s Q4 2024 results underscore its strong position in the Spanish real estate market. The company reported a record revenue of nearly €590 million, a 12% increase from the previous year. This growth is attributed to successful project completions and a strong pipeline of residential units. The company’s strategic focus on high-demand areas and effective land management has positioned it well against competitors in an undersupplied market.

Financial Highlights

• Revenue: €590 million, up 12% year-on-year
• EBITDA: Approximately €75 million
• Net profit: Close to €16 million
• Gross margin: 22.1%
• Operating cash flow: €146.5 million, exceeding guidance

Outlook & Guidance

Looking ahead, Metro Basesa has set ambitious targets for 2025, aiming for a gross operating cash flow of at least €146.5 million. The company plans to deliver around 2,000 units annually, supported by a solid presales coverage ratio of 80% for 2025 and 62% for 2026. With a healthy current ratio of 3.51 and an impressive Altman Z-Score of 9.04, InvestingPro data suggests strong financial stability. Additionally, the company has raised its gross margin guidance to the mid-20s, reflecting improved operational efficiencies and strategic asset optimization. For investors seeking deeper insights, InvestingPro’s comprehensive research report offers detailed analysis of Metro Basesa’s financial health and growth prospects.

Executive Commentary

Jorge Pere Telefa, CEO of Metro Basesa, highlighted the company’s achievements and future plans: "We’ve reached the 2,000 deliveries target earlier than expected. We have a high visibility for 2025 with solid presales coverage ratios. We will continue focusing on our core strategic lines."

Risks and Challenges

• Shortage of fully permitted land, a key bottleneck in the Spanish housing market.
• Potential macroeconomic pressures, including interest rate fluctuations.
• Market saturation in certain regions, which could impact future growth.
• Supply chain disruptions affecting construction timelines and costs.

Metro Basesa remains well-positioned to capitalize on the growing demand for housing in Spain, leveraging its strategic land management and diverse project portfolio to drive future growth. The company offers an attractive dividend yield of 7.11% and maintains a beta of 1.08, indicating moderate market correlation. InvestingPro subscribers can access over 30 additional financial metrics and expert insights to make informed investment decisions.

Full transcript - MVC Capital (NYSE:MVC) Q4 2024:

Juan Carlos Calvo, Director of Corporate Development and Investor Relations, Metro Basesa: Hello, good morning, and welcome to the Full Year twenty nineteen-twenty twenty four webcast from Metro Basesa. My name is Juan Carlos Calvo, I’m Director of Corporate Development and Investor Relations. And as usual, we have in the call as well Jorge Pere Telefa, CEO of Metro Basesa and Jorge Tejada, CFO. We are going to present an overview of our operating activity and the financial results for the full year 2024. The slides of this presentation have been released to the market earlier this morning, and they are available through the CNB website and in our company website.

We have also sent it by email to our usual distribution list for analysts and investors. At the end of this presentation, there will be a question and answer session. If you wish to ask a question via conference call, you can register by pressing 5 in your telephone keypad at any time, and we will read it out. Now I hand it over to our CEO to start a presentation. Please, Jorge?

Jorge Pere Telefa, CEO, Metro Basesa: [SPEAKER JOSE RAFAEL FERNANDEZ:] Good morning, everyone, and welcome to our twenty twenty four full year results presentation. Let me dive in directly into the highlights on the page of the presentation number five. And we are experiencing for the last months and I think in the coming future as well, an undersupplied housing market. We have just witnessed a year in which the supply demand imbalance persists and with new housing starts just covering 50% of the new households and this is without even considering the backlog from the past or the supply demand from the past. This is resulting in a continued pressure on housing prices and what we have seen is that trend in the second half of the year with the reduction of the rate, the interest rates in the European market, the transaction numbers are again growing, reaching record figures.

Metro Ateza has delivered 2,000 units in the year, which is a target that we aim to achieve later in a few, I would say, in 2025. However, we’ve been able to achieve that result in 2024 with record revenues of almost million and an EBITDA of million and a return to positive net profit of close to million. We have grown our presales by 12% with a total backlog right now of billion as of December 31. With all of that, we have exceeded our guidance provided at the beginning of the year to have a cash flow, an operating cash flow between million and million being the result of EUR 146,500,000.0, therefore, being a very good year for Metro Basesa for our operating results, financial results and as I will point out later in the presentation, also with a positive guidance or a positive view of the years coming forward. Now I hand it over to Juan Carlos just to give us a brief overview of the market in Page number eight.

Juan Carlos Calvo, Director of Corporate Development and Investor Relations, Metro Basesa: Yes, the bottom line about the situation of the Spanish housing market is that the demand fundamentals continue to be very well supported by demographics growth and macro growth. And in the second half of the year, it has been accelerated due to the decline in interest rates. And we can see that in the first chart, the evolution particularly in the last few months in the growth of housing transactions in Spain. And this has translated into pressure on house prices, upward pressure with positive growth. And in the end, the situation of the supply gap continues to exist in the sense that housing starts, even though it has started to increase, it still covers roughly 50% of the projected household formation in Spain.

The main bottleneck continues to be the shortage of fully permitted land. And we think that solving this will require more agile transformation procedures, shorter licensing periods and more public private collaboration, which is something that is still not being fully addressed. With this back to Jorge. Thanks, Fangcadio. So moving

Jorge Pere Telefa, CEO, Metro Basesa: on to some operational figures. In terms of residential deliveries, as I mentioned before, we have delivered almost 2,000 units, so beating our expectations from being a little bit above what we deliver in 2023. We’ve grown in revenues in 17% with the total revenue from residential deliveries being at almost EUR $590,000,000 with an average selling price of close to EUR 300,000 per house and a gross margin, which is 22%, twenty two point one %. Basically, the performance, the strong fourth quarter performance delivering 1,200 units is what has allowed us to reach that figure. As I will mention later on in our guidance, a figure that we hope to consolidate in the coming years.

The margins at 22.1% are in line with our guidance on the low 20s. However, we have a more positive outlook in terms of margins for the years coming forward. Important to highlight the project office in La Ratura, Palma Saltas, as we know it from the first in Seville that I will talk about in a second and also the BTR segment in which we delivered two BTR projects in both in Seville and Entre Nucleos. And with those two projects delivered, we have now delivered all our BTR exceeding projects exceeding 1,000 units in total. Isla Natura, as I mentioned, located in Palma Saltas, Seville, is a great example of Metro Aphasa’s capacity to develop new districts and it’s a capacity that we will also see in coming developments.

As you may know, this is a district we’ve been talking about in the past where we have over 1,800 units in total. More than 1,500 units are already launched, all of them under construction and about three seventy three delivered already. As of the end of twenty twenty four, we had delivered three thirty seven, but in January, again, we’ve continued delivering units in these projects. I think it’s nice to see the picture of June 2022, in which we were starting the organization and how the development looks like in December of twenty twenty two, twenty four, sorry, so two years and a bit later where we already have, as I mentioned here, about 18 projects in construction. Basically, we will continue delivering units in this project.

And as I mentioned at the beginning, I think it’s a proof of Metro Acesa’s capacity to contribute to sustainable development of new areas in which urbanization CapEx are required and in which having a vast or a good percentage of the units allows us also to, let’s say, control the way that we want to deliver the units, also optimize margins and at the end contribute to the P and L of the company. In terms of moving on to page number 11, in terms of presales, we’ve grown our presales figure by 12%, totaling million, basically with 500 increase in the number of units and with a higher average selling price, per unit, which will give us an idea of what the average selling price will be in the future. This represents four eleven units sold in the quarter with an average selling price of $3.63. So again, figures that are way above 300. I think it’s important to note that in the last quarter quarters sorry, months, as we mentioned in the last presentation, we’ve been kind of managing the break, the hand break in terms of not selling too many units in order to optimize margins in our development.

And as we will see in the next page, given the coverage that we have in terms of presales for the deliveries of ’25, ’20 ’6 or even ’27, I think it’s a time now to rather than to sell more units to actually sell more margin. Moving on to Page number 12 in terms of operational activity. Our backlog of units stands at over SEK 3,200 with more than SEK1.2 billion in future revenues and an average selling power price of I think very strong visibility of the years coming forward with 80% coverage of our deliveries in 2025 and 62% of the deliveries of 2026. These are very good presales coverages that again will make us focus on maximizing margin rather than maximizing number of units being sold in the coming months, especially for the deliveries of 2025 and 2026. We have over 4,000 units under construction.

Basically, this represents an average of 2,000 units per year to be delivered. And in commercialization, we have 5,000, almost 6,000 units, 5,633 But if you divide it by a little bit less than three years of commercialization, again, we have about 2,000 units of, on average, of deliveries in the coming years. In terms of land activity, we are active, as you know, in the entire land value chain, which we consider as management, sales, land sales of non strategic assets and then also land acquisitions as a top up to our existing land bank in order to launch around 2,000 or a little bit of more than 2,000 units per year. In terms of land management, I think it’s important to note that in the next three years, we expect more than 6,000 units of excellent areas to actually become fully permitted And therefore, good set of launches will come in projects like Los Terros, Placerda Papelera in El Prada (OTC:PRDSY) De Rio Regatta in Barcelona, also in Vinival and Valencia where we recently had the provisional approval of the Peri, Penimaclete and Valencia and also Lastermicas in Barcelona. So finally, these developments are coming and we will see a good set of launches in the next three years.

In terms of land sales, our total P and L revenues, including residential and commercial, are close to million in the P and L of 2024. And also, we have a backlog of binding contracts of close to million. And these are contracts that will appear in the P and L mostly in 2026 and some in 2027. So basically, sorry, ’25 and ’26, ’20 ’5 and ’26 correction there. And in total, we have now sold $455,000,000 in revenues in the period of 2018 to 2024.

So therefore, consolidating our rotation of non core residential and commercial assets. In terms of land acquisitions, we purchased close to seven ninety units with a total commitment of investment of million and focusing mainly in fully permitted plots of land located in high demand and high margin areas. Out of those seven eighty seven units, six seventy five are already launched and many of them already under commercialization. Our commercial portfolio, as you know, is a portfolio where we aim to divest the full portfolio in a few years. The activity that we have in 2024 is on the one hand that the second JV with VITA, the operator of residential, different residential projects like student housing and also flex and co living.

We signed the second plot for almost 500 residential units in our Oria District or in the old Klesa factory. And we also have EUR 55,700,000.0 of backlog of binding contracts that will flow through P and L as we sign the deed in the next year. Also important to highlight that we have now in the Porto San Port building office where we have the JV with Tiemann Spire (NYSE:SR) with a 75% occupancy and figures growing with in the second half of the year and also in the beginning of the year, we have seen increased interest in the take up of the space of this building. Finally, talking about our ESG strategy, I would say that an important milestone was executed during the year, which is the approval of our new strategic ESG plan twenty fivetwenty seven, which aims to consolidate Metro Acesa as a sustainable and responsible developer actively accompanying the new SG regulatory framework, incorporating sustainability activities in all our strategic and operational processes. With this, I now hand it over to Jorge to talk about our financial overview.

Thank you, Jorge,

Jorge Tejada, CFO, Metro Basesa: and good morning, everyone. Just a quick review of our main figures in our profit and loss account in Slide 17. 12 percent revenue growth year on year with significant increase in development revenues. Good performance in terms of development gross margin up to 22% and practically breaking in land sales. Almost EUR 75,000,000 EBITDA from development, meaning a recurring earning of EUR 49,000,000.

Finally, we have finished with a positive net result of almost EUR 16,000,000. With reference to our free cash flow in the Slide 18, EUR146.5 million of gross operating cash flow, exceeding widely the guidance of EUR 100,000,000 to EUR 125,000,000. In terms of now in the Slide 19, concerning our net debt, as previous quarters, very solid and diversified financial structure with EUR 400,000,000 of gross financial debt and EUR $314,000,000 net at a very competitive cost. 13.1% of loan to value, a comfortable ratio below our reference of 15% to 20%. Important mention has the process of refinancing of our corporate loan that we signed in October, where the company agreed extension of the maturity until October 2029 versus 2026 previously and increased the limit up to 76,000,000, meaning more than EUR 65,000,000 versus previous loan.

Summarizing, diversified financing mix, good access to various sources of capital at competitive cost and no relevant maturities within the next four years. Finally, about our asset appraisals. In the Slide 20, almost EUR 2,400,000,000.0 of GAV gross asset value, out of which 86% represents our residential portfolio, 14% commercial one. Positive growth in value, almost 5% with an increase of almost 7% in residential and a decline 4.6% in commercial portfolio. Finally, in terms of net asset value, per share after the distribution of almost $0.7 per share during 2024.

Now I will hand over Jorge with closing remarks.

Jorge Pere Telefa, CEO, Metro Basesa: Closing the presentation, I would reiterate that we’ve had a very successful 2024 and we have positive prospects for 2025. We’ve reached the 2,000 deliveries target earlier than expected and with record revenues and a positive net profit. We will consider distribution on a dividend in May and will be decided in March as usual with the core of our annual shareholders meeting. And as I mentioned during the presentation, we have a high visibility for 2025 with solid presales coverage ratios and a higher dynamism in the land market. Therefore, our guidance for 2025 is that we will have a cash flow of million or more gross operating cash flow that will come basically from both business lines.

I think growth in housing development revenues, not only as we have seen with the average selling price of our backlog and our recent presales in the last part of 2024, but also in terms of margins, I would say that if we consider a bracket between 2025% gross margin, we have been until now guiding towards low 20s and I would say now we will be close to the mid 20s, closer to the mid-20s. And also, a higher land sales based on the strong backlog of million that we have already signed and also a few other operations that we have in the pipeline. All of that, we will continue focusing on our core strategic lines, which is the residential development as our key business line with around 2,000 units annually, plus or minus in each of the years coming forward and all of them fully owned. Also land management in order to bring those 6,000 plus units in key areas or key developed, key strategic locations to bring them to market as soon as we can. And finally, sales of non strategic client to optimize our portfolio size and quality.

And finally, in our Commercial segment, we will continue with our gradual divestment via land sales or project developments, turnkey developments in some cases or JVs in others. And with that, I close the presentation and hand it back to Juan Carlos.

Juan Carlos Calvo, Director of Corporate Development and Investor Relations, Metro Basesa: Thank you, Jorge. We are now ready to start the question and answer session, starting from our participants in the conference call. Okay. The first question comes from Ignacio Dominguez, analyst from JV Capital. Please, Ignacio?

Ignacio Dominguez, Analyst, JV Capital: Yes, good morning. Thank you for the presentation and taking our questions. I just have one. Could you provide us with more visibility on the gross margins for the housing development business in the fourth quarter, excluding the build to build project delivered? Thank you very much.

Jorge Pere Telefa, CEO, Metro Basesa: [SPEAKER JEAN FRANCOIS VAN BOXMEER:] Yes, I think, hello, Matthew. Good morning. Going forward, I think, first of all, to say that we have no BTR developments on the pipeline. So therefore, it means that there will not be lower margins due to that. And therefore, as I mentioned, I think in the bracket between 20%, twenty five %, we will be closer to 25% than to 20%.

We’re changing our guidance from low 20s rather to closer to mid-20s? I think that was the question.

Ignacio Dominguez, Analyst, JV Capital: Yes. I was looking for house, the gross margin for the Housing Development business, excluding the build to end project you delivered in the fourth quarter.

Jorge Pere Telefa, CEO, Metro Basesa: Okay. I think the, to be honest, I don’t have that precise answer if I take the two apart. So it is obviously higher than the 2.1, I would say, a little bit higher than 23%, but we can come back to you with the exact answer later on if we may. But I would say a little bit higher than 23% and then going forward, as I mentioned, closer to 25%.

Jorge Tejada, CFO, Metro Basesa: Okay.

Juan Carlos Calvo, Director of Corporate Development and Investor Relations, Metro Basesa: We do not have more questions from the conference call. And so far, we have not received questions from the webcast. So if that’s the case, we will close the webcast at this point. So in this case, we conclude the company presentation for the full year 2024 Metro Bethesda. And 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 look forward to meeting you again next time.

Ignacio Dominguez, Analyst, JV Capital: Thank you.

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