Inmobiliaria Colonial SOCIMI S A : Transcripción Presentación Resultados Anuales 2022

Transcript of the Inmobiliaria Colonial Full Year 2022 Webcast

Pere Viñolas: Good afternoon to everyone. It's a pleasure to be here again in order to share with you the results for 2022. I am Pere Viñolas, CEO, and I am with Carmina Ganyet, Chief Corporate Officer, and Carlos Krohmer, Chief Corporate Development Officer.

I'm on page 6 of the presentation, which is a summary of the main highlights of the results for 2022. After the end of the year, basically, we can share these numbers regarding 2022.

First of all, our recurring profit grows 26% to a new number of €161M. Second, our EPS grows 21%, that is, 29.8 euro cents per share. The EBITDA grows 14% to €283M. Our revenues grow 13%, 7% like-for-like, €354M.

So first comment on our main highlights: strong cash flow as the main message for our results.

Second row: resilient values. So the gross asset value grows 5% compared to the year before. In

terms of like-for-like, it would be 1%. Disposals: in line with appraisal values for a total amount of €500M, roughly speaking. The NTA remaining at 11.83, minus 1.7 compared to one year before, and the net disposal value growing 15% to a new number of 12.72. So second row of main highlights, resilient values.

Third row: solid balance sheet. Loan to value 36.9%. That is including recent disposals. Liquidity of 2.6 billion, again including disposals. Fixed cost as a percentage of total debt at 100%, so mainly all of the debt hedged. Cost of the debt, average cost of the debt at the year-end 2022: 1.6%. So again, a solid balance sheet as a summary for this year. These are the main highlights. I will enter into details, of course, for all of these numbers.

Page 7. Just to summarise and maybe emphasise some of these KPIs. Behind these numbers, first of all, what is being a driving force is the letting volume. The letting volume at the end of the year is 177,000 m2. This is the second highest number in the Group's history, well above our average. As you know, this has been a trend not only for 2022, also for 2021, 2020. So we are in a structural process of strong letting of our premises.

As a consequence of that high occupancy, 96% occupancy, maybe it's good to highlight the performance of Paris: 99.8. If we translate this letting volume and higher occupancy into rents, three messages. First of all, full pricing power. So 5% indexation impact in our annualised gross rental income, 7% in the case of Madrid and Barcelona. Spain is enjoying a higher effect of indexation. ERV growing 5% to the Group, 6% for Paris, and a release spread of 6% for the Group, 8% of Paris.

Page 8. I would like to highlight maybe what's the main driving forces in this performance that we see for Colonial before entering into details. A number of messages I would like to share with you. First of all, what is clear at the end of year 2022 is that Colonial is delivering strong cash flow growth, but in particular with full pricing power. So to the question of to what extent inflation is being passed through clients, roughly speaking, we are passing everything. So full pricing power, as we could expect from the kind of clients, buildings and contracts, leasing contracts that we have with our clients.

Number two, this cash flow growth that is offering this full pricing power, it also shows a very healthy like-for-like growth. I would like maybe to emphasise that beyond being a good number, as you will see, now that more or less all of the data in the sector is already available, to put it in a way, we are at the high end. We are leading the growth in terms of like-for-like gross rental income in our sector.

The third message is that this full pricing power, this healthy growth in our gross rental income, is producing the level of inflation hedge that we would like to have. That means that the cash flow growth of Colonial is offsetting the impact of the yield expansion that we have experienced so far. That's an important message. Full inflation hedge right now.

Number four: in the meantime, this is having the support not only of our existing assets, but also from the new projects that are delivering its additional alpha value. But as a consequence of all of this, basically, we are enjoying an NTA that by the end of 2022 remains mainly resilient. If we would include, factor in the dividend already paid, I would say that the number at the end of 2022 is the same number as 2021.

This resilient NTA allows me to go into the next step, which is regarding capital structure. What can we say? Well, first of all, we've been achieving some divestments. First of all, these divestments are real in a moment where there's a lot of speculation or talking about what companies should and most of all can do. We are effectively delivering already done divestments. Second, divestments that are done, mainly, roughly speaking, at NTA. So this is confirming a little bit the health of our assets and in particular, of their valuation.

With these divestments, we can confirm that we are comfortable with the evolution of our capital structure, and we would like to highlight two things about our capital structure beyond the LTV number and the rating, which is already known.

The first is that I think that we enjoyed an outstanding financial hedging structure. We basically have all of our capital structure, our debt, fully hedged. But not only in terms of the picture as of today, but more importantly, going forward into the long term, we can enjoy as of today a secured, very low interest rate for a number of years. After a number of years, it's just slightly above 2%. This number, projected into the future, we believe that it's even more important than whatever number we can say about today.

Maybe as a conclusion, and I think that is an interesting thought out of this, maybe we'd like also to share to what extent is relevant the net disposable value number because of this. In the NTA, there's a lot of discussion about what may happen to the value of the assets because of the debt, because of the rising interest rates, because of a number of things. But then there are a number of hedging strategies that are not really seen there, that are seen when you look at the net disposal of value. And what is happening to our net disposal value is that is growing at a double-digit number, reflecting this quality check on the health of our debt.

So the message is that behind these numbers, there is strong cash flow growth with full pricing power; resilient asset values, where you can see pricing power offsetting rates shift; solid NTA benefiting from the polarisation of the market; and financial cost under control in terms of 100% of current debt at fixed cost.

These are our highlights for today. Now, as usual, we will enter into different sections to go more in depth. And now I ask Carmina to step in, to go into the section about financials.

Carmina Ganyet: OK, thanks, Pere. In this section, we are going to see deeper the main financial indicators, mainly showing the full benefit of polarisation. In page 10, you can see how these 2022 results show a double-digit profit growth with an increase of EBITDA of 14%, a recurring net profit increasing 26%, and as a result, the earnings per share increasing 21%. An [inaudible] with a very resilient valuation, showing a gross asset value increasing 5% with a like-for-like 1% positive, showing also an NTA growth of minus 1.7% post dividend. If we add the dividend, mainly the NTA remains flat. As I mentioned before, with a significant growth on net disposal value of 15%, up to €12.72 per share.

And all this recurring profit increasing 26%, and mainly it is beating the EPS, the upper range of the guidance, as we guided during the year. So we are in the upper range of the range of the guidance and mainly, the main impact of the recurring profit is due to the additional revenues.

And what are the main impacts of these additional grants you can see on page 12. Basically, first, we are increasing income in the comparable portfolio with 7%, driven by indexation, rental growth

and letting new space. Additionally, we are also increasing rents thanks to the project pipeline and the renovation, contributing with additional 7% on the growth on the revenues. Basically, 14% is thanks to the right strategy on prime assets with prime clients. And the third additional impact is due to the fact of additional acquisitions, mainly Pasteur in Paris and the headquarters of Danone in Barcelona, contributing additionally 4% growth.

And on the opposite side, you can see here in the chart the impact of the disposals with -16 million. So mainly, the rental income variance increases 18%, thanks to the pricing power and new acquisitions and net disposal. The total gross rental income increases 13%. As I mentioned before, the 7.2% delivered in 2022, it's the highest like-for-like growth in the sector. So we are beating our peers, and also this year we are beating our historical like-for-like growth in the last five years, as you can see in page 13.

When we look at a more granular analysis, the main impact of this like-for-like growth on page 14, you can see here how the gross rental income increases in Paris, 13% in the portfolio average including Paris -- sorry, 17% growth -- with outstanding like-for-like 7% total portfolio and positive in all the markets: 8% in Paris, 6% in Madrid and 9% in Barcelona.

When you look at the main driving forces of this like-for-like growth, mainly it's a combination of indexation, a combination also of pricing power. So we are increasing rents above the indexation, as you can see here, and on top, additional occupancy rates.

So pricing power at the end, it's not only passing through the indexation, it's also having the best portfolio, the best assets in prime locations and the scarcity at the end helps to this additional rental growth above the indexation levels.

In following the next page, page 15, you can see also a little bit more of the details of how we have succeeded the divestment strategy. We have developed more than €500M in line with the appraisal value. All has been done in a very narrow investment market conditions with a successfully large volume of €500M. You can see here mainly the net initial yield that this disposal has been sold, below 3%.

In average, 83% of the disposal has been assets in Spain, 17% in Madrid. You can see here the split between secondary, landlord and mature assets. So these are not the best assets, which as you can see here: secondary, land plots and mature assets significantly in Spain. As of today, 75% of the assets programme has been executed in 2023, €84M has been executed during 2022, and the rest we have an advanced and high visibility to complete the programme above €500M.

One of also the main important driving forces of resilient value and the positive NTA impact in 2022 has been delivering part of the project pipeline we had in place during the year. On page 16, you can see how we are creating value through this project pipeline. You can see here two examples, one in Paris -- Biome, and the other in Spain in Madrid -- Velázquez, creating in a blended capital gain of 60%, six zero, 40% in Biome and 90% in Velázquez. So this is also part of the beauty of this project pipeline being completed and being impacted very positively in the NTA in the 2022 valuation.

On the next page, you can see the details of our updated gross asset value. Basically, the message is that the valuation remains resilient with 1% like-for-like, higher cash flow due to the indexation, due to the rental growth, because of the scarcity of the product in our market. So this pricing power at the end offset the yield expansion that has been included in the last appraisal valuation in December 2022.

On top, we are adding additional valuation, additional value, coming from the project delivery. On the opposite side, you can see here the -- sorry, and also on top, sorry, you can see here the impact on the net acquisition. So like-for-like valuation growing 1%, additional cash flow being offset by yield expansion, and on top, new acquisitions with an increase of gross asset value of 5%.

Also here we have included a detail of the markets, how this valuation has been impacted in the different markets. But mainly the message is that the strong value performance delivered in Paris and the CBD markets as opposite this performance has been much more better than the secondary, as you can see in the details of the valuation impacting in the second half of the year.

If we look at our capital structure on page 18, as I mentioned, the fact that we have completed this disposal programme, enhanced the capital structure, enhanced the profile of our liquidity with more than 2.6 billion of liquidity, the net debt after disposal is below 5 billion and the long-term value performance after disposals remains below 37%: 36.9%.

And how is performing this capital structure? [Inaudible] we would say, thanks to the financial policy, we have secured the cost of debt. So today, all the debt, 100% post disposal, is fully hedged, and this profile of hedge -- in the appendix, you will see more details -- remains at this level until 2025, thanks to the positive mark-to-market at very, I would say, interesting levels of rates, and also thanks to the bonds at fixed cost at a very interesting level.

So the stable financial growth remains in the range of 1.7% and projecting this cost of debt thanks to the hedge remains below 2%: 2.5%. So a fully hedged position at a very interesting level of