Hello, good morning, and welcome to the webcast on Metrovacesa results for the first semester, 2024. My name is Juan Carlos Calvo. I'm Director of Corporate Development and Investor Relations, and as usual, we also have in the call, Jorge Pérez de Leza, main speaker, as CEO of Metrovacesa, and Borja Tejada, Financial Director. We are going to present an overview of operating activity and financial results for the first semester of the year. The slides of this presentation have been released earlier to the market this morning, and they are available through the CNMV website, as well as the 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 star key, star five, sorry, star five in your telephone keypad at any time, and you can cancel your question by pressing again, star five. If you're participating via webcast, you can type your question directly in the webcast platform, and we will read it out. Now, I hand it over to our CEO to start the presentation. Please, Jorge.
Yes, good morning, everybody, and welcome to our mid-year 2024 results presentation. Let me start with the highlights on page 5 of the presentation. In terms of market, we continue to see strong sector fundamentals with the Spanish economy remaining strong, a recent upgrade of 2024's GDP, and a strong labor market, which for us is really a good sign. Also, the imbalance of supply and demand continues to be strong due to favorable demographics, with more than 200,000, 250,000 households being created every year, and a supply that doesn't even cover half of that. Also, transactions and mortgages are showing signs of improvement as the interest rate scenario starts to have a better outlook.
In terms of operations for Metrovacesa, we had a strong commercial activity in the first half of the year, with over a hundred, sorry, 1,000 pre-sales, which represents a 15% growth compared to the previous year, and also surpassing the EUR 1 billion mark, being at EUR 1.2 billion in terms of backlog. The absorption rate, as we measure it, continues to be strong, 2.8%, very close to, you know, what we consider optimum, which is 2.8%-2.9%, to be sold in general. And then also land sales, growing pipeline of binding contracts
We have EUR 58 million in binding contracts, part of them to be finalized or to be notarized in the coming years, versus 45% that we have, that we had last year in December. In terms of financials, as Borja, our CFO, will explain then, later, we continue to have positive earnings in the first half of 2024, with revenues of EUR 235 million, a 42% growth compared to last year. We delivered 675 units with higher gross margins, above 24%, very strong in terms of gross margins, and then EBITDA of EUR 31.3 million, with a positive recurring pre-tax profit of EUR 22.4 million. We will go into bigger details later on each of these metrics.
Let me hand it over back to Juan Carlos to just give you a brief view of how we see the market.
Yes, and, thank you. Just a few charts and ideas here. Essentially, the market is performing very well in the start of the year, in the first six months of the year. We are highlighting the evolution of the economic growth. I mean, in the first quarter, the actual GDP performance has been 2.5% growth, and that has been more positive than expected and has led to further upgrades by most analysts. We picture here Bank of Spain forecast, which is now 2.3%. That is 60 basis points higher than at the beginning of the year. And the Spanish economy is growing faster than the average of the European Union. Secondly, about demographics.
Recently, the INE has revised the forecast of household growth for the next 15 years. The new figure is greater than the previous forecast. Now they are forecasting 443,000 new household creation on average annually for the next 15 years. This is higher than before. So this is stressing even further the imbalance between demand and supply, and the supply is really covering less than half of the needs to simply cover the household creation. And finally, we have recent data about transactions and mortgages.
Volumes in this case, we are picturing the statistics from the notaries as of May, where we see after some volatility on a monthly basis, but this is back in relatively positive territory after declines evidenced throughout the year 2023. We see some discrepancies here between the INE and the notaries statistics, in this case, but in both cases, both the statistics are showing an improvement versus the declines that we saw during last year. So this is a positive element that confirms the recovery of the Spanish housing market. Now back to Jorge.
... Thank you, Juan Carlos. So I think our operational activity reflects in a way you know the good dynamics of the market of the residential market in Spain. Our pre-sales in page number nine we had a net pre-sales of 537 units in the quarter. And in total for the semester we had over 1,000 units in pre-sales which is really our best semester in BTS sales since 2018. I think also this is important to note that we are carrying out a very active activity of raising prices and maximizing margins.
So we're not opening the gates and selling everything we can, but rather we are really monitoring each development on a weekly basis with the help of all the data that we have, blocking units and blocking units in order to maximize prices. And despite that, you know, let's say, detailed analysis, we are still selling very well. So I think that, that points out, you know, what, what we're saying, that the market is quite strong. Our, our, our coverage ratio, or absorption ratio is 2.8%, which is, you know, what we consider optimal, considering that we have to sell, you know, the, the whole of our development of 100% over approximately three years.
If you divide that by the number of months, it gives you exactly this 2.8%. So we are right on target in managing that. And our client is actually quite solvent compared to the market. And we have, you know, from what we... The data that we gather from our clients, they have an average price to household income of 4.7 years. So, quite, again, quite strong compared to the national average, which is more close to 7 or 8, or 8 years. Moving on to the residential deliveries. We delivered, in the quarter, total of... Sorry, in the semester, a total of 675 units, which represents an 18% increase.
More important than that is that we grew revenues by almost 39% to EUR 206.7 million. This is due to the fact that our ASP or average selling price increased from EUR 286,000 per unit to EUR 335,000. This is due to a mix of product, but not only that, it's also due to the fact that we've been raising prices, I would say, in the last year, about 4%. We've had an average increase in prices of around 4%. Our gross margin stands at 24.2%, which is again quite, I would say, the strongest margin since 2018.
This is despite, you know, slight increases in some areas in construction costs, as well as higher financing costs. You know, as I said before, this is due to the fact that, you know, strong demand coupled with a very detailed revenue potential management from our teams on a weekly basis in each development. I would say that for the remaining of the year, if we're fiscal full year 2024, we're right on track, and we will have a higher concentration in the second half, as we normally all do in the sector. So, we will stand at what we said that we would deliver, which is more units than last year.
We have, you know, most of the CFOs in place already and ready to start delivering and to comply with our target for the year. Coming years, very strong coverage as well, so 2025, 73%, and 2026 has grown now to 50%, so we feel quite comfortable of our coming years, 2025 and 2026. And finally, the client is financing 27% with equity or with, and the average LTV is 71%, which combines well with what I said before, of the, let's say, financial stability or aptitude of our clients. Moving on to page 11, I'm talking more general about our operational activity.
We have a sales backlog of 3,700 units, which is EUR 1.2 billion in future revenues, so a slight increase versus December 2023. The average unit price stays at EUR 324,000, so well above EUR 300,000, the EUR 300,000 mark. With a high reliability in the sense that 79% are formalized in contract, so close to 80% in contract and 20% reservation. We have almost 6,500 units under commercialization. 57% of that are sold, and hence our strong coverage ratios for the coming years.
We have launched or started commercialization of 800 units in the first half of the year, and we have a potential of EUR 2.2 billion in potential revenues with higher selling price, 344,000-345,000 EUR per unit, which, you know, reflects the, again, the price increases that we are experiencing in the market. Under construction, we have almost 4,400 units, with 512 construction starts in the first half of the year. And on track to what we consider is necessary for our deliveries in the coming years.
In terms of land activities, the P&L revenue, so that means notarization, it stays at EUR 8.3 million, versus EUR 1.3 million in the first half of 2023. Six residential land plots, and I think this is a small figure, but will grow across the year as some of the binding contracts that we have in place will actually be notarized. We formalized part in 2024 and part in 2025. Again, so 8.3 is a small number. I think, it's still low to take any conclusions on gross margins on land sales, as what I will explain later. But, you know, I would say that the market, we are confident in the market for land sales towards the end of the year.
In terms of land investments, we've purchased a total of EUR 23.4 million and 476 units in the first half of 2024, of which we've paid so far EUR 9.7 million. And in addition, we have EUR 39.45 million purchasing pending, which is part of purchases from last year and part from this, from this year. We are purchasing our purchasing strategy, as you know, is to top up our existing land bank in order to be able to launch, you know, around 2,000 units per year. And we are very focusing very much on prime locations with attractive margins and IRR.
You know, with a full, with a team which is fully operational now, and able to locate or to find very attractive opportunities. Some of them, I would say, off market and, you know, let's say that we will improve our margins going forward. In terms of urbanization CapEx, EUR 22 million paid in the first half of the year, mainly between Los Cerros, which, as you know, is, you know, the urbanization is already in place to be finalized for phase one next year. And probably to allow what we call the Edificación Simultánea, or construction at the same of the urbanization being carried on, I would say, in the first quarter of next year.
And also in Palmas Altas, Seville, where urbanization is at least the taxes is in place, and where we will start delivering our first units in the coming months. So, that ties nicely into page 13. And as I just mentioned, in Palmas Altas, those of you who go to Seville, I would recommend to go and see it. It's quite impressive to see how the whole development or the whole area has come into life. And we will start delivery of six projects, or a total of 350 units, in the second half of the year.
But on top of that, we have, you know, a total of 20 active projects with 1,200 units under commercialization, of which half of them are already sold. We have land for an additional 500 units that we will launch between the remaining part of the year and probably all of them in 2025, the rest. In Oria, which is another key project for us, Oria Innovation Campus, or as it was known in the past, the Clesa factory, the yogurt factory. We have turnkey in place for 2 buildings, as you may remember, 42,000, approximately 42,000 square meters, or 1,100 rooms with Vita. The student housing, Oria Neo, which is already under construction.
The works started in December 2023 with expected finalization in 2026. The second building, Oria Pulse, which is the co-living, with, again, close to 500 rooms, and in which we are finalizing details for construction that we should start after the summer, and formalize formalization of the JV with Vita also in September. So again, I think Oria, coming in with this, we would have almost half of the square meters of the area already under construction. The remaining parts, let's say that we have a good prospect of [audio distortion] in place to put in construction the whole development in the coming months.
In terms of ESG, we continue to make good strides, I think, in order to, you know, to be ready to comply with the European Taxonomy and all the requirements on non-financial reporting, as well as decarbonization, that we need to carry on as an industry, for the not so long coming years in the future. So, 100% of our launches are now AA in their energy efficiency certificate. And I would say that, you know, 100% of our projects are also getting sustainable certificates from Green Building Council. And again, now we are carrying, and I think this is most important because, it is what will be measured in the future.
We are carrying out a life cycle analysis of 100% of our projects in order to be, you know, very sure of what is our carbon footprint. And now, you know, starting to analyzing each project's potential improvements or potential measures to decrease that carbon footprint as we go forward. Also, we are increasing the monitor of waste management, which is another thing that, you know, will have to be done anyway, compulsory in the coming years, and promoting the use of circular and circular construction materials to reduce our carbon, carbon footprint.
So I think in two years or in one and a half years, we really have shifted from energy certificate towards more life cycle analysis and all the measures that we need to put in place in order to in the coming years, reduce that carbon footprint. In terms of also social, again, I think we are continuing our efforts to contribute to the economical development and social welfare of the areas where we work. You know, with the measures that are listed here. In terms of corporate governance, well, we've updated now our corporate map of areas risk or corporate risk map, including ESG, the ESG risks, and double materiality analysis, which is, again, something that everybody needs to know.
Finally, the adoption of the Responsible Artificial Intelligence Manifesto and our commitment to the United Nations Global Compact . With that, I now turn it to Borja to give us a financial overview.
Thank you, Jorge, and good morning, everyone. Concerning our profit and loss account, it's slide 16. Yes, some key figures. EUR 235 million of total revenues, up 24% year-on-year, driven mainly by higher residential deliveries, up 18% year-on-year, and higher average selling price, up to EUR 335,000 per unit, up 17% year-on-year. Good performance in terms of gross development margin, up to 24%, 2% above previous year. More than EUR 31 million of EBITDA, and having closed with a recurring pre-tax profit of EUR 22 million. Now, with reference to our cash flow, free cash flow, 66.2 million euros of gross or operating cash flow.
We're on track to meet our target for the end of the year of EUR 100 million-EUR 125 million. Concerning our net debt, as always, very solid financial structure, 13.8% loan-to-value, a comfortable ratio, and below sector average and our reference to 15%-20%. Nevertheless, we are increasing this percentage in order to optimize the capital structure of the group, higher CapEx in ongoing developments. EUR 436 million of gross debt, and around EUR 340 net. As always, very diversified financing mix with the good access to various sources of capital at a very competitive cost, with no relevant maturities up to 2026.
Finally, we're talking about our asset appraisals, EUR 2.5 billion in terms of GAV, out of which 83% represents our residential portfolio and 17% the commercial one. Positive growth, 2.8% like for like, versus December 2023, with an increase of 4.4% in our residential portfolio and a decrease of 6.7% in the commercial one, due to mainly this commercial one, due to interest rates and higher yields required by the sector and the market. Finally, in terms of net asset value, EUR 13.34 per share, after the distribution of EUR 0.36 of dividend in May, which represent ex-dividend, an increase of 2.8% compared with December 2023. Now, I will hand over Jorge with closing remarks.
Thank you, Borja. And now moving to the last page of our presentation, the closing remarks. I would, you know, ratify what I've been talking through the presentation, which is that the solid market trends at the end you know result in a good start of the year, and also having good positive prospects for the near term. I would say not just for the remaining part of the year, but also for 2024, for the next years, 2025 and 2026, as you can see from our sales coverage of the deliveries for those years.
Our improved operations resulted in increasing sales backlogs both in housing development as well as in sales, and with, you know, with our platform, like I mentioned before, that is able to sustain and maximize margins going forward. I'm sure some of the questions will come later as to, you know, what are our margins going forward, and we've always been guiding with these low twenties. Low twenties is very precise, as you can see, but I, I can say now that probably we are more on the 22%-23%, but rather the 21% that we were aiming before. And finally, we are reiterating guidance in terms of our cash flow generation for the year, which is stood at EUR 100 million-EUR 125 million for the year.
With that, I have finished and hand it back to Juan Carlos.
Yes, thank you, Jorge. We are now ready to start the question and answer session. Starting—We will start with the, our participants in the conference call, and later we will move to the webcast, questions. If you wish to ask a question in the conference call, please dial star five in your telephone keypad. You can cancel it if you press again star five for a second time. We will allow now for a few seconds, so you can register for your questions. Okay. So for now, we, we don't have, questions on the, on the conference call. We do have some questions on the webcast, so we'll be reading them. Starting from, a question from an investor.
A question on legislation and the topic of alternative uses for the land classified for office or commercial use into residential. I understand that legislation passed in Madrid region only allows residential use for social housing or protected housing. Is this correct? And if that is the case, is this an interesting option for you or not enough financially, not attractive enough financially?
Well, thank you, Miguel, for the question. Let's see. I will try to make a short answer, which is probably not easy, but, in terms of, let me talk first, in general about the, what the legislation means in very general terms. This legislation that has been passed for Madrid, for the Community of Madrid, the region of Madrid, allows the, to build residential use, and I will talk about what that means in, commercial land, that has office use. So therefore, in those lands that have use of offices, you can build residential. What kind of residential can you build? The residential has to be public housing, protected, and for rent for the next 15 years.
So from the time of delivery, 15 years, you have those units to be rented at protected rents, and after 15 years, they become free housing. So therefore, after 15 years, you should be able to either sell them at market prices or to rent again at market prices and not protected. So you have, like, two periods, you know, 15 years, which is protected housing for rent, and then afterwards it becomes free housing. And whether that is attractive or not, in general, I would say that it is. And obviously at the end it will depend on, you know, the land location and the module that you can apply. The module, I mean, the pricing module for rents.
But in general, and now talking more about the case of Metrovacesa, we have several plots that would catalog on that. Actually, let me just finalize before in general, talking about the law. This is a law that was approved by the Community of Madrid, but then the municipalities have the, let's say, the ability or the right to either approve it in all areas or in some areas. So one municipality could say, you know, "I'm not going to approve this in any of my locations," or they could limit it in some areas. And in order to do that, they have four months since the approval of the law.
So I would say that, you know, after the summer, let's say mid, mid of the next quarter, the municipalities will have to say whether and what, in which areas they approve this change. Okay? Whether it's attractive or not, I think that it is attractive. Usually it's, I think, not for, you know, private equity seeking super high IRRs, but for funds that are already investing in affordable housing rent. You know, you have, let's say, a product that will have, you know, a reasonable yield for 15 years, and then suddenly you could have, you know, for example, in one of our, in some of our areas, in, you know, in a good neighborhoods of Madrid, suddenly you find yourself with hundreds of units that become free housing.
So I think that has an upside potential that makes it attractive for investors. And there are several inquiries for investors.
Okay. So, moving to next question, from Javier Díaz, analyst from Renta 4. Good morning. Congratulations on the financial results. Thank you for taking my question. Please, can you give us more color about the margins regarding land sales?
... yes, as I mentioned, Javier, thank you for the question. As I mentioned during the presentation, I think you know, the results that we're showing for this first semester are not representative of what our land margin should be. I think we are, you know, as I mentioned in other calls, always targeting to be close to zero. So meaning that, you know, our sales price is around the net, the net value or the book value of the land. But in some cases, as I've always mentioned, if we need to sell with a slight discount to that, we will.
If it's land that is not as strategic for us, we are ready to sell with some discount to our book value in order to monetize those lands that are not strategic for us.
Okay, thank you. We don't have any more questions from the conference call. We do have a question from the conference call, from the line of Ignacio Romero from Banco Sabadell. Please, Ignacio.
Yes, hello. Good morning. My question has to do with land sales. I mean, given the imbalance between supply and demand that we are having in the housing market, how come the land market is not as stressed as well, one would suppose, given the you know, the need to build new housing? How do you see the land market going forward?
Well, thank you, Ignacio, for the question. I think, you know, we can talk in general about the market again, and then specifically about Metrovacesa. I would say that in general, in the market, you have, like, two different pathways, you know, the areas or tier one or tier two cities where, you know, the demand is super strong and everybody wants to build there. And I would say that in those locations, the market is tight. Margins are, you know, adequate, but you have to really find off-market opportunities to that really work. And so it's, I wouldn't say it's impossible, but it's not easy, you know?
I think the pressure is mainly on fully permitted land where, you know, all the, I would say, you know, a lot of the funds or new equity that has been raised for co-investment is really looking for fully permitted land in order to start construction as soon as possible and reach the high returns that they are expecting, no? In other locations that are, you know, more tier three locations, then the market is not as strong. You know, in the sense of, now talking about Metrovacesa, I would say that, you know, we've been buying. First of all, we don't need to buy 3,000, 2,000, 1,000 units. I mean, we are, as we've always said, we're buying 500, 700 units per year.
In exceptional cases, a bit more if there, you know, if there is a super attractive opportunity. For those kind of opportunities in tier one cities, we're able to find, you know, off-market opportunities that gives us good margins. If we had 2 or 3 000, I would be, you know, a little, a little, a little bit more concerned. Now, in other locations, what we sell is, you could say, "Well, why aren't you selling more residential land?" Well, because the land we are selling is in locations, where we are not developing. We don't want them to develop, because they are tier three markets, or they are very small in terms of units.
I mean, you can see the, our revenue this year, this semester of EUR 8.6 million is 6 plots, so the average amount per plot is not very big. Also, and then also commercial land, I think, you were more referring to residential land, but I just chip in here with commercial land. I think the market has improved, not for office use, where I would say there it's, you know, it's really limited. I mean, now, unfortunately, as we all know, office market is kind of more limited or with uncertainty, but rather in the commercial lands with commercial use that allows or office use that allow different uses, like, for example, PBSA or co-living, I think there is demand for that. Strong demand, I would say.
Okay, thank you.
Okay, back to the website. We have a question from an investor. Well done for the great semester. What is your maximum level of units under construction that you think you can get to in 2025 or 2026 while maintaining your current financial discipline?
[audio distortion] , then we should have under construction 4000, roughly, and that should be the target. [audio distortion] , but in that case, you have to multiply by three. So multiply 2000 units per year, you should have around 6000 under construction.
So it's a very rough estimate, so I want to [audio distortion] , but I think that's high level ratio, [audio distortion] you know, commercial data of a [audio distortion] should give you a, a rough, a quite accurate, not a rough, but a quite accurate view of what's going to happen, yeah, in the future. Okay, and we're already there.
Okay, I think this seems like the all the questions that we have for both the conference call and the, and the webcast. So I think we can, we can, finish the conversation. We can finish the webcast at this point. This... Therefore, this concludes the company presentation for the first semester of 2024 of Metrovacesa. 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, next time. Thank you.
Thank you.