Hello, good morning, and welcome to this webcast from Metrovacesa on the First Semester Results of the year 2023. My name is Juan Carlos Calvo. I am Director of Strategy and Investor Relations, and today we also have Jorge Pérez de Leza , CEO of the company, and Borja Tejada, CFO. We are going to present an overview of our activity and key developments during the first semester of the year. The slides of this presentation have been released to the market earlier 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 take a question via conference call, you can register by pressing star five in your telephone keypad at any time, and you can cancel your question by pressing again star five for a second time. Once again, if you want to ask a question, press star five. If you are participating via webcast, you can type your question directly in the webcast platform, and we can read it out at the end of the presentation. I hand it over to our CEO to start the presentation. Please, Jorge?
Yes. Thank you, Juan Carlos. Welcome to our midyear 2023 results presentation. Thank you for attending in these busy days. I would like to start on page number 5 with some highlights of this first half of the year. In terms of market context, what we see is a resilient housing demand, fueled by good Spanish GDP growth and also employment data, which continues to be quite consistent and positive. The volume of transactions we see that is holding up in the market despite the spike in mortgage rates. The outlook is still volatile, with keeping an eye on the evolution of interest rates and job creation.
The cloudy future on those two issues seems to be clearing up. As a result of that, the operations on Metrovacesa side are quite solid for the first half of the year, and we see improvement in pre-sales on coverage ratios for 2023, 2024, and 2025 deliveries, and also a pickup in land sales. As you will see later, we've had an increase, a slight increase on year-on-year and quarter-on-quarter on our pre-sales on BTS. Our coverage ratio for 2023 to 2025 deliveries continues to grow, and the land sales, which were somehow weaker in the first quarter, are now under a solid deal flow, both in residential and commercial land.
In terms of financial, Borja, our CFO, will enter into more detail later, but we confirm our targets for the years. It's true that we have more deliveries concentrated in the second half, but with the coverage that we have in terms of pre-sales and construction advance, we are quite certain of complying with our targets. On appraisal values that we did, we do on the midyear every year, we have almost a 1% like for like overall growth. Although a negative, or a decline in the value of our commercial assets, close to 3% on a like for like, as we all expected, given the cloudy, let's say, environment on the commercial assets for now. That leads to, yeah, an impairment on the PNL.
The full year estimates, as I mentioned at the beginning, we confirm our cash flow targets for the year of between EUR 100 and EUR 100 and EUR 50 million operating cash flow. After these highlights, I hand it over to Juan Carlos to give us a brief view on the housing market.
Yes, thank you. Just a summary here, our with a few charts on the statistics of the sector. The reality is that the housing market is performing relatively steady, even during the year and with only modest declines or deceleration in some of the ratios, and certainly performing better than other European countries for the housing market, showing that there is less sensitivity to the increase in interest rates or mortgage rates than perhaps was feared by many observers at the beginning of the year.
If you look at the number of transactions, the accumulated figure for the first 5 months, which is the statistics, is a decline of 4%, which is a modest decline, after actually a significant increase in the preceding years. The last 12 months figure is around 640,000 number of transactions, which is a still a relatively solid number. The demand is holding up what we're saying, compared particularly with the supply. The supply is continues to be very much limited, constrained below 100,000 units. This remains clearly below the number of household creation in Spain, which last year was around twice that figure.
This is one of the keys for the performance, particularly of the new construction, homes. House prices and construction costs are softening, but still in positive territory. Well, I mean, certainly, the scenario in the last six months has been, holding up, relatively well.
The reality is that the context is still volatile, so we have to be monitoring very closely the evolution of interest rates and mortgage rates to see whether there will be a different impact in the rest of the year. Particularly the evolution of the macro situation with the impact on job creation. Those should be the two main variables to monitor in the next few quarters, but the situation so far is so good.
Great. Thank you, Juan Carlos. Moving on to page number 9. As I mentioned at the beginning, in terms of pre-sales, what we see is that we have an increase in volumes, and not only in volumes, also in the ASP, the average selling price in the second quarter.
We sold a total number of units of 483 net sales, which represents a 17% quarter-on-quarter increase, and 14%, almost 15%, increase compared to last year, which is quite positive. I would like to rehighlight the ASP, which stands at EUR 345,000 per unit, which is, you know, which shows a better mix of product as well as the ASP growth that we've had in the preceding quarters and still hold for now. The total number of pre-sales for the first half of the year is now 908 units, with an ASP of EUR 325,000.
The monthly absorption rate, as we measured, it is now at 2.5%, which is, you know, a very healthy figure. We always like to be, you know, around between 2.5% and 2.7%. This is slightly above our average for 2020-2023. Good figures. Moving on to page number 10, about deliveries. We've delivered 572 units, and as I mentioned at the beginning, this year, we are more backloaded in deliveries, and we will see the figure picking up in the third quarter. We are fairly confident of fulfilling our... Not just the cash flow target.
As you know, we've always mentioned that the cash flow target is what we focus on, and that's a combination of land sales as well as deliveries. Deliveries similar to last year. We're very confident that we will hit that figure at the end of the year. Again, important to highlight that the average selling price of the units delivered is close to EUR 350,000, and again, you know, higher than in previous quarters. I think it's good to highlight as well that the gross margin has picked up a little bit, 22.2%, compared to lower figures. We still stick to our guidance of being in the low 20s. We continue to deliver on that.
Finally, I would like to just focus a little bit on how our client looks like, because I think that, you know, it's one of the reasons of probably, you know, having a solid pre-sales figure, which is, we see that 32% of our clients are buying without a mortgage, and that is consistent again with what we saw in the full year 2022. Also, of those taking a mortgage, the LTV, the average LTV is 72%, so not hitting the full, you know, the full figure of 80% or in some cases, even higher, that the banks are giving.
The average affordability ratio is 4.3 years, so very far from the 7 years that, you know, that is considered 7-8 years, that is considered to be, you know, above that, to be an unhealthy number. We are very far from that figure. Moving into page number 11, and looking at the operational activities, what we see is that we are well on track to, you know, achieve to be above the 2,000 units per year down the road. In terms of our pre-sales backlog, we have now 3,500 units in the backlog, with EUR 1.1 billion in total sales value, and again, with an ASP above EUR 300,000.
More than 80% of these 3,500 units are in contract. I forgot to mention that cancellations are not an issue, so therefore, you know, 80% contracts is a solid figure. Units under construction, we are at 4,100 units, which indicates the potential deliveries within the following 24 months. Finally, units under commercialization, we keep on growing, and despite, you know, the near, sorry. After subtracting deliveries, the net figure is still growing, so it means we are launching and more products, and we're putting more products into commercialization, which will also help to fuel future sales. Potential revenues, with an ASP above 300,000 unit of those units under commercialization, is more than EUR 2.2 billion.
Our pre-sales coverage for 2023 to 2025 is as I mentioned at the beginning, solid. For 2023 is 93% now, 2024 is close to 75%, 74% exactly. Then 2025 is at 36%, so a good growth compared to the previous quarter as well. Obviously, we have under construction everything for 2023 and 2024. Otherwise, it would be difficult to deliver in those years. Then 2025, it is close now to 50% of the under construction.
In terms of moving to page number 12, in terms of land activity and land changes specifically, I think the deal flow is somehow solidifying. We are now at a total figure of binding contract signed for the year of EUR 52 million. One-third coming from residential and two-thirds coming from commercial land. Most of them of these binding contracts are to be completed, formalized, or signed notarially within the year. With prices slightly below book value, but just only slightly. Again, with pipeline still solid for further contracts to be signed in the second half year.
Finally, before we moving into financials, I would like to spend, you know, a few moments on ESG and how we are progressing on that. We are now In terms of the environmental part, 100% of our launches are now with AA certificates. Also, 100% of our launches have the Green Building Council certificate. Finally, we are now measuring in our footprint, in 100% of our footprints, which will allow us in the future, to be more, let's say, to be more sustainable and to reduce that footprint as we progress in more environmentally friendly design and construction. In terms of the social part, we focus on this presentation in talking more about the work of our DUS department, which is the Department of Sustainability and Urbanism.
In which, you know, we are working very hard on participatory diagnostic studies in most of our non- or non-fully permitted land. Progressing with the different stakeholders in the municipalities and in the areas that we're working on to create the best possible environments from a functional and also environmental point of view. Finally, in terms of corporate governance, I would like to highlight that we now have, you know, the ISO, our certificate ISO 27001 for information security. The 9001, we already had it for quality management and the 14001 for quality environmental management. Progressing quarter by quarter on our ESG commitment. Now I hand it over to Borja for our CFO, for the financial part of the presentation.
Thank you, Jorge. Good morning, everyone. In terms of profit and loss account, just some key figures. Revenues from development, EUR 164 million, with more than 22% gross margin for being our guidance. Repeat that, EUR 10 billion and EUR 34 million of impairments, mainly in commercial land. With reference to recurring pre-tax profit, breakeven. Now, in slide 16, in terms of gross operating cash flow, in line with our budget, more than EUR 26 million, after having invested EUR 20 million in land purchases, and have monetized more than EUR 51 million in deliveries and land sales. Well, track for achieving our guidance of EUR 100 million-EUR 150 million before year end. In slide 17, we can check our net debt with a very solid financial position, as always.
It's a gross debt of EUR 460 million and net slightly above of EUR 300 million. 12% of loan-to-value, a very comfortable ratio, below our reference of 15%-20%, no relevant maturities up to 2026. In terms of treasury, around EUR 200 million, out of which EUR 115 million is fully available after dividend distribution of EUR 50 million in May. Finally, about our asset prices. Net asset value of EUR 13.73 per share after the distribution of EUR 0.33 of dividends in May, meaning +1% like for like versus December 2022, with an increase of more than 2% in our residential portfolio and decrease of circa 2%-3% in commercial one.
EUR 2.5 billion in gross asset value, out of which 78% represent our residential portfolio and 22% commercial one. I will hand over Jorge with the closing remarks.
Thank you, Borja. As closing remarks, I would again like to highlight that the market trends, we saw a good 1st half of the year. Despite uncertainty still being present, we still, you know, see that demand is being solid. We will nevertheless always adapt to eventual trend changes if any happen. As of now, we continue full speed with our launches and putting product into commercialization and solid performance in operating KPIs. Strong visibility for 2023-2025 below deliveries, as I mentioned, and keeping up with our strategy of, as I mentioned, of launches and working towards surpassing that 2,000 deliveries per year figure.
Finally, we reiterate again our full year guidance of operating cash flow between EUR 100 million-EUR 150 million, which is a combination of residential deliveries plus land sales, that, as you have seen, have had a solid performance in the first half of the year. With that, I hand it over to Juan Carlos.
Yes. Thank you, Jorge. We are now ready to start the question and answer session, starting from our participants in the conference call. If you wish to ask a question, please dial star 5 in your telephone keypad. You can cancel your question by pressing star 5 again. Now we will allow for a few seconds so you can register for your questions. We have a first question coming from the line of Ignacio Domenech from JB Capital. Please, Ignacio.
Hi, good morning. Thank you for taking my questions. I have two. Firstly, have you noticed any changes in the average buyer, with non-residents buying a higher proportion of homes compared to domestic clients? In terms of household wealth, how has the wealth of the average buyer changed compared to previous years? Secondly, my second question is on cost inflation.
Excuse me, Ignacio. I think the line, the sound of the line is not very good. Can you maybe speak up a little bit or?
Start over again, please, Ignacio, because I didn't catch any of the questions.
Okay. Yes, my first question was if you have noticed any changes in the average buyer, with non-residents buying a higher proportion of homes compared to domestic clients? In terms of household wealth, and how has the wealth of the average buyer changed comparing to previous years?
Ignacio, I would say in terms of non-residents, I think we are at a figure which is 22% of international buyers, which is, I would say, similar to what we had last quarter, and maybe, you know, slightly higher of what is the, you know, the average for many years, which is around 20%. I would say, you know, fairly slightly above average, but consistent with what we had last quarter. In terms of household loans, no real change. I mean, last year, again, you know, we had, like, you know, a little bit more than 30% buying with equity, and that still stays the same.
Of, you know, of those buying with a loan, the average figure, the average LTV now is 72%. Maybe it's slightly higher than what we had last year, but no significant change.
Okay. Thank you.
We have a second question from the conference call, from the line of Ignacio Romero from Banco Sabadell. Ignacio, please.
Hello, good morning. A quick one on my side regarding the impact of land sales on cash flow this year, should we expect the EUR 52 million of land sales that you have highlighted in page 12 of the presentation to be actual cash flow for this year, 2023? Thank you.
Yes. Hi, Ignacio. Jorge here. I would say about three quarters of that would be, as I think we mentioned, would be formalized and meaning, you know, full payment of that. Around third quarter would be an estimation. On top of that, we will see, you know, what happens with the second half of the year.
Okay. Thank you.
We don't have more questions from the conference call. We have some from the webcast, starting from Mariano Miguel, analyst, from Banco Santander. A few questions on my side: Can you give us some color on the July presales? Secondly, land sales increased substantially in the second quarter. How should we see evolving this in the second semester? Could this mean an increase of the guidance? Third, gross development margin at around 22% in the first semester, we expect it to stay in those levels in the second half of the year.
Okay, thanks, Mariano, for your question. Going one by one, I think, July is quite solid. It's quite solid, so just, I think no further details on that, but that's still quite solid. Good news. In terms of land sales, I think we still have, you know, a solid deal flow coming in, but I prefer to be cautious on that. Again, we're not dry. I think further deals will be signed.
What will probably happen is that, you know, whatever we sign as binding contract on the second half of the year, will most likely not be shown in the P&L, meaning that we will sign a private contract with some prepayment and probably the final signature notarial deed might fall over to the next year. Again, that's to be seen, okay? We are more positive than what we were at the beginning of the year on land sales, definitely. Finally, on the gross margin levels, I would say that what I said before, which we stick to the low twenties figures.
And, you know, as we have mentioned in the past, keep in mind that we still have to deliver about 400 units of BTR, which 200 from Palma, Mallorca, will be delivered immediately. And then, another 200 coming in in Valencia and Seville. Those carry a slightly, Still about 20%, but not 22% gross margin. I would say overall, we will finish the year, depending on, you know, on the deliveries in the final 2 months, that we will have also quite a few projects from Costa del Sol with higher margins. I think we will be between 20%-22%. I cannot be more specific than that because it will depend on the final mix.
Okay, we have a question from Javier Valderrama, analyst from Bestinver. Given the high visibility of the presales and construction, advancing for the year, and adding the EUR 50 million land sales in binding contracts, would you say that the cash flow guidance is more likely to stand in the upper side of the range of EUR 100 million-EUR 150 million?
To be seen. I mean, let's say for now that we stick to the EUR 100 million-EUR 150 million, and then if as I mentioned, the land sales that we have on the pipeline materialize, then we will be more positive in the third quarter.
Next question from Andrea Fernandez, analyst from CaixaBank. "Thank you for taking my question. On residential deliveries, do you continue expecting similar deliveries to those witnessed in 2022? Secondly, what gross margin can we expect in the first half?" I'm not sure if this is in the second half, but I'm not sure if this has been partially answered.
I think yes. I think yes, so.
Probably, yes. Next question is coming from an investor. Do you see a reduction in sales with the latest increase in mortgage costs?
Well, I think Juan Carlos Calvo talked a little bit about the market. I mean, I think, we have to look at, I think, two key figures here. You know, the first one is notarial deeds signed, which is a figure that is easier to follow because that's, you know, published from public statistics, either the National Statistics Institute or the notarial figures. What we see there is a slight decrease, but that includes second-hand units being bought now, as well as the signature or the notarial deeds of first or new homes, of which private contracts were signed many years ago. I think what we see there is a reduction in second-hand volumes more than the first or new units that were signed a few years ago.
We have to look at presales, which there are no, let's say, public figures or public statistics for that. You can only get the flavor from, I would say, from what the listed companies report. What we see there is still very solid, as I mentioned. I would say that despite overall volumes going down, I think the second-hand is being more hit than the new, the new sales and new presales.
Okay, next question, coming again from Ignacio Domenech, analyst from JB Capital. I have two more questions. Firstly, on cost inflation, do you expect costs, construction costs to remain high for the next two years, mainly due to higher labor costs and higher salaries? Secondly, what is your main concern for the year 2023?
Well, on the first one, what we see is that cost inflation is somehow much more stable. It has stabilized at a higher level than. It hasn't come down to what it was, you know, a year and a half ago, but it's more stable, definitely. What we see now on all our bidding process is that... you know, we are, I would say in 80% of the cases, we are on what we budgeted, and then on maybe on 20%, maybe due to, you know, the area where the project is located, you may have a slight increase from what you were expecting, but you can, you know, through negotiations, we normally bring it down to budget.
In those cases, you actually absorb the potential margin hit through HPA, sorry. Overall, the margins are staying quite constant. I, to be honest, the only reason to see a huge surge again in the next years would be if supply increased, you know, above something like a 120,000 unit figure. We are very far from that, and it takes quite a while to, you know, if all developers now kind of went full speed, like, you know, the big ones are. We are still holding, you know, launching. Let's say the whole industry went full speed, it would still take a few years to really reach, you know, an output of more than 120,000 units.
In the next two years, we don't see a huge risk on that. Secondly, on the main concern for 2023, well, I would say, interest rates growing more than what we see now as, you know, somehow, stabilizing. We see it as stabilizing and whether, you know, the risk it would be if it continues to grow more than what we predict right now, and they stay very high for long.
Secondly, maybe, political, let's say, inaction, that at the end, we enter into a situation in which we, you know, we are kind of, without a government for long, and that group may result on at the end, you know, a little bit of paralysis in the economy, in the economy overall.
Thank you. We have an additional question from 1 investor or shareholder. Is the recent increase in our reselling price an exceptional thing, or are you trying to focus on higher quality product going forward?
Well, I think it's a combination of both things. First of all, ASP that we have had mainly last year, where we had figures reported between 5%-6%. This year, we're still having a slight ASP, but not that much of a figure. That's one issue. The second source of it is the product mix. What we see is that overall, you cannot say that this is just a quarter thing, because if you look at, you know, the ASP that we are predicting for deliveries at the end of the year, we look at the ASP of the backlog, and we look at the ASP of the units under commercialization.
In all of those figures, we are above 300,000 EUR. This is not a quarterly thing anymore. It's more of a trend that it has to show up, because if at the end, in your backlog and in your units under commercialization, you are above 300,000 EUR, that means that your deliveries down the road will be above that figure.
We have no more questions from the webcast. I believe we don't have more questions from the conference call. If that's the case, we will conclude here the presentation of the results for the first semester of the year. 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 hope that you will enjoy a very good summer break. Thank you. Goodbye.