Thank you. Good morning, everyone. Thank you for joining our financial year 2022 earnings call. Our CEO, Kruno Crepulja, and our CFO, Foruhar Madjlessi will walk you through our presentation and give you an update on our current business performance and our outlook for 2023. As usual, this will be followed by a Q&A session. With this, I would like to hand over directly to Kruno.
Good morning, everyone. I'm glad you could join us for our financial year 2022 earnings call. In an overall very challenging environment, we achieved good results, which were on the bottom line level at the top end of our expectations. We continue to achieve high margins. We are generating significant positive cash flows after investments. Therefore, we are maintaining a strong balance sheet despite high cash returns to our shareholders. The current environment, we are benefiting from a high share of pre-sold units, which are currently under construction. We have projects under construction or pre-construction worth around EUR 3.3 billion and thereof, 89% have already been sold. This forms a robust basis for expected revenues and cash flow generation in 2023 and also in 2024.
The transaction markets in Q4 and also at the beginning of 2023 remained dried out. With a high uncertainty, the market is still in the process of adapting to the new interest rate environment with buyers hoping for bargains. We are witnessing a significant slowdown in our sales speed. Institutional investors are more or less in a wait and see mode. I think it is not realistic to expect a certain demand recovery before H2. Admittedly, the visibility on the timeline is currently still pretty low. It is also important to note that the indications of interest for our product, new build properties, remain high, which is also attributable to the superior energy efficiency and rental prospects. On the pricing side, we haven't made any price concessions to date. We expect some increasing price pressure going forward, especially for a restart of the institutional business.
The financial year 2022 was a tough year. The Russian invasion of Ukraine caused disruptions in the supply chains and shortages of important building materials. This had a significant adverse impact on development of construction costs, which increased overall by some 17% and also on the availability of building materials and therefore on the construction speed. We have budgeted a further rise in construction costs for 2023. We expect a mid-single digit CPI growth. Nevertheless, it is also fair to say that we have seen a normalization in the availability of material and inflation is currently receding. On the procurement side, the start to the year has been overall quite encouraging so far. Let's now take a brief look at our financial KPIs for the financial year 2022.
Our adjusted revenues amounted to EUR 621 million, below previous year's level, but in line with our revised forecast. The decrease reflects the impact from a lower sales speed and also the mentioned supply chain disruptions. Our gross margin stayed at a high level of 25.3%, which is in line with our targets. This key figure again reflects leading profitability in the sector. With our conservative cost budgeting, a large share of fixed price contracts and subsidies for energy efficient buildings, we were able to largely compensate for the higher construction costs. Due to the lower revenues, a reduced margin from a very high level, and also due to normalized tax rate, our adjusted earnings after tax dropped to some EUR 50 million.
Therefore, as you know, we reached the top end of the revised guidance of EUR 40 million-EUR 50 million, which is a good result, I think. On the back of these results, we will propose a dividend of EUR 0.35 per share to the AGM. We are sticking to our planned payout ratio of 30%. Our shareholders will benefit from a lower share count after deduction of our treasury shares. Against the backdrop of our high backlog of pre-sold units, we are confident that we can achieve largely stable results and a clearly positive cash flow also in the current financial year, 2023. Accordingly, we expect adjusted revenues of EUR 600 million-EUR 700 million. An almost stable adjusted gross margin of around 25% and adjusted earnings after tax of EUR 40 million-EUR 50 million. Moving to slide five in our presentation.
As usual, we provide high transparency regarding the recent development of our retail customer business. The retail sales ratio dropped below its long-term mean in late summer last year. We had a short list year-end rally, which was attributable to pull forward effects from an important sales project in Leipzig. Here, the real estate transfer tax was increased, effective from first January. Since the beginning of the year, the sales ratio is at depressed level. The mentioned pull forward effects are one reason for this, but there's a high reluctance of buyers. Many of them are waiting for potential price adjustments. The demand situation is generally better for projects which are in an advanced stage, but it's difficult to attract demand in the early sales and construction phase. We have reacted accordingly, and we have postponed planned sales starts. This also has a negative impact on the reported sales figures.
There are still high indications of interest from our clients. The underlying demand is definitely there from both private and institutional investors. Again, we clearly believe it will take some time before we can expect a stronger recovery. The following slide, six, we provide an overview of relevant macro indicators. We all know that the market environment has changed over the last 12 months. The war in the Ukraine, with the emergence of inflation and the resulting jump in interest rates, has a negative impact on affordability and consumer confidence. There's currently high uncertainty in the market, which is reinforced by the slump in transaction activities. Nevertheless, the data points that can be taken from the market research, and this also corresponds to our assessment so far, point to rather stable headline prices for new builds.
Headline prices certainly do not provide the full picture, as incentives are not visible here. Hence, these statistics, therefore, may leave a slightly too positive impression. But it is certainly undisputed that newly built properties are performing significantly better than existing properties. The other side of the medal, as frequently discussed, the war in Ukraine as a Black Swan event, caused a significant rise of construction costs of some +17% in 2022. We have factored in a mid-single digit CPI growth also for 2023. At the start of the year, we currently see more. Significant price increase for concrete, but on the other hand, the prices for other important building materials, timber and construction steel, decreased to pre-war level. It is clearly a positive development for us that our negotiation power vis-à-vis construction companies has improved significantly.
Over to page seven. It is becoming increasingly obvious that the current situation will result in a further significant tightening of the supply shortage in the German housing market. Due to low construction activities over the last years, which continuously fell short of the required level of 350,000 units per annum, we have already built up a substantial housing deficit of around 700,000 units in Germany only since 2013. For 2023 and 2024, there's significant decline in new supply to only 200,000 units or even below that level on the cards. The order cancellation building construction's at a record high level. On top of that comes additional demand pressure from the influx of refugees, especially coming from the Ukraine. Many of these people have the intention to stay in Germany.
There's currently tremendous pressure on the letting market, supporting upward pressure on rents. There are hardly any vacant apartments in Germany, especially not in the metropolitan areas, which are basically fully let. The short-term decline in demand from owner-occupiers, which is also illustrated in the chart with a slump in mortgage demand in Q4, is further putting the pressure on the rental markets. Moving on to slide eight. Despite the high uncertainty in the market, it is widely recognized that new build properties are the winner of the energy crisis. They are benefiting from superior demand in investment and letting markets. Research provided, for instance, by JLL, comes to the conclusion that the price differential among residential properties in the market is clearly a function of the energy standard, and that this price differential is widening. There's clear rationale behind this.
Crucial for the tenant budget is the so-called warm rent, including heating costs. Accordingly, the potential cost advantage of an existing building from a lower cold rent is offset by the rising energy costs. Property investors also have to consider the potential CapEx backlog for energetic modernization in their investment calculations. New builds in attractive regional markets enjoy strong tenant demand. This has, for instance, been highlighted by ImmoScout, the leading German property marketing platform. Attractive apartments can be rented out with inflation-linked rental contracts and therefore, new builds are clearly gaining relative attractiveness as an investment product with a decent real yield. Instone, with its product portfolio, is ideally suited to the current demand situation. In addition to the pure energy cost aspect, the general ESG aspect also speaks in favor of new builds, especially for institutional investors.
Some 94% of Instone's building contribution, contributing to 2022 revenues, meet the energy efficiency requirements of the EU Taxonomy, which stipulates a net zero emission building standard _ 10%. Let's move to slide nine. The strengths of our asset class, such as the high stability, are well known, and the worsening shortage in the market will support the growth momentum for the underlying cash flows. Nevertheless, we also cannot ignore the new fact that the strong jump in interest rates will result in a yield expansion also for new builds in investment markets. There is of course, a high degree of uncertainty as to what the net price effect of the increased yield requirements and the counterbalancing effect of the further improved growth outlook will be. On slide nine, on the left-hand side, you find a table with a sensitivity analysis.
Usually, we sell projects to institutional investors on a two-year forward basis, and therefore the expected rent level in two years is the basis for initial yield calculation. We assume that market rents for new builds will grow by some 10%-12% over that period, and we can imagine that the yields will go up from slightly above 3% to maybe some 3.7%-3.8%. This would imply an expected price correction of some 5%-8% for the institutional market. This assumption is also supported by a look back into the past, if history is a good guideline. The periods with positive yield spreads to bonds, which we are still having right now, have been more the exception in the past, especially in periods with higher inflation.
Despite high volatility in inflation and rates in the past, yields for new builds hardly exceeded the 4% level since German reunification. It is clear that lower volumes and expected price pressure clearly pose challenges for our industry. Nevertheless, we are firmly convinced that Instone's strong positioning will also offer significant opportunities in the medium term. On page 10, we have once again summarized some key arguments to emphasize that Instone is ideally positioned to weather the storm. One key strength is clearly our industry-leading margin, which is also attributable to our in-house construction expertise. We are a cost leader. We are able to offer free finance department at price points starting at EUR 4,000 per sq m, including land, which enables rent levels of around EUR 13. Numbers which are significantly below the figures rumored by some of our peers.
Furthermore, we have a very strong balance sheet and highly predictable cash flows from pre-sold projects. 91% of our units under construction are already sold. Our land bank is on average three years on our books, with additional value creation from gaining zoning permissions. On the other hand, we see that the consolidation in the industry is clearly progressing. Larger competitors with their non-core development activities are leaving the business. Smaller players with high leverage and high investment activity at the peak of the cycle are already struggling. We believe that this offers great medium-term opportunities for Instone. With that, I would like to hand over to Foruhar for the financials.
Thank you, Kruno, good morning to everyone from my side. Before getting into financial results, I wanted to highlight a few achievements in the context of our ESG reporting. Let's turn to page 12. We've made quite substantial progress regarding the scope of our ESG reporting. In particular, we are voluntarily in compliance with essentially all of the requirements of the EU Corporate Sustainability Reporting Directive, as well as the EU Taxonomy. Both of these regulations will only become mandatory for us two years down the road. You will find the many details of our sustainable reporting in our annual report. Let me highlight just a few. First, we are now publishing more than 60 sustainability KPIs in line with the Draft European Sustainability Reporting Standards. While this number is likely to further increase, the current disclosure is already well advanced.
We are fully compliant with reporting requirements under the EU Taxonomy. Based on our analysis, 97% of our revenues are taxonomy eligible. 87% of our revenues are derived from activities that are environmentally sustainable according to the Taxonomy, i.e., these revenues are taxonomy aligned. From a total of 191 buildings that have contributed to revenues in 2022, 180 or 94% are taxonomy aligned. Life cycle analysis to measure greenhouse gas emissions is now a standard feature for all of our projects. We have developed and started to establish a methodology to measure social impact of our quarter developments. Finally, we have announced our intention to increase diversity in our supervisory board with a target share of female directors of 33%.
To this end, we have announced our intention to propose appointing a new female director at our AGM in June this year. Over the page, again, I won't go through this list of selected ESG KPIs. However, I wanted to highlight the long list of KPIs and associated targets we have set ourselves for continued improvements. More disclosure, including relevant targets, can be found in our annual report. Let me turn to our 2022 financial results on page 14.
Overall results have clearly suffered from a variety of detrimental macro effects we had to cope with over the year, including rapidly rising interest rates for home buyers and institutions, market-based construction price increases to the tune of 17%, supply chain bottlenecks resulting in a relevant slowdown in construction speed, inflationary trends exacerbating affordability issues for many of our clients. Pricing pressure for real estate assets, in particular in the H2 of the year. Against this background, we consider our results to be satisfactory. These numbers, together with our outlook, should provide some comfort in the resilience of our business. Let's look at a few selected numbers. First, revenues have come in at EUR 621 million, despite all of the headwinds described earlier and new sales contracts of less than EUR 300 million.
This is due to our vast volume of pre-sold properties that generate substantial revenues and cash flows as the construction progresses. Second, our gross margin of 25.3% remains impressive, in particular against the trend of increasing construction cost pressure in the marketplace. This achievement is due to our prudent project cost management, our construction management expertise, as well as the overall quality of our product. In addition, we are benefiting from a total of around EUR 87 million of approved subsidies related to the energy efficiencies in so-called KfW 55 and KfW 40 projects. These subsidies will be payable at completion of the relevant projects, while earnings will accrue in line with construction progress. In 2022, energy subsidy related income has had a EUR 7.3 million positive impact on our adjusted gross profit, thus lifting our gross profit margin by 1.1 percentage points.
The positive impact of energy-related subsidies will continue over the next years in line with construction progress for the relevant projects, as we will record an aggregate of approximately EUR 80 million of incremental subsidy-related earnings. Third, with EUR 72.5 million we over delivered on our EUR 80 million platform cost target. As previously announced, we have delayed or canceled new hires, focused on containing admin related expenses, and substantially reduced variable compensation for our employees. We aim to keep a strict focus on costs and are ready to adjust the platform subject to market conditions. Despite the inflationary pressures, we currently expect the platform costs for 2023 to the tune of EUR 80 million. Once again, developments will be closely monitored. Finally, with EUR 50 million, we have achieved adjusted earnings at the top end of our revised guidance.
Page 15 shows the mix of institutional versus retail sales and revenues. As you can see, aggregate demand for our product has dropped by approximately 50% for our retail offering and by more than 80% for our institutional product. The aggregate drop in sales contracts amounts to 74%. This has, of course, contributed to the drop in revenues, albeit on a less pronounced level. Clearly, institutional demand will be a key swing factor for 2023 revenues, and should institutional demand recover will result in upside risk on our revenue and profit guidance. Turning to page 16, we have summarized our financial debt and cash position. Net debt has gone up slightly while our loan to cost ratio is essentially unchanged at 21%. A figure we consider to be moderate.
We are also very comfortable with our 2.8x net debt to EBITDA, despite a substantial EBITDA drop of almost 60%. It is important to reiterate our financial strength at a time where many of our competitors struggle to maintain financial flexibility. This clearly is a competitive advantage while at the same time providing downside protection. Page 17 reinforces this point. First, looking at the left-hand side, our operating cash flow for 2022 has been in line with our previously communicated expectation at EUR 190 million prior to any new land investments. Even after new land investments, we have maintained a positive operating cash flow of EUR 70 million.
In this context, it is worth noting that almost all our land-related payout in 2022 related to Q1 or prior year commitments as we have essentially paused new purchases post the date and following Russia's invasion into Ukraine. Second, the right-hand side of the page summarizes our liquidity position. We've held EUR 255 million in cash or cash equivalents. In addition, we have access to EUR 170 million of undrawn revolving credit facilities, giving us total access to cash of EUR 425 million. In addition, we have unused project financings to cover our construction expenditure of more than EUR 300 million. We will continue to manage the business for cash and invest into new land on a selective basis only. About EUR 30 million of land payments are due this year from prior year commitments.
Any incremental investment will be intensely scrutinized against the macro backdrop and the individual opportunity until visibility is improved and the market environment has stabilized. Over the page you see our corporate debt maturity profile. There are no major maturities until twenty. Also, I'd like to remind every 2027 promissory note completed in August of last year at a five point one proving our continued access to attractive senior unsecured funding despite more difficult financing markets. We intend to continue our regular financings, albeit on a more opportunistic basis as we have no immediate need for additional funds. On to page 19, you can see a summary of our share buyback related spending, as well as cash returned to shareholders by way of last year's dividend and this year's proposed dividend.
In aggregate over the 15 months period to June this year, we will have returned EUR 80 million in cash to our shareholders.
While maintaining a balance sheet that continues to be healthy and strong. As we had communicated throughout 2022, we intend to propose to the June AGM an approximately 30% dividend payout relative to our adjusted 2022 net income. That is EUR 0.35 per share for fiscal year 2021, 2022. Page 20 shows our 2023 forecast. We expect to achieve revenues of EUR 600 million-EUR 700 million, a growth margin of around 25%, and earnings after tax of EUR 40 million-EUR 50 million. Our underlying assumption to achieve these figures includes new sales contracts amounting to EUR 150 million. Please note that this guidance does assume no significant institutional sales and mid-single digit construction price inflation.
To the extent institutional buyers will return to the market by year-end, there will be upside risk to our adjusted revenue and adjusted earnings guidance. With that, I would like to conclude the presentation and open the call for questions.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Thomas Rothäusler with Deutsche Bank. Your question please.
Hi. Morning, everybody. A few questions actually. The first is on house price inflation. I mean, if I look at the recently published Europace, house price index for newly built units, I think it was up 6% year-on-year in February. Just wondering what's your experience here and what is your assumption regarding house price inflation for this year?
Hello, Thomas. I think what was seen in the market is that we have seen HPI growth in the Q1 and partly in the Q2 in 2022. A sidewards development, stable price levels due to the fact that the developers are currently not giving any discounts. Looking at the sales speed, which we of course communicate very transparently, you see that there is some kind of price pressure if you would the same levels before.
What is your assumption regarding house price inflation for this year?
We currently, we are not accepting any price reductions in the ongoing sales activities due to the fact that we have a very high presale rate or sales rate. We commented on our expectation for price reduction being at a level of 5%- 8% in one of the charts. That's our expectation linked to the yield expectation from investors, which we think is a realistic scenario.
Yeah. Thanks. On sales activity, I mean, this is currently close to zero. I mean, have you ever experienced such trough levels? What could be a trigger for recovery? Maybe also, I mean, are there any signals or signs of a recovery? Like if you look at the requests maybe or reservations, can you provide some color here?
What we clearly see is, of course You know, we have had this effect of our Leipzig project, where a lot of sales of the first two months were pushed into last year due to the tax increase. There's one effect. The second is that we haven't started new sales of new projects, which also has of course an influence on sales speed. What we clearly see is that we are still further selling and we have still interest in coming to the site, visiting and also discussing with our potential clients. There's a large group currently on the sideline which can afford to buy but are expecting discounts.
We believe that we will see an increase of activities in the H2 of this year when it will be clear for potential clients where the stabilization of the pricing. I think this is a very important topic. If it's clear that the price levels will stabilize, then we will see again, a speed up of sales activities in both groups, institutional buyers but also private buyers.
Okay. On institutional demand, I mean, currently there's the MIPIM. Any feedback, any signs of demand or more demand or any change?
I can give you a short view. We of course, we are discussing with our colleagues who are currently visiting the MIPIM, the direction and the feedback. I can also give you a macro view because I think that's also important to mention. First, the feedback we are currently getting from the MIPIM is that there are investors with investment capability focusing on co-living with a price indication which confirms our assumption of 5%- 8% price reduction. This is, I would say, the smaller part of the market currently.
The majority of the investors is still in the wait and see mode, where we get clearly the feedback, "Yes, we are willing to buy in the future, but we need more clarity regarding price levels." On the other hand, when I look at the macro topics here, I'm firmly convinced that the demand will come back and also the sales activities will improve going forward. I think the product itself is attractive being, let's say, a protection against inflation. The real yield is close to 4%. I think these are all parts plus the further rise in rents and the extremely low vacancy rates. I think the market needs time to accept the new reality.
I expect this from institutional side, that we will see more deal flow, in the last quarter of this year, starting.
Okay. My last question is actually, I mean, with the profit warning last year, you said to review all strategic options. Any update here?
Thomas, it's Foruhar. There's no specific update than that we can provide other than to confirm that this is still ongoing and on our agenda.
Okay. Thank you.
The next question is from the line of Thomas Neuhold with Kepler. Your question please.
Yes. Good morning. Thanks a lot for taking my question on the presentation. I think it's best to take them one by one. The first question would be on chart 24, the breakdown of your project portfolio and the pre-sales level. Can you give us an indication about the maturity profile, so to speak, of the EUR 3.3 billion of pre-sales, in which years will you most likely recognize the revenues of these pre-sold projects? A question related to that, the guidance, revenue guidance for this year, EUR 600 million-EUR 700 million, which portion is related to already pre-sold units which will be delivered this year?
Of the EUR 3 billion of pre-sold properties, about just short of EUR 2 billion have been recognized in revenues already. There's EUR 1 billion to come from our pre-sold properties, Thomas. Of that, I'd say 50%-60% will be this year, and the remainder, the majority of the remainder will be next year. There will be, I think, smaller amounts in the following years.
Understood. Thank you. Secondly, I was wondering how many new projects you have started in the last couple of months. Especially I was wondering, you know, once you have worked off basically the projects which are currently under construction, what might happen then to sales levels in 2025 and 2026 if you're not starting a lot of new projects in terms of construction.
In terms of the secured revenues will, as I said, of the EUR 1 billion that is still outstanding based on pre-sold properties, you know, it's gonna be about 40% in 2024, if we don't sell additional property. I think that the zero sales case is unlikely. What we're expecting is a sideways movement relative to the current year in terms of revenues, and also profitability.
I think additionally, Thomas, it's, it's also fair to say that we still further are working of course, on the projects regarding master planning processes, building permit processes. If we, if we postpone the sales, that does not mean immediately that we postpone completely the revenues due to the fact that we are still further working on the projects.
Mm-hmm.
My last question is, I was wondering if you can comment on the development of land prices, what is happening there. You mentioned that you are very selective in terms of new land plot acquisitions. What must happen for you in order to add additional land plots, additional new projects to your portfolio going forward?
What we see in the acquisition that, I would say was nearly a comparable situation to the wait and see mode we are seeing from institutional buyer side because the sellers of land, if they are not forced to sell, they are not currently giving big discounts. My personal belief is that if we assume a 5%-8% price reduction for new builds, then we will see a land price reduction, which will be at a level of 15%-25%. If we look at new projects, that's what we calculate. We assume, you know, we assume a lower price for land, roughly 20%. We want to have a gross margin which is exceeding 25%.
That's the way how we look in acquisition currently, and our acquisition teams. If we meet these parameters, then we will also start to buy again. Currently, again, the sellers are not at this price levels.
Yeah. Understood. Thank you.
Welcome.
The next question is from the line of Manuel Martin with ODDO BHF. Your question, please.
Thank you, gentlemen. Just one question, leading. Maybe you can give us some comments on what was going on or what is going on in terms of energetic subsidies. There was a kind of a chaotic situation last year, and with KfW subsidies and also with the requirements that are needed for new construction. Are there any new aspects which might influence the negotiations with potential project buyers? Is this going to be more difficult or more complicated? Maybe you can elaborate a bit on this, please.
I think what's important for us is that for the projects in our pipeline, including those that have not been sold yet, we have secured an aggregate of close to EUR 90 million of subsidies. Those have expired to, or the programs have expired in February last year. Until the expiry date, we were able to secure and get approval for this amount of subsidies. There are selective support programs out there that are probably not massive and that will be taken up very quickly by the market. There is currently no direct subsidy scheme out there. Well, no direct cash out subsidy out there. It's just a subsidized financing that you could currently obtain.
The key benefits I think we have collected, it's hard to say what's gonna come out of all the debates that are ongoing. I would think with the ongoing crisis of new house supply, there has to be some sort of support either on the side of the purchasers or on the construction side. For now, there's no visibility.
Okay. I see. Also a bit of confusion or just low visibility.
Yeah, true. Again, you know, we have, as I said before, we have had a EUR 7.3 million positive impact from the subsidies in our earnings last year. We expect a low double-digit number of benefits for this year. What we have already secured is material in the context of our profitability for the next few years.
I think what we where there is a potential benefit for us is clearly the affordable housing, the social housing parts where the government is, let's say, will spend significant amount of money here. Here we can benefit with our product for the affordable housing. Going forward, I think that is clearly from my perspective, a chance or a positive element going forward.
Mm-hmm. Okay. Okay. Thank you.
Welcome.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one on your telephone at this time. The next question is from the line of Philipp Kaiser with M.M. Warburg. Your question, please.
Yeah. Thanks for the presentation and thanks for taking my question. Just a couple of questions left. Two actually, to your guidance for this year. I would start with the gross margin. You guided for a stable development of the gross margin. To get that right. The easing of the material costs will kind of offset of an increased price pressure during the year. Are there any other effect on the margin you see?
Just to remind you, the majority of the revenues we're gonna generate for this year is based on pre-sales. There's no price risk.
Yeah.
As you rightly point out, we have, I think, prudently, calculated the cost situation for the projects. We're expecting mid-single digit construction price increases. We have already locked in 70% of the purchasing requirements for this year. I think that's a very robust number.
Perfect. As you mentioned it, if I remember correctly, you secured roughly EUR 550 million in revenues without additional sales in this year. That means your guidance include EUR 50 million-EUR 150 million new sales volume in this year, which the majority will be retail clients and no significant deals with entities are included.
Correct. I think also, you know, something to bear in mind, you know, if and to the extent the institutional market recovers, as I said before, there will be upside risk to our guidance.
Okay. Fully understood. Very helpful. Then you also pointed out the significant positive operating cash flow you expected in this year. I think the driver are the high pre-sold rates you already mentioned and also the low acquisition volume. Could you give us a range what you potentially might will be acquired during the year? This does have a negative impact on your midterm growth after like the muted acquisition volumes last year and now might also be only selective acquisitions in this year. Yeah. What's your view on that?
If you look at our total pipeline, EUR 7.7 billion, EUR 3 billion of which have been pre-sold, and EUR 5.7 billion of which have to still will still come through revenue recognition. This is so substantial that we have no immediate requirement to purchase new land. I'd say that, you know, as before, we have EUR 30 million of prior year commitments.
Mm.
On top of that, we will make opportunistic acquisitions if and when the opportunity really makes sense to us. We are under no pressure.
Mm
to make unreasonable or risky investments into new projects.
Okay, sure. Nothing really to hurry due to the midterm growth. The pipeline is so sufficient that it's nothing you need to rush. Okay, perfect. Speaking of competitive landscape or competition on the market, you already also mentioned that smaller competitors have way higher leverage might begin to struggle or even struggle. Anything you already see potential M&A targets or distressed portfolios or is it too early to see really attractive opportunities on the market?
What we clearly see is that the pressure is increasing. There have been, you know, the one or the other who stopped the business or has to stop the business. It's clearly from my perspective, still a bit too early. I think the real chances I expect to come up in the H2 of this year because everyone is currently trying to defend the book values, et cetera, et cetera. Clearly the pressure will increase and we are there. We work very close in acquisition. I think from my perspective, you know, platform deals, I would assume as not as realistic as portfolio deals because we are not willing to pay any platform value.
we look at-
Mm
... you know, the metric I explained earlier regarding, you know, what we expect, prices for land-
Mm
... and what is our margin expectation. Here we are very, very focused and conservative. Again, I think, for us going forward, it's a very good chance to increase step-by-step our market. The smaller developers, but also the developers who bought land with a very high debt position. They are not really acting currently, and I don't believe that they will come back soon. Therefore, for us, clearly.
Mm
It's a good chance and a good time period going forward.
Okay. There might be some attractive portfolios out there by the 1/2 of the H2 of this year, where you can kind of take your cash into action. Okay. Fully, fully understood. That's well, all from my side. Thank you very much. Was very helpful.
You're welcome. Thank you.