Morning, ladies and gentlemen. After this brief break after the last meeting, we'd like to welcome you to the Quarterly Summary of Results Conference for Q1 2025. [Foreign Language] The conference is attended by the CEO of Atal, Zbigniew Jurasz. Good morning, ladies and gentlemen. My name is Andrzej Biedronka-Tetla. I am the CFO. As usual, our presentation will be divided into three parts. In the first part, I will give our presentation of results for Q1 2025 for the group, after which Zbigniew Jurasz will comment on the current situation of the company and the macroeconomic situation. We will ask you to share your questions via the Q&A panel. Let's start with the presentation and the summary of results for Q1 2025. As usual, you're familiar with it, we start with operating activities, namely from presenting the investments in progress and in the pipeline in Atal Group.
At the end of Q1 2025, we had 53 undertakings in progress for 10,888 flats, 627 total saleable area, 627,000 sq m. You see most of the cities; that's where most of our investments are located, apart from Szczecin, which is quite new, from 5-13 in the other cities. In the Tricity, we have 13, and we have some planned investments. The number of planned investments is quite high. As for sales of flats, the first quarter of 2025, as you know, a drop as compared to Q1 2024. We need to emphasize then Q1 2024 last year was still the consequences of sales resulting from the Safe Loan 2%. This drop is quite huge year to year. As you know, January - February, they were like there were a lot of days off and winter holidays, Christmas.
In March, sales increased and were much higher and better. Below, the diagram shows that the sales in Q1 2025 is at the level of 348, which is a result that we had at the end of 2022 and at the beginning of 2023. As for flats in offer, the number 8,094 at the end of Q1 is high, much higher than in the similar period last year. It increased as compared to the end of 2024 even. This results from the fact that we are implementing a large number of new investments, and we are preparing on increased sales in the future due to higher interest in mortgage loans. We are increasing operations in this area as well, but this will be commented on by the CEO.
As for handovers, according to the schedule and termination of construction works in the first quarter, we did not plan to hand over a significant number of investments. Major investments that we handed over to final customers were development undertakings in Wrocław, 84 flats, and in Łódź, 79 flats, which impacted our income that I will present further on. As for comparing it to the first quarter of 2024, it's a huge drop by 67%. Plus, again, as you were aware of it, we presented it from the end of last year. This schedule of terminated construction works was planned. Here you see another piece of information about the number of total saleable area: 12,400 sq m by the end of March were handed over. As for new lands in Q1 2025, it was the second 2024 was the second record.
In Q1 2025, we purchased land worth PLN 81 million, which will, according to our estimates, allow us to build 48,000 sq m of new flats. Again, I'm emphasizing that we're either owners or perpetual use of right holders of this land that is shown in here. That's how we market in our balance sheet. We purchased land in Kraków, Wrocław, Warszawa, Gdańsk, and the average price for a sq m of saleable area of a flat, estimated obviously, is PLN 1,697 per sq m, which is a very good result as for the cost of purchase. The land bank of Atal Group at the end of calendar quarter allows us to implement projects for 577,000 sq m.
As for dividend, obviously, after publishing the results of 2024, the management board recommended, which we posted in an ongoing communication, we opted for the dividend payment in the amount of PLN 238.7 million, which is 86% of the income of profit of Atal. This will be shared to the supervisory board, and the decision will be taken by the shareholders' meeting. The total dividend amount that we've paid out so far is PLN 1.209 billion, plus the plan that is recommended by the management board. This would amount to almost PLN 1.5 billion. As for the potential of handovers for 2025, these are the projects that we are planning to finalize: Atal City Square and Nowe Miasto Polesie. These are the projects that contributed to handovers in 2025. We finalized this lighter gray color.
These are terminated investments in Warszawa and in Wrocław, and the schedule of investment finalization has not changed as to what we planned. As for the number of flats, that were 682 that were not transferred, out of which 400 were already sold. So those unhanded over flats is like 200 of them more. These are like individual flats for each investment. The contracting level is 48% for 2025. Potential of handover in 2026 is a huge number of projects that we have ongoing. This is the first page. I will show you the second page in a moment. As you can see here, these are mainly projects handed over in Q3 - Q4. This is where the income will be reported. We're planning to finalize investments for 6,323 flats, out of which 16% are covered by contracts.
Mainly, they will be handed over in the second half of 2026. We still have time for contracting and selling them, quite a long time. It's open. As for the potential of planned projects, we're talking about planned unlaunched projects after 2027. After 2026, from 2027, we're planning, using the land we have, to implement 51 development undertakings, covering more than 12,000 flats. Now, the second part of our presentation, consolidated financial results. Here, as for the profit and loss account, we need a broader comment here in Q1. In 2025, we reported PLN 136.724 million net profit, but this resulted from the schedule of handover and finalization of construction in Łódź and in Wrocław. I would also like to use the gross margin, because we mentioned last time that net margin is the most important and nothing changed here.
Just to show you the profitability of those construction sites, of those investments, we want to use this index as well. Profitability at these two projects was 31.7%. It's like one of the highest profitabilities. Obviously, net result PLN 43.282 million when we include operating costs, management costs, and all the other costs. Including this low result of low handovers, the result of the operation activity is PLN 31 million, and it diminishes the income. In this quarter, we see increased financial costs. Financial revenues, actually. A word of comment here. These mainly include the costs of prepayment discount. These are the financial revenues that we recognize according to International Accounting Standards. Those costs that we recognize, like PLN 13 million, almost PLN 14 million. These are the commissions and interest to be paid to financial institutions over PLN 3 million.
PLN 10 million is like reversed recognition of discounts of prepayments. Again, net result that we reported at the end of Q1 was PLN 17.115 million. Net margin is 12.5% in Q1 2025, which does not prove that in the future, does not say that in the future, when we have more income, this net margin will be restored to the levels that we are used to. As for the consolidated financial results, I would like to show you the margin, net margin, and gross margin, to see the income and cost side. Gross margin for Q1 2025 was one of the record high compared to other previous periods, and net margin was the lowest according to this diagram. For the reasons that I explained, that's what it was due to.
As for the financial results of balance sheet, here we should emphasize an increase in assets, current assets. We'll comment on that in a moment. On the other side, we have the total liabilities that finance this increase in current assets. We see this increase in current assets from PLN 3.8 billion at the end of 2024 to PLN 4.279 billion at the end of Q1 2025. Equity, virtually no changes here. What I wanted to show you here is an increase in inventory in Q1 2025 to PLN 3.837 billion. That's an increase compared to the end of 2024. PLN 2.523 billion, the inventory was financed by those liabilities. Now cash, a word of comment. Obviously, there's a drop when we finance our investments. We don't use loans or cash loans. If we have our equity, and we use it to finance our investments.
Now a few words about inventory. Again, there is an increase in ongoing projects that will be finalized at the end of 2025 and partly in 2026, some 2027. This level of inventory is PLN 3.837 billion. As work, finished products, there is an increase from PLN 194 million to PLN 291 million. I am talking about the level of flats here, that like the level was PLN 600 million, but PLN 400 million of them are already sold. Yeah. Maturity of debt at the end of Q1 2025, the structure of debt maturity, we financed our operations by bonds, PLN 340 million, also loans granted by the shareholder in the amount of PLN 300 million, and bank loans, PLN 145 million. These are the items that are to be redeemed in 2025. As for bonds, yesterday we redeemed bonds for PLN 80 million. This debt here is lower by this amount.
In 2026, we will have to repay PLN 100 million of loans granted by the shareholder, and in 2027, PLN 130 million in bonds will be redeemed, and PLN 100 million will be returned to the shareholder. We have the commitment of the shareholder to support our operations. As for sources of financing our operations at the end of Q1 2025, as usual, we mainly use equity in the amount of PLN 1,757 million, but also prepayments, PLN 809 million, quite high, and loans from the shareholder, PLN 500 million, and corporate bonds, PLN 470 million, and bank loans, PLN 445 million. As for a summary of our achievements, the number of investments launched and the number of construction projects started here, you can see we started in Q1 2025. We started the construction for five projects, 870 flats, and sales launched for four investments, 800 flats.
In the same period, we finalized a similar number of investments, which is four investments, 689 flats. Let's move on to the comment of our CEO to comment on the current situation. After the comment, we will give you a space for asking questions. Okay, ladies and gentlemen, the situation on the market, you analyze it, we comment on that as well. The situation that has been going on since last year until Q1 this year, it's quite difficult, but we need to find a way to cope with it so that ultimately we gain good results. As for today, we pay out dividend, even in the difficult year of 2024, we propose the payment of dividend, quite high, one top highest dividend. Nothing changes in the dividend policy here.
Our entire strategy, that we've had for about nine months now, is like we've been thinking about how in this market, which was kind of predictable in terms of interest rates until this period, we assumed that interest rates would be high. Now they started lowering the interest rate, and it will take time. We need to distribute our projects so that we reach a moment where the interest rates are lower and we have an opportunity to sell more on the market. We did that. We shifted some investments towards 2026 - 2027. You see that on ongoing sales, we have no problem. We have inventory for more than 200 flats. For our scale, it's a small amount. There is no inventory that is built, but not sold. We're not burdened by that.
We're burdened by a huge number of constructions, but we, according to plan, these are not delayed or postponed constructions. The year before, last year, it was quite easy to predict it because the National Monetary Fund kept saying there were no chances for interest rate decreases. We accumulated those constructions for 2026 2027, but some of it will start accumulating at the end of 2025. This is when we'll be selling it. Is it a good strategy? We think it is because demand can accumulate or can be locked. We know that it was obstructed and accumulated for the situation, because of the situation, but we will see a rebound on the market soon because the society keeps functioning in the same way and the market functions according to the same rules all the time.
We think that our supply will be met by huge demands. We started developing our potential in specific branches. We've had many branches. We added one more, Szczecin, further development in Poznań, one of our latest branches, and the base for servicing. We assume that in 2026-2027, we will have no problem to sell 4,000 flats. We need some technical basis for that because demand, it's one thing, but we need to service it. We need to be able to hand it over. We need to be able to cope with all this, handle all this. We have this basis. We are fully prepared to do it, to handle it. We are safely convinced it's going to work out. That's what we're aiming for.
As CFO has explained, the situation for Q1, we anticipated it, that the handovers will be lower and the costs will be the same. The result is flattered, but we should not take it into account. It was important to maintain profitability, and that's what we did. If we increase, try to force an increase in sales in the last few quarters, it would reflect on the margin. We tried to maintain the prices, postpone the sales, and implement it according to our margins and assumptions that should finally end up at the level of 20% of net margin. This is our base ground scenario of our benchmark. You know that quarterly, sometimes it varies. In terms of implementation, we do not see any bigger problem. A word of comment, there will be some questions about that in terms of construction.
There's no big difference. We have contractors on the market available and urban investments and some competitive investments. As for gaining constructors, there's no problem, though those things that are related to National Recovery Fund, there's railway infrastructure and energy infrastructure and road infrastructure. That's where these funds are going. For the construction sector, it does not affect it. Perhaps in a few months, there'll be some changes, but the offers of contractors are at a stable level. They're not changing too much. The second element of our puzzle is a very bad general situation with contractors. Now we have a good situation because when we shifted some investments with the land bank, I mean, we use our land. We have 53 investments ongoing. Our land bank is very good, but it's very difficult to get land because the supply of land is depleting.
There are no new local plans, special changes. Like all the, we do not see any, we cannot expect anything from the state to be released on the market, but there is no such competition because a lot of our competitors, medium-sized and small developers, they are not implementing their investments or further stages of investments. The market is narrower. There are sometimes some offers. Despite very poor supply from the administrative perspective of land, the land is available and it is expensive, but they stopped the prices of them. They are not increasing anymore. There are no major problems with implementation of investments. We are on schedule with all the investments. We maintain all the deadlines. We are quite optimistic about that. Now it is time for your questions. Please feel free to ask questions now. Okay, we are back to answer your questions.
There are several questions regarding sales in Q1 and also April - May and perspectives for the entire year.
I will provide a global answer. Sales in April are actually better. In May, it's slightly better as well. In June, we're anticipating further improvement. We're talking about a situation that the quarter should be much better than the first quarter. The main increase in sales is anticipated in Q3 - Q4 actually. As for the final number, our estimates are the same. We're assuming much more sales in Q3-Q4. We're also assuming that the level between PLN 2,200 million-PLN 2,500 million, it's quite safe, and we're aiming to sell more in 2026 - 2027.
There were a few questions about the saleable area of flats.
There's a change on the market. These medium-sized flats are kind of blocked and hindered.
Mainly what's looked for are large corner located. This is a financially independent customer, as we call them. This is something that we say on a standard basis. This is something countable. What's also looked for are very small flats. This average size is dropping, which is not very good because there was a moment where people were looking mainly for medium-sized flats. This was improving, but here's a drop now, and this is strictly related. The problem of financing flats is unfortunately suffered by families because a small flat, like for a single person or a starting family, that's easy, but there's a struggle for paying for it. Those large ones, but lack of supply, they are also sold. Lack of support for the families results in a situation that is more difficult to sell medium-sized flats.
We hope for a natural growth because if the interest rates drop, despite lack of any support from the state, we hope that there will be an increase in sales of those medium-sized flats. That is it for sales.
Maybe there are a few financial questions. Cost of financing in Q1 2025 were higher than the entire 2024. Are you expecting any increases in further quarters in 2025?
Again, there is a similar question in costs in further quarters and the impact on interest rates.
Like I said in the presentation, we actually see the costs that are reported in Q1. These were mainly the costs of discounts for prepayments. This amount of PLN 13 million, almost PLN 14 million that we reported in our financial results, they refer to financial costs related to interest.
That's PLN 3 million- PLN 3.2 million, which is an increase by twice an increase compared to Q1 2024. Here you can see that these reversed bookkeeping records regarding discounts of prepayments increased the cost by almost PLN 10 million.
The second question, when you ask about the discount rate on the change and its impact on the discount of prepayment.
It does have an impact on financial revenues. When we receive those prepayments for flats that will be handed over in more than a year, they will be discounted according to lower interest rates. As for financial revenues, they will result from the discount of prepayment at lower levels. On the other hand, you saw the sales base is relatively high. If sales in Q2 are higher than before, there will be a larger scale for the discount.
Those financial costs, it's hard to estimate as of today because it's ongoing. It depends on current sales. If we sell flats that will be handed over in more than a year, it will impact financial revenues. In consecutive periods, it will also impact financial costs related to the discount.
As for cash flow on operations in consecutive quarters.
There was also a question about debt in consecutive questions, and these are related.
Actually, we're in a year which it's not the first time in ATAL Group's history. When in 2025, we have a much smaller number of handed over flats, and we will receive money for much fewer flats than we build. This is a significant number, like several times higher number of flats being constructed. We're entering a cycle of increasing debt.
Cash flow, we know it's going to be lower as compared to the one we're having on the expenses side. The inflows will be lower than expenses. We will probably have to increase debt to finance it. Also, in our balance sheet, you see that we get financing from corporate bonds, from bank loans, but also we have a commitment of the main shareholder on supporting further the company with consecutive loans. We need to take this perspective when we think about the question. The inflows in 2026 will be much higher because, as you could see, the potential of termination of construction works in 2026. As you remember the slide, those two slides, because the investments are so numerous that they did not fit in one slide.
The income, the revenues that will be generated by the sales of those flats that will be finalized in 2026, they will be able to pay for our bond or loans from 2026. In 2025, we may say it will be more loans, but in 2026, we'll be reducing the level of debt.
What about cash flow that we've said that a short comment on behavior of customers after first interest rate decreases?
For now, there are no major changes here. Actually, the customers are quite aware of the situation. They're very much interested in what's going on. Q1 is usually worse than Q2. Q2 is usually a natural increase. Those interest rates, this first decrease has improved that. We have a customer that did not have the creditworthiness for now, and now this threshold has decreased.
It released a group of customers that do have a creditworthiness now, but it's not an abrupt increase so far.
Can you tell us what part of flats are sold in the offer 10/90?
It's difficult to answer this question clearly because these sales are volatile. We have different promos. Customers can usually use one cash value or a schedule. Depending on the city, it differs. It depends on the deadline of the investment. We use the schedule for investments that are to be finalized in 2025. It's hard to determine the percentage in percentage terms. What are the target sales in 2025 for the entire year? Have you mentioned it? Yes, we've mentioned it already. Sales in April for number of flats sold, we cannot really tell you as yet, but we share our results quarter-by-quarter.
It will be increasing quarter-to-quarter. These will not be abrupt changes, but it will be higher than the previous one. Now we're in the middle of May. For this 1.5 months, this increase as compared to the previous quarter is like by several dozen percent. We cannot tell you. We have not provided results monthly, and we would like to keep this formula of quarterly reporting.
I think we've answered this next question. The second part of question, do you see any tendency as for actual current trend in terms of size of flats?
We've discussed it. Yes, the small ones and the big ones that we mentioned.
It's a question about how the company is prepared financially for consecutive quarters. It's related to the question that I answered a moment ago.
What I said is that the main shareholder is ready to provide financial support in the form of loans.
Now, is the company taking any special action, promos, discounts, other stuff like that to improve sales?
Yeah, it's a key question. It's about assuming a different specific strategy. It's a difficult market. We maximize discounts and promos at the cost of future sales. I mean, with the goal of future sales. We have a reasonable sales policy, and we go from quarter to quarter hoping on an improving situation. These are the two scenarios. This is what we decided to do, the second scenario. We're not fighting for bigger discounts. We don't have ongoing inventory. We have future inventory contracted at a lower level, but that's the way it is on the market now. As for increasing promos, we have at least two quarters to decide.
If we assume a worse scenario than the one we're assuming, that sales are not going to be improving that significantly in Q3-Q4, if we have this scenario, then we'll still have time to increase promos in 2026. That's our strategy in this situation.
Another question, whether the company has changed the way of reporting, of recognizing accounting items related to interest in Q1 in 2025. So the costs that are related to construction are reported in the cost of construction, and the cost you saw in the profit and loss account, the PLN 3 million, this is not strictly related to construction, like ongoing loans and discount on prepayments, 10/90.
We've answered it.
What was the average price in Q1 2025 versus Q1 2024?
As for Q1 growth, price was PLN 11,000 per sq m, almost PLN 12,000 per sq m at the end of Q1 2024. It was slightly lower, PLN 11,500 per sq m.
How many flats would the company like to introduce in a conservative and in an optimistic scenario in Q2- Q4 2025?
As you saw in Q1, we introduced 800 flats, in Q2, more than 700, so 1,500 flats over this year. We're preparing to, as you know, we don't leave any investments behind. We keep working on them. The potential for 2025 could be like 4,300 flats, but these are the investments that are, first of all, planned for the end of this year, 2025, but they can also be added to it. We will also be observing what's going on on the market. It does not have to happen in Q2- Q4, this number of 4,306 flats.
Do you want to add anything?
No, we'll be reporting it on a current basis.
We assume that 60-70% of what is planned will be introduced to our offer, specifically when our offer is not doubled in a specific neighborhood or district where we have lots of flats for sale. We'll be shifting it, postponing it, but we need to have all the projects ready with the permits and everything. We have most of the permits for those over 4,000 flats. We're working on some technical issues only. Find the questions that are repeated.
Handover level in 2025, what's your expecting? Similar to last year.
It's going to be quite similar. What's the cost of building flats in the popular segment per one square meter? It's a problem to answer this question because the popular segment, that's not what we do on an ongoing basis. We don't do a lot of it. This popular, by price, it's like in Łódź, they have lower prices.
You might say that we have this popular segment, but we actually do not do it. It is rather standard plus. We virtually have not too much of our investments in the popular segment. We take care of our investments. We build our image for many years ahead. We dedicate a lot of our time for land development. It is quite difficult to answer it. I answered regarding the cost of construction. For the last few quarters, they have been on a stable level, three-four quarters. This is the answer I can give you.
What scale of funds would the company like to spend on purchase of land in 2025?
We think it is not going to be too much because our land bank is quite good in terms as compared to sales opportunities.
We spend more than PLN 100 million on that, and we think that for specific projects, we're going to spend about PLN 100 million more. In total, PLN 200 million probably.
What part of sales is by cash and what part of sales is by loans? By loans. Financed by loans.
Yes, we see that it's quite similar. About 40% of customers are cash customers, and loan customers are increasing. It was about 50%. Now it's reaching about 60% because creditworthiness is improving. With every consecutive quarter, with every consecutive decrease in the percentage rate, there should be more loan funding. Offer, yes, we answered this question. The question about competition, that's probably not something we would like to answer.
What competitive activities are observed on the market?
We tried to combine questions that were similar in one.
One more question about the cost of construction in Warsaw per square meter.
We would not like to share this publicly. We spoke about standardized costs. I think we've answered most of the questions. We've combined some of the questions that were similar. If there are no further questions, we would like to thank you for today's conference. Should there be any more questions about more details, please feel free to contact us by phone or by email with investor relationships. Next conference will be in September. We'll see you then.