Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Instone Real Estate Group SE (XTER:INS, Financial) delivered a solid operating and financial performance in Q2 2024, indicating resilience in a challenging market.
- The company experienced a moderate demand recovery in the retail customer business, with sales up significantly compared to the previous year.
- Instone maintained a strong balance sheet, high liquidity, and leading profitability, allowing it to act from a position of strength.
- The company successfully extended maturities of its promissory note loan, strengthening its financial profile.
- Instone achieved a high gross margin of 25.7% in H1 2024, showcasing its operational excellence and profitability.
Negative Points
- The institutional market remains difficult, with many investors still reluctant to engage in deals.
- Adjusted revenues for H1 2024 were slightly below the previous year's level, reflecting challenges in the market.
- The company expects its gross margin to decrease slightly in the second half of the year due to changes in the project mix.
- Inflationary pressures continue to affect the supply side, although they are easing.
- The process of closing institutional deals is taking longer than in the past, indicating ongoing market hesitancy.
Q & A Highlights
Q: What are the main concerns of institutional clients regarding investments, and what is the expected size of prospective deals in the second half?
A: Institutional clients have varied concerns, including pricing and the management of existing portfolios, particularly with commercial developments. Some investors, like pension funds, are cautious due to their current portfolio constraints. However, there is still appetite for residential investments, especially in projects with social housing components. Instone expects to close at least one institutional deal in the second half, with a minimum size of EUR40 million, potentially larger.
Q: How does the timeline for closing deals compare to previous years?
A: The timeline from initial contact to contract signing is currently three to four months, slightly longer than in the past due to market conditions. Previously, deals could close in two to three months. The process involves initial investor interest followed by due diligence.
Q: What is Instone's strategy for land investments, and what are the main requirements before investing?
A: Instone focuses on projects with completed zoning for short-term development and long-term projects where capital is not immediately required. The company targets top metropolitan areas and expects increased opportunities due to market stress. Instone recently acquired land in Frankfurt and Dusseldorf, emphasizing good locations and short-term project readiness.
Q: What is the expected gross margin for the second half of the year, and what factors influence it?
A: Instone anticipates a slight dilution in gross margin due to project mix changes, but expects it to remain above the guided level. The company sees potential upside and will provide more clarity in the third quarter.
Q: How does Instone's financial strategy support future growth?
A: Instone maintains a strong liquidity position with over EUR250 million and access to revolving credit facilities. The company is shifting focus from cash preservation to growth, leveraging its financial strength for future investments while remaining disciplined in acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
