On Tuesday, June 4, 2019, an investor chat between representatives of the Management Board of GK Immobile - Rafał Jerzy, President of the Board, Sławomir Winiecki, Vice President of the Board and Piotr Fortuna, Member of the Board was held.
During the discussion, we talked about the company's financial situation after the results of 1q2019. The investors also asked questions about the plans towards Atrem, the restructuring of Projprzem Makrum, the development of Focus Hotels network and the development investments. Almost 500 investors participated in the discussion, and the Management Board of the company responded to nearly 35 questions. We encourage you to get familiar with the entire report.
GK IMMOBILE 13:05
Welcome to the investor chat of the IMMOBILE Capital Group and we warmly encourage you to ask questions.
How will Atrem's losses affect the GKI's financial results this year? What is the long-term plan for this acquisition or will the company ultimately be incorporated into Projprzem?
GK IMMOBILE 13:07
The results have been consolidated since June 1. The restructuring should take us at least a year.
investor GKI 13:08
A negative result in 1q2019, acquisitions, payment of dividends, wage pressure - they are all cash absorbents. How is the company's cash situation nowadays? What is the balance of funds in the accounts?
GK IMMOBILE 13:08
Indeed, property development and acquisitions require cash, nonetheless, we consider our cash situation to be stable. Detailed information about the balance of accounts is provided in periodic reports.
What are the company plans, as far as development segment for this year is concerned? How many apartments do you foresee to be delivered, how many new ones are being built at the moment?
GK IMMOBILE 13:09
This year, the development segment does not foresee the completion of construction and delivery of apartments, so we will see a surge in revenues only in the next year, where the next stages of construction will have been completed in both our investments. 303 apartments are under construction.
Wierny akcjonariusz 13:10
What are the reasons for such a result in 1q2019?
GK IMMOBILE 13:10
The results of the first quarter were primarily affected by the developer and industrial construction segments. It was poorer, which is caused by either the cyclical nature of contract execution in the industrial construction and a smaller number of delivered apartments in the development. Due to the nature of our operations, the Group's results should be looked into during periods of at least one year.
Wierny akcjonariusz 13:11
Are you considering any buyback of the GKI shares in order to improve the liquidity and price situation on the share price?
GK IMMOBILE 13:11
At this very moment, we do not consider a buyback. In our view, the buyback of shares would worsen the liquidity situation, and how would it be the impact the price situation - this is something we cannot foresee.
Will Atrem remain on the stock exchange and what are the assumptions for the restructuring for this year?
GK IMMOBILE 13:12
There are no delisting plans, we are making efforts to utilize the synergies between Atrem and the GKI.
What about the Focus Hotels development plans, will the company debut on the WSE?
GK IMMOBILE 13:13
Focus Hotels is growing at a satisfactory pace. As for the debut, the plans are postponed, we are waiting for the situation improvement on the WSE.
investor GKI 13:15
Has the restructuring in Projprzem come to an end? What else is there to do?
GK IMMOBILE 13:15
The management board of Projprzem Makrum has completed the restructuring. However, the only constant in our organization is the change, which is why the PJPMKM Management Board has moved from restructuring to development smoothly. Presently, the investment is underway to expand the factory in Koronowo.
investor GKI 13:15
What are the plans for Atrem? What will happen in the first place? Where can you see the greatest synergies?
GK IMMOBILE 13:15
We can see the synergies in the administrative and business-related part.
What is the up-to-date area of real estate secured for subsequent investments?
GK IMMOBILE 13:17
The Platanowy Park estate is almost 10 ha, the Osiedle Uniwersyteckie – over 5 ha. At the current pace, these land resources will have lasted for about 8 years.
Do you buy new plots of lands for investments?
GK IMMOBILE 13:19
Despite the currently large land resources in hand and another development investment in preparation, we are also analysing the real estate for further possible development projects simultaneously.
Does Immobile continue to have plans to introduce Focus Hotels to the stock exchange and what do their implementation depend on?
GK IMMOBILE 13:21
The introduction of new companies depends on the ‘climate’ of the stock market. We believe the present as a not favourable period to do so.
investor GKI 13:23
How do you assess the situation on the construction market? How on the development market? I would be grateful if you analyse it briefly.
GK IMMOBILE 13:23
Times poorer for the developer we find as favourable for executive companies, and in better times - for the development ones. We observe changes in this market and we adapt to them.
Will the development outside of Bydgoszcz announced for some time in the development area finally begin? A developer with a qualitative approach like yours would be useful in Warsaw :)
GK IMMOBILE 13:26
At the moment, we are staying focused on Bydgoszcz.
Please tell me, what is the implementation of development projects in Bydgoszcz? At what stage are the deliveries, how much of the “housing” potential is still left in these projects?
GK IMMOBILE 13:31
In the Platanowy Park investment, we are implementing phase 2, which we will put into use at the end of 2020. It is 195 apartments and 217 parking slots in a multi-station garage. This stage is expected to generate PLN 76.2 million net of revenue. As for the moment of publication of the report for the 1Q, development contracts for the amount of 17.4 million have been entered into. Stage 3 is under preparation, with 258 apartments and 318 parking slots in the multi-station garage planned. The entire Platanowy Park is ultimately 1,250 apartments.
Osiedle Uniwersyteckie - the investment is under construction and sales of the first stage with a total of 108 apartments and a total usable area of 4,431 m2, 36 individual garages built into buildings and 72 external parking slots. The planned revenue from this part of the investment is PLN 25.7 million net. Stage 2 is under preparation with 106 apartments, ultimately all stages will have included approx. 600 apartments.
investor GKI 13:33
What kind of companies do you keep an eye on in terms of further acquisitions? Are these companies to be joined and integrated vertically as part of business processes, or rather aimed to expand the scope of the Group's operations? I am asking for an indication of the industries, markets or, at least, the ranges of the expected benefits of the M&A merger, so that we can know what to expect.
GK IMMOBILE 13:33
We do not talk about planned acquisitions before putting them into effect.
investor GKI 13:35
How big is the impact and whether it is an essential impact to increase the energy prices? It seems that in the industrial field it can be quite a lot, but, if you may, please give me more detailed information.
GK IMMOBILE 13:35
The share of energy costs in our costs is so minor that it is not the main area of our considerations.
What are the benefits of conducting business in several segments instead of one in the main?
GK IMMOBILE 13:37
This provides us with stable revenues and resilience to market fluctuations.
You announced lately that you had signed a contract for the opening of the second hotel in Szczecin. Are you conducting more talks and may we expect more hotels in a short time, besides Warsaw?
GK IMMOBILE 13:41
We are constantly working on further hotel contracts. At the same time, we are analysing dozens of facilities and we have several negotiation processes open, nonetheless, only a small percentage of these talks ends up with the signing of a contract on conditions satisfactory for both parties and we inform about it on a regular basis. We hope that we will be able to sign a few more contracts this year.
There is a lot going on in the company – acquisitions, investments, etc., and the rate is falling, why?
GK IMMOBILE 13:43
We do not want to evaluate the behaviour of investors. The company is doing and will do everything to allow investors to properly assess its value.
What is the reason for the decline in the asset lease segment?
GK IMMOBILE 13:45
The decline in revenues in this segment arises mainly from the sale of Stocznia Pomerania in Szczecin.
What results in the increase in general administrative costs compared to the same period last year?
GK IMMOBILE 13:47
The increase in costs resulted mainly from the call for the sale of ATREM S.A. shares. and, as its consequence, the preparation of the group structure for further development.
Which business segment do you want to develop the most?
GK IMMOBILE 13:50
We strive to develop the Group's business segments symmetrically.
Are further acquisitions feasible or will further development be mainly organic?
GK IMMOBILE 13:53
The current market situation favours acquisitions. It all depends on the attractiveness of a given project.
Are you not afraid that the industries in which you operate may be very susceptible to an economic slowdown?
GK IMMOBILE 13:56
Our sales are diversified both geographically and in terms of industries. We are not afraid of a slowdown. The slowdown in any of the industries in which we operate will be used for appealing acquisitions using the cash generated by other industries in the group.
Rafał Irzyński 13:58
Will the time needed for the restructuring process in Atrem be similar to the one in Projprzem?
GK IMMOBILE 13:58
Will need about a year to do so.
I have a question regarding the development segment. There is a slowdown in the sale of apartments. Does this also affect you?
GK IMMOBILE 14:00
As at this moment, we do not notice this phenomenon in our projects.
Rafał Irzyński 14:02
Does the development dynamics of the Modulo segment coincide with your base scenario? What is the value of orders for this year and what is the company's revenue forecast for this segment?
GK IMMOBILE 14:02
We would rather not to step on toes of the board of Projprzem Makrum S.A. From the perspective of the main shareholder, we can say that a harder challenge for the management of Projprzem Makrum S.A. is the profitability of this product than the sales volume.
How does the company finance investments in development and acquisitions?
GK IMMOBILE 14:02
For us, the main sources of financing are bank loans and cash.
Has the issue of the Zremb Chojnice acquisition still feasible or is not there a chance to return to talks?
GK IMMOBILE 14:03
No chance. The issue is no longer feasible.
In total, along with the restructuring costs, how much will it cost to acquire Atrem? Does Atrem dispose of any real estate that may be of additional value to you? How was the acquisition financed?
GK IMMOBILE 14:05
The company should soon start to benefit from the restructuring. The company owns real estates in Złotniki near Poznań, in Gorzów Wielkopolski and in Ostrów Wielkopolski, where it conducts its operations. The acquisition was financed from cash and the bank loan.
Rafał Irzyński 14:07
Recently, the purchase of a facility for the Focus Hotel chain has not been successfully carried out either in Poland or abroad. What stands in the way? What are the obstacles to setting the right purchasing goal?
GK IMMOBILE 14:07
Until now, we have not had any proposal for a bargain purchase, which is why we have been focused on lease contracts. At the same time, we started the construction of a hotel in Bydgoszcz and we signed new lease agreements.
There were to be hotels in Romania and they are not there. Will Focus appear there? What is happening with the company in Bucharest, which was mentioned on WallStreet 22?
GK IMMOBILE 14:10
We have not found any interesting investment opportunities in Romania so far. We are focused on development in Poland, where we manage to develop the network with greater ease and security.
Higher revenues in the hotel industry and increased loss - what are the reasons?
GK IMMOBILE 14:14
We opened new hotels between the Q1 2014 and the Q1 2019 - the hotels in Poznań and Sopot, which have not yet reached their revenue potential and will improve their results in the future. Moreover, the hotel industry is cyclical - the first and fourth quarters are relatively poorer than the second and third quarters, where we traditionally count on a good result of this segment.
Six months ago you were talking about the first revenues from Modulo. How does this segment look now and is it worth developing?
GK IMMOBILE 14:16
In the first quarter, this segment's revenues increased by 50%. We expect more dynamic growth in the quarters to come. In view of the above, we believe that it is worth developing this segment.
GK IMMOBILE 14:17
We are very thankful for your interest and numerous questions. Another opportunity to ask questions to the management of Grupa Kapitałowa IMMOBILE is the next General Shareholders Meeting, which will be held on June 25, 2019. We warmly invite you to register at the General Shareholders Meeting and visit us in Bydgoszcz (registration deadline at the General Shareholders Meeting: 9/06/2019).
We also encourage you to visit our blog and subscribe to the company's newsletter at http://blog.immobile.com.pl