Quarterly Report Quartiers Properties – July to September 2022

Quartiers Properties AB (publ) has today published the company’s quarterly report for the period July to September 2022.

The company's best ever quarter, with EBITDA of SEK 7,556 thousand.

July–September 2022:

• Net sales in the third quarter were SEK 78,385 (70,574) thousand. Of net sales, apartment sales accounted for SEK 40,219 (42,095) thousand and income from operating activities for SEK 38,166 (28,479) thousand.
• The company’s operating cash flow, including property sales, was SEK 23,882 (32,680) thousand. Cash flow from operating activities improved by SEK 5,222 thousand, while investments in project properties increased by SEK 12,941 thousand, which was the reason for the decrease in cash flow by SEK 8,708 thousand compared with the same period last year.
• Gross income totalled SEK 8,401 (1,591) thousand. The improvement was due to both increased selling prices for properties sold and a successful pricing strategy in the company's operator business, with higher prices contributing to higher margins.
• Operating profit before depreciation and amortisation amounted to SEK 7,556 (1,837) thousand.
• Income after tax was SEK 6,076 (-12,837) thousand.
• Earnings per share were SEK 0.11 (-0.25).

January–September 2022

• Net sales for the period amounted to SEK 167,355 (106,692) thousand.
• Revenue from the operator business amounted to SEK 73,367 (48,630) thousand.
• Revenue from the sale of properties during the period amounted to SEK 93,988 (58,062) thousand. 
• The company’s operating cash flow, including property sales, was SEK 31,057 (47,288) thousand. Cash flow during the period was affected by the payment of the outstanding purchase price for Centro Forestal Sueco of SEK 15,273 thousand and investments in project properties of SEK 13,262 thousand.
• Gross income totalled SEK 2,516 (-7,901) thousand.
• Operating profit before depreciation and amortisation amounted to SEK 333 (-5,938) thousand.
• Income after tax was SEK -23,584 (-44,631) thousand.
• Earnings per share for 1 January–30 September 2022 were SEK -0.45 (-0.86). 
• A total of 24 apartments in the company’s complex in Benahavís were sold in the period, compared with 15 in the same period in 2021. Profit, less selling costs, totalled SEK 42,854 thousand. SEK 41,935 (24,305) thousand of this profit has been recognised in previous periods as an unrealised change in value. Reported earnings for the third quarter were therefore SEK 919 thousand before tax.
• Reported equity at 30 September 2022 amounted to SEK 253,559 (250,489) thousand.
• The company’s net asset value at 30 September 2022 was SEK 320,172 (292,002) thousand, which equates to SEK 5.55 (5.33) per share. The net asset value has been adjusted for preference shareholders’ share of equity, corresponding to SEK 81,238 thousand, and accumulated unpaid dividends, as well as default interest on unpaid dividends totalling SEK 18,587 thousand. 

Other events in the third quarter

• On 26 July, the acquisition of a plot of land next to Boho Club Marbella was completed with the payment of a final purchase price of EUR 0.9 million. The property is intended to be used for future expansion of Boho Club's room capacity.

Other events since the end of the period

• In September, the refurbishment of 10 new bungalows began on the property where Boho Club operates. These new bungalows are expected to be completed in April 2023 and will increase the capacity of Boho Club from 30 to 40 rooms, providing the basis for continued revenue growth with a high gross margin in the operator business.

Message from the CEO

The figures show that we are now clearly on the right track. We have just had our best quarter ever, with earnings for the period that are a full SEK 18.9 million better than the same period in 2021. This is due to increased sales, as well as reduced financing costs and higher gross margins. This, in turn, is the result of us successfully increasing our prices more than our costs have risen, due to soaring inflation.

However, there are other factors that please me even more right now. In particular, the positive operational momentum we currently have. Following a number of organisational changes in recent months, we are seeing increased consistency in our delivery to customers, which has meant we are continuing to deliver good sales figures in both our operator business and residential sales into the fourth quarter. Reducing seasonality in the restaurant business is a priority for us because it allows us to train, retain and work with the same team all year round, which results in a higher-quality product, more guests and higher prices. We have been measuring several aspects of customer satisfaction over the past six months, and we can see that these results are also moving in the right direction. We are on the right track in this regard too, but are far from satisfied. We're just getting started and are working hard to deliver an exceptional customer experience.

Current global conditions, with significant geopolitical risk, inflation, expectations of a recession and central banks continuing to raise interest rates at a rapid pace, means that things are a little topsy-turvy at the moment in purely macroeconomic terms. Few, if any, expected the scenario we have experienced in recent years with Covid, or war in Europe. Although, despite all the difficulties, business is now starting to pick up in earnest, we are realistic about the business in the near future and are conscious of the impact that high inflation, coupled with sharply higher interest rates, is having on people's willingness to spend and invest. This could affect both our residential sales and our operator business going forward.

Whatever the extent to which this happens and however the future unfolds, a revision of our current capital structure is warranted and much needed. We opened the hotel at Boho Club on 15 December 2019 and in March 2020 we had to close. The banks withdrew and our intended financing was not forthcoming. We found solutions and a way forward but had to cancel the dividend on the preference shares. Covid has caused an enormous amount of grief and pain in the world, especially for all those who have lost their lives, lost loved ones or who continue to suffer from the effects of this disease. Many companies and businesses have gone under or have taken out loans that now have to be paid as interest rates rise. Many companies will be unable to cope. We are not one of those companies, but we have to acknowledge how Covid has fundamentally affected us. A conservative calculation shows that increased financing costs and losses, due to Covid paralysing our operations, had a negative SEK 80 million* impact on cash flow during 2020–2021. That corresponds to 28% of our interest-bearing liabilities.

Hotel property owners without a knowledgeable and skilled operator will find it difficult and will be forced to make changes or sell properties. So it’s important for us to be there and take advantage of these opportunities. However, to do so, and to seriously regain momentum after the market challenges of the last two years, we need a strategically correct capital structure to complement our operational and development skills.

The aforementioned costs, as well as the need to find a long-term sustainable balance in financial cash flow even after the current housing projects have been sold, mean that some action to reduce outstanding preference share debt will probably need to be taken. At the end of September, the Board of Directors decided not to resume dividend payments on the company's preference shares. This is due to increased uncertainty in the wider world and changing business conditions. At the same time, a process was initiated to evaluate a voluntary redemption offer for the preference shares, as well as an analysis of the company's need to restructure its current capital structure, of which preference shares form a significant part. This analysis is ongoing and we intend to provide more information as soon as possible.

Marcus Johansson Prakt
Chief Executive Officer

Quartiers Properties AB (publ) is required to disclose this information under the EU Market Abuse Regulation. This information was provided for publication through the agency of the contact person above at 8.30 a.m. on 3 November 2022 .

Quartiers Properties

Marcus Johansson Prakt, Chief Executive Officer
Email: marcus.prakt@quartiersproperties.se
Phone: +46 72 018 59 98

The company in brief
Quartiers Properties is a Swedish property development company with a focus on excellent design and quality, and is active on the Spanish Costa del Sol. The company was founded in 2014, since when it has built up a portfolio of investment properties and project properties. The company develops, sells and rents out properties.

Quartiers Properties owns and manages Boho Club, which is a boutique resort in Marbella’s Golden Mile district with a restaurant and 30 hotel rooms. The project has won awards for its design and architecture, and since its launch in 2019, both the hotel and the restaurant have established themselves as leading venues in Marbella. Visit Boho Club website www.bohoclub.com to book a hotel room or reserve a table at the restaurant. The restaurant is open daily, serving breakfast, lunch and dinner.

Quartiers Marbella Apartments is an apartment complex in Benahavís, the neighbouring municipality to Marbella, where Quartiers runs apartment rental operations. The apartments are ideal for short- and long-term accommodation and are popular among families, as well as groups visiting Marbella for leisure purposes, fitness holidays or to play golf. Visit our website www.quartiersmarbella.com to book your apartment.

Hacienda Collection is an apartment project in Benahavís just outside Marbella, where Quartiers Properties is selling apartments that are ready for immediate occupancy. The apartments are located in a gated community featuring wonderful views of the Mediterranean. These apartments feature a large, open floorplan with big windows, high-end kitchen, separate laundry room and 2–3 bedrooms. The spacious terraces offer plenty of scope for spending time with family and friends. Visit the website for additional information and to book an online or in-person viewing:  www.haciendacollection.es.

Mangold is the company’s Certified Adviser. Mangold can be contacted on +46 (0)8 503 015 50 or by emailing ca@mangold.se.