EARNINGS RELEASE 4Q19 3 - cdn.investorcloud.netcdn.investorcloud.net/.../Informes/2019-4T19-D-en.pdf · Quarterly Report 4Q19 ri.caduinmobiliaria.com 2 de 20 CADU CLOSES 2019 WITH

4Q19 EARNINGS RELEASE

3

Quarterly Report 4Q19

2 de 20 ri.caduinmobiliaria.com

CADU CLOSES 2019 WITH REVENUE OF MXN 4,304 MILLION, EBITDA OF MXN 1,083 MILLION AND NET INCOME OF MXN 552 MILLION

OPERATIONAL AND FINANCIAL HIGHLIGHTS

For the full-year 2019, EBITDA dropped 2.5% YoY, totaling MXN 1,083 million. 2019 EBITDA Margin was 25.2% (+1.2 pp. YoY). 4Q19 EBITDA posted a 15.1% annual decrease, amounting to MXN 244 million, with a 27.1% margin (+3.7 pp. YoY)

For FY2019, Net Income reached MXN 552 million, a 33.4% YoY decrease. In 4Q19, a Net Loss of MXN 67 million was recorded vs. the Net Income of MXN 247 million in 4Q18. Net Margin stood at 12.8% (-5.1 pp. YoY) in FY2019

2019 Consolidated Revenue amounted to MXN 4,304 million, vs. 4,626 million in 2018, recording a 7.0% fall. 4Q19 Consolidated Revenue reached MXN 900 million, down by 26.6% when compared to MXN 1,227 million in 4Q18

For the full-year, Free Cash Flow was MXN 203 million, positively compared to the negative MXN 160 million of 2018. In 4Q19, a positive Free Cash Flow of MXN 225 million was recorded, vs. negative MXN 161 million in 4Q18

During FY2019, Average Sale Price increased 4.6% to MXN 552 thousand, from MXN 528 thousand in 2018. 4Q19 Average Sale Price was MXN 588 thousand, vs. MXN 592 thousand in 4Q18

In 2019, only 545 homes were sold to customers requiring any subsidy (7.3% of total homes sold), 73.2% down vs. those of 2018. Over 4Q19, we did not record any home sold with subsidy, compared to 276 units in 4Q18 (14.1% of total homes sold)

Cancun, Quintana Roo, Mexico, July 06, 2020. – Corpovael, S.A.B. de C.V. (BMV: CADUA), a leading homebuilder in the development of affordable entry-level, middle-income and residential homes in Mexico, announced today its results for the fourth quarter (“4Q19”) and Full-year 2019 (“FY2019”). The figures presented in this report replace those posted on February 25, 2020, are expressed in nominal Mexican pesos (MXN), are audited, prepared in accordance with IFRS and current interpretations and may include minor differences due to rounding.

http://ri.caduinmobiliaria.com/













*Figures in Mexican pesos. Considering 342,022,974 shares outstanding in 4Q19 and 4Q18.

KEY INDICATORS (MXN MILLION)

Indicator 4Q18 4Q19 ∆% 2018 2019 ∆%

Homes Sold (Units) 1,960 1,481 (24.4%) 7,837 7,416 (5.4%) Average Sale Price (thousands) 592 588 (0.7%) 528 552 4.6%

Home Sold Revenue 1,160 871 (24.9%) 4,138 4,094 (1.0%) Commercial Land Plot Sales 42 39 (6.4%) 131 149 13.9% Housing Land Plot Sales - - - - 39 - Construction Services 25 (10) (>100.0%) 357 20 (94.3%) Total Revenue 1,227 900 (26.6%) 4,626 4,304 (7.0%) Operating Income 227 112 (50.5%) 940 831 (11.7%) EBITDA 287 244 (15.1%) 1,111 1,083 (2.5%) EBITDA Margin (%) 23.4 27.1 3.7 pp. 24.0 25.2 1.2 pp. Net Income 247 (67) (>100.0%) 830 552 (33.4%) Net Margin (%) 20.2 (7.4) (27.6 pp.) 17.9 12.8 (5.1 pp.)

FCFF (161) 225 (>100.0%) (160) 203 (>100.0%) Interest Coverage 3.06x 2.72x (0.34x) 3.06x 2.72x (0.34x) Net Debt / LTM EBITDA 2.42x 2.97x 0.55x 2.42x 2.97x 0.55x Leverage (Total Liabilities/Equity) 1.04x 1.07x 0.03x 1.04x 1.07x 0.03x EPS* (MXN) 0.67 (0.20) (>100.0%) 2.28 1.51 (33.7%)

BALANCE SHEET INDICATORS (MXN million)

FINANCIAL INDICATORS

Indicator 4Q18 4Q19 Indicator 2018 2019

Cash & Cash Equivalents 674 491 ROE (%) 18.0 11.4

Accounts Receivable 436 297 ROA (%) 8.8 5.5

Inventory 7,484 7,942 EBITDA (MXN million) 1,111 1,083

Other Assets 789 1,282 Net Income (MXN mill.) 830 552

Total Assets 9,383 10,012 EPS (MXN) 2.28 1.51

Bank Debt 2,711 2,727 Working Capital Cycle

(days) 781 950

Local Notes 650 986

Total Debt 3,361 3,713

Other Liabilities 1,413 1,462

Total Liabilities 4,774 5,175

Stockholders’ Equity 4,609 4,837












The figures primarily reported in 4Q19 were affected by two events subsequent the issue date of the original earnings release, and which are disclosed below:

Cancellation of the sale of land plot #186

In May 2020, the investors who acquired the land plot #186 in Playa del Carmen, (pursuing to participate in co-developing activities) notified the management their decision to suspend investments due to COVID-19, thus stopping the commitments of payments made to the Company for the months of June and December 2020 and requesting a partial cancellation of the operation. Consequently, and following the advice of the Company’s external auditors, CADU decided to partially reverse the revenue recognized from this transaction in 4Q19; keeping the sale in the proportion of the funds already settled (MXN 40 million)

Deferred taxes

As of the end of 4Q19 (audited), Stockholders' equity embraces an adjustment in retained earnings for MXN 334 million when compared to non-audited figures reported in 4Q19 net income, of which MXN 220 million stemmed from the cancelation of the transaction of Land Plot #186, while the remaining MXN 114 million derived from deferred tax provisions.

Effects of Abovementioned Operations on the Financial Statements

(Figures in MXN Thousands)

Homes Sold 872,760 73.86% 870,657 96.73% -2,103 -0.24% 4,096,423 89.34% 4,094,320 95.14% -2,103 -0.05%

Other Revenue 308,868 26.14% 29,409 3.27% -279,459 -950.24% 488,765 10.66% 209,306 4.86% -279,459 -57.18%

Total Revenue 1,181,629 100.00% 900,067 100.00% -281,562 -31.28% 4,585,188 100.00% 4,303,626 100.00% -281,562 -6.14%

Cost of Sales 685,373 58.00% 561,087 62.34% -124,286 -22.15% 2,852,450 62.21% 2,728,164 63.39% -124,286 -4.36%

Interest Recognized in Cost of Sales 40,768 3.45% 76,696 8.52% 35,928 46.85% 153,139 3.34% 189,067 4.39% 35,928 23.46%

Total Cost of Sales 726,140 61.45% 637,783 70.86% -88,358 -13.85% 3,005,589 65.55% 2,917,231 67.79% -88,358 -2.94%

Gross Income 455,488 38.55% 262,284 29.14% -193,204 -73.66% 1,579,599 34.45% 1,386,395 32.21% -193,204 -12.23%

General Expenses 124,574 10.54% 95,467 10.61% -29,107 -30.49% 521,276 11.37% 492,169 11.44% -29,107 -5.58%

Depreciation and Amortization 3,257 0.28% 54,364 6.04% 51,107 94.01% 12,562 0.27% 63,668 1.48% 51,107 406.84%

Operating Income 327,657 27.73% 112,453 12.49% -215,204 -191.37% 1,045,762 22.81% 830,558 19.30% -215,204 -20.58%

Financial Income 1,342 0.11% 2,377 0.26% 1,035 43.54% 15,723 0.34% 16,758 0.39% 1,035 6.58%

Financial Expenses 13,246 1.12% 19,823 2.20% 6,576 33.18% 36,546 0.80% 43,122 1.00% 6,576 15.25%

Earnings Before Taxes 315,753 26.72% 95,007 10.56% -220,745 -232.35% 1,024,939 22.35% 804,193 18.69% -220,745 -21.54%

Taxes Incurred 48,200 4.08% -1,049 -0.12% -49,249 4696.85% 138,140 3.01% 88,891 2.07% -49,249 -35.65%

Deferred Taxes 0 0.00% 163,049 18.12% 163,049 100.00% 0 0.00% 163,049 3.79% 163,049 100.00%

Net Income 267,553 22.64% -66,993 -7.44% -334,546 499.37% 886,799 19.34% 552,253 12.83% -334,546 -37.73%

EBITDA 371,682 31.46% 243,513 27.05% -128,169 -52.63% 1,211,463 26.42% 1,083,293 25.17% -128,169 -10.58%

Change4Q Original Issue 4T Adjusted 2019 Original Issue 2019 AdjustedChange













Given that the adjustments explained above had to be conducted in the Financial Statements of last quarter of 2019 (“4Q”), certain indicators of 4Q such as gross income, net income and EBITDA do not reflect the actual results of the quarter, therefore it is recommended to focus on the whole year.

Balance Sheet

(Figures in MXN Thousands)

Cash and Cash Equivalents 504,519 491,434 -13,085

Accounts Receivable 558,074 296,732 -261,342

Other Accounts Receivable 573,203 682,974 109,771

Inventory 7,642,762 7,942,026 299,264

Deferred Taxes 0 106,677 106,677

Sundry Debtors 0 25,860 25,860

Security Deposits 55,285 0 -55,285

Advance Payments 536,296 376,360 -159,936

Property, Plant and Equipment 82,362 62,721 -19,641

Value-added Tax 52,912 0 -52,912

Issuance Expenses 25,235 27,396 2,161

Total Assets 10,030,648 10,012,180 -18,468

Bank Loans 2,726,468 2,727,236 768

Sundry Creditors 56,340 261,102 204,762

Accounts Payable 243,514 0 -243,514

Accounts Payable to Related Parties 0 26,548 26,548

Land Plot Suppliers 81,022 81,022 0

Housing Deposits 82,367 103,633 21,266

Other Taxes and Expenses 2,816 2,116 -700

Income Tax 0 67,324 67,324

Deferred Taxes 666,671 920,123 253,452

Debt Issuance 1,000,000 986,169 -13,831

Total Liabilities 4,859,198 5,175,273 316,075

Stockholders’ Equity 171,011 171,011 0

Equity Related Expenses -91,462 -91,462 0

Retained Earnings 2,607,098 2,607,099 1

Share Premium Reserve 1,571,792 1,571,792 0

Year's Income (Loss) 886,799 552,253 -334,546

Surplus 64,263 64,263 0

Stock Repurchase Fund -38,052 -38,052 0

Total Stockholders’ Equity 5,171,450 4,836,905 -334,545

Total Liabilities and Stockholders’ Equity 10,030,648 10,012,178 -18,470

2019 Adjusted Change %2019 Original Issue












Message from the CEO

Dear investors:

The results posted primarily for both 4Q19 and FY2019 were affected by subsequent events to its issue date, such as the cancellation of the operation Land Plot #186 and the deferred tax provisions carried out under terms disclosed in this report. Given that these adjustments had to be conducted in the last quarter of the year, certain indicators of 4Q such as gross income, net income and EBITDA do not reflect the actual results, therefore it is recommended to focus on the whole year rather than quarterly results. Regardless of the foregoing, and as we anticipated, before a softened house demand derived from the prevailing economic slump in Mexico (especially in the construction industry), the uncertainty of the clients to acquire new homes and the reduction in subsidies in the sector, the Company deployed a number of strategies gearing towards the strengthening of its key operating indicators, including the constant supervision of inventory levels, enhancement of funding terms (with both suppliers and financial institutions,), divestiture of non-strategic assets, cash flow generation, reduction of expenses and indebtedness’ improvement, among others Quarterly revenue from Affordable Entry-Level stood for 62% of the revenue mix; while the remaining 38.1% derived from middle-income and residential housing. For the full-year, the housing revenue mix was composed of 69% of Affordable Entry-Level and 32% from Middle-income and Residential homes. Quarterly average sale price decreased slightly from MXN 592 thousand in 4Q18 to MXN 588 thousand in 4Q19, while 2019 average sale price reached MXN 552 thousand, 4.6% higher than the MXN 528 thousand in 2018. During 4Q19, the full settlement of local notes CADU15 was conducted in a timely manner and a positive free cash flow of MXN 225 million was generated. Therefore, in FY2019 a cash flow of MXN 203 million was recorded. Last, with regard to the impacts stemmed from COVID-19 spread, as well as the measures adopted to address it and the outlook for 2020, these are discussed in our 1Q20 Earnings Release.

Pedro Vaca Elguero,

Chairman and CEO












4Q19 Consolidated Revenue amounted to MXN 900 million, 26.6% down when compared to the MXN 1,227 million of the same period last year, as we recorded a MXN 289 million contraction in Home Sold Revenue. 97% of quarter’s consolidated revenue stemmed from Homes Sold (MXN 871 million), 4% came from Commercial Land Plot Sales and remaining -1% stemmed from loss of MXN 10 million of Construction Services, due to audit adjustments conducted in 4Q19.

In 2019, Consolidated Revenue totaled MXN 4,304 million, a decrease of 7.0% vs. the MXN 4,626 million of 2018. Home Sold stood for 95% of Consolidated Revenue, reaching MXN 4,094 million, while the remaining 5% was originated from Commercial and Housing Land Plot Sales, as well as from Construction Services, for MXN 149 million (3%), MXN 39 million (1%) and MXN 20 million (1%), respectively.

95%

3%2%

4Q18

Homes Sold Commercial Land Plot Sales

Construcion Services

96.8%

4.3%

(1.1%)4Q19

Homes Sold Commercial Land Plot Sales

Construcion Services

OPERATING RESULTS

Total Revenue (MXN million) 4Q18 4Q19 ∆$ ∆% 2018 2019 ∆$ ∆%

Homes Sold 1,160 871 (289) (24.9%) 4,138 4,094 (43) (1.0%) Commercial Land Plot Sales

42 39 (3) (6.4%) 131 149 18 13.9%

Housing Land Plot Sales

- - - - - 39 39 -

Construction Services

25 (10) (35) (>100.0%) 357 20 (336) (94.3%)

Total 1,227 900 (327) (26.6%) 4,626 4,304 (322) (7.0%)

26.6%

CONSOLIDATED REVENUE

MXN 1,227 million

MXN 900 million


















The revenue mix by housing segment was as follows:

NOTE: Affordable entry-level homes are those in a price range under MXN 500 thousand, middle-income homes are those within an MXN 500 thousand to MXN 2.5 million range, and residential homes are those exceeding the MXN 2.5 million mark. Within the residential segment, those homes with prices above the MXN 8 million are classified as “luxury homes”, such as Allure’s.

During 4Q19, Home Sold Revenue amounted to MXN 871 million, compared to MXN 1,160 million in 4Q18, mainly following a MXN 158 million decrease in the Affordable Entry-Level homes, which was affected by the postponement in purchasing decisions of a clients’ segment belonging to Infonavit’s affiliates, whom decided to wait until the start of the Joint Credit scheme “Unamos Creditos”. On the other hand, the clients continue to show caution in the acquisition of higher-value prototypes, effect reflected in the MXN 131 million decrease in Middle-Income and Residential Revenue.

Consequently, 62% of home sold revenue belongs to the Affordable Entry-Level, 27% to Middle Income and the remaining 12% to the Residential segment.

Although 2019 Revenue from the Residential Segment increased 58% (driven by the first full-year of titling activities of “Allure”) and that MXN 54 million increase was registered in Affordable Entry-Level, Home Sold Revenue fell slightly by 1.0%, to MXN 4,094 million, as MXN 303 million drop in Middle Income homes was recording, as this segment has been affected by the home acquisition slowdown prevailing in Mexico. For the FY2019, the contribution of Affordable Entry-Level homes was 69%, 17% from Middle Income; and, 14% from Residential.

60%40%

4Q18

Affordable Entry-Level Middle-Income Residential

MXN 1,160 million

62%

38%

4Q19

Affordable Entry-Level Middle-Income Residential

MXN 871million

Home Sold Revenue (MXN million) 4Q18 4Q19 ∆$ ∆% 2018 2019 ∆$ ∆%

Affordable Entry-Level Homes Cancun 151 182 30 20.0% 738 930 192 26.0% Playa del Carmen 340 263 (77) (22.7%) 1,338 1,297 (41) (3.0%) Guadalajara 137 16 (121) (88.0%) 422 225 (197) (46.6%) Mexico Valley 15 5 (10) (67.0%) 89 35 (55) (61.3%) Aguascalientes 6 - (6) (92.3%) 16 5 (11) (68.3%) Ciudad Juarez / Other 46 71 25 54.3% 165 330 165 >100.0% Total Affordable Entry-Level 696 537 (158) (22.7%) 2,768 2,822 54 2.0% Middle-Income Homes Cancun 221 164 (58) (26.0%) 663 474 (189) (28.4%) Mexico Valley 100 68 (31) (31.3%) 353 239 (114) (32.4%) Total Middle-Income Homes 321 232 (89) (27.6%) 1,016 713 (303) (29.8%)

Residential Homes Cancun 143 101 (42) (29.5%) 354 560 205 58.0% Total Residential Homes 143 101 (42) (29.5%) 354 560 205 58.0% TOTAL 1,160 871 (289) (24.9%) 4,138 4,094 (43) (1.0%)

Homes Sold Revenue

24.9%
















592 588 528 552

4Q18 4Q19 2018 2019

Average Sale Price (MXN thousand)

Homes & Buyer’s Subsidies (Units)

CADU TOTAL 4Q18 4Q19 ∆ ∆% 2018 2019 ∆ ∆%

With Subsidy 276 - (276) (100.0%) 2,035 545 (1,490) (73.2%) Without Subsidy 1,684 1,481 (203) (12.1%) 5,802 6,871 1,069 18.4%

Total 1,960 1,481 (479) (24.4%) 7,837 7,416 (421) (5.4%)

In 4Q19, the number of homes sold to customers with subsidy was nil, vs. 276 in 4Q18 (14.1% of total homes sold in that period). During 2019, the proportion of homes sold with subsidies was 7.3%, 18.7 pp. lower than that of 2018, reflecting a 73.2% drop in the number of titled homes sold with any subsidy.

4Q19 Average Sale Price posted a slight decrease of 0.7% YoY, reaching MXN 588 thousand, given the lesser average sale price of the Allure units titled during the period (-11.9% YoY). Nevertheless, 2019 Average Sale Price climbed to MXN 552 thousand, up 4.6% vs. that of 2018.

The following table shows the average sale prices by housing segment:

Average Sale Price by Product (MXN thousands) Housing Product 4Q18 4Q19 ∆$ ∆% 2018 2019 ∆$ ∆% Affordable Entry-Level 387 392 5 1.3% 376 398 22 5.9% Middle-Income

2,111 2,276 165 7.8% 2,223 2,417 194 8.7% Residential 14,339 12,639 (1,700) (11.9%) 15,407 13,994 (1,413) (9.2%) Total 592

7 588 (4) (0.7%) 528

7 552 24 4.6%

276 -

2,035

545

4Q18 4Q19 2018 2019

Homes sold with & without buyer's subsidy (units)

100.0%73.2%

14.1% 26.0% 7.3%

85.9% 100.0% 74.0% 92.7%

4Q18 4Q19 2018 2019

Homes sold with & without buyer's subsidy (%)

With Subsidy Without Subsidy

14.1 pp. 18.7 pp.

462 581

592581

535

523

588

2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Average Sale Price (MXN thousand)

Homes Sold with Buyer’s Subsidies

Average Sale Price

0.7% 4.6%






















Financial Performance Income Statement

Revenue and Cost of Sales Breakdown (MXN million)

Concept 4Q18 % 4Q19 % 2018 % 2019 %

Home sold revenue 1,160 94.5% 871 96.7% 4,138 89.5% 4,094 95.1%

Land plot sales revenue 42 3.4% 39 4.3% 131 2.8% 189 4.4%

Construction services 25 2.1% (10) (1.1%) 357 7.7% 20 0.5%

Total revenue 1,227 100.0% 900 100.0% 4,626 100.0% 4,304 100.0%

Costo of homes sold 777 67.0% 668 76.7% 2,749 66.4% 2,823 68.9%

Costo of land plots 23 55.0% (21) N/A 76 57.6% 74 39.4%

Cost of construction services 24 93.6% (10) N/A 339 95.1% 19 95.0%

Total Cost of Sales 824 67.2% 638 70.9% 3,164 68.4% 2,918 67.8%

The Cost of Sales went from MXN 824 million in 4Q18 to MXN 638 million this quarter, recording an MXN 186 million drop. 4Q19 cost-to-revenue ratio rose 3.7 pp., to 70.9%. Nevertheless, following the fall in Construction Services revenue (of low profit margins), coupled with Allure’s higher contribution and the increase in land plot sales in 2019, full-year cost-to-revenue ratio stood at 67.8%. (-0.6 pp. YoY).

4Q19 Gross Income reached MXN 262 million, a 34.9% YoY decrease, given the lower revenue in 4Q19. During FY2019, Gross Income decreased 5.2%, going from MXN 1,462 million in 2018 to MXN 1,386 million.

4Q19 Selling, General and Administrative Expenses (SG&A) dropped 14.6% to MXN 150 million, from MXN 175 million in 4Q18. Consequently, SG&A-to-revenue ratio went from 14.3% in 4Q18 to 16.6% (+2.3 pp.) this quarter.

2019 SG&A-to-revenue ratio was 12.9%, 1.6 pp. higher than that of 11.3% in 2018.

403 262

1,462 1,386

4Q18 4Q19 2018 2019

Gross Income (MXN million)

34.9%

5.2%

14.3% 16.6% 11.3% 12.9%

4Q18 4Q19 2018 2019

SG&A /Revenue (%)

Cost of Sales

SG&A

Gross Income

2.3 pp. 1.6 pp.






















4Q19 EBITDA amounted to MXN 244 million, 15.1% down vs. the MXN 287 million in 4Q18. Meanwhile, EBITDA Margin increased 3.7 pp. YoY, standing at 27.1%. For the FY2019, EBITDA decreased 2.5%, to MXN 1,083 million, and the EBITDA Margin reached 25.2% (+1.2 pp. YoY).

4Q19 Operating Income went from MXN 227 million in 4Q18 to MXN 112 million this quarter, a 50.5% annual plummet, as the drop in gross income was more pronounced than that of Selling, General and Administrative Expenses, which include a fixed portion.

For FY2019, Operating Income totaled MXN 831 million, decreasing 11.7% when compared to MXN 940 million last year.

4Q19 Financial Expenses registered 38.9% climb, going from MXN 14 million in the same quarter last year to MXN 20 million this quarter. For the FY2019, Financial Expenses increased by 19.4% to MXN 43 million, driven, among other things, by the local notes’ issuance of “CADU19”.

4Q19 Tax Provision was MXN 162 million, vs. negative MXN 23 million in 4Q18. For the full-year, Tax Provision amounted to MXN 252 million, vs. MXN 111 million last year.

287 244

1,111 1,083

4Q18 4Q19 2018 2019

EBITDA (MXN million)

15.1%

2.5%

227 112

940 831

4Q18 4Q19 2018 2019

Operating Income (MXN million)

50.5%

11.7%

EBITDA Breakdown (MXN million)

Concept 4Q18 4Q19 ∆$ ∆% 2018 2019 ∆$ ∆%

EARNINGS AFTER TAXES IMPUESTOSIMIMPUESTOS

247 (67) (314) (>100.0%) 830 552 (277) (33.4%) (+) Current Income Tax (62) (1) 61 (98.3%) 71 89 18 24.9%

(+) Diferred Income Tax 40 163 123 >100.0% 40 163 123 >100.0%

EARNINGS BEFORE TAXES (EBT) 225 95 (130) (57.7%) 940 804 (136) (14.5%) (+) Capitalized CFR 57 77 20 35.2% 158 189 31 19.4%

(+) Non-Capitalized Interest 14 20 6 38.9% 36 43 7 19.4%

(-) Interest Income 10 1 (9) (94.8%) 35 15 (20) (57.1%)

(-) Other Income (expense) net 2 2 - 13.0% 2 2 - 13.0% (+) Depreciation & Amortization 3 54 52 >100.0% 12 64 52 >100.0%

EBITDA 287 244 (43) (15.1%) 1,111 1,083 (27) (2.5%) EBITDA Margin 23.4% 27.1% - 3.7 pp. 24.0% 25.2% - 1.2 pp.

Tax Provision

EBITDA

Operating Income

Financial Expenses


















Net Income went from MXN 247 million in 4Q18 to MXN -67 million in 4Q19, due to the annual increase in Tax Provision (+MXN 184 million).

In 2019, Net Income decreased 33.4% YoY totaling MXN 552 million. 2019 Net Margin was 12.8% (-5.1 pp. YoY).

Net Income and EPS (MXN million)

Concept 4Q18 4Q19 ∆$ ∆% 2018 2019 ∆$ ∆% Consolidated Net Income 247 (67) (314) (>100.0%) 830 552 (277) (33.4%) Controlling Interest 229 (70) (299) (>100.0%) 778 516 (263) (33.7%) Earnings Per Share* (MXN) 0.67 (0.20) (0.87) (>100.0%) 2.28 1.51 (0.77) (33.7%)

*Figures in Mexican pesos. Considering 342,022,974 shares outstanding in 4Q19 and 4Q18.

Earnings Per Share (EPS) went from MXN 0.67 in 4Q18 to MXN -0.20 this quarter. And, when adding up the 9M19 EPS of MXN 1.71, 2019 Earnings Per Share reached MXN 1.51.

Financial Position

As of December 31, 2019, Cash & Cash Equivalents Balance was MXN 491 million, MXN 115 million more than that of 3Q19.

CADU’s cash is primarily invested in high-quality, short-term, debt securities.

Accounts Receivable Breakdown (MXN million)

Concept 4Q18 4Q19 ∆$ ∆%

Homes Sold Receivables 288 131 (157) (54.5%) Other 148 166 18 12.3%

Total Clients 436 297 (139) (31.9%)

Accounts Receivable (days) 4Q18 4Q19 ∆ días ∆% Homes Sold Receivables 25 12 (14) (54.0%) Others 109 272 163 >100.0% Total Clients 34 25 (9) (26.7%)

Accounts Receivable, as of December 31, 2019, totaled MXN 297 million (25-day turnover), vs. MXN 436 million as of year-end 2018 (34-day turnover).

247(67)

830552

4Q18 4Q19 2018 2019

Net Income (MXN million)

>100.0%

33.4%

766

1,161

783 788674 766

602376

491

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Cash & Cash Equivalents (MXN million)

Net Income

Cash & Cash Equivalents

Accounts Receivable (A/R)

















As of year-end 2019, Working Capital Cycle (WCC) was 950 days, 169 days higher than the 781 days of 4Q18, attributed to: i) a 158 days YoY climb in inventory to reach 980 days in 4Q19, due to the postponement of our clients purchase decisions; ii) a 3 days YoY contraction in suppliers, which stood at 42 days in 4Q19; and, iii) a 17 days YoY drop in prepayment days, as the level of advances received was affected by the postponement of our clients purchase decisions. Receivables decreased 9 days YoY, standing at 25 days in 4Q19.

Inventory Breakdown (MXN million)

Concept 4Q18 4Q19 ∆%

Land Bank 2,149 2,263 5.3% Work in Progress and Completed Homes 5,018 5,195 3.5%

Capitalized Interest 317 484 52.4%

Total 7,484 7,942 6.1%

Inventory went from MXN 7,484 million in 4Q18 to MXN 7,942 million as of December 31st, 2019, increasing 6.1% or MXN 458 million.

As of year-end, inventory was comprised of MXN 2,263 million in Land Bank (MXN +114 million YoY) recorded at acquisition cost, MXN 5,195 million of Work in Progress & Completed Homes (MXN +177 million YoY), and Capitalized Interests for MXN 484 million (MXN +166 million YoY).

Capitalized Interest in Inventory (MXN million)

Concept 2018 2019

Interest Paid 363 398 Financial Expenses (36) (43)

Capitalized Interest 327 355

Starting Balance 149 317

Total Capitalized Interest 476 672

Capitalized Interest in Cost of Sales (158) (189)

Balance of Capitalized Interest in Inventory 317 484

During 2019, interest paid amounted to MXN 398 million of which, 189 million are reflected in cost of sales, MXN 43 million as financial expenses and remaining MXN 166 million recognized in inventory.

34

822

45 30

781

31

878

25 8

877

25

980

42 13

950

Receivables (days) Inventory (days) Suppliers (days) Prepayments (days) WCC

4Q18 3Q19 4Q19

Working Capital Cycle (WCC)

Inventory














As of December 31, 2019, Total Debt amounted to MXN 3,713 million, from MXN 3,361 million as of year-end 2018, increasing 10.5% YoY.

Bank Loans (MXN million)

Concept 4Q18 4Q19 ∆$ ∆%

Bridge Loans 2,023 1,996 (27) (1.3%)

Land Bank 14 40 26 >100.0%

Working Capital 673 691 18 2.7%

Financial Leases 1.0 0.5 (0.4) (45.3%)

Total 2,711 2,727

16 0.6%

Bank Debt as of December 31, 2019 posted a slight growth of 0.6% (+MXN 16 million), going from MXN 2,711 at the end of 4Q18, to MXN 2,727 million. In this regard, Bridge Loans for construction activities decreased MXN 27 million, while Working Capital and Land Bank credits increased MXN 18 million and MXN 26 million, respectively.

Debt Securities – Local Notes (MXN million)

Concept 4Q18 4Q19 ∆$ ∆% CADU 15 160 - (160) (100.0%) CADU 18 500 500 - -

CADU 19 - 500 500 -

Issuance expenses pending amortization (10) (14) (4) 40.0%

Total 650 986 336 51.7%

Total Debt* 3,361 3,713 352 10.5% * 100% of the Company’s debt is denominated in Mexican pesos as of December 31, 2019.

At the end of 2019, Debt Securities amounted to MXN 986 million, 51.7% up when compared to the MXN 650 million recorded in 2018, following the issuance of Local Notes “CADU 19”, for MXN 500 million, conducted in 2Q19. It is worth noting that over the quarter, the amortization of the remainder balance of “CADU 15” was settled, in a timely manner, according to schedule.

As of December 31, 2019, CADU’s credit rating granted by HR Ratings and Verum was "HR A-" and "A-/M", respectively. Meanwhile, local notes “CADU18” and “CADU19”, were rated, by HR Ratings and Verum, at "HR A-" and "A-/M", respectively.

Leverage and Interest Coverage (Times)

Concept 4Q18 4Q19

Net Debt to EBITDA 2.42 2.97

Total Liabilities / Equity 1.04 1.07

EBITDA / Interest Paid 3.06 2.72

At the end of 4Q19, Net Debt / EBITDA ratio stood at 2.97x, vs. 2.42x in 4Q18.

Interest Coverage Ratio (EBITDA / Interest Paid) went from 3.06x at the end of 2018 to 2.72x as of December 31, 2019.

Debt













As of year-end 2019, the weighted average cost of debt was 10.77% (TIIE + 2.91 pp. / without commissions). 100% of the debt is subscribed at a floating rate.

Regarding the Company’s covenants of Local Notes, with ticker symbols “CADU18” and “CADU19”, CADU is currently in full compliance. These covenants are listed below:

That the Company’s LTM Consolidated Revenue does not show a decrease equal or greater than 30% when compared to the Consolidated Revenue recorded in the same period last year

o LTM 4Q19 Consolidated Revenue decreased 7.0% when compared to those of same period last year

That the Company’s Total Liabilities / Shareholders’ Equity ratio does not exceed the 3.0 times mark

o As of December 31, 2019, Total Liabilities /Shareholders’ Equity ratio was 1.07x

That the Company’s Net Debt / LTM EBITDA ratio will not be greater than 3.0 times o As of December 31, 2019, Net Debt / LTM EBITDA ratio was 2.97x

That the Company’s Interest Coverage ratio (LTM EBITDA divided by interest paid over the last twelve months) will not be less than 2.5 times

o As of December 31, 2019, Interest Coverage ratio stood at 2.72x

Debt Maturity Profile as of December 31, 2019 (MXN million)

Concept Up to 1

Year Up to 2 years

Up to 3 years

Up to 4 years

Up to 5 Years

Total

Bank Loans 997 1,012 678 40 - 2,727

CADU 18 129 171 171 29 - 500

CADU 19 - - - 357 143 500

Issuance expenses pending amortization (4) (4) (4) (2) - (14)

Total 1,122 1,179 845 424 143 3,713

% Total 30.2% 31.8% 22.8% 11.4% 3.9% 100.0%

On the Company’s debt maturity profile, 30.2% matures in 2020, 31.8% in 2021, 22.8% in 2022, 11.4% as of 2023 and 3.9% in 2024. The Company does not have any debt in foreign currencies.

Stockholders’ Equity, as of December 31, 2019 was MXN 4,837 million, 4.9% higher than the MXN 4,609 million of 2018. At the end of 2019, the Company’s capital structure was comprised of 51.7%, liabilities; and, 48.3% equity, while as of December 31, 2018, was comprised of 50.9%, liabilities; and, 49.1%, equity. The leverage ratio (Total liabilities / Stockholders’ Equity) increased 0.03 times to 1.07x, from 1.04x in 4Q18.

4,609 4,837

Stockholders´ Equity (MXN million)

dec-18 dec-19

4.9%

Stockholders’ Equity













33

(103)(161)

(94)

41 30

225

Free Cash Flow (MXN million)

As of December 31, 2019, Stockholders’ Equity was MXN 228 million higher than that posted during 4Q18. Separately, the Return on Equity (ROE) stood at 11.4% as of year-end. Cash Flow

Cash Flow (MXN million)

Concept 4Q18 4Q19 ∆% 2018 2019 ∆%

Earnings before taxes (EBT) 225 95 (57.7%) 940 804 (14.5%)

Investment activities (7) 56 (>100.0%) (23) 51 (>100.0%)

Financing activities 93 120 29.0% 194 232 19.4%

Cash flow before taxes 310 270 (12.8%) 1,112 1,087 (2.3%)

Cash flow from operating activities (451) 157 (>100.0%) (1,273) (696) (45.3%)

Net cash flow from operating activities (140) 428 (>100.0%) (161) 391 (>100.0%)

Net cash flow from investment activities (20) (203) >100.0% 1 (188) (>100.0%)

Net cash flow from financing activities 47 (109) (>100.0%) 68 (385) (>100.0%)

Δ Cash and cash equivalents (114) 116 (>100.0%) (92) (183) 99.5%

Cash and equivalents – beginning of period

788 376 (52.3%) 766 674 (12.0%)

Cash and equivalents – end of period 674 491 (27.1%) 674 491 (27.1%)

Free Cash Flow to Firm (161) 225 (>100.0%) (160) 203 (>100.0%)

During 4Q19, FCF amounted to MXN 225 million, positively compared to MXN -161 million in 4Q18. For FY2019, FCF climbed to MXN 203 million, vs. negative MXN -160 million in 2018.

**************************

(160)

203

FLEF

Accumulated Free Cash Flow as of December 31, 2019 (MXN million)

Accumulated dec-18 Accumulated dec-19

Cash Variations

2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
















Recent Developments

On February 11, 2020, Verum ratified its ‘A-/M’ corporate long-term (Stable Outlook) and ‘2/M’ short-term ratings to Corpovael, S.A.B. de C.V. and Subsidiaries. Moreover, the agency ratified ‘CADU18’s and ‘CADU19’s rating of ‘A-/M’.

On January 6, 2019, CADU announced the cancellation of the market-maker agreement subscribed with Casa de Bolsa Santander, S.A. de C.V.

On December 27, 2019, CADU conducted the last amortization settlement of the local notes “CADU 15”, for MXN 13.5 million.

On November 29, 2019, HR Ratings reaffirmed Corpovael’s long-term credit rating (local scale) at “HR A-” and assigned a short-term credit rating of “HR2” (its second highest rating). Furthermore, the agency ratified ‘CADU18’s and ‘CADU19’s rating of “HR A-”.

Analyst Coverage Given that Corpovael, S.A.B. de C.V. ("CADU") has issued securities under the regulations of the Mexican Exchange Internal Bylaws, it informs that the financial institutions that provide analyst coverage over CADU’s stock are: Actinver Casa de Bolsa, BBVA Bancomer, Punto CB, Apalache Analisis and Miranda GR. For more information, please visit http://ri.caduinmobiliaria.com.

About CADU Corpovael, S.A.B. de C.V. “CADU” (BMV: CADUA) is a leading homebuilder in the development of affordable entry-level, middle-income, and residential homes in Mexico. CADU has more than a decade of experience in the housing sector where it has developed a successful business model by seeking sustained, high profitability. Its competitive advantage is based on an efficient and vertically integrated structure (developing activities of land acquisition, urbanization, building, and commercialization) in markets that have been identified as having a solid demand for housing. It primarily operates in Quintana Roo, Mexico Valley, and Jalisco.

Foward-looking statements

Information presented by the Company may contain forward-looking statements about future events and/or financial results. The reader should understand that the results obtained may differ from the projections contained in this document, as past results in no way offer any guarantee of future performance. For this reason, the Company assumes no responsibility for any indirect factors or elements beyond its control that might occur inside Mexico or abroad and which might affect the outcome of these projections.














Corpovael, S.A.B de C.V. and Subsidiaries Consolidated Statement of Financial Position

As of December 31st, 2019 and 2018 (MXN thousands)

Dec-31 Dec-31 ∆%

2018 2019

Assets

Current Assets: Cash and cash equivalents $508,488 $491,434 (3.4%)

"CADU15" reserve fund 165,892 - (100.0%)

Accounts receivable (Net) 435,878 296,732 (31.9%)

Other accounts receivable (Net) 301,916 472,269 56.4%

Inventory 3,513,363 2,762,636 (21.4%)

Advance Payments 110,534 232,511 >100.0%

Total Current Assets 5,036,071 4,255,582 (15.5%)

Non-current Assets:

Accounts receivable - 210,705 -

Inventory 3,970,551 5,179,390 30.4%

Property, plant and equipment (Net) 88,672 62,721 (29.3%)

Advance Payments 124,849 143,849 15.2%

Other non-current assets 162,993 159,933 (1.9%)

Total non-current Assets 4,347,065 5,756,598 32.4%

Otros activos no circulantes -

- 6 Total Assets $9,383,136 $10,012,180 6.7%

Liabilities and Stockholders’ Equity

Current Liabilities

Bank Loans 492,386 1,571,406 >100.0%

Debt securities 156,036 124,654 (20.1%)

Accounts payable 394,074 342,124 (13.2%)

Taxes payable 4,197 2,116 (49.6%)

Income Tax payable 23,954 67,324 >100.0%

Other current liabilities 260,033 109,701 (57.8%)

Total current liabilities 1,330,680 2,217,325 66.6%

Non-current Liabilities

Bank loans 2,218,420 1,155,830 (47.9%)

Debt securities 494,172 861,515 74.3%

Lease liability - 20,480 -

Deferred taxes 730,664 920,123 25.9%

Total non-current liabilites 3,443,256 2,957,948 (14.1%)

Total Liabilities $4,773,936 $5,175,273

8.4%

Stockholders’ Equity Capital stock 171,011 171,011 -

Retained earnings 4,334,301 4,527,199 4.5%

Controlling interest 4,505,312 4,698,210 4.3%

Non-controlling interest 103,888 138,697 33.5%

Total Stockholders’ Equity 4,609,200

4,836,907 4.9%

Total Liabilities and Stockholders’ Equity $9,383,136 $10,012,180 6.7%

Financial Statements













Corpovael, S.A.B de C.V. y Subsidiarias Statement of Consolidated Comprehensive Income

(MXN thousands)

4Q18 %/Ing. 4Q19 %/Ing. ∆% 2018 %/Ing. 2019 %/Ing. ∆%

Revenue:

Homes Sold $1,159,872 94.5% $870,657 96.7% (24.9%) $4,137,673 89.5% $4,094,320 95.1% (1.0%)

Land Plot Sales 41,608 3.4% 38,924 4.3% (6.5%) 131,231 2.8% 188,879 4.4% 43.9%

Construction Services 25,308 2.1% (9,515) (1.1%) (>100.0%) 356,668 7.7% 20,427 0.5% (94.3%)

1,226,788 100.0% 900,066 100.0% (26.6%) 4,625,572 100.0% 4,303,626 100.0% (7.0%)

Cost and expenses:

Cost of sales (824,090) 67.2% (637,783) 70.9% (22.6%) (3,163,806) 68.4% (2,917,231) 67.8% (7.8%)

Gross income 402,698 32.8% 262,284 29.1% (34.9%) 1,461,766 31.6% 1,386,395 32.2% (5.2%)

General expenses (175,487) 14.3% (149,830) 16.6% (14.6%) (521,386) 11.3% (555,837) 12.9% 6.6%

Operating income 227,211 18.5% 112,454 12.5% (50.5%) 940,380 20.3% 830,558 19.3% (11.7%)

Dividends received 1,629 1,841 13.0% 1,629 1,841 13.0%

Financial income 10,274 531 (94.8%) 34,753 14,912 (57.1%)

Financial expenses (14,464) (19,818) 37.0% (36,316) (43,118) 18.7%

(2,561) (17,446) >100.0% 66 (26,365) (>100.0%)

Earnings before taxes 224,650 18.3% 95,007 10.6% (57.7%) 940,446 20.3% 804,193 18.7% (14.5%)

Income taxes:

Current 22,583 1.8% (162,000) 18.0% (>100.0%) (110,885) 2.4% (251,940) 5.9% >100.0%

Net Comprehensive Consolidated Income

$247,233 20.2% ($66,993) 7.4% (>100.0%) $829,561 17.9% $552,253 12.8% (33.4%)

Controlling interest 228,884 (69,806) (>100.0%) 778,247 515,613 (33.7%)

Non-controlling interest

18,349 2,812 (84.7%) 51,315 36,640 (28.6%)

Net Comprehensive Consolidated Income

247,233 20.2% (66,993) 7.4% (>100.0%) 829,561 17.9% 552,253 12.8% (33.4%)

Net Income (Loss) per Share*

0.67 (0.20) (>100.0%) 2.28 1.51 (33.7%)

* Considering 342,022,974 shares outstanding in 4Q19 and 4Q18.












Corpovael, S.A.B de C.V. y Subsidiarias

Statement of Consolidated Cash Flow

(MXN thousands)

4Q18 4Q19 2018 2019

Operating Activities

Earnings before taxes 224,650 95,007 940,446 804,193

Items Related to Investment Activities

Depreciation and Amortization 2,863 54,363 11,917 63,668

Interest Income (10,274) (531) (34,752) (14,912)

Interest Expenses 36,107

43,102 36,107 43,102

Dividends received - 1,841 - 1,841

Capitalized interest recognized in cost of sales 56,742 76,696 158,287 189,067

Cash Flow from Earnings Before Taxes 310,088 270,478 1,112,005 1,086,959

Cash Flow from or used in Operating Activities

Decrease (increase) in accounts receivable 57,393 97,293 27,399 139,146

Decrease (increase) in inventory (553,033) 59,813 (1,572,347) (291,922)

Decrease (increase) in other accounts receivable and other current assets

(89,836) (52,486) 23,817 (286,071)

Increase (decrease) in accounts payable 315,752 54,907 197,418 (51,950)

Increase (decrease) in other liabilities (100,263) 58,055 131,328 (158,481)

Income taxes paid or reimbursed (80,535) (60,524) (80,535) (46,757) Net Cash Flows from or used in Operating Activities (140,434) 427,536 (160,915) 390,924

Investment Activities

Investment in property, plant and equipment (30,712) (6,703) (33,835) (6,703)

Other non-current accounts receivable - (196,630) - (196,630)

Interest received 10,274 531 34,752 14,912

Net Cash Flows from or used in Investment Activities (20,438) (202,802) 917 (188,421) Financing Activities

Bank loans 971,594 1,499,649 3,166,170 3,565,679

Debt certificates - - 500,000 500,000

Amortization of bank loans (830,651) (1,434,325) (2,542,168) (3,549,249)

Amortization of debt certificates (40,000) (40,000) (160,000) (160,000)

Dividends paid - 1,320 (256,518) (289,485)

Interests paid (120,629) (124,679) (362,743) (398,359)

Other items 66,803 (10,904) (276,454) (54,035)

Net Cash Flows from or used in Financing Activities 47,116 (108,938) 68,287 (385,449)

Increase (decrease) in Cash and Cash Equivalents (113,757) 115,796 (91,711) (182,946)

Cash and Cash Equivalents at Beginning of the Period 788,137 375,637 766,091 674,380

Cash and Cash Equivalents at End of the Period 674,380 491,434 674,380 491,434

Note on Financial Statements: in addition to the contents of this report, for better analysis we recommend referring to the details noted on financial statements found at http://ri.caduinmobiliaria.com.











Documents

EARNINGS RELEASE 4Q19 3 - cdn.investorcloud.netcdn.investorcloud.net/.../Informes/2019-4T19-D-en.pdf · Quarterly Report 4Q19 ri.caduinmobiliaria.com 2 de 20 CADU CLOSES 2019 WITH