Falling profits end tough year for Metrovacesa

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Real estate group will now focus on commercial markets

12 February 2008

MADRID - Metrovacesa on Monday said net profit fell sharply in 2007 due to the loss of earnings from French unit Gecina, although it predicted strong income growth through to 2010 in spite of a slowdown in Spain's residential real estate market.

Net earnings for last year amounted to EUR 1.255 billion, 29.9 percent less than in 2006, the company said, blaming the decline on a shareholder spat that forced it to part ways with its French rental property unit Gecina halfway through the year.

The loss of Gecina as part of a deal between major shareholders Joaquín Rivero, Bautista Soler and the Sanahuja Group cut the value of Metrovacesa's assets to EUR 12.9 billion from EUR 20.12 billion a year earlier. Until the split, Metrovacesa was Spain's largest property developer and one of the top five in Europe.

Following a revaluation of assets, the company said earnings before interest, tax, depreciation and amortisation (EBITDA) rose 4.9 percent to EUR 954.9 billion on the back of a 35-percent increase in revenue to EUR 1.49 billion.

Of that, growth was strongest in the rental segment, with revenue climbing 27.1 percent to EUR 256.9 million, while sales of residential properties remained "stable" from the previous year at EUR 611.1 million.

With the Spanish property market slowing rapidly following the end of a decade-long boom in house prices, Metrovacesa indicated that it will focus primarily on the commercial and rental markets over the coming years. It predicted that by concentrating on building shopping malls and leasing office space, it can be certain of 22-percent profit growth per year through to the end of 2010.

The strategy, fittingly dubbed the Phoenix Plan, is intended to return the firm to its former status as one of Europe's biggest developers, a company spokesman said. It will entail investment of almost EUR 4 billion over the next two years, as well as divestments of around EUR 1.35 billion.

By the end of 2010, the plan envisages Metrovacesa sitting on assets worth EUR 17.3 billion, concentrated particularly in Spain, France, the United Kingdom and Germany.

[Copyright EL PAÍS 2008]

Subject: Spanish news

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