Neinor Homes Sa Ord

Good day and thank you for standing by. Welcome to the Nainor Homes 1H25 results presentation. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. Alternatively, you may submit your questions via the webcast. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your first speaker today, José Cravo. Please go ahead.

Thank you. Hi, good morning, everyone. My name is José Cravo, and I'm the Head of Investor Relations at Niner Homes. Today, we are going to go over results for the first semester of the year 25. And as usual, we are here with Borja García-Gottiaga, our CEO, Jordi Artemis, our Deputy CEO and CFO, and Mari Lapiedra, our CIO. We'll start the presentation with the key highlights. Then, on Section 2, we will provide a quick summary of the evolution of the Spanish residential market. On Section 3, Jordi will review financial results, and on Section 4, we'll provide a quick update on the voluntary tender offer over Ayala Homes. And finally, Borja will end up with the key takeaways. after the presentation of the Q&A session to answer any questions you may have. Now I'll hand over the presentation to our CEO, Borja García Ochoa.

Thank you, José. During the first half of the year 25, we have seen probably the best performance in the history of our company. Let's start with the execution. On product launches, construction, and commercialization activity, we have delivered an excellent performance in a business that's gaining momentum day by day. During this period, we have also fully integrated the company that we absorbed last year, Habitat, and now we are operating it with absolute normality. Now looking ahead to the full year, we are reiterating our full year 25 guidance. By this moment of the year, we have a much better visibility on deliveries as construction has progressed at a strong pace and sales continue to prove just how dynamic the Spanish market is. Now let's talk about strategy. Following the launch of our voluntary tender offer for AEDAS, we are fast-forwarding our investment roadmap and re-skimming it at the same time. The platform is growing, but in an equity efficient way, designed to scale returns and to expand return on equity. We keep, year by year, creating value in a cyclical industry. And finally, let's talk about the market. Spain's residential market continues to outperform. What we have been saying for the last three or four years, it's now crystal clear to everyone. Spain is one of the safest residential markets worldwide, offering best-in-class risk-adjusted returns. Demand is solid. Supply is tight and affordability is healthy, especially in our segment. Construction costs are rising modestly with inflation. and interest rates coming down. So what does all that mean for us? It means we are executing in a macro environment that supports our plan. And we are one of the very few players with the scale, the strategy, and the balance sheet to capture the upside. So in very few words, execution is strong. Guidance is solid. Our strategy is accelerated. And the market is finally playing in our favor. Please follow me to the next slide. Here in this slide, as always, we provide a snapshot of Nainor's operational and financial performance. On the left, we highlight the main KPIs that are driving the business forward. Today, we are managing a portfolio of 22,000 units, nearly half of which are fully owned by Nainor. Out of that total, close to 11,000 units are under production, scheduled for delivery over the next three years. And for the first time in our history, our order book exceeds 4,000 units. This means 1.6 billion in future revenues for Naino and our joint venture partners. PreSales reached 1,700 units in the first half, representing a 45% increase year on year. And while we have delivered a strong growth in sales, a clear reflection of how dynamic the market is, we are also being disciplined on pricing. And we continue to update prices and are now seeing house price increases of 4%, 5% for the year. This incremental pricing power combined with construction costs that are rising only in light with inflation, provides a solid foundation for margin expansion in the second half of the year and into 2026. Now, despite the strong operational momentum, deliveries in the first half have been lower, as it was forecasted given that the majority of deliveries are scheduled for the second half of the year. As a result, financials on the right-hand side of the slide appear softer here today. But let me be clear. We have very good visibility and full confidence in meeting our full year 2025 guidance. Jordi will elaborate on the financial outlook later in the presentation. And now please follow me to slide number six. Now let me walk you through the basics of our business model and explain why Neynor is in the best position to lead in one of the Europe's most fragmented housing markets. As we have mentioned in previous presentations, the Spanish housing market produces roughly 100,000 new homes per year and remains highly fragmented. That fragmentation for us creates opportunities has the scale, structure, and systems to execute with industrial precision. On this slide, you see a summary of our industrialized development model, built around a clever five-year stage cycle. Land acquisition, project design and marketing, commercialization, construction, and final delivery. Each stage is optimized and the full cycle typically takes around three or four years. What sets our platform apart is how industrialized and externalized it is and how we have refined it over more than a decade. Project design is led by our in-house architecture team and executed through a network of over 100 approved studios. Sales and commercialization are outsourced to more than 20 trusted brokerage partners, giving us national reach in an addressable market of 600,000 housing transactions annually. Financing is another strategic strength. Thanks to longstanding relationships with the Spanish top banks, we have deep access to a 20 billion capex lending market that consistently supports well-structured residential projects. On the construction side, we operate through a diversified network of 30 contractors, currently managing over 60 active projects. And beyond the operational setup, our geographic reach is key. Nainor has built true capillarity through a network of seven regional offices, ensuring local presence and market insight at every stage of the value chain. This structure, externalized, decentralized, and perfectly designed give us the flexibility to scale, the efficiency to protect margins, the ability to deliver through the cycles, and to the risk every development from day one, starting with that acquisition and continuing through design, sales, and construction. We have the best teams and professionals, the strongest land bank in the country, and a business model that is fully equipped to deliver at scale. Now let's move to the next section, where we will review the fundamentals of the Spanish housing market, which continue to provide the ideal backdrop for our growth. Spain continues to lead the growth charts across developed markets. As you can see on the left side of the slide, GDP is expected to grow by 2.4% in 2025 and 1.8% in 2026, well ahead of the UK, Germany, the Euro area, and even the US. And what's important here is not just the level of growth, but the quality behind it. It's growth driven by a growing population, strong job generation, rising wages, solid private consumption, and accumulated savings. Please follow me to the next slide. Adding to the strength of the economy, the Spanish housing market is benefiting from a combination of lower household leverage and falling interest rates. Since 2008, household debt to GDP has been cut in half, dropping from 85% to just 43% today. At the same time, over the last year, your arrival has come down from 4% to around 2%. This implies cheaper mortgages and better affordability for homebuyers, thereby supporting and increasing housing demand. Beyond lower leverage, another defining feature of the Spanish housing market is its structurally limited supply. Today, Spain is producing only around 100,000 new houses per year, and that figure has remained broadly stable in recent years. To put it in context, before the financial crisis, the country was producing 500,000 to 600,000 units annually. And the 30-year historical average still sits at around 200,000 homes per year. Looking ahead, even in a context of a strong and sustained demand with more than 600,000 transactions per year, we do not expect a material increase in supply. This supply situation, combined with healthier household fundamentals, is what makes the Spanish market resilient to external macroeconomic shocks like the ones we have seen in recent years. In addition to strong macro fundamentals, declining leverage, lower interest rates, and limited housing supply, it's important to highlight that real house prices in Spain remain 20% to 20% below pre-crisis levels on real terms. Only in 2024, price grew faster than the overall inflation. Furthermore, if we look at the house price to income ratios, they remain healthy. Among Nainor clients, this ratio typically sits between four to five times annual income, which is well below peak levels and reflects our positioning in the mid to high segment of demand. All of this supports our view that the Spanish housing market continues to offer upside and remains well positioned for several more years and healthy performance. And now I give the word to Jordi to go with the financials and a quick update on the EIDAS transaction.

Thank you, Borja. Let me start with the key operational and financial highlights in slide 13. We have notarized a total of 803 units during the semester, of which 421 were fully owned by Nenor and 381 were delivered through our asset management platform. This delivery level is fully in line with our internal forecast, since the vast majority of our developments are scheduled to complete in the second half of the year. On the revenue side, we recorded 148 million, broken down as follows. 112 million from our core business with 323 units delivered at an average selling price of 348K per unit. 9 million in management fees from our asset management division and 27 million from ancillary revenues, basically includes land sales, construction services and rental income. In terms of margins, I would like to highlight that this was our best first half in five years. we achieved gross development margin of over 30% during buy, 28-29% margin in our business, and higher margin contributions from the asset management and auxiliary divisions. Below gross margins, financial performance reflects the seasonality in which we have lower delivery volume in H1, adjusted EBITDA of 18 million and net income of 6 million. Now, looking at the balance sheet, We ended the semester with 334 million in net debt, which implies a loan-to value of 22.9%, right in line with our target range of 20 to 30%. It's important to note that this figure excludes 228 million of equity raised for the AEDAS transaction, since from a conservative point of view, we treat it as restricted cash. With this set, and given that we generate the vast majority of the results in second half of the year, Let me reiterate our full year 2025 guidance. EBITDA should range 100 and 110 million euros, as promised. Now, please follow me to the next slide, where I will provide an update on the NENOS asset rotation program. As you may remember, the crystallization of the B2R portfolio was one of the critical decisions in our strategic plan. Today, we can proudly say that we are done. we have successfully closed agreements for a total amount of 325 million, covering more than 1,300 units and achieving a gross development margin of around 25%. The remainder of the portfolio, which means around 400 units and 80 million units of value, will be monetized through a granular build-to-sell strategy. This investment has supported the execution of the two pillars of our strategic plan defined in 2023, On one side, shareholder remuneration, and on the other, equity efficient growth, which at the end of the day, what we look for is to recycle capital into higher IR projects, above 20%, or alternatively, accelerate distributions to shareholders, optimizing the balance sheet. In the next slide, you can see with what we have recycled the capital. As you can see on the left-hand side of this slide, since 2023, we have acquired land for more than 31,000 housing units, strategically located across Spain's most dynamic regions, being Madrid the most relevant region accounting for almost 50% of total units. In terms of value, we have already executed 1.8 billion in land investment in only two years. And this compares to the five years target of 1 billion. I would say that this is the direct result of the track record we have built and the confidence we have earned from both public and private investors. With such relevant investment, we are not in a rush to continue investing. Having said this, it's true that we still see compelling opportunities in the Spanish market. As you can see in this slide, we currently have around 350 million of potential land deals under analysis, representing about 3,000 new units. That said, we remain as disciplined and selective as ever, and we will only deploy capital where it's accurate for our shareholders. Now, please follow me to the slide number 17 so that we can provide an update on the ILS transaction. As said in previous calls, this is a transformational move for Neynor, and despite it doesn't depend on us, we are on track to close it by end of this year, 2025. Let me begin with the offer price. Following the 136 million dividend paid by AEDAS in July, which means 3 euros, 15 euros per share, the offer price has been adjusted from 24,485 to 21,334 per share. On the funding side, execution has been outstanding. We completed an accelerated book build at 15.25 per share, a 10% premium to pre-deal levels, raising $228 million and issuing close to 15 million new shares. Demand was exceptionally strong. This deal was six times oversubscribed, with solid support from institutional investors, which also has implied an increase of the free flow and liquidity. Since the announcement, Naino's share price has increased by more than 25%. And this is a clear sign that the market recognizes the strategic and financial rationale of the deal. Now, in terms of regulatory and execution steps, we have submitted all required filings to the FDI authority and to the CNMC, which, as you know, is the antitrust regulator. Also, the tender offer application has already been submitted to the CNMC, and once authorized, the prospectus will be published. Following that, the acceptance period will begin. And within that window, AEDA's board should publish its formal opinion on the offer. And finally, Neynor will seek shareholder approval at the general shareholders' meeting, which we expect to hold before the settlement of the deal. So in summary, the timeline is progressing as planned, the funding is secured, the shareholder support is strong, and the market has clearly endorsed the transaction. I will hand the presentation back to Borja for the closing remarks.

Thank you, Jordi. Before we move to the Q&A, let me leave you with four key messages that define who we are and where we are headed. First, Neynor is operating a fully scalable industrialized platform. After a decade of refinement, we have built a model that delivers consistently, efficiently, and at scale across regions, across cycles, and across partners. Second, we are exposed to one of the strongest housing markets in Europe. The Spanish residential market is structurally undersupplied, demographically supported, and fundamentally healthy. This is not cyclical. It's sustainable growth, and we are perfectly positioned to lead it. Third, we are growing with profitability. Margins are expanding forward by pricing discipline, cost control, and operational leverage of a platform that we can easily scale. And fourth, we remain, like always, very disciplined. We maintain conservative leverage, make selective capital allocations, and run a flexible model that adapts quickly, no matter the macro conditions. That's how we scale without compromising returns, and that's how we protect shareholders' value. In summary, we are growing with intention, we are performing with margin, And we are investing with a clear focus on long-term value creation. And now let's move please to your questions.

Thank you. If you would like to ask a question over the phone lines, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. Or if you wish to ask a question via the webcast, please type it into the box and click submit. We will start with a question from the phone lines. Your question is from the line of Fernando Abril Martorell from Alantra. Please go ahead.

Good morning. Thank you for taking my questions. I have four, please. First, on the construction activities, how many units did you start constructing in the first half on your core VTS and fully owned land bank, and also how many units did you have in WIP and finished by the end of this first half. Second, regarding asset rotation that you've mentioned before, have you included any more land sales in your fiscal 25 guidance? Third, on your NAV breach, can you confirm that the capital increase proceeds are included in the working capital and other line? If so, and excluding, I think you paid out around 100 million dividends this year. So NAV appears broadly flat, more or less, excluding the dividend payment. Is that correct? And then last one, in the event you fully acquire AEDAS, could this allow you to accelerate your JV investment commitments tied in AENORS with AEDAS Land Bank? Thank you.

Fernando, we'll start with the first question on the construction activity.

Yeah, those are a lot of questions, Fernando. Okay, first on the construction activity that you were asking. Right now, we have under construction nearly 7,000 houses. The exact number is like 6,700 or something like this. During the first part of the year, we have started the commercialization of around 1,300 units. We still expect to launch another 2,200 units to start commercialization. That will mean the new cranes that we will be putting in. Regarding the first goals, you know that our first goals are just the units that we start to design, so the real launches. During the first half, we have approved 13 new developments, which represents 1,500 units. So basically, I will say also just to complement a little bit your question that from the point of view of construction, all the construction for the delivery of this year is advancing well. The finish, the end of the construction of the last developments that we have to deliver this year is expected to happen during summer. We have an important development, a couple of important developments in the area of Marbella called Santa Clara and Selene that we expect CFO by the last week of August, first week in September. So we should have time enough to deliver in the Q4.

Okay, I take the second question, Fernando. In regards to asset rotation on land sales, for this year in our internal numbers, we had 25 million euros in value. Regarding your third question on the net asset value, you are right, but it's true that basically we have had a negative impact coming from Los Carriles that has implied 20, 30 million euros of impact, negative, or reduction, let's say, excluding that because there is a delay. So I know that you might be aware of that. So if you exclude this 20, 30 million years impact, that implies the net asset value could have increased by 2% roughly, which for six months makes sense and pretty conservative.

And the last one, I don't know, Mario. Yeah, I'm taking the fourth one regarding the acceleration of JVs. Yes, we commented that on the base case in the underwriting of AEDA's portfolio, we are assuming around 3,000, 4,000 units that would go for sale assist, mostly to feed our JV business, and this is still in place. We will analyze the evolution of the portfolio as settlement, and we will close the final strategy and allocation to the different JVs and partners.

Okay. Thank you very much.

Thank you. We'll now take our next question. This is from Manuel Martin from OdoBHF. Please go ahead.

Hello, good morning. Thank you for taking my questions. Two questions from my side. You had a gross margin of 30% in the first half year, if I saw that correctly. The guidance for 2025 is heading towards 28%. That means that in H2, the gross margin should be below 28%. Can you give us a bit of flavor on what's going to drive that margin coming down?

Well, it's a matter of product mix. So, obviously, each development has its own margin. And depending on what we deliver, we recognize one gross margin or another. And H1 is not representative because it's a very low level of deliveries. But if you look at the annual guidance, 27, 28, whatever you want to consider, it's quite similar to what we did in the past, in the last year, that was 27%.

Okay, understood. Second question, it's on the upcoming merger of IDAS. What's your scenario given that Castle Lake is going to tender 79%? What do you think will happen with the other shareholders, the remaining 21%? Have you heard anything about whether they would like to tender or not or Which scenarios could you imagine, including a possible squeeze out and at which price? Maybe you can elaborate on that, please.

Well, you know that we need a voluntary tender offer and we go for 100%. In regards to the price, for us it's obvious that it's an equitable price, basically because there has been a process in the market trying to sell the company and we have been the ones putting the best offer on the table. So for us, it's equitable. What will do the minority shareholders? We don't know. We will have open the acceptance period. So let's see. In any case, for us, it's voluntary. So if they accept and we do squeeze out, it's fantastic. And if they don't accept, they will not be squeezed out. So we are quite open there.

OK. Thank you.

Thank you. As a reminder, if you would like to ask a question over the phone line, you can press star 1 and 1 on your keypad. Or to ask a question via the webcast, please type it into the box and click Submit. There are no questions on the phones at the moment, so I will hand back to José to check for any questions from the webcast.

Thank you, operator. We have here some questions that we'll go through in different groups. The first question is on commercialization, if we can provide some indication of where the coverage ratios for the year 2025, 2026, and 2027 stand as of today. Mario?

Yeah, perfect. We are close to 90% of coverage ratio for the units to be delivered in 2025. For 2026, we are reaching the 60%. And for 2027, we have touched the 20%. And in our view, and based on the course of the business plan, we are a bit ahead of the sales curve. But we are maintaining this balance between volume and HPA caption. So we are comfortable with the performance of this semester, and we will try to keep as disciplined as possible with the sales curve, not anticipating too much volume.

Thank you, Mario. Then we have here another question on the land market, saying if we expect any acquisitions beyond the transaction we are currently doing with AEDAS. And what's the overall environment that you see on the Spanish market?

Okay. Well, our main focus is to close the AEDAS transaction, as you can imagine, and digest that portfolio that would generate a lot of alternatives and a lot of possibilities to feed our JVs, as we have commented before. But once said that, we have already a pipeline of 350 million and more than 3,000 units, 50% in Madrid and the rest between Malaga, Valencia and Basque Country mainly. And depending on the cash available, and the different alternatives that we had post-closing of either transaction, we will execute. But always, as commented, very disciplined and with this 20% IRR and 1.8 times multiple as target. And regarding the global environment, well, we see... good momentum on the macro, as Borja commented in the presentation. There are few opportunities as there is a high scarcity of land, but we feel that we are the main player to get to that opportunity due to our granularity, due to our size, due to our capacity to generate that business. And as commented, we have a good pipeline. So all in all, we are we would say.

Thank you, Mario. Now I hear some questions for Jordi. One on, you know, if we're seeing further consolidation opportunities in the Spanish market and, you know, how Niner will approach this.

Yes, I mean, I still know there are PE funds behind some corporates that they will need to exit at some point in time. So it's quite obvious now that there will be opportunities sooner than later. In our case, I mean, I think that we first need to digest, you know, that we are in the process to get the settlement. And in any case, it must be accurate for our shareholders. So it's not, you know, that we will jump to the opportunities because we need to grow. It's not the case. It's a matter of trying to put a solution structure that makes sense for our shareholders. If it applies the opportunity, we will jump.

Thank you, Jordi. And another one, if we could remind the financial policy post-merger regarding leverage and the credit rating.

Yes, absolutely. Remember that our policy was to have a 20% to 30% loan-to-value. And in our homes, this is what we committed always. In the last 10 years, also in the last bond issuance, done in November of 2024. So this has not changed. It's true that if that we have the non-recourse or reinfenced structure of ILS transaction, which we put more leverage there. So combining or considering also the non-recourse debt, loan-to-value would be between 37.5% and 40% in the next one year, two years. But given that there is a leverage profile assumed in ILS transaction, after these two years, we will come back to the 23% loan-to-value, also including the non-recourse debt.

Thank you, Borja. And then we have here a question perhaps for – thank you, Jordi, sorry. We have here a question for Borja on the impact of the 100% tax on the property purchase by non-EAP residents on the demand for timber, particularly in the markets with higher foreign buyer activity.

Well, really we don't expect any impact at all. First, because less than 3 or 4% on a yearly basis of our sales are to non-GEU residents. So even if this measure could be approved, it wouldn't have any impact in our normal activity. But moreover, we don't really think that this measure could be implemented in any region. At the end, in Spain, the decision to increase such taxes It's not on the Spanish government. It's more on the regions. And basically, the regions who want to protect more these type of transactions with non-new foreigners are the touristic regions. And they are not interested at all in approving or implementing such a measure. So no impact at all.

Thank you, Borja. And then here another question more on the markets. How do you see the market and the cycle evolving in the next few years? After several years where house prices have been going up year after year, how much longer can this go? And how do we see affordability in the market and for NIDOR clients?

Well, as we have explained many times in the past, the Spanish residential sector has little leverage. The supply is very limited. and demand has been growing as the economy is strong and interest rates started to decline. So in terms of housing prices, we will note that real prices, that is to say adjusted for inflation, they have barely recovered since 2014. More importantly, when you look at the ratios of affordability, they don't look stretched. The problem young families have to buy an apartment is not to pay the mortgages, it's to make the down payment. So these people are being forced to be in the rental market even though they could afford to pay mortgages. And this creates an excess of demand in the rental market that looks way more expensive. If you look at the rental market in Spain, it has been growing from 17% to 21% in the last five years. And this is what is creating these expenses in prices. So, as we have explained, we see room still for house prices on sales to keep increasing in the coming years.

Thank you, Borja. We don't have any further questions, operator. So, I guess we will finish the session of the first half results, and if you have any questions or doubts, we are ready to take it offline. Okay? Thank you, everyone.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.