Neinor Homes, S.A. (HOME) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Neinor Homes First Half 2026 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jose Cravo, Head of Capital Markets and Investor Relations. Please go ahead.

Thank you. Hi. Good morning, everyone. My name is Jose Cravo, and I'm the Head of Investor Relations at Neinor Homes. Today, we're going to go over results for the first semester of the year 2026. And as usual, we are here with Jordi Argemi that is taking the role as the new CEO; Borja Garcia-Egotxeaga, our Departing CEO; and Mario Lapiedra, our CIO. We will start the presentation with the key highlights in Section 1. Then on Section 2, we will provide an update on the Spanish residential market. On Section 3 and 4, we will review operational and financial results. And on Section 5, we finish with the key takeaways. After the presentation, there will be a Q&A session to answer any questions you may have. Now I'll hand over the presentation to our CEO, Jordi Argemi.

Thanks, Jose. Before I begin, I would like to thank the Board of Directors and the shareholders for my appointment as CEO and for the trust they have placed in me. In my view, after several years in which we have consolidated our position as the undisputed leader of the Spanish residential market, this company has never been stronger. We have the full backing of our stakeholders, a track record that speaks for itself and a demonstrated capacity to raise capital in both public and private markets. In my view, these strengths will be the key to lead the company into the next phase of growth. And I couldn't be prouder of what we have done in the last few years and more ambitious about what comes next. With that said, let's start with the presentation in Slide #4. Starting with the context, the first half of this year has been tricky. We have integrated AEDAS against a backdrop of real geopolitical uncertainty with the war in the Middle East and volatile energy prices. Through all of it, this company has done an exceptional work, and I would like to thank every single person in Neinor Homes for keeping the focus after a big acquisition such as AEDAS. Now 4 big messages today. First, the market. The fundamentals held through uncertainty, resilient growth, the healthiest household balance sheet in decades and a market still pretty short of homes. We will show you in a minute why Spain continues to be one of the best residential markets in the world. Second, execution. We have integrated AEDAS, the largest acquisition in our history and in the sector. And in just 4 months, we have done it with 0 disruption on the deliveries, construction, commercialization or IT systems. It is true that we have a strong track record based on Quabit and Habitat transactions, but AEDAS is a different animal due to the size. Third message, the financials. We have operated a step change in scale without disruption, and the year-on-year figures demonstrated clearly. But this was not growth for the sake of growth. Margins remain very solid, and this translated into strong cash flow generation; strong enough to accelerate our shareholder remuneration targets for the year, buy out the AEDAS minorities after the second tender offer and pay back EUR 100 million of Apollo's debt ahead of schedule, all of it in less than 6 months. And fourth and last one, the guidance. We already reiterated in April in our AGM and today, with the first semester closed, our visibility over those objectives keeps on growing. In my view, the best answer to uncertainty is delivery. And in this first half, we have delivered once again. If we move to next slide, it shows the whole company on one page. And the story this slide tells is both scale and growth. With AEDAS fully integrated, every single KPI has stepped up. On the operational side, we have a land bank of nearly 37,000 units, out of which 23,000 are fully owned and 19,000 active units under production, giving us years of visibility and tangible cash flow generation. Commercialization is well advanced with a record order book of 9,300 units worth EUR 3.3 billion, half of the total active units. On the financials, we delivered close to 2,400 units, also record and generated EUR 680 million of revenues. But as you know, volume is one thing and profitability another. Our priority has always been to translate execution into profitability to have better returns for our shareholders. In that sense, the first semester, we have kept strong underlying margins, driving an EBITDA of EUR 119 million. Overall, every metric is materially higher than a year ago. That is the accretive impact of AEDAS, flowing through the business in record time and better than our initial expectations. We will review it in detail later on. Now let me hand over to Borja, who is going to comment on the market.

Thank you, Jordi. Good morning, everyone. As always, let me start by giving the big picture. And my message is the same one I have been giving you. Spain remains one of the safest and strongest residential markets, not only in Europe, but in the world. This semester, that message was tested once again. We have a war in the Middle East, energy prices moving up and plenty of geopolitical noise. And yet look at the chart on the top right. In January, the consensus for Spanish GDP growth this year was 2.2%. Today, after 6 months of geopolitical uncertainty, it stands at 2.3%. That is nearly 4x the Eurozone average of 0.6% and well ahead of the U.K. and Germany. And one of the reasons behind this growth has been, without a doubt, the job market and the private consumption in Spain. Year-to-date, the Spanish economy has created more than 600,000 jobs, taking social security affiliates to an all-time record of 22.4 million people. More people working and living in Spain means more households and therefore, more demand for housing. Having said this, if there is one variable where we have felt the impact of the conflict in the Middle East, it has been inflation, which accelerated to 3.2% in June. This is mainly the conflict feeding through energy prices, a supply side effect not overheating demand. So the takeaway from this slide is simple. The Spanish macro has been extremely resilient. Please let's move to Slide #8. On the Slide #7, I showed you the demand. On this slide, I want to show the quality of that demand because a strong economy is one thing, but what makes a housing market truly resilient is the strength of the balance sheets behind it. And here, Spain is a class of its own. Household debt stands at just 43% of GDP, the lowest level in more than 20 years and among the lowest in Europe. Look at the chart in the right. In 2008, Spanish households were among the most indebted. Today, we are below Germany, the U.K. and the U.S. That is 43% points deleveraging since the year 2010 peak. Mortgage debt tells the same story, the dash line. It has halved since the peak to a record low of 30% of GDP. Meanwhile, families keep saving. The savings rate remains high at over 11%. And on financing, yes, the Euribor has moved up by around 0.8 points, close to 2.9%. But mortgage rates in Spain remain very competitive at around 2.5% and 3%. So put it together, low leverage, high savings, cheap fixed rate financing for 30 years. This is why Spanish demand is resilient to shocks. When rates move, our buyers do not break because they were not stretched to begin with. Please follow me to Slide #9. So far, I have shown you the demand and the strength of the balance sheets behind it. Now let's look at the other side, supply. This is where the Spanish opportunity becomes truly structural. The message is simple and well-known. Spain does not build enough houses, and it hasn't done it for over a decade. Spain is building less than 90,000 units per year. At the 2008 peak, Spain built nearly 600,000 houses. We are 85% below that level. And look at the chart. Since 2020, housebuilding remains almost flat. Demand is booming, but supply has not responded. So the key question is why? And there are 2 structural reasons. The first is land. There is not enough fully land permitted. Madrid is the clearest example. New supply has fallen 25% since 2021, simply because permitted land is scarce. The second is the structure of the market. The Spanish residential market is [ extremely ] fragmented. It is dominated by small local developers. These are not institutional players. They lack scale. And critically, many of them, they lack access to bank financing for construction. So even when demand is there, even when land exists, much of the market cannot fund the CapEx to build at reasonable costs. This is the heart of the opportunity, a structural shortage driven by fragmentation and limited access to capital. It is a market that needs an institutional grade, well-capitalized platform to build at scale. That is exactly what Neinor is. And in today's market, that is our competitive advantage. Now let me put the numbers together. According to the Bank of Spain, since 2021, Spain has accumulated a deficit of 750,000 homes, and the gap keeps widening. In the first quarter alone, households grew by 56,000. Moreover, this week, the Spanish Statistics Institute released its population forecast for the upcoming years. And in the next 15 years, the Spanish population is expected to grow by more than 4 million people. More households forming and not enough homes being built. This is not cyclical. It is structural, and it does not correct quickly. Please follow me now to Slide #10. So let me bring this section together. Think about what I have just shown you. Demand is strong. Balance sheets are healthy and supply is structurally short. Put those 3 together, and you would expect one thing, significant increases in home prices. But that is not what happened in Spain. And this slide is, for me, the most important of the section. Look at the chart. This is how prices since 2005, indexes across 4 countries. You see in Germany, the U.K. and the U.S., home prices have nearly doubled. Spain isn't anywhere close to it. And here is the key figure. In real terms, adjusted for inflation, Spanish prices are still 21% below the 2007 peak. Since the [ trough ] in 2014, prices have grown 60% in nominal terms, but just 24% in real terms. So the growth has been real but disciplined. Coming back to the beginning, the Spanish residential market after the global financial crisis is significantly smaller, but much, much healthier. And this is where Slide #8 connects. Prudent bank lending has kept demand disciplined, no excesses. Looking forward, our view is clear. Demand is resilient, supply is constrained, credit is disciplined. And with this context, we expect prices to keep rising in the following years at around 5% per year, not a spike, sustained structural growth, exactly the environment in which we operate the best. With that, let me hand back to Jordi.

Thank you, Borja. Clearly, the market backdrop is strong. Now let's turn to Section #3, where I will comment the operational results. The event of this semester has been the integration of AEDAS. The headline is simple. We have completed it in 4 months with 0 disruption to deliveries. Regarding the time line, in March, we closed the second tender offer, increasing our stake to 97%. In April and May, we executed the key organizational changes, mainly in operations, the investment team and human resources. And by June, the integration was complete. In a business of this size, in my view, that's exceptional. Why it went so well? Basically 3 points. First, a proven playbook. This is our third relevant integration after Quabit and Habitat, and this one increased our land bank by more than 60% in a single step. Second, the integration is fully derisked. We took control of construction sites and commercialization without any interruption. Accounting, financing, IT and management control are onboarded. There is no pending integration risk left on the table. Third, we came out of it stronger. Alberto Delgado from AEDAS has been appointed Group COO, leading operations together with Gabriel Sanchez, our Chief Business Officer. We have kept the best people and reinforced the team. That is how we integrate for the long-term. And the chart on the right is the proof. Through an integration of this scale, deliveries didn't slip. We delivered close to 2,400 units in the first half, which is around 40% of our full year guidance, right on track. And the most important point, we divest for the returns and have written at a 20% IRR and 1.8x invested capital. And everything we have seen since closing has confirmed those assumptions. Now, follow me to Slide #13. If Slide 12 was about execution, this slide is about visibility. For me, the most important operational slide in the presentation. The headline, I said before, 2,400 units already delivered and almost 19,000 units currently under production with a very significant degree of execution embedded. Three numbers from it, an active portfolio of 18,933 units, a record order book of 9,300 units worth EUR 3.3 billion, close to half of that portfolio and 13,400 units in work in progress or finished, 71% of it. Now let's focus on the charts. On the left, presales coverage by delivery year. In 2026, 89% already presold. In 2027, 78%. And in 2028, 2 years out, it's 43%. These ratios are 6 months ahead of our standard business plan [indiscernible], and that changes the strategy for the second semester. Being this far ahead, we are shifting the focus on capturing further HPA. On the right-hand side, you have the construction coverage. Everything we plan to deliver in 2026 and 2027 is already under construction. And 2028 is already moving, more than 50% as of today with turnkey agreements in place. So as conclusion, developments are being built and sold years in advance. We have strong visibility, and this give us confidence to reiterate our guidance. Please follow me to Slide 14. Now a question we get in almost every meeting. What about construction cost? With the situation in the Middle East, cost inflation is once again a key focus for investors. Let me answer this question from 2 different angles. The theory, I mean, margin sensitivity to higher cost and our real track record. Regarding the theory, take our selling price as 100%. Hard cost that basically means labor and materials are only 45% of that price. The only 55% is land, other cost and margin. Because hard costs are less than half the price, a small move in price offsets a much larger move in cost. Basically, 1 point of selling price offsets 2 points of total cost inflation and 4 points of material inflation. Right now, we are anticipating mid- to high single-digit inflation driven by materials and a price increase of around 5%, as Borja said before, fully offset this impact. Now our track record, the chart on the right. The black line is construction cost inflation, up 85% since 2015. Labor cost, supply chain disruptions, the war in Ukraine, one shock after another. The red line is our gross margin. Through all shocks, it has been consistently above 24% to 25% guidance. So cost up 85% and margins helped. That is the result of pricing power and healthy affordability in the Spanish market, especially in our mid-high segment. So we remain comfortable with our margin outlook for the upcoming years and reiterate our 24% to 25% gross margin. Now let me hand over to Mario to review the investment activity of the first half of the year.

Thank you, Jordi. After having a look to the operational area, now I'm going to explain how we keep growing as part of our equity efficient strategy. Remember what we said at the beginning, good margins are not enough. The goal is to turn good margins into better returns for shareholders. And the way we do that is through smarter uses of capital through Neinor Asset Management. The best example this semester is Rio Real, a new Luxury segment JV with Stoneshield of around EUR 120 million through the monetization of our strategic asset. We crystallize value today, accelerate cash flows and keep managing the asset, maximizing returns with a fraction of the equity. And this is not the first time. We did exactly the same with Joaquin Lorenzo asset together with AXA back in 2023 and with Orion, Santander AM or Ameris Capital in 2024. That is the model, proven and repeatable. Behind the model, we have reinforced the engine. With the AEDAS acquisition team fully integrated, our investment team has tripled in size with specialized teams across 3 verticals: Corporate Transactions, Granular Build-to-Sell and Alternative Living and Affordable. More origination capacity, more diversification, more deals we can look at, at the same time. And one more effect worth naming. With the acquisition of AEDAS, our largest competitor disappears, one less rival bidding for every plot of land, every portfolio, every deal. Now the numbers on the right side. Year-to-date, we have closed circa EUR 180 million of investments, roughly half and half, EUR 90 million on Neinor's balance sheet EUR 90 million through joint ventures. Of that, around EUR 160 million in Build-to-Sell, some 850 units, plus a new Flex Living project of around EUR 15 million. And the pipeline keeps building, more than EUR 350 million under analysis, EUR 150 million in Granular Build-to-Sell and EUR 200 million in Alternative Living and Affordable projects. So the message is simple. We are not just delivering this year's results. We are deploying capital with discipline with partners and with less equity per euro of growth that is the engine for the years ahead. Now I hand over the presentation back to Jordi to review financials.

Thanks, Mario. Now before we jump into the financials, one more announcement, a special one for me. I want to give a very warm welcome to our new CFO, Aiala Zubiaur. Aiala has been with this company for more than 10 years, and I'm truly honored that she is the one taking over my role as CFO. Aiala will be with us for the full year results. Today, as part of the transition, I will cover the financial section one last time. So let's move into Section #4. Now the numbers. First column, what we have delivered; second, our guidance. As you will see, every line is on track. Deliveries, as said many times, 2,400 units. This compares to the full year guidance ranging 5,000 to 7,000. Revenues reached EUR 680 million, EUR 632 million comes from the development business and EUR 28 million comes from ancillary divisions, mainly our own construction unit. And I would like to highlight that there are EUR 20 million coming from the Asset Management business, already more than what we recorded in the whole year 2025. So very strong growth in our core business line as well as in Asset Management business and a fulfillment of 40% of our annual objectives. This figure excludes EUR 100 million from the sale of Rio Real expected to be concluded during the second half of this year. Now profitability; in the first half, we have recorded EUR 187 million of gross profit. That means 27.6% gross margin. EBITDA recorded has been EUR 119 million and 2 aspects here to highlight. First, on our cost structure. Overheads are close to EUR 40 million as we start to realize some synergies. But remember, for us, the critical element of the underwriting is delivery and execution, not cutting cost. Second, a EUR 10 million positive contribution from profits realized in the Asset Management business. This mainly relates to the sale of La Termica project, which was not assumed in the business plan and where we had a 20% stake. Then at the bottom line of the P&L, you can see we earned EUR 54 million. And 3 concepts here to take into consideration versus the previous years. First, a relevant increase in one-offs. This is mainly due to the purchase price allocation of AEDAS acquisition, EUR 30 million recorded in the first half. But remember that this is purely accounting with no cash impact. Second, financial expenses have materially increased to EUR 40 million, and this compares to EUR 10 million of last year. This is mainly due to the Apollo EUR 750 million senior secured notes. And as said at the beginning, we have started to repay this bond sooner than the original calendar, EUR 66 million already repaid and another EUR 33 million to be executed soon. Actually, it will come tomorrow. We took this decision given the strong cash flow generation and excess cash available. And third, higher tax expenses. The Apollo notes expenses sit at the holding level, while profits are generated at the development companies, so we cannot generate the tax shield. This fiscal inefficiency was already factored into the business plan, and we are working on alternatives to optimize it. Overall, the key message is that we are completely on track to achieve the net income target of EUR 120 million to EUR 140 million, which once again is adjusted for one-offs. Finally, net debt, broadly flat at EUR 1,166 million in the first 6 months. There are a couple of impacts that are relevant. On one side, we have distributed close to EUR 170 million of dividends. And on the other side, we have registered the second tender offer over AEDAS, which has implied an investment of around EUR 200 million. So basically, we have funded 70% of the year's shareholder remuneration, increased our stake in AEDAS to 97% and began repaying the Apollo notes ahead of schedule, and net debt stayed broadly flat. It shows a strong cash generation of this business. With that, we reiterate every single target for 2026, deliveries, revenues, EBITDA, net income and net debt. With that said, please follow me to the last slide of this presentation, the key takeaways. Let me close with 4 messages that summarize the investment case of this company. First, the market; strong structural fundamentals and a persistent supply shortage. As Borja showed before, demand is healthy. Balance sheets are strong, and Spain simply doesn't build enough homes. And all this in a fragmented market with limited access to capital. Our scale is our real competitive advantage. Second, guidance. We reiterate every target for 2026, and we do it with multiyear visibility, almost 19,000 units under production, nearly half of them already sold. 2026 and 2027 are largely built and sold. It's not a forecast. It is a portfolio with significant execution embedded. Third, cash flow, strong underlying margins maintained through the largest acquisition in our history and that converts into cash. This semester, we funded 70% of the year shareholder remuneration, increased our idle stake, and we began repaying the Apollo's note in advance with net debt broadly flat. And fourth, growth, further growth ahead, powered by an expanding Asset Management platform, more scale, more partners, less equity per euro of growth, that means higher returns. So to summarize the semester in one line, we have integrated the largest acquisition in our history, delivered record results and strengthened our visibility for the years ahead, all at the same time. Thank you very much for your attention. And now we are happy to take your questions.

[Operator Instructions] And our first question comes from the line of Ignacio Dominguez from JB Capital.

I have a question on gross margins. Looking specifically at the pure Build-to-Sell development business, what gross development margin do you expect in the second half? And given the strong mix seen in the first half, do you expect your mix to remain strong in the second half? Thank you.

I take it. I mean you know that our guidance for the full year is always the same 24%, 25%. It's true that in the first semester, we are above. That's a reality. It's also true that when you look at the past, our track record despite our guidance has been always same 24%, 25%, we get an extra margin of 1%, 2%. So let's see how we end the year. I think that there are still a lot of challenges operationally speaking, I mean, a lot of deliveries to be done in the second semester. We prefer to be cautious and keep that 24%, 25% and keep that upside risk for the year-end if we are able to get it.

And our next question comes from the line of Fernando Abril-Martorell from Alantra.

I have a few, please. First, on land sales. So can you give us more details around the EUR 100 million disposal to Stoneshield? When do you expect this to be closed in H2 or I mean, what is pending for this to be closed? And also linked to land disposals in the AGM, you mentioned you wanted to sell around EUR 400 million cumulative in '26 and '27. So what is the visibility on this today? And also, should we assume EUR 100 million this year, EUR 300 million next year? So any comment on this would also be helpful. Second, on the Apollo's loans. So you've [ only ] repaid EUR 100 million out of the EUR 750 million. I don't know if you have -- maybe you can comment on any internal objective you may have of new repurchases in the near future, just to try to see how can we model the financial cost going forward? Third, on guidance. H1 EBITDA, you've almost reached 50% of the year target. And well, the expected delivery volumes should be bigger in the second half. And then on top, you may have the profit from the land sale to Stoneshield. So my question is, how -- I don't know if you can elaborate a little bit more on the guidance because it seems quite prudent, especially if the land sale is finally closed before the year-end. So also any comment on this would be very helpful. And last one, sorry, Slide 13, there is a presales coverage ratios, 89%, 78% on the Neinor's fully-owned portfolio. And Jordi, I think you've mentioned '28 is at 43%. My question is based on what targeted deliveries. So what is the internal delivery target you have for the fully-owned portfolio? I'm sorry for the...

Wow, Fernando, a lot of questions. I have tried to write them in a paper your questions. I answer the last one, which is to be clear, I don't know what I have said, but it should be 33%. So if I have said 43% that typo -- probably I'll take it. Sorry for that. It's 33%, okay? So going to your first question, land sale Rio Real, Rio Real is closed. By the way, that mean, we have signed the contract. The only thing is that pending to some urbanistic milestones, and we do believe that these urbanistic milestones should be achieved between -- mainly in Q4, between October, November. So it should be recorded by year-end. It is assumed. And actually, in our business plan was already in our numbers. So I also answered part of your guidance question that Rio Real is not an upside, it's embedded. It's included, okay? What else? The second question was about the EUR 400 million land sales that you are -- Mario will take it.

Yes. Regarding the disposals for us, it's more rotation of equity and a way to create more JVs. So this year with Rio Real, we are covering the budget. But on top of that, we have had around EUR 50 million of sale assets, small land plots non-strategic that we sell in the market. And for the next year, we are already working on potential vehicles with the land bank that would achieve the figures potentially we will anticipate. But today, we are working on it.

Just a follow-up on this, Mario. I guess this EUR 50 million is now in the market plus new more for the next year. I guess this is all coming from AEDAS?