Good day, and thank you for standing by. Welcome to the Neinor Homes 1H 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a questions and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. If you wish to ask a question via the Q&A box available on the webcast link any time during the conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, José Cravo. Please go ahead.
Hi. Good morning, everyone. My name is José Cravo, and I'm the Head of Investor Relations at Neinor Homes. Today, we'll go over financial results of the first semester of 2023. As usual, we are here with Borja García-Egotxeaga, our CEO, and Jordi Argemí, our Deputy CEO and CFO. We will start the presentation by doing a recap of the strategic update we presented four months ago. We will update you on the fundamentals front, and reinforce our view that Spain is one of the safest residential markets in the world right now. Jordi will review our value proposition with the context of all the milestones we achieved recently, we shall finish with conclusions and the Q&A question. Now, I hand over the presentation to our CEO, Borja.
Thank you very much, José. Welcome everyone. It's been four months since we presented our strategic update. I would like to start by recalling the most important messages we gave back in March. First, we said that for the last five years, we have been executing our business plan flawlessly. We delivered nearly net 1,000 units, generated EUR 2.3 billion in revenues, EUR 500 million EBITDA, and EUR 350 million net income. The second message was that the Spanish market is today one of the safest residential markets worldwide, as it is undersupplied, underleveraged, and underpriced. Third, in spite execution, a healthy balance sheet and solid fundamentals, we keep trading at significant discounts.
We decided to launch a strategic plan, where the capital allocation is designed to solve the biggest challenges we have in front of us today, valuation discounts and growth. Please follow me to slide number five, so that we can elaborate further on these two pillars of our strategy. First, on shareholder remuneration, we have announced a plan to distribute EUR 600 million until 2027, where EUR 450 million will come in the next two years and a half. We are doing this to put the company in value, and today this is by far the highest and most attractive dividend yield across Spain and Europe. Our second objective is to pursue equity efficient growth. To achieve this goal, we have designed a program with EUR 1 billion investment target for the next five years, of which 50% will come from new equity partners.
We are firm believers on the Spanish real estate sector. Today we are seeing attractive opportunities in our core build-to-sell business, but also on the emerging living asset classes, such as senior living or co-living. Furthermore, I would like to add that the feedback we have received from capital markets regarding our business plan was very positive, as we plan to distribute the best dividends in the Spanish and European real estate sector, while we ensure a sustainable growth of the company. Investors and analysts did also raise some questions. Will we be able to distribute such dividends with the bond that Neinor had raised a couple of years ago? Will we be able to crystallize the value of our rental platform in a scenario of higher interest rates?
Will we be able to find investors that want to join us on the co-investment business when the real estate sector is suffering in other European countries? Will we be able to continue protecting our margins from the construction cost inflation seen in recent years? In the next slide, number six, you will find the answer to all these questions. What did we do in the last 12 weeks? Starting on the upper part of the slide, which includes all milestones related with Neinor's EUR 600 million shareholder remuneration program, the first thing we did in April was to refinance our bond by a green loan, while we effectively reduced its cost from 4.5% - 4%, with important financial savings for our shareholders.
At the same time, thanks to changes in the covenants, we guarantee that we are able to deliver on our shareholder remuneration strategy. The second task was to unlock and crystallize value in our build-to-rent platform. We have already successfully sold five assets, representing 700 units for nearly EUR 200 million. With these sales, so far, we have executed and exceeded our yearly targets by more than 50%. Third, we would like to take this opportunity to say that following the asset disposal program implemented during the first half of the year, visibility on 2023 objectives have improved significantly. Today, we are reiterating our 2023 targets of EUR 140 million and EUR 90 million of EBITDA and net income.
As a consequence of the increased visibility, we are also announcing an EGM to approve EUR 126 million distribution to shareholders. On the bottom part of the slide, we have the milestones related with our equity-efficient growth strategy. As you know, in our business plan, we announced a EUR 1 billion investment target for the next five years, of which 50% will come from partnerships with new investors. In just four months, we announced two joint ventures with renowned investors worldwide, such as AXA and our main shareholder, Orion Capital, for a total of EUR 150 million. This implies a 50% overachievement versus our EUR 100 million yearly target. These agreements will play a key role for Neinor in the next years to come, and we are just getting started.
To sum up, I am extremely proud of all the work and achievements we have made in such a short period. Four months ago, analysts and investors asked us for execution. I hope we have cleared all the doubts. Please follow me to slide number seven, where you have a snapshot of our operational and financial performance. Here, you have a summary of our performance during the first six months of the year. On commercialization activity, we have sold more than 1,000 units, 3% more than in the same period last year. Our order book is worth more than EUR 700 million, and we have above 90% pre-sales coverage for the year 2023, which means we are nearly fully sold.
In terms of prices, very important to highlight that we keep pushing, and we have recorded a 3% HPA, as we strive to maximize margins and the value of our land bank to shareholders. On deliveries, we have notarized more than 700 units during the first half of the year, which is completely in line with our business plan. On a pro forma basis, if we include the sales of Europa Homes and Joaquín Lorenzo, our revenues stood at EUR 277 million. Sky Homes is not included here due to accounting standards, but contributes with EUR 66 million of gross cash flow. All in all, EBITDA and net income were respectively EUR 52 million and EUR 30 million. By the end of June, net debt position was EUR 345 million, continuing to show a healthy loan-to-value of 20%.
Please follow me to next slide. Here, you can see the pro forma results with the impact of the disposals announced, whose accounting effect will take place during the second half of the year. In addition, you can see that including these asset sales, we have already fulfilled 37% and 33% of the EBITDA and net income targets for the year, while deliveries from the core build-to-sell business will accelerate during the second semester, as it was expected. In the meantime, we keep progressing and improving visibility, as we did last week with the sale of Dual Homes, which is not included in the pro forma figures shown. Let's move to section two and slide number 10 to review the Spanish macro and residential sector fundamentals. In this chart, you see two things.
First, that the perspective of GDP growth for Spanish economy in the year 2023 have doubled since January. In fact, two days ago, the International Monetary Fund announced its new forecast for the Spanish economy, right now it is expected to grow by 2.5% this year. Second, that Spain will lead the economic growth tables in both 2023 and 2024. Please, let's go to next slide. Here we see that from 2023 to 2027, which is the scope of Neinor's new five-year business plan, Spain will create more jobs than other economies. With an employment market that is not as tight and a significantly lower energetic exposure to Russia, inflation data in Spain is one of the best ranges of the all European countries.
In May, inflation was already at 2%, which, as you know, is the target of the European Central Bank. Let's shift to the fundamentals of the Spanish residential market. We start with the supply side by showing that Spain is producing 50% less new homes on a per capita basis than the U.S., U.K., or Germany. Spain is clearly undersupplied. In the next slide, we can see the house demand. On the demand side, this chart with the OECD data is self-explanatory. Spain is one of the few countries where young population is still growing, 30% growth in the next 15 years. This is very important for housing demand, as the Millennial generation is only now approaching its prime buying age. Not only that, as you can see in the slide 14, net immigration is also a key driver of housing demand for Spain.
Again, on OECD data, Spain is one of the countries in the world with the highest flow of immigrants as a percentage of its population. These flows are coming mainly from European and Latin American countries. Remember that Spain is being affected also by a huge interest of tourists that are buying houses in Spain since COVID. So far, 15% of house sales in Spain are for foreigners. Follow me to slide number 15. Here we put together demand and supply in one picture. Over the coming years, CVRP expects supply to be stable at around 100,000 per year, while new household creation has accelerated to levels around 200,000. If these estimates prove correct, the balance between demand and supply will keep compounding year after year, making more and more attractive our business. Now I hand over the presentation to Jordi.
Thank you, Borja. I said in March, when we presented the new business plan, Neinor has a unique value proposition for our shareholders. This value proposition is based on two main concepts. On one side, strong shareholder remuneration, actually being the highest dividend yield amongst listed real estate companies in Spain, but also in Europe. On the other hand, a strong growth based on co-investment that will lead to a stabilized return on equity of 15%, and this compares to the 10%-12% achieved in the past. If you go to slide 17, you will remember from March that these two concepts should imply a total future valuation between EUR 1.3 billion and EUR 1.4 billion. This valuation has two relevant concepts.
On one side, the shareholder remuneration, EUR 600 million, which will be completely tangible, not subject to volatility or credibility of the equity markets. On the other side, between EUR 600 million and EUR 700 million of value for the platform after having an invested capital of EUR 500 million. All in all, and considering that our market cap was, in that moment, EUR 0.7 billion, investors could multiply by two times the investment in just a few years. This is what we explained in March, now, just after four months, we have done a big step forward in regards to visibility of these two value drivers. Regarding the visibility of the dividends, let's go to slide number 18. Here you have the snapshot of 2023- 2025 deliveries.
The first aspect is that we have already more than 100% of the product to be delivered underway. We have almost 90% under construction, and with approximately 900 units, additional units, with licenses received, where we should break ground in the coming months. Also, with our solid performance in build-to-sell and build-to-rent sales, we have almost 45% of the total product sold, providing us excellent visibility for the coming years. If we jump to the next slide, you will see the second aspect. We are one of the few companies in real estate that is not struggling with the interest rates or refinancing problems. As we try to illustrate here in this slide, we don't have any refinancing risk until 2025, as we expect to partially repay the corporate loan with cash flow proceeds originated by our activity.
Also, very important, one year ago, we took the decisive action to mitigate interest rates by buying stocks to protect us for scenarios where the Euribor is above 2%. You know, today, Euribor is at 4%, approximately. We took the right decision, as a result, we have protected our margins. Third concept of the dividend visibility is the build-to-rent divestment in slide number 20. This build-to-rent divestment supports our shareholder remuneration plan of EUR 600 million. Borja said that before, many of you told us it was too good to be true, and that the weakness of our business plan was our capacity to monetize this business line.
Today, after a successful disposal program of EUR 200 million, and with selling prices close to GAV, I hope you no longer question our dividend plan. Through these sales and treasury share cancellation, we have already secured EUR 160 million, which means already 35% of the shareholder remuneration target over the next two years and a half. All this with only four months after we have presented the new business plan. Thanks to it, today we are in a position to anticipate the shareholder remuneration for this year, 2023. In slide 21, and as Borja commented in the introduction, you can see the details of this anticipation.
We are calling an AGM for the first of September to approve a payment of EUR 75 million in dividends that will occur in two different tranches: EUR 35 million in early October, and the remaining EUR 40 million that should come between December and March. All this together with the first payment, to all this together, we will cancel EUR 51 million of treasury shares, and this represents 6.3% of the Neinor's share capital. Please follow me to the next slide to provide visibility on the second value driver of Neinor, the growth and platform value. In just four months, we have been able to sign two JVs in the build-to-sell segment that worth EUR 150 million.
On one side, we have AXA, a tier one investor worldwide, and on the other side, we have Orion Capital, one of our relevant shareholders. These EUR 150 million already imply a 30% of the total target of the following five years. Remember that we estimated EUR 500 million investment through co-investments. Thanks to this action plan, we are putting in place, of shareholder remuneration, the reduction of the number of years of landbank and these JVs, we are targeting to increase our stabilized return on equity to a level of 15%. In the coming quarters, we will continue to update the market regarding our growth strategy. As I said before, in the meantime, dividends will start flowing to our shareholders. Now, I hand over the presentation back to Borja for conclusions.
Thank you, Jordi. Allow me to finish with some key messages and try to summarize everything we did over the last couple of months. Starting with the macro, the forecast for the Spanish economy have held their ground during the first semester. Despite unprecedented interest rate hikes, the Spanish residential sector has remained solid. The performance of our core build-to-sell business has remained steady. We sold 3% more units than we did last year, when interest rates were significantly lower. Cancellation rates remain at historically low levels. On the build-to-rent, we have proved the value of our portfolio through EUR 240 million sales program, driving EUR 110 million in free cash flow to equity, representing 16% of our adjusted market cap.
On the co-investment front, we signed the first two deals worth EUR 150 million, of which we have already deployed EUR 70 million in land acquisitions. We are currently seeing more appetite than we initially anticipated, and we are very enthusiastic about the prospects for this business line that should have a positive impact on our return on equity. To finish, I would like to reiterate our annual objectives for 2023. This is EUR 140 million EBITDA and EUR 90 million net income. Today, thanks to the asset disposal program, we have a much better visibility on these objectives. Therefore, we decided to anticipate the first dividend payment of our shareholder remuneration program with EUR 126 million distribution. Always, we will keep working hard to bring more co-investment, more build-to-rent crystallization, and great performance on execution.
Thanks for your attention, and now we are ready to answer any questions you may have.
As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. Please stand by while we compile a Q&A roster. Our first question comes from the line of Ignacio Dominguez of JB Capital. Please go ahead. Your line is open.
Good morning. Thank you for taking my questions. I have two. Firstly, could you please explain why is your sales coverage ratio for full year 2024 deliveries lower than in previous years? Do you have any targets to reach by the end of the year? Secondly, could you please explain the rationale behind the deal with Orion? They are already your shareholder, now you also launch a joint venture with them. If you could provide some color on this, will be helpful. Thank you.
I'm Manuel Rapera. I'm taking the coverage ratio. Basically, we are fulfilling the business plan. We have almost everything sold already for 2023, with a 90% coverage. For next year, if we take into account just the build-to-sell deliveries, we are in a range of 35% coverage, and we hope to end up the 2023 period with 60%-65% coverage for 2024. For the 2025 deliveries, we have a coverage of almost 10%. On top of that, you know that we have some additional rental buildings, but as we have anticipated most investment to this year, we'll have more time and we will see the best strategy to dispose that buildings in the next two years.
Orion as a shareholder and as a partner of JV, we are very proud to be honest, to have the main shareholders.
investing directly in real assets, also with us. The strategy behind the co-investment and the JVs is the same for us shareholder that for a third-party investor. It's basically that on one way we are improving the return for the current shareholders, and the other way for the platform, we are being able to maximize the synergies and the growth alternatives for Neinor. We think it's a win-win situation for shareholders, for the company and for the co-investor partners.
Thanks.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Fernando Abril-Martorell from Alantra Equities. Please go ahead. Your line is open.
Hello. Thank you. Thank you for the presentation. I have two questions, please. First is with regards demand. How demand is going in July? Also, I don't know if you can provide sort of a guidance about new net pre-sales for the second half of the year, just to see your pre-sales coverage ratio reaching your guidance. Also, second question with regards the net debt. I don't know, but considering the large amount of deliveries that are back and low, the monetization of the build-to-rent, which is, I guess, pending to be cashed in, also in second half and the land plot sale as well. A lot of proceeds coming out in second half.
I don't know if you can guide and guide, sorry, about the net debt for full year end. Thank you.
Okay. I'm taking the first one relating the demand. Yeah, we have seen a solvent demand. It's true that in this quarter, we can say that we have felt that the funnel of leads and visits, and solvent buyers, has been narrowing a bit. The reality is that also the supply of new stock has been decreased during the last months. At the end, the imbalance and the balance between number of buyers with financial capabilities and number of units available in the market, we feel that it's even better than six or 12 months ago.
As of now, and the sales of July also are in that line, we are fulfilling with the sales curve that we have in the, in the business plan. Mm. Regarding the second question, I take it, the guidance, we don't change it in regards of net debt. should be close to 250, maximum EUR 300 million. It's true what you are saying, know that we have divested build-to-rent that, which is a lot of cash, but it's also true that we have some deferred payments that will flow to Q1 2024. We don't consider this deferred payment as cash, as you can imagine, because we are being conservative. Same numbers, the only thing is that we have the risk significantly, the cash generation in 2024.
As a result, we have more visibility to pay the dividend now than we promised to the market in that year.
Okay. Thank you very much.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of José María Cánovas from Global Income. Please go ahead. Your line is open.
Hi, good morning, and thank you for taking my question. My question is regarding build-to-rent disposals. As we have seen, recent disposals came at a very small discount to GAV. How confident are you regarding future disposals? Should we expect a similar discount or should we expect a larger discount due to the quality of the assets? Just to understand, how are you feeling on that front? Thank you very much.
Thank you. Now, the reality is that we have probably worked harder than we used to to find the correct investors and the correct buyers for this type of assets. The reality is that we have found certain investors with core plus types of money and with different strategies, but all of them within a mid-long term and with low need of finance. They rely on the fundamentals behind the build-to-rent market in Spain, and they have potential upsides on a stabilization of the financial conditions in three, four, five years, and also on a slightly yield compression that could make them double-digit profit.
With this type of fundamentals and investment case, we feel comfortable that we will still having conversations in the next years with this and other investors to keep exploring alternatives in the build-to-rent asset class.
Thank you.
Thank you. There are no further questions via the phone. I will now hand to the speakers for questions via the webcast.
Thank you, operator. I'll start with the questions we're receiving from the webcast. The first question, would be, I think, with regards to the path and the pace of build-to-rent sales. If we expect or if we are seeing, this as a potential risk for the full year 2023 guidance?
Well, as I said before, I mean, the business plan itself shows a relevant, a huge value potential to be created, you know? Just understanding our business plan, no, upsides, there is plenty of value there. The build-to-rent investments, what implies is that we try to secure the dividend, not only for this year, but also for next year. We are working there. We are not talking about, you know, increasing any type of guidance based on that.
Thank you, Jordi. Another question on build-to-sell deliveries, the target, or value we expect for the second half.
Well, we reiterate our guidance. Remember that for this year, no, was 2,500 units. We hit our target. If you deduct the number of deliveries that we have done in the first semester, you will get, the ones for the second.
Thank you. We received some questions with regards to the financials. Starting with the ASP and gross margin during the semester, why was it higher than our guidance? There is a justification for this.
Question, please?
Gross margins, for the first semester, that have been higher than normal.
Well, you know, this semester has not been materially, I mean, it has not been on the deliveries. You know, the department really comes in the second semester. Don't consider this number as a stabilized number. It's good. Remember our target, which is EUR 140 million EBITDA for this year and EUR 100 million from 2024 onwards. These are the numbers.
Thank you, Jordi. Here, another question on the evolution of the OpEx during the semester versus last year.
Well, no, it's similar. Actually, if you take the slide, which is just 27, the overheads are extremely stabilized despite the inflation. When you look at the OpEx, you can see that we are at 50%, because the deliveries have been also 50% compared to last year, you know, we are being like last year, very, you know, very light and optimized.
Thank you, Jordi. We have no further questions from the webcast. Operator, you may close the conference call. Thank you, everyone, and have a great summer.
Thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.