Good day, and thank you for standing by. Welcome to the Neinor Homes Full Year 2023 Results Presentation. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Alternatively, you can submit your questions via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, José Cravo. Please go ahead.
Hi. Good afternoon, everyone. My name is José Cravo, and I'm the head of investor relations at Neinor Homes. Today, we are going to go through the results of the fiscal year 2023, and as usual, we are here with Borja García-Egotxeaga, our CEO, and Jordi Argemí, our Deputy CEO and CFO. We will start the presentation with the key highlights of the year, and then we will update and review the fundamentals of the Spanish residential sector on section two. On section three, Jordi will review financial performance for the year 2023 and the revised guidance for the coming years, and we shall finish with the main 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, Borja García-Egotxeaga.
Thank you, José. So please let's start. Follow me to slide number four. I would like to start this presentation with four key messages. First, for the fifth year in a row, we have fulfilled our operational and financial targets. As for the second message, I would like to recall that it has been almost one year since we presented our new five-year plan, and execution has been our number one priority. Not only we have been able to provide visibility on our ambitious shareholder remuneration plan, but we have also been able to grow the company through equity-efficient deals.
Third, I am pleased to say that thanks to our new capital allocation strategy, which combines the highest dividend yield in Spain with our ambition to keep growing this platform, Neinor shares have delivered a 30% total return to our shareholders through a combination of dividends and capital gains. The fourth message is that Spain continues to consolidate its image as one of the safest residential markets worldwide, as it is under-supplied, under-leveraged, and underpriced. Please follow me to slide number 5, so that we can go deeper on these ideas. Here you have a snapshot of our operational and financial results from the year 2023. Jordi will review this in greater detail later in the presentation, but let me highlight the following figures. On deliveries, we have notarized more than 2,500 units, slightly above our expectations.
In terms of our operational activity, we have finished 2023 with nearly 6,000 units active and more than 4,000 under construction or finished, which means we have good visibility for the coming three years. With regards to commercial activity, we have sold almost 2,000 units while still increasing prices by 4%. Capturing additional HPA and controlling the pace of sales has been critical to protect margins. On the financial side, we have recorded more than EUR 700 million in revenues and EUR 103.6 million in EBITDA. On the bottom line, we have reached EUR 99 million, which is 10% better than what we guided to the market last year. In terms of leverage, we have finished the year with EUR 211 million net debt, which is equivalent to a conservative loan-to-value ratio of 14%.
Please, let's go now to next slide. Here you have a summary of deliveries, EBITDA, and net income since 2019, and we couldn't be more proud of these results. On deliveries, we have exceeded the five-year target by 9%, delivering more than 11,000 units. In terms of operational results, we have been able to beat our estimates by 11%, thanks to better margins, as we have been able to protect the value of our assets in a cost inflationary environment. Finally, on the bottom line, we've beaten it by 20%. In summary, we have finished this five-year period that presented multiple challenges with a best-in-class execution and financial results.
However, the objective of today's conference call is not to focus on the past, but rather to look forward and see how the dividends are a reality and how the co-investment business is already providing a potential upside to our midterm guidance. Please follow me to the next slide. As you know, shareholder remuneration is a key part of our value proposition in the short term. During 2023, we took important steps in this direction, such as the refinancing of our green bond or the EUR 250 million asset disposal program. In the coming 24 months, we shall distribute, distribute EUR 325 million to shareholders, which is equivalent to more than 40% dividend yield, the highest in the Spanish market.
So the good news for investors is that the stability of our Neinor’s shareholder remuneration targets keep increasing, and these cash flows are just around the corner. Please follow me to the next slide. On top of the attractive shareholder remuneration proposition, we also want to keep growing this company under an equity-efficient strategy. If you recall, as part of our strategic plan, we said we will invest EUR 1 billion in new land over the next 5 years, of which EUR 500 million will come from new partners. As you can see on this slide, during 2023, we have closed 3 JVs with renowned investors, raising a total of EUR 300 million out of a 5-year objective of EUR 500 million. This higher than anticipated interest is extremely good news for the company, as our financial guidance does not consider this upside.
The important news today is that we already have almost 800 units from our JVs in different launching stages, which already makes this business a reality. Later in the presentation, Jordi will provide more guidance on this. Now, please follow me to section number 2, where we will review the Spanish residential market, which, as I said in the beginning, is clearly positioned as one of the safest residential markets worldwide. First, on the macro front, I would like to start by highlighting that the Spanish economy expanded by 2.5% last year, significantly above of European peers. Looking ahead for 2024 and 2025, the market expects this outperformance to continue, and the Spanish economy should continue to grow at a pace of 1.6% annually. Let's go to the next slide.
On the job market, we have seen a very solid performance in Spain. The Spanish economy created nearly 800,000 jobs during 2023 and sits well above the levels of 2008. For the upcoming two years, this trend will continue as economies expect further job creation and unemployment to keep coming down. Both these metrics, GDP and employment growth, are obviously two positive indicators for the housing market outlook for years 2024 and 2025. Please follow me to slide number 12. With regards to leverage, we would like to highlight the strength of the balance sheet of Spanish households. First, by saying that Spain has a lower household debt to GDP than Germany, and this is the first time since 2005 that this is happening.
If we look at the evolution of the mortgage debt stock, in Spain, it is nearly 70% lower than what it was during the financial crisis. So overall, there is an extremely solid equity position by Spanish families and banks. Follow me to slide number 13. In addition to lower leverage, the cost of mortgages in Spain is one of the lowest across Europe, which explains why the overall affordability picture is not as stressed as it is in other countries. Furthermore, adding to the positive macro outlook for the upcoming years, interest rate expectations by central banks have started to decrease as inflation is quickly normalizing. For the next 24 months, the market is expecting ECB to cut rates by nearly two points, from 4.5% to 2.75%.
One-year Euribor is already reflecting these forward expectations and has already corrected by nearly 15% since the maximums in last November, to around 3.6% today. Please follow me to the next slide to see the evolution of the housing deficit in Spain. This chart clearly explains why residential fundamentals are so healthy and resilient in Spain. Net household creation has accelerated significantly after the pandemic to levels above 200,000 households per year, while new homes finished stood at around 80,000 per year. With this forecast, the housing production deficit, which has been accumulating since 2013, is expected to increase by a further 40% until the end of 2025. So overall, we see a supporting fundamental backdrop for the next years in a context where interest rates are expected to come down.
Now I pass the presentation to Jordi for the financial results.
Thank you, Borja. Now we are going to review in further detail the set of financial results we have published today, as well as the perspective for the business in the coming years. If we move to slide number 16, and before we zoom into details, my first message is to note that over the last three years, we have faced multiple challenges, but we have been able to stay ahead of the curve. In early 2021, we anticipated the investment cycle after the pandemic, and we doubled the size of our land bank. In 2022, we saw the interest rate increase coming, so we took the measures to protect, on one side, the operating profitability, and that means gross margins and EBITDAs. Since in the sector, remember that the interest cost is capitalized and recorded in the cost of goods sold.
On the other side, our balance sheet in terms of refinancing. Here, remember that we signed a cap for EUR 300 million nominal at 2% in August of 2022. All this with double-digit cost inflation on the background... Even with these circumstances, today, we are presenting better than expected 2023 results based on solid margins and strong cash flow generation. Now, let's go into the details. On this table, you have a comparison between the guidance we presented last year and the results we have finally achieved. First, I would like to start on the top line, where we have delivered more than 2,500 units and generated audited revenues of around EUR 600 million, which are aligned with the guidance we gave.
Having said this, remember that those build to rent assets that were transferred to an EDAV, which means that they were reclassified, reclassified from stock to fixed assets, do not generate revenues in the P&L when they are sold to an investor. Only the margin is recognized in the P&L. As you can see in the full notes of this slide, we have sold three assets: Sky, Hacienda, and Ametistas, whose exit price has been EUR 111 million. So from an operating point of view, you should consider that total revenue generated with the divestment of build to sell and build to rent has been EUR 705 million, which is the data point at revenues line that you can see in this slide.
Second, our adjusted EBITDA, or in other words, our build to sell EBITDA, was better than initial anticipated, EUR 129 million versus the EUR 100 million euros roughly guided. And this is due to several factors. On one side, a positive impact between house price growth and cost inflation. Second, a tight grip on OpEx and structural cost. And third, the divestment of Europa and Dual, that initially were build to rent assets, but they were, that we sold them before being transferred to an EDAV. So instead of being build to rent, they have been, from an accounting point of view, build to sell finally. And thirdly, if you look at the EBITDA caption, we recorded EUR 136 million.
Remember that here we consider the revaluation of build-to-rent assets when they are internally transferred to an EDAV, which is the previous step to sell it to an institutional investor. Here, we got it with up to EUR 40 million, and finally, it has been significantly lower, as you can see in this slide. And this is because of Dual and Europa, already commented, no? That there is, there is a kind of reclassification, and also because we have decided not to transfer to an EDAV, and thus recognize the margin of Parla and Sevilla. That amounts to EUR 12 million. And the reason not to recognize it is to be more efficient from a tax perspective. And given that we already reached and exceeded the operating targets, we took this decision.
Including Parla and Sevilla, which would be the real like-for-like comparison, we would have generated EUR 148 million EBITDA, which means 6% above our expectations. If you look at the bottom line of the P&L, you will see the net income. We have recorded EUR 99 million, which is 10% better than our guidance to the market. And again, if we do the like-for-like comparison with Parla and Sevilla now included, the net income would have been EUR 110 million, which is basically 20% above our guidance. And fourth, net debt position. We have finished the year with a loan-to-value 14%, and if we include the EUR 40 million dividend paid this week, basically on Monday, it would have been 17%. But in any case, it's better than the 20%-25% range guided.
So all in all, we have exceeded all targets and KPIs, both operating and financial. Now, follow me to the next slide so that we can review our guidance for the coming years. On this slide, you see a table with the same guidance we published last year, but we are now including the impact of the co-investment business. First, I will note that for the years 2024 and 2025, we don't expect any significant change, as we expect our margins to continue resilient. However, from 2026 onwards, upsides starts to emerge, as we expect a gradual guidance uplift in EBITDA of up to EUR 10 million, which implies up to a 10% increase versus previous forecast.
This increase should translate to the bottom line, which implies our earnings guidance will also grow by up to 10%, which in absolute terms means almost EUR 80 million per year. From 2028 onwards, we expect the JV business to stabilize, and contribute at EBITDA level around EUR 20 million per year. Which means that assuming EUR 110 million of total EBITDA, the JV's contribution would be almost 20% over the total result, and that a build to sell would imply around 80%. So overall, we see a quality guidance uplift for EBITDA and earnings that is earned through the fees in the JVs. It is a steady service business, in the same way it was our contract with Kutxabank in past years, and therefore it has a much lower execution risk, as you know.
Together with optimization of our balance sheet, this potential guidance uplift is a decisive step to improve shareholder returns towards the level of 15% return on equity that we were targeting since last year. With that said, please follow me to the slide number 18. Finally, I would like to provide an overview of operational visibility for the coming years. On this slide, at the bottom of each column, you see the deliveries we have accomplished in the year 2023, and above, the units we have active under construction or sold by December of last year, 2023. As you know, this company has a target to deliver 6,500 units during the first three years of this business plan.... And just with 2023 results, we have achieved around 40% of this target.
We have finished 2023 with almost 6,000 units active, which means that the product to be delivered in year 2024 and 2025 is nearly 100% launched. With regards to WIPs, we now have more than 4,000 units under construction, which provides full visibility to cover 2024, 2025 deliveries. And finally, on sales, we currently have an order book of almost 1,300 units, which means that we need to sell 2,700 units over the coming two years in order to achieve our targets. These 2,700 units break down as follows: 1,100 are from build-to-rent buildings, which are only sold when construction is completely finished in order to protect margins.
Remember that we have invested in 2023, around EUR 200 million of this product at a very good prices, so this question mark should not be on the table anymore. The remaining 1,600 units are from build to sell product. So these figures imply that we are today 50% pre-sold for this product in the coming two years, which is completely in line with our business plan and historical rhythms. Remember that we normally have 60%-65% coverage for one year, no, forward, and 30%-35% for two years forward. But on average, normally we are in the 50%, taking into account the two years. Now, I hand over the presentation back to Borja for conclusions.
Thank you, Jordi. I would like to finish with a summary of the main ideas of this presentation. First, as I have been saying all along, the Spanish market is one of the safest residential markets worldwide. Over the last four years, we have faced the pandemic, a supply chain and energy crisis, inflation, with prices going up double-digit, and in year 2023, an unprecedented hike in interest rates. During this period, we have reiterated our view that the Spanish residential sector will resist well to these challenging conditions due to its fundamentals, and this has been the reality. But now it's time to look ahead for 2024 and 2025, where the expert consensus starts to see a brighter outlook emerging with further GDP growth, job creation, and lower interest rates. Together, we expect these factors to drive a stronger market dynamics.
The second message is on the visibility for the coming two years. As Jordi has explained, we have 100% of target developments under construction, and we expect margins to continue solid. So the EUR 325 million in dividends are just around the corner. I would like to note that these cash flows represent more than 40% of our market cap today. Third, I would like to reiterate that we said what we said in July. We continue to see a higher than expected interest by investors to co-invest alongside Neinor. We have been front-loading execution on this front, and we are committed to get our target of EUR 500 million assets under management.
Finally, my fourth, last, and most important message is that thanks to the advanced execution on our JVs business today, we are increasing our medium-term guidance, EBITDA, and net income guidance by up to 10%. This mean going towards EUR 110 million EBITDA and EUR 80 million net income. And I would like to finish and reiterate that once the JV business is fully stabilized around 2028, the increase to guidance could even double. So now we are ready to take any questions you may have.
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Okay. Thank you, operator. So I was just reviewing the questions. I'll start with the first one. Given the 100% payout mentioned in February 2023, would the potential increase of 10% in net income for the years 2026 and 2027 translate into additional dividends?
I take it, José. From a technical perspective, yes. Obviously, we have more net income. It will be translated into more dividends. Today, I think it's too soon. We are more at operating level, no, being focused to generate this extra margin. Once we have it, we will tell you.
Great. Thank you, Jordi. Second question, if we can give an indication of the pre-sales coverage for the years 2024 and 2025.
Okay, this is Mario Lapiedra, I take this one. Regarding our target of deliveries for these two years, we have 4,000 units, out of which around 1,100 are build-to-rent units. That as you know, we will start working on the disposal of the buildings once they are getting to completion during this year. The remaining 2,900 units, that are the ones on build to sell, we have an order book of roughly 1,300. That is 45%. For the two years, that is more or less 60% for 2024 coverage.
... and close to 30% of the coverage of 2025, in line with the original guidelines on curves that we have always maintained.
Thank you, Mario. Third question, what is the impact in working capital, namely on the book value sold of BTR deliveries?
I understand that there's a bit to build to rent of 2023, okay? If the question is for next years, I will take it later on. For this year, as you know, we have sold, exit price, EUR 185 million, roughly, of build to rent, okay? The cost of value sold, basically it's EUR 175 million-EUR 180 million. It's exactly the same or close to the same number, because remember that we have Sky and Hacienda, whose margins were already recorded in the previous years. So now, basically, we don't have extra margin due to these two divestments.
Thank you, Jordi. And then, for 2024 guidance, if the guidance is cautious when compared to what we have achieved in the year 2023, or if it is realistic?
Thank you. I would say it is realistic. It's a guidance where we have fully now on the guidance for year 2024. Of course, all the units that have to be delivered are under the different phases on construction. And basically for this year, 2024, we are not so tight as we were last year in the deliveries. Last year, as you know, in year 2023, we had a huge accumulation in Q4. For this year, we have more or less 50% of deliveries will happen in H1 and the rest in H2. So, the year is realistic and both from margins and evolution in sales, cost in the construction, and so on, everything is working normal.
Thank you, Borja. Then we have here, a double question. Go one by one. First, on the external service cost evolution, why was it lower than in previous years?
Well, I mean, in the, in the cost caption, you will have another, version updated. We have separated overheads plus others, okay? Here, there, there is an impact of EUR 5 million, which comes from a build-to-sell WIP that we have finally divested. It was in a subsidiary embedded. So once, we have divested this asset, which is from Ibiza, we record only the margin, not the sales, okay? It's the, the same happens as build-to-rent, but in this case, build-to-sell, okay? If you exclude this impact of EUR 5 million, you will see that we have lower cost OpEx and overheads, and it is because we have done a plan, no, during the previous year to optimize our, our structure, and this will be, recurrent over the years, no?
We have, like, EUR 2 million-EUR 3 million of lower structure.
Then the second question, if we can provide more color on the breakdown between development gross margin of build to sell and build to rent segments in the year 2023, and what could be expected for the years 2024 and 2025.
I also take it, Jordi. Regarding the build to sell business, we are always sticky at the 24% gross margins. We have never changed this gross margin. And regarding build to rent, it has been higher. It has been between 25% and close to 26%. But remember that here, if you look at the P&L, it's difficult and complex to see that because part of the margin of Hacienda and Sky was already recorded in the past, as I answered in the first question, no? But, the reality, which is, the real margin embedded, is 24% of margin build to sell, 25%+ build to rent.
Okay. Thank you, Jordi. Then the next question is with regards to the potential impact of the recent decision by the Spanish Supreme Court on the usage of deferred tax credits. If you can elaborate on what impact this could have for Neinor.
This, it's a good point. This is a potential upside, no, that can come. We have not updated that in our future targets because we prefer to be conservative. You know, that the Supreme Courts have stated, no, that it's not constitutional, there are restrictions and limitations to use the different tax assets, but it comes from only one month ago, so let's see the reaction of the government. If this is finally, you know, green light, we should have some impact, positive impact, no? Instead of the typical tax rate of 18%-19% that we were paying in the past, we could be close to the 15%, roughly, no? You know, that it's, we have different tax assets, but depends on the subsidiaries where we have, no, those tax assets. It's not...
Their impact is not directly, no? But the reduction of 3%-4% over the tax effective tax rates could have could apply.
Okay. Related with this question on the evolution of year-on-year on taxes, if we can provide some detail.
Well, partially has been answered, because, again, in the past, if you look, no, we have always used different tax assets because we have plenty, you know, different tax assets coming from Habitat, mainly. Our tax rate has never been 25%. It has been close, no, to 18%, 19%, 20%, depending on the year. This year has been even lower, no, because, based on the Supreme Court, the auditor has requested us to activate some deferred tax assets, additional tax assets. And we have put the minimum because we want to be very conservative with that approach. And we have included, like, EUR 8 million, no, of additional. That's why if you look, the tax rate this year is around 8%-9%.
Okay. Thank you, Jordi. And then, on if we can provide some visibility on the pending build to rent sales for the coming years? And now, how many of these could happen in the year 2024 versus 2025? What is the stage of the negotiation?
Okay, I take this one. We have 3, 4 developments, around 400 units, that are getting to completion phase during this year. So we are launching, as we speak, the potential disposals. During these months, what we have seen is an increasing appetite for this type of product from different investors, as they feel that the interest rates forecast are positive and the rest of fundamentals remains very strong as the demand, the rent increase, et cetera. So we will keep working during the year, and when we have something more advanced, we will let you know.
Okay. Thank you, Mario. Another question with regards to land acquisitions. What are we seeing or expecting for the year 2024?
Okay, for this year, 2024, the land purchases that we are considering in the business plan is slightly above EUR 40 million through core investment. This means that this EUR 42-43 million will be used by Neinor to attract all the investors. And as we have been doing, some of our investments in the JVs with a participation that it will oscillate between 10%-20%, and this is the target for this year.
Thank you, Borja. And then a final question, with regards to pre-sales, in the build-to-sell business year to date, if you can give any color.
Well, the first month has been good, in the same trend that we closed 2023, with good absorption ratios in most of the developments and with the same inputs from the demand. Strong, low supply, and good perspectives, potentially for the interest rates that would also be a positive side for the sales.
Okay. Thank you, Mario. Operator, we don't have any further questions here, so if there are no additional questions on the phone line, we will finish this session.
There are no questions on the phone lines.
Okay. Thank you. Thank you very much, and we remain available to answer any follow-up questions you may have. Thank you.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.