Ladies and gentlemen, welcome to the publication annual report 2025 in Essen, Germany. I'm Sergen, the Chorus Call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Burkhard Sawazki, Head of IR & Capital Market Communication and Strategy. Please go ahead, sir.
Good morning, everyone. I would like to welcome you to our full year results earnings call. Our CEO, Kruno Crepulja, and our CFO, David Dreyfus, will walk you through our presentation and give you an update on our current business performance and our outlook for 2026. As usual, this will be followed by a Q&A session. With this, I would like to hand over directly to Kruno.
Yeah. Hello, everyone, and thank you for joining our Q4 results earnings call. When we look back on 2025, we are pleased to note that we have achieved all of our operational and financial goals, which is not a given in a still challenging market environment. Furthermore, and this is equally important, we continued to strengthen the foundation for accelerated future growth. The most critical factor, as you all know, has been the demand side in recent years. Therefore, it is clearly encouraging to see that the recovery is continuing to gain momentum. We witnessed robust demand in the fourth quarter, which was by far the strongest quarter since emergence of the crisis. Our retail business remains the main growth engine. Sales in this customer segment more than doubled in 2025, primarily due to demand from private buy-to-let investors.
The attractive tax incentives have clearly been a game changer. Growth accelerated further over the course of the year, with new sales starts contributing significantly to this momentum. An important contributor to achieving our full year sales target was also our institutional business, with the signing of deals totaling EUR 140 million in the fourth quarter alone. We are also observing a slow recovery in this segment. We are currently in advanced negotiations on the first deals for 2026, which gives us reason for cautious optimism in this customer segment as well. Nevertheless, we expect the private investor business to remain the key demand driver also in 2026, and we are preparing for this by significantly increasing our planned sales launches. Due to the growing importance of the private investor business, we have taken a strategic step to further strengthen our sales activities.
Together with two experienced partners, we have recently founded Westway, our own sales company as a joint venture. This will help us to significantly increase our market penetration and sales performance while also improving our margins. The first project to be marketed through this new digital platform is our Mosaic project in Düsseldorf, and I'm pleased to report that it has had a strong start with the first sales contracts already signed. Let's now take a brief look at our financial KPIs for the full year 2025. We reached adjusted revenues of EUR 504.4 million in line with our expectations. We expect 2025 to mark the trough of the cycle for revenues and earnings, and anticipate a gradual recovery starting in 2026. Our gross margin stayed at a very healthy level of 23.8%.
This was even slightly better than we initially expected. We believe that this is still the benchmark in our industry and underscores our operational excellence. Our adjusted earnings after tax amounted to EUR 31.6 million, also well within our targeted range. As already discussed, on the back of the strong retail business and the contribution from our institutional deal, the sales volume increased significantly to EUR 502.3 million. Coming to our dividend proposal. You have seen our recent news release that we intend to pay a dividend of EUR 0.43. We believe that our very strong balance sheet allows us to distribute a higher dividend while continuing to pursue our growth trajectory. The proposed dividend corresponds to an attractive yield of 5% at current depressed share price levels. The idea is that the EUR 0.43 represent a floor for the coming years.
With this signal of strength, we want to further bolster investor confidence in our equity story. As additional information now that we have clearly passed the trough, the tangible book value per share amounts to EUR 14.12. We expect the recovery to continue in 2026, and we anticipate a clear upward trend in sales, revenues and earnings. Therefore, we expect revenues to be in the range of EUR 550 million-EUR 600 million. A further expansion of our gross margin to more than 24%, supported by high margin project acquisitions. At the bottom line, we anticipate adjusted net earnings of EUR 35 million-EUR 40 million. As the leading indicator for our business, we expect sales to increase to EUR 650 million-EUR 750 million. This forecast is mainly based on continued strong growth in the private investor business.
A more dynamic recovery in the institutional market would offer significant additional potential for growth acceleration. Our forecast is, of course, based on the assumption that the conflict in the Middle East will not be prolonged and will not have any lasting economic impact. Unfortunately, negative effects cannot be ruled out in the event of a prolonged period of uncertainty with the rising inflation and interest rates. Moving on to slide four in our presentation. Our sales ratio shown in the upper chart illustrates the sound sales performance of our retail business, especially at year-end. At the beginning of the year, there is traditionally weaker seasonality, but the sales ratio after a temporary dip has already reverted to its long-term mean in recent weeks. This points to another dynamic year-on-year increase in Q1. Sales to private buy-to-let investors will remain the key growth engine in 2026.
We are responding accordingly to the strong demand in this customer segment, and we will significantly expand our sales offering for products tailored to the attractive incentive schemes. We plan to double the number of sales launches year on year, which is expected to be a key driver of substantial volume growth. On slide five, we provide a breakdown of our sales and revenues in 2025. While our private customer business has become the most important sales contributor with a share of roughly 60%, revenues are typically somewhat lagging, and pre-sold projects from the institutional business were still the main revenue pillar in 2025. For 2026, we expect a continued moderate recovery in the institutional business. We are already in advanced talks for an institutional deal which currently looks very encouraging. Nevertheless, many traditional core investors are still reluctant to buy for various reasons.
At the same time, the private investor business offers much stronger short-term visibility. Therefore, this customer segment will likely become our most important source of revenues in the near future. Our optimism for the retail business also based on the market's positive response to our sales launches last year. This makes us very confident that we can further scale up this strong performance by expanding our offering. On slide number six, we provide you with an overview of last year's sales starts with their current status as of the end of February. We have seen very strong momentum for our project in Duisburg, near to the border of Düsseldorf, Gefilde near Stuttgart and Lahnwärter in Frankfurt. Also, the project Kösterweg near Hamburg, which we launched in Q4, is showing very strong sales momentum.
To be fully transparent, all of our projects are in line with or ahead of their targets. The sales speed for our project in Hofheim near Frankfurt is, for instance, somewhat slower, which is in line with our expectations as the apartments of this project have larger average living spaces and are therefore primarily designed for owner-occupiers rather than buy-to-let investors. We are addressing all relevant customer groups. The sub-project of our Park Residence project in Leipzig is a slightly different situation. The building complex is a listed building. As you can see, we are seeing very strong demand for this product too. Our last sales start was the Mosaic project at the end of the year. This is the first project that we are marketing through our new in-house sales platform, Westway, which we have recently founded.
Additional projects are in the pipeline, and in recent weeks we have started the pre-marketing of several projects. Therefore, you can expect further progress with additional sales starts in our next quarterly update. On the next slide, you find an introduction to our recently founded sales platform. This is a joint venture with two well-established and experienced partners, Knight Frank Frankfurt and Homebase, a digital platform for private buy-to-let investors. This platform will act as an additional sales channel alongside our existing distribution channels. Key target clients are buy-to-let investors. To address this customer group, Westway will focus on digital sales via corresponding online channels. The clear objective is the building up of a nationwide platform. The rationale is to further strengthen our sales capabilities, broadening market penetration while also reducing dependence on external distribution platforms.
A key advantage is also to retain part of the margin in-house. The brokerage fees agreed with Westway are considerably lower than what we are currently paying to other external distribution platforms, which should provide additional support for our margins. We have just started our sales activities, and the first apartments of the Mosaic project have already been successfully sold. There's a steep ramp-up for our new platform with a pipeline of several sales starts over the course of the year. We view this as an important strategic step for scaling up our private customer business. On the following slides eight and nine, we provide you with an overview of relevant market indicators for our business.
Despite the broader macro uncertainties, including the volatility in interest rates, prices for new builds in the top seven cities remained stable or grew moderately on a year-on-year basis, with a stable development during the last quarter. We also observe a positive underlying trend, and we are starting to implement the first price increases in some sales projects geared towards buy-to-let investors. The rising scarcity of residential space in the metropolitan areas, which is also reflected in sustained very dynamic rent growth, remains the key factor for the positive underlying development. This is especially true for highly energy efficient, good quality new builds. The price premium for energy efficient building continues to rise. The rent development in the top cities, based on the data from Bulwiengesa, is shown in the lower chart on this slide.
Rents remain on a dynamic structural growth path, with maybe a slight recent slowdown from elevated levels. Rents are also still outpacing general inflation, which has also stabilized. Moving on to slide nine, which illustrates construction price inflation over time. The most recent data points from the Federal Statistical Office confirm a very stable trend over the last few quarters with rather moderate CPI growth. We are also sticking to our own view based on our own on the ground experience that cost price inflation for larger residential projects is still lower due to the continuing weak order situation for mid-sized construction companies, which gives us strong negotiation power. As our gross margin development demonstrates, all of our projects are well within their cost budgets.
At the same time, we would like to point out that the war in the Middle East can have a meaningful impact on material costs, and we continue to monitor the situation carefully. Moving on to slide 10. In light of increased acquisitions, our GDV climbed to EUR 7.1 billion, excluding our shares in JVs despite rising completions. The slightly lower volume of projects currently under construction is more than offset by a higher GDV in the presales and pre-construction phase. The operational risk profile remains very low, with 90% of the units under construction already being sold. The pre-sold volume of EUR 2.7 billion provides high visibility for future revenues and cash flows. The volume recognized amounts to more than EUR 470 million. We are creating value by securing building rights for our land investments over time.
We made further progress on the approval side during 2025, and our land bank with zoning rights increased to around EUR 1.8 billion. This also gives us flexibility and allows us to bring additional products to the market as soon as we see an even stronger market recovery, including the institutional segment. We secured and acquired land plots for projects with a GDV of around EUR 1.2 billion in 2025. As mentioned in the past, out of this approximately EUR 500 million have been allocated to our JV business. The JV projects will be treated as at equity projects, and their respective GDV is not included in the EUR 7.1 billion, which just comprises the fully consolidated projects. The Instone share of these JV projects has increased to more than EUR 800 million.
The GDV of the 7.1 billion alone. Therefore, not Instone's total business volume. Acquisitions via JV structures offer significant benefits. They allow us to fully capture attractive land acquisition opportunities in a buyer's market, scale our proven operational efficiencies, optimize risk diversification across our portfolio, and enhance return on equity. We continue to have an extensive deal pipeline, and we are well on track to acquire projects with a total GDV of at least EUR 2 billion by the end of 2026.
We still see a highly attractive window of opportunity for acquisitions with the property market having bottomed out, with the rising supply of attractive buying opportunities, and with still low bidding competition. We are currently focusing on projects with a shorter duration and therefore our acquisitions should further strengthen our growth profile over the next two to three years. With this, I would now like to hand over to David for the financial section of the presentation.
Thank you, Kruno. Let me now walk you through our full year 2025 results in a bit more detail, starting with our adjusted results of operations on slide 12. Our adjusted revenues were slightly below previous year's level and in line with expectations. The decline is attributable to the expected, somewhat lower construction output. We expect this trend to reverse and return to top line growth in 2026. We have continued to deliver a very healthy gross margin of 23.8%, which was even a notch better than we anticipated at the beginning of the year. This clearly reflects an industry-leading profitability, and it is again testament of our operational excellence. I think it is very strong message that we are able to maintain very healthy gross margins throughout the cycle.
Recent acquisitions of higher margin projects and cost savings in selling expenses are providing upside potential to our gross margin even without additional HPI growth. Our platform costs in the fourth quarter were higher than in the previous year. This increase was largely attributable to the lower release of provisions compared to the previous year. The releases in 2024 were more of a one-off effect and the underlying platform costs were largely stable. The development of personnel expenses serves as a good proxy for this. They stayed largely flat at slightly below EUR 50 million for the full year 2025. We do not expect a significant increase in platform costs in 2026 despite overall cost inflation. Further down in the P&L our net interest expenses increased slightly. This was mainly attributable to a lower share of capitalized interests due to rising number of construction starts.
On the bottom line, we posted earnings after tax of EUR 31.6 million, which is above the midpoint of our guidance range. I think it is fair to say that this is a very solid result at the trough of the earnings cycle. Over to page 13. Thanks to the significant cash generation from pre-sold projects in recent years, our financial leverage has dropped to a very low level, which gives us ample headroom for growth. While we have started to deploy our capital into new opportunities, our leverage ratios have increased only marginally so far and remained at very low levels. A low loan to cost ratio of just 11.9% and a low net debt to EBITDA of 2.8 times clearly reflect our strong financial position.
Some purchase price payments acquired in 2025 are still due in the first quarter of this year, and we will continue to execute our land execution strategy in 2026. The increased investment activity will lead to a temporary rise in leverage ratios, say over the next 18-24 months, until cash conversion starts to kick in. Nevertheless, you can rest assured that a strong balance sheet will remain a key cornerstone of our business model. Moving to the next slide. Over the past few years, we have proven that our business model can produce strong cash flows. While we still expect substantial cash contribution from our pre-sold projects, we have now entered, as just mentioned, a new growth and investment cycle.
We bought land plots for projects with a GDV of EUR 1.2 billion in 2025, and we were able to negotiate deferred payment structures, further supporting capital efficiency and the IRR of these projects. We will continue to acquire projects and expect total acquisitions with a GDV of at least EUR 2 billion by the end of 2026. This corresponds to expected acquisition costs of around EUR 300 million for 2025 and 2026 in total. A good part of this will be financed, and part of it might be borne by project partners. In addition to investments in land, there will also be a temporary increase in cash requirements for our new projects where we have started construction.
This is mainly attributable to the typical cash flow profile of retail projects, where typically investments must be made in working capital during the early construction phase, with cash flows turning positive with increasing construction and sales progress. However, we still generated an operating cash flow of more than EUR 50 million before land acquisition payments in 2025, which further strengthens our financial flexibility for acquisitions. On the back of the recent years, our liquidity position at year-end amounted to more than EUR 250 million, which is predominantly available for growth investments and the envisaged construction ramp-up. There is only a smaller drawn debt position on corporate level remaining. Accordingly, the net cash position on a corporate level amounts to almost EUR 150 million.
Moreover, we were able to secure a term loan of EUR 47.5 million in the last quarter of 2025, and thus increased our undrawn credit facilities to slightly above EUR 190 million. As a result, the financing of our planned growth investments is fully covered. Chart 15 provides you an overview of the current financing structure of our corporate debt, which is, I guess, rather self-explanatory and without major changes. Finally, coming to our outlook on slide 16. After having achieved all of our operating and financial KPIs in 2025, we expect the market recovery to continue in 2026, with an improvement across all of our relevant metrics. We expect our sales volume to reach EUR 650 million-EUR 750 million.
This does not yet assume a recovery of the institutional market, which provides additional upside in the medium term. We expect adjusted revenues in the range of EUR 550 million-EUR 600 million, a further expansion of our gross margin to above 24%, and earnings growth with expected earnings after tax of EUR 35 million-EUR 40 million. The rising sales volume should translate into accelerated earnings growth from 2027 onwards. In the current geopolitical situation, we unfortunately cannot ignore the disclaimer that our outlook assumes that there will be no prolonged conflict in the Middle East, and therefore no lasting macroeconomic turmoil that would affect our business model. With this, I would like to conclude the presentation and move on to the Q&A session.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to stay in loudspeaker mode while asking a question. Anyone with a question may press star and one at this time. We have the first question coming from Thomas Neuhold from Kepler Cheuvreux. Please go ahead.
Yes, good morning. Thanks a lot for taking my questions. I have three, and I think it's the best to take them one by one. Firstly, on the crisis in the Middle East. I was wondering, did you see already any kind of impact on the demand after the outbreak of the crisis? I was also wondering which building materials could potentially be impacted if the crisis is longer than expected. Did you already react? E.g., like, starting to order more raw materials or building materials where you could face a shortage or significantly higher prices if the crisis lasts longer?
Hi, Thomas.
The first question.
Yeah. Thank you, Thomas. On the ground, we currently don't see any impact. The reservation number and also the notary deeds agreements, I would say we are working on this without any interruption. Of course, we have to wait and see in the coming weeks and months is there more influence. On the ground we currently see no real influence. Your second one, and maybe I can also mention that the first weeks have been very positive from, you know, overall demand from all the customer groups. We start very positive into this year. On the B2C business, there's currently no impact.
Your second one regarding material cost inflation or cost price inflation for construction, first the general picture. Our purchasing processes, let's say up to date, are going quite well and we are purchasing below our budgets. You know that we have generally priced in a slight cost price inflation for this year in our calculation, but we believe that we will see more sideways development due to the fact that the order books of the construction companies are still weak and there's really low construction activity, let's say in the market. There we see a strong negotiation power currently on our side.
Of course, if, you know, the war is going further and you have impact on energy costs, this always results in, you know, cost price inflation on materials which are energy intensive or oil based. So like, you know, any insulation material, et cetera. Looking at, you know, the experience we made in the past, our purchasing strategy is currently to, let's say, to be very early in the purchasing process, also to bind the companies in more than one phase.
If we are, you know, having a tendering process for the first phase, we are also securing the prices for the coming phases. This is our current strategy. Our, let's say, overall view is that we feel very comfortable with our budgets. We think this is really robust, and we don't see significant risks here from cost price inflation, due to the fact that we already have built up buffers, in the first couple of weeks.
Okay. Understood. My second question is on this Westway JV. I was wondering if you can provide more details on how it exactly is going to work, which portion of your targeted EUR 650 million-EUR 750 million sales volume will go through this joint venture. What is your share in the joint venture and how will sales and earnings be recognized from the joint venture?
When we look at, you know, the overall, sales guidance of EUR 650 million-EUR 750 million, you can assume roughly that 60%, roughly, is dedicated to buy to let investor channel. I would assume that approximately of the 60%, 60%-70% will be addressed by our Westway company, and the rest will be addressed by the platforms we are working together for many years. This is the volume you can approximately calculate. Regards to overall, I would say, the cost. Let's say the second question was the share. Our share is currently 50%.
Mm-hmm.
In regards to your question, financial metrics, et cetera. Our calculation is that the sales costs should come out at a level of roughly 5%. Of course, we plan to generate a margin working with this company. This will lower further the 5%. I can't say now an exact number, but I believe it could, you know, reduce the 5% maybe down to 4% or below.
You said you have 50% in the JV. Will it be fully consolidated or at equity?
It will stay as equity. It will stay as equity.
Okay. My last question is more for David, I guess, on the outlook for the operating cash flow this year. Is it a fair assumption that it might be negative again due to increased number of project starts you will have this year for particularly retail investors?
Yes, I think assuming a pre-land cost we're talking.
Yeah.
It's fair to say that at least we will see something closer to a break even or below zero in terms of cash flow.
Understood. Thanks a lot.
Thank you, Thomas.
The next question comes from Manuel Martin from ODDO BHF. Please go ahead, sir.
Thank you for taking questions. Two questions from my side, please. The first one would be on German politics. So far, have you noticed any further notable impulse coming from German politicians to support new constructions? Do you expect some impulse anyway? That would be the first question, please.
What we clearly see on the ground is that, you know, the cities are willing to, where it's possible to use, this so-called Bau-Turbo. You know, improvement in, let's say speeding up the zoning process and building permit process. This we clearly see on the ground. The city governments are really thinking of where to use it and how to help. This is clearly positive. Regards to subsidies, we have, you know, we are in discussions or we see that the government, let's say the government is discussing further guarantees or subsidies for own occupiers. Is there, yeah, a final decision brought?
Not yet, I believe that they will come up with a program. That's my gut feeling for supporting owner occupier sales. Let's see what is happening. This would be upside for us, really. Regarding lower bureaucracy and, you know, all this stuff discussing this reduced standard called Typ E. Here the government is currently trying to finalize this process. I personally support these activities because I believe that the standard in Germany, in the basic standard, is high. This could also additionally help going forward. Yeah. These are the discussions we currently see on the ground, not being reflected in any way in our guidance.
Mm-hmm. Okay. I see. My second question would be on the institutional investors. As you described, they are still a bit reluctant, but mood seems to improve or the interest seems to improve. Can you give us a bit more, maybe a bit more color on what your institutional investors are maybe thinking, or what are their fears or what could raise the appetite of institutional investors? Maybe you could give us a bit more color on that, please.
Yeah, sure. When you look generally at 2026 and our guidance, I think what we have planned is that the sales volume in 2026 on the institutional side is comparable what we have achieved in 2025. On the other hand, we see improvements here. You know that the co-ops which have bought last year, they are still very interested to buy further projects. Which client group we have missed in the institutional sales have been, you know, the pension funds. Our feeling is that they are coming back, not all of them, but the one or the other. We also see that the forward time period. Investors accepting, you know, in the past we've seen, you know, forward sales 24, 30 months or longer have been accepted.
We have seen that the institutional buyers have looked more at already finished projects or 6-12 months near to being finished. This is a bit changing. We see that there are the first signs of pension fund money or institutional money also discussing with us the classical forward structures, which is positive generally. There is some upside. We have to see, you know, what are the influences now from the Iran situation. The first weeks have been encouraging here.
When you look at the two—let's say the sales volume we are targeting this year, I have also to say that EUR 100 million of this sales volume for 2026 is dedicated to social housing, which has been always a very stable, you know, sales channel over the whole crisis time because it's not really influencing the interest costs because the project is financed by state and city sources. A significant portion is already, you know, social housing. Then we have another EUR 40 million, which is on the lower rent price level, affordable. Also, I would say a very stable product type. What I want to say with that is that we have a very conservative guidance for institutional sales for this year, and there could be upside, always looking at, you know, what the conflict in Iran is doing with us.
Okay. Understood. Thank you very much.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We have a last-minute question from Philipp Kaiser from Warburg Research. Please go ahead.
Yeah. Hello, everyone, thanks for taking my question. Just to follow up. Firstly, starting with your gross margin. You achieved 23.8% in 2025, now guiding for more than 24% for the current fiscal year. Is it purely driven by the mentioned cost control and the present cost assumptions?
Hello, Philipp. It's David. I think what you can say is that we're starting with more of the newer projects that we go into the sales process where we have a bit of a higher margin on average, or we have higher margins on average than with our existing. I think, you know, in mix, that helps us to increase the margin now going forward.
Okay. Perfectly understood. For the coming years, EBITDA margin was probably both the current macro environment, the margin should rise driven by a higher percentage of sales started from the recently acquired Mosaic project and then probably, a higher part of sales margin keeping in-house by the recently launched joint venture.
Yeah, I think, you know, we always said that we generate 23%-24% gross margin through the cycle. I think I agree if, you know, if there is improvement in sales price inflation, etc. We will of course benefit from it. I think, you know, the 23.8 or the 24% margin is a good indicator for the future, I would say. Additionally, I think what Kruno Crepulja said, we also, you know, looking forward this year, we have to say that the influence we had with the big Frankfurt project is gone because this project is handed over, which has been, you know, at a lower margin levels. This is also one of the triggers why we get to 24%, let's say margin guidance for 2026.
Okay. Perfectly understood. I mean, it's the 23.8% and also the 24% are superb margins. You mentioned in recent calls that you currently acquire quite actively attractive new projects. I thought it might be only the floor, at least for a couple of years coming ahead. Thanks for the additional information. The last one is with regards to your financial gearing, slight increase, but still on very low levels. If you would take all your envisaged acquisition volume into account, could you indicate a rough ballpark for the loan to cost where you might stand by the end of this year?
Well, you know, I think what we said is that, you know, with taking everything into account, we don't want to pass sort of the 40% LTC mark.
Mm-hmm.
We'll move within, you know, the 30%-40% range, I would say. Midterm want to come down again, you know, from those levels.
Perfect. Very helpful. Thanks a lot. All from my side.
Thank you, Philipp.
There are no more questions at this time. I would now like to turn the conference back over to Burkhard Sawazki for any closing remarks.
Thank you for your participation. If you need further information, please do not hesitate to contact the Instone IR team. Thank you. Goodbye.
Thank you. Take care.
Thank you.
Ladies and gentlemen, the conference now over and you may disconnect your lines. Goodbye.