Once again, Neinor has been able to maintain its profitability, reporting a gross margin of 27.9% due to capturing additional house price appreciation (HPA) and a tight control of construction costs. At the EBITDA level, Neinor reported 22 million euros in line with previous year and, at the bottom-line, Adj. Net Income stood at 12 million euros, which represents a growth of 97% YoY.

These results put Neinor on target to reach its FY24 guidance with c.2,000# unit deliveries and Net Income 65 million euros (EPS 0.87/sh) as the majority of deliveries are scheduled to take place during the second half of the year. Moreover, Neinor finished the half year with a solid cash balance of 224 million euros and a net debt position of 210 million euros, nearly unchanged vs December 2023.

Given its high visibility on target deliveries and solid cash position, in the coming week, 31 July, Neinor expects to distribute a gross amount of €0.5/sh to its shareholders as approved on the last AGM that took place on 17 April. The second distribution of a gross amount of €0.5/sh is expected to take place in October or November, on a date to be confirmed. The two payments will be executed through capital reductions with refund of contributions to the shareholders, following the same structure proposed in recent years. Consequently, the distributions will be subject to a 1% tax on the value of the refunded amounts, which Neinor Homes will withhold, self-assess, and pay to the Bizkaia Tax Authorities.

Improving macroeconomic outlook for the Spanish economy

In the year to June 2024, GDP growth for Spain is forecast to reach 2.3%, significantly ahead of the Eurozone average of 0.7%, according to Bloomberg consensus. For 2025, Spanish GDP is forecasted to grow at 2.0%. The underlying strength of the Spanish economy is being primarily driven by the continuing growth of household consumption, which is itself supported by the resilient labour market, with growing employment and increasing real wages, in addition to above average savings rates and a flourishing tourism sector. The prospect of further interest rate decreases by the European Central Bank further strengthen the positive outlook for the Spanish economy.

 Solid residential fundamentals on limited supply and supportive demographics

 During the last five years (2019-24) the Spanish population grew by a total of +1.6mn people and net new household creation stood at +0.7mn, with half of this growth concentrated in the provinces of Madrid, Barcelona, Valencia and Malaga. Over the same period, the number of new houses finished stood at just 400k units creating a large and growing housing deficit.

Over the next five years (2024-29), INE expects the Spanish population and households to grow at a significantly higher pace by +2.9mn inhabitants and +1.7mn households, respectively (Source: INE). On the other hand, supply is expected to remain limited at 400k to 500k housing units further aggravating the prevailing housing deficit that is compounding year after year with an annual supply of just 80-90k units.

 Neinor pre-sold 1,173 homes, its strongest start to the year since 2021

From January to June 2024, Neinor’s build-to-sell strategy is continuing to record strong growth in sales, increasing 30% year-on-year to 836 homes. In total, pre-sales amount to more than 300 million euros, implying an average selling price per unit of c.€370,000 with an HPA capture of 5% above its expectations at the beginning of the year. Furthermore, Neinor notes that visits and leads in the same period have grown 10% YoY. At the end of the first half, Neinor had an order book of 1,761 housing units worth 601 million euros, offering good visibility over its financial results for the coming years.

Despite house price growth, affordability for Neinor’s customers remains healthy with a house price to income ratio below the national average (5 years vs 7.3 years).

Successfully monetizing BTR portfolio with c.€250mn sold at attractive margins

On BTR, Neinor has secured the sale of 337 units to Avalon Properties, after the close of the half year period. Over the last 12-month period, Neinor has successfully sold 1,030 build-to-rent homes across six developments to Kgal, Savills IM, Harison Street, DEA Capital, CBRE IM, and Avalon Properties. These sales have generated approximately 250 million euros in revenue through agreeing deals with both institutional investors and family offices across the provinces of Madrid, Guadalajara, Valencia and Malaga.

 Shareholder remuneration plan on track, offering c.31% dividend yield for 2024-25

In the coming 20-months, Neinor expects to distribute 325 million euros to shareholders equivalent to a gross payment of 4.34 euros per share and 4.30 net euros per share. These payments represent the highest accumulated dividend yield (c.31%) for 2024-25 of IBEX35 and the EuroStoxx600 (Source: Bloomberg consensus).

Accelerating Joint-Venture business after raising a total of €500mn since June-23

In March 2023, Neinor unveiled its strategic plan (2023-27) with the objective to invest 1 billion euros over the next 5-Years together with new strategic partners. Neinor has signed three agreements with renowned investors such as AXA IM Alts, Orion Capital Managers and Urbanitae to raise 300 million euros in build-to-sell strategies and, so far, has deployed more than 100 million euros to build more than 800 new homes across 5 residential projects.

Furthermore, Neinor recently signed its fourth JV agreement with Octopus Investments to create the largest Independent Senior Living platform in the Spanish market with an initial investment of 200 million euros. According to CBRE, the Senior Living sector in Spain is still in its ‘infancy` with just 1.6k purpose-built units, compared to 85k, 102k and 1.9mn in the UK, France and the US, respectively. To reach an optimal level of supply Spain would need 280k new units, requiring an estimated investment of 45 billion euros. Additionally, By 2050, the Spanish population aged 65 and above is expected to grow by 60%, which compares with 35%, 45%, 24%, and 35% for Germany, Italy, France, and the United Kingdom respectively.  

As of June, Neinor has a fully owned land bank to develop 12,000 housing units with a Gross Asset Value (GAV) of nearly 1.5 billion euros. Adding the JVs with HMB, AXA, Orion and Urbanitae, Neinor is currently managing a total land bank of 17,400 housing units – one of the largest in Spain. Of these, c.7,000 are active in different stages of development and c.4,000 are under construction or finished.

Borja García-Egotxeaga, Neinor Homes CEO commented: “During 2024, we have already witnessed a significant improvement in the Spanish macroeconomic outlook, even ahead of further potential cuts in interest rates. On the ground, we continue to see solid fundamentals with a growing imbalance between demand and supply which has led to Neinor’s best start to a year since 2021 with pre-sales growing 30% year over year. Furthermore, we are seeing a stabilisation on cost inflation, strengthening the outlook of the coming years.”

Jordi Argemí, Neinor Homes’ Deputy CEO and Chief Financial Officer, commented that: “Since March 2023, we have been taking decisive steps to increase visibility and accelerate the execution on the two main building blocks of our Strategic Plan 2023-27: shareholder returns and equity efficient growth. Today, we have already approved distributions on one-third of the 600 million euro shareholder remuneration plan, and we expect to have delivered on 75% (€450mn) in the next 20-months. Moreover, on the equity efficient growth we have been very effective by already successfully raising 500 million euros from third party capital, which is key to deliver on our 1 billion euros land investment target.

* For the full regulatory announcement please refer to Neinor’s webpage (https://www.neinorhomes.com/en/accionistas-inversores/regulatory-announcements).