Dear ladies and gentlemen, welcome to the Instone Q1 2021 results conference call. At a customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Burkhard Sawazki, Head of Business Development and Communication, who will start the meeting today. Thank you. Good morning, everyone, and thank you for joining our Instone Q1 earnings call. Our management team is represented by our CEO, Kruno Crepulja, and our CFO, Foruhar Madjlessi. They will walk you through our presentation and provide you an update on our business performance and our outlook. This is, as usual, a qualified Q&A session. With that, I would like to hand over to Kruno Crepulja. Good morning, everyone. I'm glad you could join us for Q1 2021 earnings call. Our management team and I are very pleased that we had a good start to the year despite the pandemic-related economic slowdown. Although Q1 is traditionally a rather quiet quarter, the overall business performance shows us well on track to reach our fiscal year 2021 growth targets. Now let's start our presentation with the highlights on page five. Our business model is back on its growth trajectory across all parts of the value chain. Most importantly, the demand for our product remains very strong from both customer groups, private as well as institutional investors. Especially worth mentioning is that we have already signed the first two deals with institutional investors in the southern part of Germany in the larger joint venture project in Berlin at a comparatively early stage of the year and at very decent margins. The upward trend for German resi prices continues to provide major tailwind to our business model. To support the envisaged step change in growth, we are working very actively on acquisitions and the expansion of our project portfolio. Currently, we are in exclusive negotiations for several projects, including also larger size opportunities with a GDV of some EUR 1.3 billion. Deals with a volume of around EUR 240 million have already been approved year-to-date. On the construction side, our projects under construction are running according to plan. A negative factor which cannot be ignored is the recent inflationary development in commodity markets, which will result in rising material costs. Large parts of construction works for this year will not be affected as costs for such projects have already been fixed. This development will limit additional margin upside, but we can clearly reiterate our financial targets. Look at our financial KPIs for the first quarter. Our adjusted revenues amounted to EUR 128.1 million. This reflects a strong growth of + 28.5% year-on-year. In the coming quarters, you can expect further growth acceleration in absolutes and also in relative terms. Our gross margins stayed at a very high level of 31.6%, also compared to other peers in our industry. This clearly reflects the very strong demand situation for our product, and it is also attributable to a favorable sales mix. In Q1, we benefited from a high sales contribution from particularly high margin projects. Finally, with the further expansion of our operating margin, our adjusted Earnings After Tax saw a strong increase of some 85% year-on-year to EUR 16.1 million. Coming to our outlook. Despite some headwinds from rising commodity prices, we can fully confirm our financial targets for this year. We are expecting adjusted revenues in the ballpark of EUR 820 million-EUR 900 million and adjusted Earnings After Tax in the range of EUR 90 million-EUR 95 million. The EAT is also the basis for our future dividends. We intend to keep dividend policy unchanged with a payout ratio of 30% of EAT. On slide number six, you can find the chart with our retail sales ratio, which is calculated on a weekly basis. This chart is again a good indicator for the strong underlying demand dynamics. After the recovery from the first lockdown period in spring last year, the demand remained stable at a high level above the long-term mean. We are not only benefiting from volume effects, but are also able to exploit the favorable pricing environment. As another positive demand indicator, we currently also have a strong backlog of reservations and notarization appointments, providing high visibility for strong sales development also in the weeks ahead. On the following slide number seven, we again collected some data points regarding the development of the overall market environment. Although results of the different surveys comprise a rather wide range, the overall direction is very clear. The upward trend for German residential properties in metropolitan areas also continues in the first month of 2021. Against the background of this positive momentum witnessed over the last month, we also view a close to mid-single digit HPI growth, i.e., a further yield compression as a realistic scenario for 2021. On the financing side, we have recently seen a slight rise in mortgage rates from their all-time lows. Nevertheless, this has not changed the overall picture. It is obvious that the still ultra-low interest costs with average mortgage rates are still below 1% for 10 years, and the good availability of debt for residential investors remain very supportive demand factors. The main demand drivers for institutional investors remain fully intact. A lack of defensive asset classes, also due to structural headwinds in other real estate segments and the attractive spread to bond market yields, also in the historical context, are pushing demand. We can confirm that we are receiving strong indications of interest from institutional investors also for the remainder of the year. The margins on the deals we have negotiated and on the two institutional deals we have signed year-to-date are absolutely in line with the retail channel. This clearly provides additional optionalities. In general, the institutional business offers some structural advantages, such as a superior cash flow profile and an overall lower complexity in the marketing process, et cetera. Let's move to slide number eight. One major new development for our business over the last few months, as well as for many other industries, was a strong rise in commodity prices. As a result, within a short period of time, we have seen a jump in cost for certain construction materials such as construction timber, steel, copper, or for facade insulation. Apart from mounting material price inflation, the availability of certain materials, i.e., the risk of potential delays, is a risk factor we also have to keep an eye on. We expect that CPI growth in 2021 will exceed our initial assumption of 3.5%, possibly by 1-2 percentage points, driven by higher material costs. The higher material costs are partly offset by more moderate growth in labor costs. Due to decreasing demand for commercial development projects, our negotiation power vis-à-vis the construction companies has improved over the last month. Moreover, the majority of our construction costs have already been fixed. Generally, we at Instone, I think that is really fair to assume, are comparatively well-positioned in a market with rising supply constraints. Our established network with long-lasting supplier relationships and our leading market position are paying off. Last but not least, the fact that we are mainly focusing on single awarding of trades, unlike most of our peers, is clearly helpful in this respect. This offers a higher degree of control over our suppliers and ultimately our construction costs. All in all, the above-budget CPI growth in 2021 is mitigated by, first, a certain amount of cost buffers. Secondly, the HPI growth we have seen in Q1, as well as, thirdly, the significant share of 2021 construction costs we have already contractually fixed. For the avoidance of any doubt, despite the recent price developments and the current supply chain risks that we do monitor and actively manage, we remain absolutely confident to achieve our 2021 guidance. Moving to our portfolio section on slide number 10. We have committed for step change in growth with a midterm annual revenue target of EUR 1.6 billion-EUR 1.7 billion. The launch of our Value Home product is supposed to be a key driver for this. Instone will therefore continue to expand its project portfolio in the coming two years. We are going to invest into land in the ballpark of EUR 300 million-EUR 400 million each in 2021 and in 2022. We are making good progress on this. Currently, we are in exclusive negotiation for several deals, including also large size opportunities with a total GDV of around EUR 1.3 billion. This also comprises a decent share of Value Home projects. Hence, we are hoping that we can provide further positive news in the coming months. Important to note that we have already approved three projects year-to-date in the metropolitan areas of Stuttgart, Erlangen, Nuremberg, and Rhein-Main, with a GDV of around EUR 240 million. Slide 11 illustrates a breakdown of our current project portfolio as of the Q1 reporting date. There are no major changes compared to the previous quarter. The portfolio is made up of 51 projects with more than 13,500 residential units. Almost 90% of the GDV is in the most attractive metropolitan areas of Germany and the remaining part in very attractive B cities. On the right-hand side, you can see the usual breakdown of the current development status of our portfolio. Of the nearly EUR 6.1 billion of GDV, around EUR 2.6 billion is already under construction or pre-construction, and thereof, EUR 2.4 billion or more than 90% has already been sold. This secures a high level of visibility for our expected sales and earning growth in the years to come. With that, I would like to hand over to Foruhar for the financials. Thank you, Kruno, and good morning to everyone from my side. Let's go right into our Q1 financial results. Page 13 shows our Q1 P&L. We are satisfied with our Q1 results as they do reflect a good start to the year. Our EUR 128 million in revenues are markedly higher versus the comparable 2020 periods and in line with our expectations. The revenue figure corresponds to EUR 119 million of concluded sales contracts, up 70% versus Q1 2020. As you know, the first half of the year tends to contribute a lower share to full-year revenues and earnings compared to the second half, the period during which most institutional sales tend to be completed. You should expect a similar pattern this year, with sales and revenues tilted towards the back end of this year. Our very strong 31.6% gross margin continues to benefit from favorable mix of projects with particularly high margins. These mixed benefits are expected to fade out as the year progresses. In addition, a number of lower-margin social housing projects will temporarily weigh on our margin when they occur. For Q2, we would expect the gross margin substantially lower, more likely in the low to mid-20s%. Kruno has already explained the sensitivity of our gross margin to material cost increases for the current year and the mitigating effects based on, one, our high share of already secured fixed-price contracts. Second, reduced capacity utilization in the construction industry associated with the need for our contractors to absorb a portion of the price increases in order to win new business. Third, the opposing trend of HPI that will benefit our 2021 revenues and margin to the extent associated with yet unsold units. In summary, I would like to reiterate our expectation for an unchanged 2021 gross margin of 26%-27%. Q1 platform costs have increased in line with expectations as we continue to invest into future growth. As previously communicated, our expected platform costs for the full year are around EUR 80 million. Our attractive 20.8% Q1 EBIT margin benefits from EUR 2.5 million income from joint ventures. The figure reflects our 50% share in a Berlin-based joint venture that has successfully completed an institutional sale of five buildings with a total of 537 units. Finally, you will notice a relevant reduction of interest costs. This is due to a combination of our 2020 corporate refinancing at favorable rates, as well as the reduction in gross debt outstanding versus the prior year period. Also, the 2020 Q1 figures include approximately EUR 700,000 non-recurring profit-linked payments to our Wiesbaden joint venture partner deemed as interest under IFRS. Page 14 provides an overview of sales and revenues associated with retail and institutional clients. Focusing on the pie in the middle of the page, you can see the split on a pro forma basis, i.e., including the sales contracts associated with our unconsolidated Berlin joint venture. On that basis, approximately 60% of our Q1 sales have been institutional versus approximately 40% retail. As the strength in institutional demand for residential real estate continues and in line with our previous communication, we do expect our institutional sales to exceed 60% for the full year 2021. With respect to revenues for the three months to March 31st, approximately 40% are related to projects sold to institutions. For the full year, the institutional share can be expected to exceed 60%, in line with the volume of new sales contracts. On to page 15, we provide a snapshot of our balance sheet and leverage. As project financings have been repaid and incremental cash flow has accrued, our net debt figure is down by about EUR 150 million versus December 2020. As a result, our loan-to-cost figure amounts to 11% versus 26% at year-end. Once again, the figure is based on historic costs of our inventories, not fair value. The corresponding net debt to EBITDA figure stands at 1.1x. The balance sheet will relever substantially over the next few quarters as we execute our growth plan and invest into new projects. As we have communicated a number of times, our mid-term revenue target of EUR 1.6 billion to EUR 1.7 billion is completely funded. In particular, no further equity will be required in order to hit the target. Over the page, with our operating cash flow at EUR 150 million, we have had a particularly strong quarter. It is worth mentioning that milestone payments from our project Westville have contributed significantly to the strong cash flow figure. The aggregate Westville-related prepayments are reflected in our balance sheet as part of the other current liabilities. Nevertheless, the full year 2021 operating cash flow will be negative as we will invest in excess of EUR 300 million in new land and in line with our ambitious growth target. As you can see in the table on the right-hand side, our undrawn corporate debt facilities and cash position adds up to more than EUR 400 million of liquidity. In addition, we have undrawn project financing lines with EUR 90 million undrawn capacity to cover future construction costs. Page 17 provides an update of our prospective NAV calculation. The figure reflects the NAV we would generate if our entire pipeline would be developed to hold in a rundown scenario without adding any new projects to our pipeline. On a per-share basis, our prospective NAV stands at €33.50. As you can see on page 19, our outlook for 2021 remains unchanged. While the commodity price developments will be monitored and managed closely, our high level of fixed-price construction contracts for 2021 and the favorable HPI development will help mitigate any detrimental commodity price developments. Consequently, we remain fully on track to achieving our full-year targets for 2021. With that, I would like to open the call for questions. Sorry, operator, would you mind allowing our audience to ask questions? Of course. Thank you. Now we will begin a question and answer session. If you have a question, follow the speakers. Please dial zero one on your telephone keypad now to enter the queue. Once your name is announced, you can ask a question. If you find your question is off before it's your turn to speak, you can dial zero two to cancel your question. If you are using speakerphone today, please lift the handset before making your selection. One moment please while we get your questions.. The first question is by Thomas Rothäusler of Jefferies. The line is open now, sir. Hi. Morning, everybody. I have a question on the acquisition pipeline you referred to EUR 1.3 billion of GDV. Can you give us some color on pricing, what you expect, what you see in the market, and also competitive situation? By when can we expect you to announce the next deals? Hello, Thomas. Regarding the competitive environment, after a short freeze caused by the pandemic, the competition is back, also driven by the strong demand for resi projects. The main change is that we see a less competitive environment for huge projects due to financing issues of highly levered actors, which have been very aggressive before the pandemic started. This is the competitive environment. Looking at price levels, what we currently see is, this is also linked to the strong demand in the HPI growth we are already facing in resi sales. The land prices are starting to rise again, approximately at the level of 2x HPI, which is current HPI growth we would assume at near to mid-single-digit size. Looking at our EUR 1.3 billion of portfolio, which is under exclusivity, of course, the number is significantly bigger for all the projects we are currently checking in the acquisition. We are doing our jobs regarding due diligence and negotiation, and I would expect the next four to six weeks to have the next deal announced. Can we expect this to be larger deals, larger land plots as you refer to the better competitive situation for you there? It's hard to say. Let's say we have different project types in the portfolio. There are larger sites, let's say, in the portfolio, and we'll see how far we get with the due diligence now in the next weeks. It could be a larger project, but it could also be a mid-size project depending on the finalization of the due diligence process. Okay. Maybe a last question on the topic we've discussed with last reporting actually, which was slower building permission process. Any change there or any relief in the meantime, or have things get even worse? Maybe some thoughts on this. I think it's working as we have reflected it in our plan. Overall, I would say it's still a mixed picture. There are authorities working faster, others slower. I would say the speed is similar to what we have reflected the last time. We're making good progress. Overall, I would say, we achieved the building permit for all the Westville parts, which was important. I think you can see this also in the positive cash flow position. This is mainly driven by Westville. We got the payments for the building permit. We feel very confident with our this year guidance and also for the outlook for the next year. Okay. Thank you. You're welcome. The next question is by Pascal Boll of Stifel. Your line is open now, sir. Yeah. Hey, good morning. I have several questions. First one is on the cost inflation. You give on page eight of your presentation, you give a scenario analysis. Can you explain that a little closer? I don't get really the point here. You mentioned a materially lower gross margin in Q2. You also remain confident on your 26%-27% target for the full year. Does this imply that you assume a higher or a better product mix in the second half of the year? Finally, your net debt to EBITDA number came significantly down to 1.1x. What do you expect this number to be at the end of the year? Thank you. Okay. Hello, Pascal. I'll take over the first one. Foruhar will answer the two following questions. Regarding the material cost inflation. What we are showing is overall our assumption for cost price inflation we are using is 3.5%, including labor and material cost inflation. Now, what we have faced in the last weeks is that material costs overall went up 7% to 9%. This leads to CPI growth of approximately 5% - 6%. We have this other effect, I would say, and I mentioned it, the labor cost inflation is a bit lower, and what is slowing down a bit the 7% to 9% is additionally that the capacities of company construction companies weakened through COVID. These are the positive effects. Overall, we see a 5%-6% cost price inflation currently, and as mentioned, this is only, let's say, influencing, of course, our margin, let's say partly because it only influences the projects where we don't have any contract signed already and the projects which have been already sold, where we can't react on pricing. This is very limited and therefore, it's completely compensated by the HPI growth we've seen in the first quarter. Hopefully with that, I have given you more insight and more transparency. Let's assume that next year for the following projects, the CPI assumption will be 5% or 5.5% instead of 3.5%. What would that do to your gross margin if we assume that the HPI pricing is more or less flat? Yes, if we would face further, let's assume 5%, an increase of 1.5% cost price inflation, which couldn't be compensated by HPI, then this would have approximately, let's say, overall, 40%-50% would be the impact on gross margin. Assuming 1.5% increase would lead them to 0.75% lower gross margin, approximately. As mentioned, it really influences only the projects where we haven't fixed the contracts. It would influence the margin if we don't see any HPI growth above the 1.5%. Sure. Makes sense. Thank you. Pascal, on the other two questions, in terms of the gross margin, this is really just a health warning that Q2 margin will be lower but shouldn't be a concern. If you think about it, will be a one-off effect and then Q3 and Q4 will be more in line with our full year target figure. The average will be 26%-27% for the full year. That's subject to these trades happening in Q2, which is never a certainty, but it is from today's perspective, the likely outcome. In terms of the leverage figure, as we discussed, we are at 1.1x. I would expect us to approach 3 x by year-end, as we still expect to invest, let's say north of EUR 300 million of incremental monies into new projects. Thank you. All right. The next question is by Thomas Neuhold of Kepler Cheuvreux. Good morning, gentlemen. Thank you very much for taking my questions. I have three and maybe we take them one by one. The first one is a follow-up question on the cost inflation topic. Do you think the cost inflation is transitory or do you see it's rather permanent? I was wondering if you have adopted your cost inflation assumptions in your models when you look at new projects, or are you still using the 3.5%? Yeah. Hello, Thomas. Good question. From my perspective, and I have to say that this is based on what we see in the market and what we hear from our suppliers and also what we see from analyst side. I expect for the raw materials, where it's more a production driven issue currently, that we have reached a peak. That's what the suppliers and analyst feedback is currently. It will normalize during, let's say, the next six to 12 months. This is insulation, steel, et cetera. For copper, I would expect the prices, let's say, the inflation for copper prices staying at a high level due to very strong demand, not only from our industry but from all industries. This is my personal view. Currently our calculation assumption that cost price inflation is compensated by HPI remains the same. Currently we see stronger HPI growth than 1.5%, and our assumption is that both positions are compensating each other. The second part of my question, what are you modeling in now as you evaluate new projects? Are you still using 3.5%, or are you using a higher inflation? Thomas, we haven't changed our models. Okay. Clearly, it would also be, I think, inconsistent to assume that the price increase, not just the price level, but the price increase would continue at that speed. Okay. Fair point. Good. The second question is on the regulatory environment. Can you please elaborate what the impact on your business could be from the mobilization of land for construction, [Non-English content], and the federal funding regulation for energy efficient buildings? I can maybe start with the subsidies. The new BAFA regulations is not really a major change for us. It is replacing the need to take out a loan via the KfW bank by the possibility to-- which would then be sort of repaid only in part. This can now be replaced with a direct subsidy for the same amount. We are entitled in a number of our projects to receiving these benefits. It's a negotiation question then, whether we keep them for ourselves or we build them into the sales price and let the buyer, either the retail buyer or the institutional buyer, reap the benefits of the subsidies. That is not really a major change. In terms of Bauland Mobilization, I think there's a lot of restrictions in the law that don't apply to us specifically, but make the availability of new condo sales more difficult for other players. I don't want to say that regulation is helpful for us, but it's probably more detrimental to the competition. It's more likely, I think, to drive prices further up than harm our business. Okay. My last question is on the upcoming elections. Can you maybe share your views on what the potential chances and risks for your business could be from the likely participation of the Green Party in the next government? There are two main topics. Of course, I think it's on the agenda of all the parties. It's climatic change and it's affordable housing. Of course, the Green Party will push additionally more the climatic change part. From our perspective, I think we are well prepared to this, having the right answers with Value Home focusing on affordable housing, increasing the part in our business for affordable housing. Secondly, for the quarter developments, being a, I would say, a huge company in this business area, putting in renewable energy, being flexible in the question of product development, et cetera. I think we are well prepared for this. I would assume that overall the regulation will further increase. I see more chances than risks for our company in this field. Great. Thanks a lot. You're welcome. Next question is by Emily Biddle of Credit Suisse. Morning, guys. I hope you're well. Thanks for taking my questions. Two please. The first one, I just wanted to come back on land buying margins. As we look at it today, obviously you've been active in the last quarter, but do you think that you're buying land on the same margins that you were through the second half of last year? When you're buying land at the moment, are you continuing to make the same sort of near-term assumptions on house price inflation and CPI that you were six months ago? Are you trying to capture that higher level of build cost inflation within the land price? Is there anything we need to think about there in terms of long-term margins? Secondly, you obviously said that the project delays aren't getting any better or worse than they were last time we heard from you, and that gives you confidence in next year's revenue. Are we at a point when the guidance for next year can become more specific than just north of EUR 1 billion? Are we closer to getting a slightly narrower range there? Thanks very much, guys. On the guidance point, I think in line with how we've dealt with that in the past, I think we will become more specific only with full year numbers next year. That's our plan currently. If we were to expect a material change to the revenue figure out there we would clearly be providing feedback and input here. Secondly, in terms of the margin, we have said that we're expecting a 25% in line with our long-term margin, and any deviation from that, I think we'll specify more precisely as I said, in line with historic practice with full year numbers. It will be around that level, or at that level. Regarding your question on margins in acquisition projects, I would say that we are still facing the same margin assumptions. It's the 25% for the core business, 20% for Value Home. We have had after the pandemic, the one or the other projects we already reflected this, let's say with an upside potential we catched caused by the pandemic, currently, I would say the land price development and the competition situation is leading to margins we have also seen before the pandemic started. Looking at our calculation assumption, let's say if you look at the current market environment, we see HPI growth at the level of near to 5%, cost price inflation at a level of 5%-6%. This would mean that the cost price inflation numbers are overcompensated by HPI when you compare this with our assumption 1.5% HPI and 3.5% CPI, which is still in place. We are still very conservative here due to the fact that I think that the construction costs, the material costs will normalize in the coming six to 12 months. We don't see any necessity to change this here. Great. Thanks, guys. You're welcome. The next question is by Philipp Kaiser of Warburg Research. Hello, everyone. Thanks for taking my question. Just two short questions left from my side. First, [Non-English content] on to the building permit side. They shouldn't trigger any risk this year. What about next year? When the normalization on the building permit side have to start, that there will be no further delays also in 2022. The second one is on the acquisition pipeline. Just could you indicate what volume is earmarked for Value Home from the EUR 1.3 billion of project in the acquisition pipeline? Starting with the last one, approximately EUR 500 million is dedicated to Value Home. Regarding the building permit processes, if, let's say the permission speed is as is today, and we've seen it in the last one to three quarters, then we don't see any risk for our guidance for next year. I would say we're exactly where we expect it to be. We've built in that sort of slowdown for the current year into our numbers for 2021. With the vaccination improvements, we have to, from today's perspective, expect that we will be back to normal by the end of the year. Perfect. Thanks a lot. As a reminder, if you want to ask a question, please dial zero one now to enter the queue, zero one. No further questions. I hand back to Mr. Crepulja for closing remarks. Yeah. Thanks again for your participation. If you have further questions, please do not hesitate to contact the IR team also after this call. Thank you. Goodbye. Thank you. Ladies and gentlemen, thank you for your attendance.