Servizi
Nexity_9M 2024_Business activity and revenue
CONFIRMED RECOVERY IN RETAIL SALES
ONGOING PROACTIVE IMPLEMENTATION
OF THE TRANSFORMATION PLAN
Business activity and revenue for the first 9 months of the year
Ongoing proactive implementation of the transformation plan over the quarter, following a very active first half of the year
Outlook unchanged subject to no deterioration in the macroeconomic environment
VÉRONIQUE BÉDAGUE, CHAIRWOMAN AND CHIEF EXECUTIVE OFFICER, COMMENTED:
“Nexity's performance in the third quarter was in line with our trajectory, and the crisis scenario facing our sector is taking place as I have observed for more than a year now. Because we were among the first to anticipate this crisis, we were among the first to allocate the resources needed to overcome it. A number of positive signals have been confirmed, with interest rates now beginning to come back down and increasing widespread awareness of the urgent need to take action for housing, in the US, Europe and France. Our business activity in the third quarter showed positive momentum in retail sales, up 11%, driven in particular by our range launched at the end of September, developed in partnership with LCL. The success of this range shows that there is strong demand for affordable, low-carbon housing. It also reflects the importance of purchasing power and mortgage rates for aspiring first-time homebuyers, and in that regard the recent decreases and the announced expansion of the PTZ interest-free loan scheme are positive signals to fuel the recovery.
To maintain this edge, we are also proactively continuing to implement our transformation, positioning Nexity as France's leading urban operator for regional and urban regeneration. Deleveraged, agile and focused on development, Nexity will be ready to rise to the challenges of the new real estate cycle and capitalise on the rebound starting in 2025.”
I. Business activity and revenue by division
* Following the sale of the Property Management for Individuals business, finalised on 2 April 2024, revenue for this business is presented separately in the following tables within a separate “Discontinued operations” line item for 2023 and 2024. For 2023, this line item also includes indicators relating to the activities in Poland and Portugal, which were disposed of in 2023.
Residential Real Estate Development
Business activity:
In a housing market in which reservations are still significantly down, with a 9% overall decrease at the end of Q2 according to the French Federation of Real Estate Developers (FPI), Nexity booked a total of 8,109 reservations over the period, down 12% by volume (and down 9% by value).
Performance was solid in Q3 (up 11%), driven in particular by the success of the supply launched in late September in partnership with LCL to help first-time buyers and young people access loans in order to become homeowners. Site traffic on our sales platforms was up 35% and the number of contacts established doubled, reflecting renewed interest from individual investors, especially first-time buyers, with whom reservations surged 14% by volume (vs 9M 2023), accounting for 16% of total reservations.
As part of the implementation of its plan to adapt supply for sale (see Section 2 under “Recalibrating”), the Group continued to take proactive measures and abandoned 64 programmes designed before 2023, the profitability of which was no longer certain in the new cycle. This decision led to the cancellation of 1,504 reservations, recorded before 1 January 2024, comprised of 195 retail sales and 1,309 bulk sales.
Supply for sale at end-September came to 5,757 units, down 26% relative to year-end 2023 and 12% relative to June 2024. Absorption rates were down by nearly 1.5 months relative to June, at 6.4 months.
Revenue declined by 8% to €1,804 million in the first 9 months of the year, primarily reflecting the decline in business activity from projects underway, with revenue stabilising in Q3.
This volume does not yet include the initial contributions of the Carrefour partnership to the backlog, which are expected starting in Q4, with the filing of four building permits (representing a total of around 800 homes, more than 4,200 sq.m of retail space and €120 million in business potential).
Commercial Real Estate Development
With the market still challenging, marked by higher interest rates and changes in usage for commercial real estate (investment in France was down 18% at end-September 2024, with commercial real estate expected to reach a low point in 2024), Nexity recorded €55 million in new orders during the period, higher than the amount recorded for full-year 2023 (€39 million) but still much lower than the level before the crisis.
During the quarter, Nexity delivered two projects totalling nearly 110,000 sq.m, illustrating the Group's capacity to complete large-scale mixed-use projects on schedule:
These deliveries brought the total floor area delivered since the beginning of the year to more than 170,000 sq.m, including the following iconic projects:
At end-September 2024, revenue totalled €349 million, driven, as in 2023, by the contribution of the green business park in La Garenne-Colombes.
Services
Revenue from Services, excluding discontinued operations (Property Management for Individuals, or PMI), amounted to €349 million at end-September 2024, down 11%, still buoyed by Serviced Properties but affected by the slowdown in Distribution.
On 25 July 2024, Nexity announced that it had entered into exclusive negotiations with Crédit Agricole Immobilier with a view to selling Nexity Property Management.
Consolidated revenue under IFRS
In IFRS terms, reported revenue to end-September 2024 totalled €2,429 million, down 12% relative to 30 September 2023 (down 6% on a like-for-like basis; see details in Annex 7).
II. Ongoing proactive implementation of the transformation plan focused on our “4 Rs”
After beginning to refocus its business in 2023, Nexity began rolling out its transformational roadmap in early 2024 and is forging ahead with the implementation of its proactive decisions relating to deleveraging as part of the Group's refocusing, reducing operating expenses to resize its cost base, and adjusting supply to fit new market conditions. Following a very active first half of the year, the Group continued to implement this plan during the quarter, focused on its “4 Rs”:
Refocusing: Making every possible effort to deleverage
During the quarter, the Group also maintained a healthy, disciplined level of control over its balance sheet and its liquidity, which was boosted by the delivery of the large-scale LGC and Carré Invalides commercial programmes, in particular. As such, the amount of confirmed undrawn credit facilities at end-October came to €800 million, which comprised the total amount of confirmed credit facilities with repayment due in 2028 and without limitations of use.
As a reminder, all the Group's Euro PP bondholders and partner banks agreed in Q1 2024 to waive its obligations with regard to financial ratios until the end of financial year 2024. This waiver reflects the support Nexity has from its partner banks and Euro PP bondholders for the implementation of the Group's transformation.
Resizing: Execution of the plan to reduce operating expenses to support the Group's transformation
The redundancy plan, for which the information and consultation procedure was initiated in April 2024, was approved in Q3 by all employee representatives and by the French labour administration. Its implementation will therefore be effective starting November 2024, in line with the planned schedule and budgeted amount.
The overall reduction in the cost base on a full-year basis is expected to amount to €95 million, equating to a 16% reduction , 75% of which is expected to be achieved from 2025.
Recalibrating: Plan to adapt supply for sale
In Q3, the Group continued to adjust supply for sale to fit new market conditions through resolutely proactive measures.
All of these measures were reflected in decreased supply for sale (down 26% vs December 2023) and the virtual absence of unsold completed homes at end-September (less than 100 units, or ~1%). Adjustments to selling prices for supply under construction, the launch of programmes adjusted to fit new market conditions and the abandonment of unprofitable programmes are aimed at improving profitability for development starting in 2025.
Redeploying: Shifting towards a regional, multi-product organisation, focused on development and urban regeneration
III. Recognised low-carbon ambition
For the sixth year in a row, Nexity has taken first place in the four main categories of the BBCA ranking, confirming its commitment to – and leadership in – low-carbon real estate.
Since the launch of the BBCA certification in 2016, 175 Nexity developments have been (or are in the process of being) certified, totalling nearly 1 million square metres.
This recognition reflects the Group's ongoing rollout of its ambitious strategy in support of resilient, low-carbon cities. As a reminder, the Group's low-carbon ambition is to achieve a 42% reduction in its carbon impact per square metre delivered between 2019 and 2030, 10% above the level required by France's RE2020 environmental regulations. On average in the first 9 months of the year, the Group's developments at building permit stage outperformed RE2020 requirements by 30%, thus meeting the new 2025 regulatory threshold in advance.
IV. Outlook unchanged
Thanks to the effective implementation of its roadmap and its tangible commitment to adjust and transform its organisation, the Group is able to maintain its 2024 outlook unchanged:
Nexity is aiming for improved profitability from 2025, and as a result, maximum net debt of €500 million at year-end 2025.
FINANCIAL CALENDAR & PRACTICAL INFORMATION
A conference call will be held today at
6:30 p.m. (Paris time)
(in French, with simultaneous translation into English)
The presentation accompanying this conference will be available on the Group's website from 6:15 p.m. (Paris time).
The conference call will be available on replay at
www.nexity.group/en/finance from the following day.
Disclaimer: The information, assumptions and estimates that the Company could reasonably use to determine its targets are subject to change or modification, notably due to economic, financial and competitive uncertainties. Furthermore, it is possible that some of the risks described in Chapter 2 of the Universal Registration Document filed with the AMF under number D.24-0287 on 16 April 2024 could have an impact on the Group's operations and the Company's ability to achieve its targets. Accordingly, the Company cannot give any assurance as to whether it will achieve its stated targets, and makes no commitment or undertaking to update or otherwise revise this information.
NEXITY – LIFE TOGETHER
With €4.3 billion in revenue in 2023, Nexity is France's leading comprehensive real estate operator, with a nationwide presence and business operations in all areas of real estate development and services. Our strategy as a comprehensive real estate operator is designed to serve all our clients: individuals, companies, institutional investors and local authorities. Our corporate purpose, “Life together”, reflects our commitment to creating sustainable spaces, neighbourhoods and cities that let our clients connect and reconnect. Nexity has been ranked France's number-one low-carbon project owner by BBCA for the sixth year in a row, is a member of the Bloomberg Gender-Equality Index (GEI), was included in the Best Workplaces 2021 ranking and was awarded Great Place to Work® certification in September 2022. Nexity is listed on Euronext Paris (Compartment A) and is eligible for the Deferred Settlement Service (SRD) (SBF 120 index).
CONTACTS:
Anne-Sophie Lanaute – Head of Investor Relations and Financial Communications /
+33 (0)6 58 17 24 22 /
investorrelations@nexity.fr
Cyril Rizk – Media Relations Manager / +33 (0)6 73 49 72 61 –
presse@nexity.fr
ANNEX: OPERATIONAL REPORTING
1. Residential Real Estate Development – Quarterly reservations
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2. Residential Real Estate Development – Cumulative reservations
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3. Breakdown of new home reservations (France) by client
4. Backlog
5. Services
6. Revenue – Quarterly figures
7. Revenue: Transition to IFRS – Operational reporting
GLOSSARY
Absorption rate: Available market supply compared to reservations for the last 12 months, expressed in months, for the new homes business in France.
Business potential: The total volume of potential business at any given moment, expressed as a number of units and/or revenue excluding VAT, within future projects in Residential Real Estate Development (new homes, subdivisions and international) as well as Commercial Real Estate Development, validated by the Group's Committee, in all structuring phases, including the programmes of the Group's urban regeneration business (Villes & Projets); this business potential includes the Group's current supply for sale, its future supply (project phases not yet marketed on purchased land, and projects not yet launched associated with land secured through options).
Current operating profit: Includes all operating profit items with the exception of items resulting from unusual, abnormal and infrequently occurring transactions. In particular, impairment of goodwill is not included in current operating profit.
Development backlog (or order book): The Group's already secured future revenue, expressed in euros, for its real estate development businesses (Residential Real Estate Development and Commercial Real Estate Development). The backlog includes reservations for which notarial deeds of sale have not yet been signed and the portion of revenue remaining to be generated on units for which notarial deeds of sale have already been signed (portion remaining to be built).
EBITDA: Defined by Nexity as equal to current operating profit before depreciation, amortisation and impairment of non-current assets, net changes in provisions, share-based payment expenses and the transfer from inventory of borrowing costs directly attributable to property developments, plus dividends received from equity-accounted investees whose operations are an extension of the Group's business. Depreciation and amortisation includes right-of-use assets calculated in accordance with IFRS 16, together with the impact of neutralising internal margins on disposal of an asset by development companies, followed by take-up of a lease by a Group company.
EBITDA after lease payments: EBITDA net of expenses recorded for lease payments that are restated to reflect the application of IFRS 16 Leases.
Free cash flow: Cash generated by operating activities after taking into account tax paid, financial expenses, repayment of lease liabilities, changes in WCR, dividends received from companies accounted for under the equity method and net investments in operating assets.
Joint ventures: Entities over whose activities the Group has joint control, established by contractual agreement. Most joint ventures are property developments (Residential Real Estate Development and Commercial Real Estate Development) undertaken with another developer (co-developments).
Land bank: The amount corresponding to acquired land development rights for projects in France carried out before obtaining a building permit or, in some cases, planning permissions.
Market share for new homes in France: Number of reservations made by Nexity (retail and bulk sales) divided by the number of reservations (retail and bulk sales) reported by the French Federation of Real Estate Developers (FPI).
Net profit before non-recurring items: Group share of net profit restated for non-recurring items such as change in fair value adjustments in respect of the ORNANE bond issue and items included in non-current operating profit (disposal of significant operations, any goodwill impairment losses, remeasurement of equity-accounted investments following the assumption of control).
Operational reporting: According to IFRS but with joint ventures proportionately consolidated. This presentation is used by management as it better reflects the economic reality of the Group's business activities.
Order intake – Commercial Real Estate Development: The total of selling prices excluding VAT as stated in definitive agreements for Commercial Real Estate Development projects, expressed in euros for a given period (notarial deeds of sale or development contracts).
Pipeline: Sum of backlog and business potential; may be expressed in months or years of revenue (as for backlog and business potential) based on revenue for the previous 12-month period.
Property Management: Management of residential properties (rentals, brokerage), common areas of apartment buildings (as managing agent on behalf of condominium owners), commercial properties, and services provided to users.
Reservations by value (or expected revenue from reservations) – Residential Real Estate: The net total of selling prices including VAT as stated in reservation agreements for development programmes, expressed in euros for a given period, after deducting all reservations cancelled during the period.
Revenue: Revenue generated by the development businesses from VEFA off-plan sales and CPI development contracts is recognised using the percentage-of-completion method, i.e. on the basis of notarised sales and pro-rated to reflect the progress of all inventoriable costs.
Serviced Properties: Operation of student residences and flexible workspaces.
1 Change restated for the impact of programmes abandoned as part of efforts to adapt supply for sale to market conditions
2 Market data for retail sales: Down 20% according to the FPI at Q2 2024
3 NPM: Nexity Property Management
4 Employee representatives and French labour administration (DRIEETS)
5 The volume of reservations net of 1,504 cancellations (relating to the abandonment of 64 programmes) came to 6,605 units.
6 Scope: France (total). 8,815 reservations, including 706 for subdivisions (vs 10,046 in 9M 2023)
7 Source: FPI Q2 2024
8 Source: Immostat Q3 2024
9 Total floor area net of additions/disposals
10 Method used to calculate occupancy rate updated at 1 January 2024 to take into account the inflationary environment and the impact of rent indexation; rolling 12-month basis – occupancy rate at mature sites (open for more than 12 months).
11 The presentation on the governance structure is available on the Group's website:
nexity.group/en/about-us/our-governance
12 Regulations setting out demanding thresholds every three years for reducing carbon emissions across the life cycle of a real estate development (materials and energy).
Attachment
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