PR Nexity – Q1 2024 business activity and revenue

Written by Customer Service on April 25, 2024. Posted in Earnings Releases And Operating Results.

Paris, 25 April 2024, 6:00 p.m. CEST

BUSINESS ACTIVITY IN LINE WITH EXPECTATIONS
PROCESS UNDERWAY OF DELEVERAGING
AND TRANSFORMING THE GROUP

Q1 2024 business activity and revenue

Slight recovery in retail sales (up ~1%) after 2 years of continuous decline in a market that remains sharply lower
(down 31%¹)
Bulk sales for the quarter: 567 units, not representative of non-linear business activity over the course of a full year²
Group revenue of €770 million, in line with our expectations (down 14%)
Backlog relatively stable at €5.1 billion, equating to 2 years’ revenue

Process underway aimed at deleveraging and strengthening the Group’s liquidity position, in line with our announcements

Sale of Property Management for Individuals business to Bridgepoint completed on 2 April, with sale proceeds of €400 million bolstering the Group’s solid liquidity position

In-depth transformation of the Group’s business model towards that of an urban operator

Reorganisation of the Group focused on urban regeneration, our customers’ needs and operational performance, including the implementation of support measures for 500 employees as part of a redundancy plan (PSE in French)
- Plan to reduce operating expenses aimed at reducing our cost base by €95 million, equating to a 16% reduction³
Partner banks and bondholders⁴ backing the Group’s transformation, in particular by waiving⁵ obligations with regard to financial ratios

Guidance unchanged

Véronique Bédague, Chairwoman and Chief Executive Officer, commented:

“Even as the market continues to decline, with weak implied yields for investors, Nexity’s retail business activity has begun to pick up. Having shown itself to be agile in refocusing its business in 2023, in 2024 Nexity is forging ahead with the implementation of proactive decisions to adapt its range of products and solutions while doing everything it can to deleverage and reduce its cost base, thus positioning itself to successfully pivot towards an urban operator business model. The sale of our Property Management for Individuals business to Bridgepoint, completed in early April, and the implementation of our cost-savings plan, including a redundancy plan, demonstrate the progress we are making on our roadmap and mean we can maintain our guidance unchanged for the current financial year. 2024, set to be a financial low point, will be a year of transformation for Nexity into a more agile business, ready to bounce back from 2025 onwards thanks to opportunities driven by the emerging needs of regions and clients. This will enable Nexity to return to growth and ultimately reward its shareholders, whom I look forward to seeing at our Shareholders’ Meeting on 23 May.”

Q1 2024 BUSINESS ACTIVITY AND REVENUE BY DIVISION

Key figures to end-March 2024

Home reservations (France)	Q1 2023	Q1 2024	Change 2024 vs 2023
Volume	2,811 units	2,005 units	-29%
Value	€575m	€446m	-22%

Revenue (€m)	Q1 2023*	Q1 2024	Change 2024 vs 2023
Development	700	593	-15%
Residential Real Estate	575	489	-15%
Commercial Real Estate	125	103	-17%
Services	194	177	-9%
Property Management	92	89	-4%
Serviced Properties	61	66	+8%
Distribution	40	22	-45%
Revenue	893	770	-14%

* 2023 revenue restated to account for the disposal of the activities in Poland and Portugal in July and September 2023, respectively.

Residential Real Estate Development

In a housing market in which reservations are still significantly down, with retail sales estimated to be down 31% in Q1 2024,⁶ Nexity booked 2,005 reservations over the period, down 29% (down 22% by value).

Slight recovery in retail sales, up ~1% (1,438 reservations)
Bulk sales accounted for 567 reservations in the quarter (vs 1,384 in Q1 2023)

Sales in Q1 were not representative of the level of business activity expected over the full financial year, due in particular to the non-linear nature of business activity for bulk sales. This non-representative nature is even more apparent in 2024 given the market’s reliance on macroeconomic factors and the contribution of bulk sales (67% at year-end 2023), automatically implying heightened sensitivity to the timing of deals signed with social housing operators over the course of the year.

Supply for sale at end-March 2024 came to 7,028 units, down 10% relative to year-end 2023, with take-up periods also down at around 6 months.

These trends reflect the following:

The ongoing highly selective approach to launching programmes (with an average rate of pre-selling of more than 75%⁷ on programmes launched over the past 15 months)
The Group’s ability to sell its new supply for sale, notably thanks to pricing that has been adjusted and is in line with demand (20% by volume of new sales launches in Q1 have already been reserved)
The relevance of tailored financial support measures put in place in the first quarter, facilitating the sale of developments under construction

The slight growth seen in retail reservations in Q1 2024 along with the 26% decrease in supply for sale between Q1 2023 and Q1 2024 perfectly illustrate this capacity to successfully sell existing units as well as those currently under construction.

Developments under construction accounted for around 49% of the total supply for sale (vs 60% for the market as a whole at year-end 2023) and the stock of unsold completed units remained marginal, at around one hundred.

Lastly, Nexity’s supply for sale located in supply-constrained areas – and thus eligible for the “Pinel”, intermediate rental housing (LLI) and 2024 PTZ interest-free loan schemes – accounted for 85%⁸ of its total supply for sale at end-March. This calculation takes into account France’s revised zoning map, which came into force in late October 2023.⁹

Revenue declined by 15% to €489 million, reflecting the decline in prior-period business activity.

The backlog at end-March was stable at €5.1 billion, equating to two years’ revenue.

Commercial Real Estate Development

With the market at a cyclical low, still marked by higher interest rates and changes in usage for commercial real estate (according to CBRE, investment in France was down 45% year-on-year in Q1 2024), as expected, Nexity recorded a low volume of new orders in the first quarter of 2024 (€9 million).

Having delivered over 100,000 sq.m in 2023, the Group delivered nearly 20,000 sq.m in the first quarter of 2024, including nearly 10,000 sq.m of business premises. These developments bring total deliveries over the past five years¹⁰ to over 700,000 sq.m, including almost 200,000 sq.m of logistics facilities, warehouses and business parks and over 50,000 sq.m in educational facilities, hotels and retail space.

Revenue from Commercial Real Estate totalled €103 million in the period to end-March 2024, (down 17% relative to end-March 2023), driven mainly by the contribution of the green business park project in La Garenne-Colombes, which is 81% complete.

15 developments are in progress at end-March 2024, totalling more than 200,000 sq.m and a backlog of ~€250 million, including the following:

Green business park in La Garenne-Colombes for nearly €200 million. This 95,000-sq.m project scheduled for delivery in Q2 and Q4 2024, will contribute approximately €260 million to secure 2024 revenue
Carré Invalides (Paris): Renovation of the 15,400-sq.m former headquarters of the Greater Paris regional council
Confluence (Lyon): Mixed development incorporating a 15,000-sq.m higher education campus
Reiwa: New construction of Nexity’s future head office, totalling around 25,000 sq.m, in Saint-Ouen (Seine-Saint-Denis)

Services

Services revenue stood at €177 million at end-March 2024, down slightly and once again driven by Managed Real Estate (Serviced Properties):

In €m	Q1 2023	Q1 2024	Change 2024 vs 2023
Property Management	92	89	-4%
o/w: Property Management for Individuals *	74	71	-4%
o/w: Other Property Management Activities	18	18	Stable
Serviced Properties	61	66	+8%
Distribution	40	22	-45%
Revenue	194	177	-9%

^* After announcing on 21 December 2023 that it had entered into exclusive negotiations, on 2 April 2024 Nexity finalised the sale of 100% of its Real Estate Services to Individuals activities to Bridgepoint

Revenue from Property Management (Property Management for Individuals and Property Management for Companies) fell slightly, down 4% to €89 million, confirming the resilience of the condominium and rental management and Property Management for Companies businesses. Meanwhile, rental intermediation-related business lines (sales and lettings) remained affected in Q1 2024 by the interest rate environment and persistent tight supply in the rental market.

The Serviced Properties business (serviced residences for students, coworking spaces) posted €66 million in revenue (up 8%), driven in particular by the strong growth momentum of the portfolio of coworking businesses (seven new sites totalling over 148,000 sq.m under management¹¹), as well as occupancy rates, which remained high at end-March for both coworking spaces (92%¹²) and student residences (97%).

Lastly, as expected, revenue from Distribution activities (down 45%) reflected the downturn in the new home market and the withdrawal of individual investors. However, momentum was strong in off-plan sales (2.5 times higher than in Q1 2023) and volumes returned to their normative levels, notably thanks to efforts to make the Group’s range more attractive.

Consolidated revenue under IFRS

In IFRS terms, revenue for Q1 2024 totalled €729 million, down 11% relative to Q1 2023. This figure excludes revenue from joint ventures, in accordance with IFRS 11, which requires these ventures – proportionately consolidated in the Group’s operational reporting – to be accounted for using the equity method. It should be noted that 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.

PROCESS UNDERWAY OF DELEVERAGING THE GROUP AND TRANSFORMING
TOWARDS AN URBAN OPERATOR BUSINESS MODEL

Having shown itself to be agile in refocusing its business in 2023, Nexity is forging ahead with the implementation of proactive decisions aimed at adapting its range of products and solutions while doing everything it can to deleverage, thus positioning itself to successfully pivot towards an urban operator business model.

Finalisation of the first strategic and financial partnership in real estate services on 2 April

After announcing on 21 December 2023 that it had entered into exclusive negotiations, on 2 April 2024 Nexity finalised the sale of 100% of its Real Estate Services to Individuals activities to Bridgepoint, a European leader in alternative asset management. The transaction includes a strategic partnership for a period of six years (which may be renewed for a further four years), aimed at boosting existing synergies with Nexity’s development businesses and securing their long-term future.

On the basis of an enterprise value of €440 million, the sales proceeds of €400 million received by Nexity will be used to continue the Group’s deleveraging process (net debt amounted to €776 million at year-end 2023). The Group’s solid liquidity at year-end 2023 (€882 million in cash and €630 million in undrawn credit facilities) has been bolstered by this sale.
The capital gains realised on this sale give Nexity the means to immediately implement the in-depth transformation announced on 28 February.

Proactive plan to reduce operating expenses to support the Group’s transformation

As part of the Group’s reorganisation based on a regional focus to drive operational performance, and in line with announcements made on 28 February, the social documentation was handed over to the employee representative bodies on 24 April with a view to starting the information-consultation process within the framework of the implementation of a redundancy plan (PSE in French) :

The plan concerns nearly 500 positions.
One-off restructuring costs in 2024 are estimated at ~€50 million.
Savings on the cost base are expected from 2025 onwards (amounting to €36 million) and represent total full-year savings of €45 million.

Taking into account this plan, compared with 2022, the workforce for the scope concerned¹³ will be reduced by a total of 28%.

All the savings achieved – including the payroll measures implemented as well as efforts to reduce overheads and property-related costs – represent a total reduction in the cost base that is expected to amount to nearly €95 million on a full-year basis, equating to a 16% reduction, 75% of which is expected to be achieved from 2025.

Support from stakeholders in implementing our transformation plan

In addition to strong partnerships enabling it to make increased use of land banking through structures that deconsolidate development rights (Carrefour, Mirabaud), Nexity is also backed by its partner banks and bondholders: Euro PP bondholders and all the Group’s partner banks have agreed to waive its obligations with regard to financial ratios until the end of financial year 2024.

2024 GUIDANCE UNCHANGED

Thanks to the effective implementation of its roadmap, including completion of the sale of the Property Management for Individuals business, and its specific commitment to adjust and transform its organisation, the Group is able to maintain its 2024 guidance unchanged:

Operating profit to remain positive while reaching a low point, taking into account gains on disposals, the costs of adjusting supply to new market conditions and costs relating to the Group’s reorganisation, paving the way for a rebound in 2025
Net financial debt considerably lower than at the end of 2023

FINANCIAL CALENDAR & PRACTICAL INFORMATION

Shareholders’ Meeting Thursday, 23 May 2024
2024 interim results Thursday, 25 July 2024 (after market close)
Q3 2024 revenue and business activity Thursday, 24 October 2024 (after market close)

A conference call will be held today in French, with simultaneous translation into English, at 6:30 p.m. (Paris time), which can be joined via the “Finance” section of our website, https://nexity.group/en/finance, or by calling one of the following numbers:

Calling from France	+33 (0) 1 70 37 71 66
Calling from elsewhere in Europe	+44 (0) 33 0551 0200
Calling from the United States	+1 786 697 3501

Code: Nexity FR

The presentation accompanying this conference will be available on the Group’s website from 6:15 p.m. (Paris time) and may be viewed at the following address: Nexity Q1 2024 webcast
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”, expresses 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 fifth 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 the SRD, Euronext’s Compartment A and the SBF 120.

CONTACT:
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

Residential Real Estate Development – Quarterly reservations