Adequate positioning in a still uncertain end-market
Adequate positioning in a still uncertain end-marketEARNINGS/SALES RELEASES
Altarea reported robust profit growth in H1 25. Profits in Residential Development remained stable, despite ongoing market adjustments. The financial reporting tone is clear, with a slightly more positive outlook than in Q1 25.
FACT
Revenue decreased by 20%, with a decline in development activity in both residential (-24%) and commercial (-21%) sectors. However, there was an acceleration in organic growth in property retail during Q2 25.
EBIT increased by 14% year-on-year, with a 3% EBIT margin for residential development and 21% for commercial development.
Retail property assets performed well in Q2 25, particularly in terms of EBIT, which increased by 7%.
FFO rose by 7% compared to H1 24. The 2025 guidance (unchanged) anticipates a slight increase in FFO compared to 2024. The dividend per share guidance for 2026 remains unchanged, expected to be stable compared to the dividend paid in 2025.
ANALYSIS
Well positioned in Residential Development
The recovery in bookings was confirmed in H1 25, driven by demand for more compact and less expensive apartments. This trend is evident in the average price evolution over the period (see chart below) and in order volumes, which increased by 23% in Q2 25 (yoy) following a 6% rise in Q1 25.
Quarterly performance remains volatile, largely influenced by orders from institutional investors. While it is important not to overinterpret a single quarter, a positive trend is apparent: Altarea’s offerings align well with market demand. Orders from institutional investors significantly boosted Q2 25 performance without compromising the EBIT margin of this division. This confirms the profit-oriented profile : it is not a battle for volumes aimed at compensating for high fixed costs.
Older projects are generating slightly negative margins at the EBIT level (AV est.), while new projects are achieving operating margins exceeding 8% (id.). As lower-margin projects phase out, the margin mix for Residential Development is expected to improve rapidly. This improvement is contingent on stable interest rates and Altarea’s ability to sustain strong sales volumes.
The sequential improvement in the backlog (+4%) is a positive indicator, particularly as it coincides with an increase in supply rotation speed in H1 25. In summary, Altarea is rebuilding its pipeline faster than it generates revenue. Although this does not yet ensure topline growth in 2026-27, the data indicates that Altarea has positioned itself advantageously, as reflected in its profitability. The year 2026 will serve as a significant benchmark for turnover in €m, such as EBIT, enabling better extrapolation of Altarea’s economic performance once the impact of older projects is fully eliminated.
Looking ahead to the coming semesters, we will continue to monitor the proportion of first-time buyers. The overall subsegment is experiencing only modest volume growth (see chart above). Additional measures to support individual buy-to-let investors depend on the adoption of France’s 2026 budget, amidst significant constraints.
Our assessment is that Altarea’s performance is satisfactory in a still uncertain market. Sales volumes have more than stabilised. The impact of downsizing the offering will affect the topline through 2026, but underlying profitability remains decent at this stage of the cycle.
Read across
In H1 25, Nexity’s (covered, Sell) project mix was 70% older projects with low margins and 30% newer projects with higher profitability, resulting in €4m in EBIT from €1.1bn in revenue. In contrast, Altarea’s mix was 59% older and 41% newer projects, generating €24m in EBIT from €733m in revenue. This underscores Altarea’s agility in redeployment and its alignment with market demands.
Altarea maintains a strong position in the French residential development sector. It is poised to match the operational performance of leading players like Bassac and Kaufman & Broad more swiftly than Nexity. Altarea’s above-average agility provides a buffer against market fragility, indicating an improvement in the risk-reward profile.
Retail property
Organic growth in shopping centres accelerated significantly in Q2 25, partly due to negative technical factors in Q1 25, which had weaker performance. After adjusting for indexation, Altarea achieved positive organic growth in Q2 25, with a 4% increase in the average ticket per visitor. Sequentially in Q2 25, Altarea experienced favourable momentum in rental revenue, maintaining a high rental margin of 89%, footfall, and retailer revenue. This momentum supports FFO and supports the 2025 guidance.
Altarea’s portfolio book values have remained stable since December 2024. The team is concentrating on pipeline projects, such as the Austerlitz station in Paris. While monitoring market opportunities, Altarea shows no particular interest in M&A within the current French retail property market.
IMPACT
Our estimates remain unchanged, as they already accounted for the dividend payment in shares, leading to a capital increase of €102m. Altarea is performing well; however, the Residential Development sector remains unstable, particularly due to French political factors and potential long-term interest rate fluctuations.
Therefore, our recommendation remains neutral. Greater stability is needed to consider a positive recommendation.
Altarea Cogedim is a real estate investment trust and development company. Co. is an active operator in the three main segments — retail, residential & office-hotels property — with the ability to design, develop, market & manage custom-tailored real estate products. In the Retail segment, Co. is active in real estate investment, development, asset management, providing services to third-party customers. In the Residential segment, Co. is a residential property developer. In the Office Property segment, Co. is a global operator active in all commercial property formats: high-rise buildings, business districts, corporate headquarters, renovation projects, green districts & luxury hotels.
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