Nexity: 9M 2022 Business activity and revenue - Results in line with our expectations - Annual targets confirmed

                                                                                Paris, France, 26 October 2022, 5.45 pm CEST

RESULTS IN LINE WITH OUR EXPECTATIONS

ANNUAL TARGETS CONFIRMED

Very strong performance of new home activity in a market declining sharply

11,446 new home reservations at the end of September 2022: down 8% by volume (vs. market decreasing by 21%¹); and down 5% by value

9M revenue: €2,954m (down 4%)

Stable revenue excluding the H1 2021 base effect in Commercial real estate

Continued strong growth in Services (up 9%)

Completion of the acquisition of the Angelotti group, the regional leader in urban planning and residential development in the Occitanie region

Consolidation from 1 November 2022

Annual targets confirmed

• >14% market share in residential real estate in an expected market of 130,000 units²
• >4.6 billion in revenue and current operating margin of around 8%

Strong visibility, secured future business: high backlog of €6.3bn, i.e. 2 years of development activity

Key figures at end-September 2022

* New scope excludes 2021 disposed activities, Century 21 consolidated until 31 March 2021 and Ægide-Domitys consolidated until 30 June 2021.

Véronique BEDAGUE, Chief Executive Officer commented

“In a difficult market environment, our position as a real estate leader, our size, the diversity of our products, particularly in managed real estate, and our territorial coverage allow us to outperform the market. Our Services activities continue to grow, driven by student residences and coworking. Revenue for the first nine months is in line with our expectations, our backlog secures future sales, and our potential gives us visibility. Nexity is confident in its ability to achieve its 2022 objectives. We are particularly vigilant in the current context about controlling our commitments and our debt.

In the medium term, Imagine 2026, our strategic plan, sets out a path of profitable and responsible growth by capitalising on the evolution of our business model towards that of a global real estate operator.”

RESIDENTIAL REAL ESTATE

The new home market in France has been affected by the inflationary context observed since the beginning of the year, with new home reservations down 21% in the first half of the year according to the FPI (down 17% for retail sales and down 38% for bulk sales).

Against this backdrop, Nexity's business activity held up well over the first nine months of the year, with 11,446 reservations (down 8% by volume compared with 9M 2021, down 5% by value at €2.6bn). Sales prices per square metre remain on an upward trend (up 2% for retail sales and up 6% for bulk sales compared to 9M 2021).

Business activity in the third quarter was contrasted by type of client. While retail sales fell more sharply (down 15% in 9M 2022 compared with -11% in the first six months of the year) due to higher mortgage rates, Nexity's privileged relationship with its institutional clients led to a sharp increase in bulk sales (up 11% in Q3 compared with -3% in the first six months of the year). This momentum is expected to continue in Q4 with a commercial strategy of rebalancing towards bulk sales. The Group also benefits from its differentiating expertise in managed real estate, which responds to the evolution of its clients' uses.

The supply for sale is gradually being rebuilt (up 14% to 8,180 lots compared with 7,199 at 30 June 2022) thanks to the increase in building permits (up 26% vs. 9M 2021), even though it remains at historically low levels. There is no completed homes in the supply for sale.

Revenue totalled €2,063 million in the first nine months, down 3%, in line with the trend observed since the beginning of the year resulting from the delayed new project construction starts due to the prudent management of the inflationary context leading to longer construction contracts negotiation times.

In terms of outlook, Nexity is maintaining its market share target of over 14%. The Angelotti group, which is expected to generate revenue of around €200 million in 2022, will be consolidated from 1 November 2022 and will therefore make a small contribution to the Group's 2022 results. We will remain vigilant on the adequacy of new production to market conditions, taking into account expectations of rising property mortgage rates.

COMMERCIAL REAL ESTATE

At the end of September 2022, Nexity recorded order intake of €108 million, a low point in a wait-and-see market.

Revenue for the first nine months amounted to €249 million, down 31% compared with the end of September 2021, which included the €124 million order intake contribution for the Reiwa building in Saint-Ouen. Adjusted for this base effect, revenue was up 6%. Revenue in the third quarter was up 11% compared to Q3 2021 and stood at €89 million, considering the progress of operations under construction.

The backlog (€827 million) and the business potential (€2.1 billion) give good visibility on future earnings prospects.

SERVICES 

Services revenue for the first nine months totalled €637 million, continuing the strong growth observed since the beginning of the year (+9% compared to the end of September 2021), thus consolidating a sustainable business base. The increase is mainly due to the serviced properties business: student residences and particularly coworking activities.

• Property Management revenue was stable over the first nine months, with contrasting activity depending on the business line. The condominium and rental management businesses posted a net increase in the number of units under management over the period, reflecting good commercial performance and improved customer satisfaction. Transactions and rental management are on the rise, which offsets the slowdown in rental activities reflecting the significant reduction in the rental offer. The current context of energy sobriety has led to an acceleration of Nexity's support for its clients in their condominiums’ energy renovation projects (+40% increase in the number of preliminary studies).
  
  
  
  
• In Serviced properties, Studéa recorded a 12% increase in revenue compared to the end of September 2021. The success of the marketing campaign for the 2022/2023 academic year is reflected in an occupancy rate close to 100% at the end of September. Revenue from coworking activities increased more than twofold compared to 30 September 2021. This increase is explained by the continued excellent occupancy rate of mature spaces and a faster filling rate of new spaces. This acceleration is the result of a broader client base (start-ups, scale-ups and large companies) in a Paris market that is under-supplied compared to other world capitals. A new flagship space opened in the heart of Paris in Q3, Morning Lafitte (representing Morning's largest space at c.9,500 sq.m and accommodating over 1,000 coworkers).
  
  
  
  
• Distribution revenue totalled €195 million, up +4% at the end of September 2022, reflecting the good level of transformation of reservations into notarial deeds. Business activity was down by only 8%, reflecting a good performance in the individual buy-to-let market.
  
  
  
  

This good growth dynamic should continue for the rest of the year.

IFRS CONSOLIDATED REVENUE

Under IFRS, reported revenue at end of September 2022 was €2,724 million. It excludes revenue from joint ventures in application of IFRS 11, which requires their recognition by equity accounting of proportionally integrated joint ventures in operational reporting. IFRS reported revenue at 9M 2021 (€3,022 million) is not comparable as it included the revenue of the disposed activities in 2021 (Century21 and Ægide-Domitys) for €196 million. On a like-for-like basis, decrease was limited at -4%.

As a reminder, 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., based on notarised sales and pro-rated to reflect the progress of all inventoriable costs.

OUTLOOK

Nexity confirms its 2022 full-year guidance:

• >14% market share in 2022, in a new home market expected at 130,000 units³
• >€4.6bn revenue and a current operating margin around 8%

Nexity will continue to closely monitor the current economic, social and health situation.

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FINANCIAL CALENDAR & PRACTICAL INFORMATIONS

A conference call will be held today in French with a simultaneous translation into English at 6.30 p.m. (Paris Time), available on the website in the Finance section and with the following numbers:

Code: Nexity en

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:

The conference call will be available on replay at 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 Section 2 of the Universal Registration Document filed with the AMF under number D.22-0248 on 6 April 2022, 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.

Contact:

Domitille Vielle – Head of Investor relations / +33 (0)6 03 86 05 02 –

Géraldine Bop – Deputy Head of Investor relations / +33 (0)6 23 15 40 56 –

ANNEX: OPERATIONAL REPORTING

Quarterly reservations – Residential Real Estate

Cumulated reservations – Residential Real Estate

Breakdown of new home reservations in France by client

Services

Quarterly figures - Revenue

* Disposed activities are consolidated until 31 Mars 2021 for Century 21 and until 30 June 2021 for Ægide-Domitys

Backlog

GLOSSARY

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 projects 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 margin: current operating profit compared to revenue

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, amortization 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 amortization include 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

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)

New scope: Scope of consolidation excluding the contribution of disposed activities (Century 21 and Ægide-Domitys) and capital gains. Disposed activities have been consolidated until 31 March 2021 for Century 21 and until 30 June 2021 for Ægide-Domitys.

Order intake: Commercial Real Estate: 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).

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

Pipeline: sum of backlog and business potential; could be expressed in months or years of activity (as the backlog and the business potential) based on the last 12 months revenue.

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 projects, 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: the Group’s business activities in the management and operation of student residences as well as flexible workspaces.

Time-to-market: supply for sale compared to reservations for the last 12 months, expressed in months, for new home reservations in France

1 Source: Q2 2022 new home market published on 15 September 2022 by FPI

2 Nexity estimate

3 Nexity estimate

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