Earnings Release • Nov 5, 2020
Earnings Release
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Unaudited data as at 30 September 2020
1 New orders net of withdrawals, in euros including VAT when expressed in value. New orders at 100%, with the exception of projects under joint control (Group share of placements, including Woodeum).
2 Client's definitive commitment is legally materialised upon the notarial signature, which regularises a reservation contract (depending on the stage of technical progress, client pays between 30% to 100% of the price at the notarial signature).
3 Revenue by percentage of completion (technical and commercial) and external services.
4 On a like-for-like basis, in July, August and September on the French scope (+1.0% including Sant Cugat shopping centre in Spain).
5 Consolidated bank and bond net debt.
6 Revolving credit facilities.
"With revenue up more than 10% and debt down since the beginning of the year, Altarea has demonstrated its ability to come through an unprecedented crisis. Nine-month absolute performance is impressive; ninemonth relative performance still more so.
Before the resurgence of the Covid-19 epidemic, Altarea was on a growth path at least in line with its objectives set last August, namely FFO for the second half of 2020 at the same level as that of the first half of 2020 and a resumption of growth in FFO from 2021.
However, the resurgence of the Covid-19 epidemic and the new period of lockdown announced on 29 October is likely to have an impact on FFO in the latter part of 2020 that is hard to quantify at this stage. However, it does not call into question the principle of a resumption of Altarea's growth in 2021, the precise timing of which will depend on the stabilisation of the health situation. Altarea's strengths and growth potential remain intact".
Alain Taravella, Chairman and Founder of Altarea
New orders grew 13% in value terms, driven by institutional investors. In particular, the Group signed two agreements with CDC Habitat for the sale of 4,570 units for a total of €1,031.5 million (excl. tax):
| New orders | 30/09/2020 | 30/09/2019 | |||
|---|---|---|---|---|---|
| Individuals - Residential buyers | €489m | 20% | €737m | 35% | -34% |
| Individuals - Investment | €510m | 21% | €811m | 38% | -37% |
| Institutional investors - Block sales | €1,407m | 59% | €586m | 27% | +140% |
| TOTAL in value (incl. tax) | €2,407m | €2,134m | +13% | ||
| Individuals - Residential buyers | 1,292 units | 15% | 2,124 units | 27% | -39% |
| Individuals - Investment | 1,796 units | 21% | 3,152 units | 41% | -43% |
| Institutional investors - Block sales | 5,433 units | 64% | 2,509 units | 32% | +117% |
| TOTAL in units | 8,520 units | 7,784 units | +9% |
During the 3rd quarter, Altarea transferred a significant part of its residential offer from Individuals to Institutional investors. Thanks to this strategic move, Altarea was able to offset the delays due to the tightening of access to credit for Individuals, and maintain the pace of regularisations.
During the 3rd quarter, the Group regularised nearly €729m (incl. tax), compared with €580m in the 3rd quarter of 2019 (+26%). Since the beginning of the year, notarised sales have thus increased by 68% in value (+47% in volume).
| Notarised sales (incl. tax) | 30/09/2020 | 30/09/2019 | Change |
|---|---|---|---|
| Individuals | €1,305m | €1,183m | +10% |
| Institutional investors | €1,307m | €369m | x3.5 |
| Total in value | €2,612m | €1,553m | +68% |
| 30/09/2020 | 30/09/2019 | Change | |
|---|---|---|---|
| Revenue (excl. tax) | €1,651m | €1,365m | +21% |
In the first half of the year, the team's mobilization on notarised sales largely offset the delay in the technical progress of the building sites. In the 3rd quarter, technical progress resumed at its normal pace.
Backlog is a leading indicator of potential revenue, which includes:
7 New orders net of withdrawals, in euros including VAT when expressed in value. New orders at 100%, with the exception of projects under joint control (Group share, including Woodeum).
8 Client's definitive commitment is legally materialised upon the notarial signature, which regularises a reservation contract.
9 Revenue by percentage of completion + external services (ie €7.3m at 30/09/2020 and €7.7m at 30/09/2019). Revenue by percentage of completion is recognised on the basis of both commercial progress (notarised sales) and technical progress (progress of building sites).
| 30/09/2020 | 31/12/2019 | Change | |
|---|---|---|---|
| Notarised sales, not yet recognised | €2,174m | €1,722m | +26% |
| New orders (units sold), not yet regularised | €1,829m | €2,057m | -11% |
| Backlog (excl. tax) | €4,004m | €3,778m | +6% |
The 26% increase in the "Notarised sales, not yet recognised" component of the backlog reflects the growth in notarised sales (commercial progress), which will feed through to revenue by percentage of completion in the coming semesters.
The lockdown measures announced by the Government on 29 October 2020 are expected to have much more muted short-term consequences than those imposed last spring. Building sites remain open and notary offices continue to operate, albeit with reduced capacity. That said, it is too early to assess the possible impact in the final part of the year, which is generally a very active period in the residential property development sector.
During the third quarter of 2020, retailer sales were favourably oriented with like-for-like growth of 1.2%10 compared with the same period in 2019. But: 1/ the growth path was mainly being driven by household equipment, while Restaurants & Leisure declined, 2/ retail parks clearly outperformed (+ 11.8%), while travel retail (-12.8%) suffered, mainly from the decline in traveller and tourist numbers.
In the 3rd quarter, footfall was 90% of last year's level, confirming the structural increase in the average basket.
IFRS Gross rental income amounted to €140.8m for the first nine months of the year, down €11.3m (-7.4%), including a €9.8m (-6.4%) "Covid impact", which broke down as:
Excluding "Covid impact", gross rental income fell by €1.5m13, primarily due to a scope effect (disposals offset deliveries and rent indexation over the period).
Since the beginning of the year, Altarea invoiced €183.3m14 and collected €132.9m (72%), broken down as follows:
Concerning the 3rd quarter, rents to be recovered mainly concern travel retail (hit by the decline in traffic) as well as Restaurants & Leisure (subject to specific restrictions).
10 On a like-for-like basis, in July, August and September on the French scope (+1.0% including Sant Cugat shopping centre in Spain).
11 Waivers granted to the smallest retailers, travel retail tenants and other medium-sized companies.
12 Spread over the firm term of the leases, in accordance with IFRS 16.
13 Net of deliveries and disposals for the period.
14 Rents and charges excluding VAT, scope France excluding Spain.
Altarea has been engaged in discussions with tenants, generally resulting in the waiver of a portion of unrecovered rents from the 2nd -quarter in exchange for compensation (extension of lease terms, review of rental values, etc.). To date, agreements have been reached with 71% of the tenants as part of a longterm partnership relationship.
When negotiations result in contractual amendments to the leases, their characteristics are (on average) as follows:
The lockdown measures announced by the Government on 29 October 2020 came just as the businesses managed by Altarea had entered a period of gradual normalisation in a context that remained difficult for many retailers.
To date, it would appear that more retailers have decided to keep trading, with nearly 300 shops open (out of a total of around 1,30015 managed), more than double the number observed during the spring.
At this stage, it is too early to quantify the impact of the new period of lockdown on the collection of rents for the 4 th -quarter or the outcome of ongoing discussions concerning the recovery of sums due, in particular for the 2 nd -quarter. In this regard, the Government, in conjunction with professional lessor and retailer bodies, is reviewing a number of support measures aimed at mitigating the impact of the second period of lockdown.
Since the beginning of the year, the Group has signed a total of €138.6m in new orders, including a delegated project management (DPM) deal in the very centre of Paris and two off-plan sales in Nantes and Toulouse signed during the 3rd quarter.
At the end of October, Altarea delivered "Convergence", Danone's new headquarters in Rueil-Malmaison, which is NF HQE Bâtiments Tertiaires certified, and will soon deliver a 46,000 m² logistics platform near Nantes to Lidl.
Bridge, Orange's future headquarters in Issy-les-Moulineaux, will be delivered in the first quarter of 2021. The building has just been awarded the WiredScore "Platinum" label, the top level of distinction for digital connectivity.
Numerous operations are under advanced discussion both in the Paris region (DPM, rental events, etc.) and in the Regions (turnkey projects, off-plan sales, etc.).
15 France scope.
| In €m | Q1 2020 |
Q2 2020 |
Q3 2020 |
TOTAL 9-mth 2020 |
Q1 2019 |
Q2 2019 |
Q3 2019 |
TOTAL 9-mth 2019 |
Q3 2020/ Q3 2019 |
9-mth 2020 /9-mth 2019 |
|---|---|---|---|---|---|---|---|---|---|---|
| Rental income | 51.4 | 42.3 | 47.2 | 140.8 | 49.1 | 52.9 | 50.2 | 152.1 | -6.0% | -7.4% |
| External services | 4.2 | 4.3 | 4.2 | 12.7 | 6.6 | 4.8 | 4.7 | 16.0 | -9.0% | -20.6% |
| Property development | 6.0 | 1.6 | 2.0 | 9.6 | - | - | - | - | - | - |
| Retail | 61.6 | 48.2 | 53.4 | 163.2 | 55.7 | 57.6 | 54.8 | 168.2 | -2.6% | -3.0% |
| Revenue (% of completion) | 384.2 | 685.3 | 574.5 | 1 644.0 | 433.0 | 460.9 | 463.3 | 1.357.2 | +24.0% | +21.1% |
| External services | 2.7 | 2.0 | 2.6 | 7.3 | 1.8 | 3.5 | 2.4 | 7.7 | +8.3% | -5.4% |
| Residential | 386.9 | 687.3 | 577.1 | 1 651.3 | 434.8 | 464.4 | 465.7 | 1.365.0 | +23.9% | +21.0% |
| Revenue (% of completion) | 116.7 | 79.8 | 84.7 | 281.2 | 101.0 | 159.0 | 98.5 | 358.5 | -14.0% | -21.5% |
| External services | 1.1 | 1.6 | 0.9 | 3.6 | 1.0 | 5.7 | 1.3 | 8.0 | -29.2% | -55.3% |
| Business property | 117.8 | 81.5 | 85.6 | 284.8 | 102.0 | 164.7 | 99.8 | 366.5 | -14.2% | -22.3% |
| Revenue | 566.2 | 817.0 | 716.1 | 2,099.3 | 592.5 | 686.8 | 620.4 | 1,899.6 | +15.4% | +10.5% |
Consolidated 9-month revenue amounted to €2,099,3 million, up 10.5% year-on-year, driven by Residential development. Business property revenue was down due to the delivery of some PDAs (including Richelieu), which contributed heavily to 2019 revenue, and the delay in some major projects (PDAs and off-plan sales).
As of 30 September 2020, available cash and cash equivalents amount to €3,149 million (compared with €2,659 million as of 31 December 2019), breaking down as follows:
| In €m | Cash | Unused credit facilities |
TOTAL 30/09/2020 |
TOTAL 31/12/2019 |
|---|---|---|---|---|
| At Group level | 644 | 1,202 | 1,846 | 1,281 |
| At project level | 640 | 663 | 1,303 | 1,378 |
| TOTAL | 1,284 | 1,865 | 3,149 | 2,659 |
All RCF16 lines remain undrawn, with an average maturity of 4 years (and none due before H2 2022). Total short and medium-term financing amounts to €843.5 million (average maturity of 5.3 months).
Liquidity available at group level amply covers all bank and bond maturities until at least the end of 2023.
Net debt at 30 September was down by €46.1 million compared to 31 December 2019 and virtually stable compared to 30 June 2020 (+€57.2 million after payment of the 2019 dividend in July).
Altarea is the leading property developer in France. As both a developer and an investor, the Group operates in the three main property markets (Retail, Residential and Business property), leading major mixed-use urban renewal projects in France. The Group has the required expertise in each sector to design, develop, market and manage made-to-measure property products. In Retail, Altarea managed assets of €5.3 billion (€3.0 billion in Group share) as of 30 June 2020. Altarea is listed in Compartment A of Euronext Paris.
16 Revolving credit facilities (confirmed credit authorisations).
17 Bank and bond debt, net of cash, cash equivalents and other similar items.
Eric Dumas, Chief Financial Officer [email protected], tel: + 33 1 44 95 51 42
Paul Richardier, Investor Relations [email protected], tel: +33 7 87 29 60 35
Agnès Villeret - KOMODO [email protected], tel: +33 6 83 28 04 15
This press release does not constitute an offer to sell or solicitation of an offer to purchase Altarea shares. For more detailed information concerning Altarea, please refer to the documents available on our website www.altarea.com. This press release may contain forward-looking statements. While the Company believes such declarations are based on reasonable assumptions at the date of publication of this document, they are by nature subject to risks and uncertainties, which may lead to differences between real figures and those indicated or inferred from such declarations.
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