Earnings Release • Nov 5, 2008
Earnings Release
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Nexity Group (NXI.PA) recorded revenue of €1,946m in the first nine months of 2008, representing an 8% increase compared to the 2007 pro forma figure3 including the contributions in kind of the Caisses d'Epargne from January 1, 2007.
* * *
The Group's business activity was markedly lower for the Residential division compared to the same period in 2007, but remained robust for the Commercial division thanks to a strong volume of order intake during the first half of the year. Reservations of new homes and subdivisions came to 6,897 units, a decline of 28% compared to the same period in 2007. Net order intake for the Commercial division was €579m (Nexity portion). Figures for the Group's Services division confirm the resilience of this business line.
In response to deteriorating market conditions, the Group has launched a vigorous adaptation and restructuring initiative, which was presented in an earlier press release.
The Group's order backlog amounted to €3,374m at end-September and represents 19 months of revenue from property development activities (both residential and commercial).4
* * *
1 Including Iselection in 2008
2 See press release dated October 8, 2008
3 The pro forma revenue figure for 2007 is calculated by simulating as of January 1, 2007 the impact of the businesses
contributed in July 2007 by Groupe Caisse d'Epargne
4 Revenue basis over 12-month period
| Change | 9M 2007 | Change vs. 9M 2007 |
|||
|---|---|---|---|---|---|
| In millions of euros | 9M 2008 | 9M 2007 | (%) | Pro Forma | Pro Forma |
| Residential | 1,311.7 | 1,167.8 | +12% | 1,167.8 | +12% |
| Commercial | 229.4 | 282.9 | -19% | 282.9 | -19% |
| Services & Distribution | 400.7 | 169.3 | x 2.4 | 348.0 | +15% |
| Other activities | 4.0 | 2.7 | - | 5.6 | - |
| Group revenue | 1,945.8 | 1,622.7 | +20% | 1,804.3 | +8% |
* Revenue generated by the Residential and Commercial divisions is calculated using the percentage-ofcompletion method, on the basis of notarized sales pro-rated to reflect committed construction costs. The revenue figure essentially mirrors the degree of completion of the various construction projects in progress.
Revenue recorded by Nexity for the first nine months of 2008 came to €1,945.8 million, representing an 8% increase compared to the 2007 pro forma figure, including the contributions in kind of the Caisses d'Epargne from January 1, 2007.1 Compared to the published revenue figure for the first nine months of 2007, which only includes these contributions from July 1, 2007, revenue grew by 20%.
1 The pro forma revenue figure for 2007 is calculated by simulating as of January 1, 2007 the impact of the businesses contributed in July 2007 by Groupe Caisse d'Epargne
Business activity for the Residential division for the nine-month period ended September 30, 2008 is presented in the Group's press release dated October 8, 2008. This press release is available on the Group's website, http://www.nexity.fr or on request from the company.
The main indicators for the period are reminded below.
Over the first nine months of the year, the Group recorded a total of 6,897 reservations for new homes and subdivisions, down 28% compared to the same period in 2007. In value terms, the drop in reservations amounted to 29%.
| New home and subdivision reservations (units and € million) | 9M 2008 | 9M 2007 | Change % |
|---|---|---|---|
| New homes (number of units) | 5,568 | 7,355 | -24% |
| Subdivisions (number of units) | 1,329 | 2,196 | -39% |
| Total new home and subdivision reservations | |||
| (number of units) | 6,897 | 9,551 | -28% |
| New homes (€m incl. VAT) | 1,105 | 1,535 | -28% |
| Subdivisions (€m incl. VAT) | 101 | 171 | -41% |
| Total new home and subdivision reservations (€m incl. VAT) |
1,206 | 1,706 | -29% |
| New home reservations (units) | 9M 2008 | 9M 2007 | Change % |
|---|---|---|---|
| Gross new home reservations, excluding Iselection and | |||
| block sales (number of units) | 6,975 | 8,582 | -19% |
| New home cancellations (number of units) | (2,865) | (2,402) | +19% |
| Block sales and Iselection sales2 | 1,458 | 1,175 | NA |
| Net new home reservations (number of units) | 5,568 | 7,355 | -24% |
In value terms, new home reservations totaled €1,105 million, representing a 28% decrease3 . The average price of new homes sold, excluding Iselection sales, was €200 thousand, slightly lower than the average price in the first nine months of 2007 (down 4%).
1 Down 29% excluding Iselection
2 Including reservations recorded by Iselection as from January 1, 2008
3 Down 32% excluding Iselection
| New home reservations (units) | 9M 2008 | Q3 2008 | H1 2008 |
|---|---|---|---|
| Gross new home reservations (number of units) | 6,975 | 1,693 | 5,282 |
| New home cancellations (number of units) | (2,865) | (1,061) | (1,804) |
| Block sales and Iselection sales | 1,458 | 504 | 954 |
| Net new home reservations (number of units) | 5,568 | 1,136 | 4,432 |
The decline in new home and subdivision reservations is attributable to the tangible deterioration in the market observed during the first half of 2008, which worsened further over the summer. These circumstances have led the Group to implement a vigorous reorganization plan, encompassing supply adjustments as well as reductions in costs and working capital requirements. Further details on this plan may be found in the press release mentioned above.
The overall context of the commercial investment market in France has taken a significant downturn since the beginning of the year. A total of €9.4 billion1 was invested during the first nine months of the year, representing a decline of 57% compared to the same period a year earlier. This decrease is explained by an abrupt tightening of credit conditions and a wait-and see-attitude on the part of investors. Nevertheless, investor focus continues to be centered firmly on new or recently built property, which now represents 44% of investments.
The office rental market remains active. It looks however fragile, with only a few large transactions and a downward adjustement in volumes for small and medium-sized units. Take-up in the Paris region amounted to 1.8 million sq.m, down 10% for the nine-month period compared to 2007. The vacancy rate remains very low (5% in the Paris region), with an immediate supply of 2.5 million sq.m, in line with normal levels.
Net order intake recorded by Nexity in the first nine months of 2008 reached €579 million excluding VAT (Nexity portion). Orders booked notably include the trading-room building for Société Générale in La Défense, on which construction work has already begun.
| Commercial division business activity | 9M 2008 | 9M 2007 |
|---|---|---|
| Offices, net orders (sq.m) | 48,400 | 90,800 |
| Warehouses, distribution centers and other activities (sq.m) | 38,800 | 76,600 |
| Net order intake (sq.m) | 87,200 | 167,400 |
| Net order intake (€m excl. VAT) | 578.9 | 292.1 |
1 Source: CBRE
Figures for the Group's Services division confirm the resilience of this business line. As of September 30, 2008, the number of managed residential housing units topped 1 million, thus remaining stable year-on-year, and included 90,000 units outside France (mainly in Germany, Belgium and Poland). Commercial units under management grew 19% to 8.8 million sq.m, thanks to new mandates and acquisitions.
The restructuring process underwent by this division is ongoing. The Group confirms its aim to increase the average operating margin in this business to a minimum of 10% over the coming years.
| Residential and commercial units under management | Sept. 30, 2008 | Dec. 31, 2007 | Change (%) |
|---|---|---|---|
| Rental management (number of units) | 223,500 | 208,500 | +7% |
| Condominium management (number of units) | 793,400 | 794,100 | - |
| RESIDENTIAL: Property under management (units) | 1,016,900 | 1,002,600 | +1% |
| COMMERCIAL: Rental management (sq.m) | 8,832,700 | 7,422,800 | +19% |
Nexity's Distribution business continues to show some resistance in a context of a marked downturn in the market for existing properties. The integration of new agencies within its network has offset the exits recorded. The net change in the number of agencies in the Century 21 network was affected by the exit of a group of 31 agencies, when they were sold by the owner. As of September 30, 2008, the Group's network numbered a total of 1,646 agencies, versus 1,642 as of end-20071 . The number of sales handled fell by 12% over the first nine months of the year compared to the same period in 2007 (excluding Keops Résidentiel). This reduction follows the trend observed at the national level in the market for existing properties.
| Franchise networks – Number of agencies | Sept. 30, 2008 | Dec. 31, 2007 | Change |
|---|---|---|---|
| Century 21 France agencies | 928 | 943 | -15 |
| Guy Hoquet l'Immobilier agencies | 653 | 627 | +26 |
| Keops Résidentiel agencies* | 65 | 72 | -7 |
| Total number of agencies | 1,646 | 1,642 | +4 |
* part of the Distribution division since January 1, 2008
With regard to its commercialization activity for real estate savings products on behalf of third party real estate developers, Iselection commercialized 853 new homes during the nine-month period.
Page 5/10 1 Including the Keops Résidentiel network, contributed by Groupe Caisse d'Epargne as part of the July 2007 operations
A total floor area of 19,400 sq.m was marketed by the Villes & Projets division in the first nine months of 2008, mainly located in Boulogne-Billancourt. As of September 30, 2008, Nexity Villes & Projets thus had a non-commercialized land potential representing a total floor area of 898,100 sq.m1 , including 548,100 sq.m in the Paris region. Fifty-six percent of this total area corresponded to potential residential properties, compared to 35% for offices and related activities, and 9% for retail.
| In millions of euros (excl. VAT) | Sep. 30, 2008 | Dec. 31, 2007 | Change (%) |
|---|---|---|---|
| New homes | 1,952 | 2,316 | -16% |
| Subdivisions | 317 | 329 | -4% |
| Residential division backlog | 2,269 | 2,645 | -14% |
| Commercial division backlog | 1,105 | 768 | -44% |
| Total Group backlog | 3,374 | 3,413 | -1% |
As of September 30, 2008, the Group's order backlog totaled €3,374 million, stable compared with end-December 2007. The Residential order backlog represents 14 months of revenue for this division while that for the Commercial division represents nearly 4 years of revenue2 . The Group's total order backlog represents 19 months' development revenue for Nexity and gives the Group genuine visibility.
Following the resignation of Messrs. Charles MILHAUD and Nicolas MERINDOL from their positions as directors of the company, at its meeting of November 5, 2008, the Board of Directors co-opted as Director and Vice-Chairman of the Board of Directors Mr. Bernard COMOLET, Chairman of the Management Board of the Caisse Nationale des Caisses d'Epargne (CNCE), and also co-opted as Director and Co-Chairman of the Accounts Committee, Mr. Alain LEMAIRE, Chief Executive Officer of the CNCE. Moreover, in his capacity of permanent representative of the CNCE, Mr. Guy COTRET was nominated member of the Remuneration Committee.
1 Indicative floor areas, which may be adjusted following the attribution of administrative authorizations
2 Revenue basis over 12-month period
With the reorganization plan discussed in previous press releases well under way, the Group confirms its full-year outlook announced for 2008 as well as its forecasts for the medium term. The Group also provides below details of its revenue guidance for the year.
* * *
1 Excluding the effects of the housing support plan announced by the French Government on October 1st, 2008 2
Taking into account Eurosic's NAV assumptions as at June 30, 2008
3 Under comparable accounting standards
| - | 2008 Revenue and business activity | Wednesday, February 4, 2009 | Market close |
|---|---|---|---|
A conference call on Q3 Revenue and business activity will be accessible in English at 3:00 p.m. CET on Thursday, November 6, 2008, by dialing the following numbers:
| - | Dial-in number (France) | + 33 (0) 1 70 99 35 14 | Access code: Nexity |
|---|---|---|---|
| - | Dial-in number (rest of Europe) | + 44 (0) 207 153 20 27 | Access code: Nexity |
Playback will be available by phone after the conference call by dialing the following number:
+44 (0) 20 71 90 59 01 (Access code: 141114#)
The presentation accompanying this conference may be followed at the following address: http://webcast.hugingroup.com/20081106\_nexity/
* * *
The information, assumptions and estimates that were used as a reasonable basis to determine these objectives are subject to change or modification due notably to economic, financial and competitive uncertainties. Furthermore, it is possible that some of the risks described in chapter 4 of the Document de Référence, filed with the AMF under number D.08-0295 on April 25, 2008 could have an impact on the company's ability to achieve these objectives. Accordingly, the Company cannot give any assurance as to whether it will achieve the objectives described, and makes no commitment or undertaking to update or otherwise revise this information.
This press release may be considered to be a Financial Report, as defined in the Transparency Directive transposed by the AMF.
As the leading fully integrated real estate group in France, Nexity combines all of the skills and expertise required by private individuals, enterprises, investors and local authorities. A leading player in the various real estate businesses: urban renewal, development (new homes, offices, commerce and other activities), real estate services for private individuals and enterprises, distribution networks, specialist financing and asset management, Nexity has established itself as a peerless actor in the French real estate sector with the capacity to offer a complete response to the needs of its clients.
With locations spanning the entire French national territory, Nexity is also present in Europe, notably in Belgium, Germany, Italy, Poland, Spain and Switzerland.
Nexity is listed on the SRD and on Euronext's Compartment A Member of the Indices: SBF80, SBF120, CACmid100, Next150 and MSCI SmallCap France Ticker symbol: NXI - Reuters: NXI.PA – Bloomberg: NXI FP ISIN code: FR0010112524
Analysts/Investors Press
Investor Relations Director Vice-President, Communication [email protected] [email protected]
Olivier Seux +33 (0)1 71 12 15 49 Guillaume Idier +33 (0)1 71 12 15 52
| € millions | 9M 2008 | 9M 2007 | Change % |
|---|---|---|---|
| New homes | 1,210.3 | 1,071.8 | +13% |
| Subdivisions | 101,4 | 96,0 | +6% |
| New homes and subdivisions | 1,311.7 | 1,167.8 | +12% |
| € millions | 9M 2008 | 9M 2007 | Change % |
|---|---|---|---|
| Office buildings | 180.8 | 218.7 | -17% |
| Warehouses and distribution centers | 22.4 | 41.5 | -46% |
| International | 26.2 | 22.7 | +15% |
| Commercial | 229.4 | 282.9 | -19% |
| € millions | 9M 2008 | 9M 2007 | Change |
|---|---|---|---|
| Services | 324.1 | 144.2 | ns |
| Distribution | 76.6 | 25.1 | ns |
| Services & Distribution | 400.7 | 169.3 | ns |
| 2007 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|
| € millions | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
| Residential | 372.8 | 403.3 | 391.7 | 573.9 | 421.0 | 483.0 | 407.7 | |
| Commercial | 98.8 | 106.4 | 77.7 | 72.8 | 60.3 | 81.8 | 87.3 | |
| Services & Distribution | 21.3 | 23.7 | 124.3 | 119.8 | 128.5 | 131.2 | 141.0 | |
| Other activities | 0.5 | 0.6 | 1.6 | 5.5 | 0.9 | 1.9 | 1.2 | |
| Revenue | 493.4 | 534.0 | 595.3 | 772.0 | 610.7 | 697.9 | 637.2 |
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