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Tuesday 20 February, 2018

Nexity

Nexity : 2017 full-year results

Nexity : 2017 full-year results

NEXITY EXCEEDS ALL ITS TARGETS IN 2017

Paris, Tuesday, 20 February 2018

Revenue: €3.5 billion (up 14%)
EBITDA: €368 million (up 21%)
Current operating profit[1]: €321 million (up 20%); operating margin 9.1% (up 0.4 points)
Group share of net profit: €186 million (up 33%)
Development backlog: €4.8 billion (up 19%)
Net debt virtually stable: €343 million (21% gearing)

Individual Clients

  • Revenue: €3.0 billion (up 13%)
  • EBITDA: €324 million (up 23%)
  • Residential real estate: 21,372 reservations, of which 18,351[2] new home reservations in France, up 15% by volume and 21% by value (14.1% market share)
  • Business potential for new homes: 47,560 units, i.e. 2.6 years of development operations
  • Services to individuals: 890,000 units managed
  • Leader in serviced residences in France (development and management): 15,300 student units managed by Studéa and 8,400 units in serviced senior residences at Ægide-Domitys (in which Nexity owns 45% of the share capital and has an option to acquire full control in 2018)

Commercial Clients

  • Revenue: €0.5 billion (up 25%)
  • EBITDA: €73 million (up 24%)
  • Commercial real estate: €402 million in order intake
  • Services to companies: 11.3 million sq.m under management
  • Commercial real estate business potential of €1.6 billion, i.e. 3.9 years of development operations

Local Authority Clients

  • Villes & Projets: ~588,500 sq.m portfolio
  • Land bank: €57 million

OUTLOOK[3]

  • Revenue and EBITDA[4] expected to grow by about 10% in 2018
  • Individual Clients: continued growth in Nexity's market share, in a market that should see slight contraction while remaining at a high level (between 120,000 and 125,000 reservations expected in 2018)
  • Commercial Clients: commercial real estate order intake: €400 million
  • Dividend per share increased to €2.50[5] payable in 2018 and at least €2.50 payable in 2019[6]

Alain Dinin, Chairman and CEO of Nexity, commented:

"The French residential market continued on a growth track in 2017, reaching the record level of 130,000 reservations. The French government has continued to move its housing policy in a positive direction overall, along the lines adopted in 2014. Although it is regrettable that a long-term strategy has not been put in place - one that would address the sector's real challenges in France, from demographic growth and urban governance to housing production costs, not to mention social housing's place in the picture, and that of institutional investors - it is nevertheless true that the measures taken have given market players several years of visibility. In the current market environment - where interest rates are starting to go back up and the financial capacity of households is, now more than ever, the decisive factor in determining demand - Nexity reaffirms its desire to "keep prices steady" in order to continue offering affordable housing to the widest possible audience.

In 2017, Nexity beat all its records and exceeded its initial targets for both sales and financial performance. Our teams recorded more than 18,000 reservations for new homes in France - giving us a market share greater than 14% - and more than 21,000 reservations in total (including Subdivisions and International business). This success is made possible by our decentralised and entrepreneurial model, our strong local presence with our experienced and dedicated staff, our positioning as a multi-specialist, but also by the quality of our sales and marketing tools, and distribution network, all of which make Nexity stronger.

Our Commercial real estate and Services businesses also turned in a strong sales performance.

Our operating profit has exceeded the €320 million mark. The Group's margin has made further headway, and the services business has improved its performance. The 2018 targets we are announcing today confirm that the Group aims to maintain its profitable growth trajectory. Lastly, our financial structure is sound; it allows us to once again increase the dividend paid to our shareholders, and will allow us to step up our growth if opportunities arise (external growth, particularly in services; investments in digital; a swifter pace of new land position acquisition, without altering our low-risk development model).

Beyond growth in each of its business lines, Nexity is aiming for an even bigger transformation. Backed by its unique market position in France and a sizable storehouse of data, the Group is preparing to shift its identity to that of a real estate services platform, in order to better serve all of its clients' real estate needs, moving beyond the simple binary of development and operations to conceive complete solutions that generate recurring revenue and create value for clients, and especially to ensure that Nexity remains useful and sustainable, placing its social and environmental responsibility at the centre of its strategy.

To this end, in 2017 Nexity adopted a new client-centred organisation (Individual Clients, Commercial Clients, Local Authority Clients, Internal Clients), henceforth reflected in its financial communications, which now uses EBITDA as its main profitability indicator, in line with Nexity's profile as a services business."

***

At its meeting on Tuesday, 20 February 2018, chaired by Alain Dinin, Nexity's Board of Directors reviewed and approved the Group's consolidated financial statements for the financial year ended 31 December 2017. The Group's condensed financial statements (income statement, statement of financial position, statement of cash flows and change in net debt) are set out in Annex 2 of this press release (pages 21 to 23). Audit procedures have been performed. The audit report will be issued after the verification of the information presented in the Group's management report.

Nexity exceeds all its 2017 targets[7]

  2017 (Actual) 2017 (Guidance) 
Increase in Nexity's market share   14.1%   > 13.5% x
Commercial real estate order intake   €402m   > €350m x
Revenue   +14.0%   10% increase x
Current operating profit   €321m   > €300m x

x: Target exceeded

The target for current operating profit of €300 million in 2018, announced in February 2016, was met a year early in 2017 as announced in February 2017 (revised upward to €300 million in 2017) and in October 2017 (at least €300 million in 2017). The current operating profit of €321 million achieved at 31 December 2017 corresponds to EBITDA of €368 million. The previously announced target of at least €325 million in 2018 has now been replaced by an expected EBITDA target of around €485 million for 2018 (which should be compared to EBITDA of €448 million in 2017, restated under the new reporting standards).

2017 business activity

Residential real estate

For 2017, the retail market for new homes in France posted its best performance since 2007. For the year as a whole, net reservations[8] totalled 130,000 units (up 2% on 2016), still driven by very low interest rates, together with improved economic conditions overall.

After bottoming out in November 2016 (at an average of 1.31%), mortgage rates for individuals increased slightly, reaching an average of 1.51% in December 2017[9], and Nexity expects this gradual increase in rates to continue. The current low level of rates remains a significant driver of housing demand (with rates averaging 1.53% in 2017, compared with 1.62% in 2016).

Most of the tax incentives designed to stimulate new housing starts were extended in the 2018 budget voted by the French parliament. The few restrictions introduced by the government (refocusing of the Pinel buy-to-let investment scheme and the PTZ interest-free loan scheme on supply-constrained areas) are not expected to have a material impact on Nexity's business, given that the Group's activities are concentrated in France's major cities and their surrounding areas.

Reservations (units and €m) 2017 2016 % change
New homes (France)   18,351   15,893   +15.5%
o/w external growth* 2,503 842  x 3.0
Subdivisions   2,601   2,518   +3.3%
International   420   479   -12.3%
Total reservations (number of units) 21,372 18,890 +13.1%
New homes (France)   3,564   2,942   +21.1%
o/w external growth* 471 138  x 3.4
Subdivisions   202   197   +2.6%
International   51   79   -35.1%
Total reservations (€m incl. VAT) 3,817 3,218 +18.6%
* Edouard Denis has been consolidated since 1 July 2016 and Primosud since 31 December 2016.   
  • New homes

In 2017, the Group booked 18,351 net new home reservations in France, thus setting a new annual record, up 15% by volume and 21% by value year on year. Since 2014, business activity levels for this division have risen by 77%. Based on initial estimates of the French market (130,000 reservations[10]), Nexity's market share reached an all-time high of 14.1%, compared with 12.5% in 2016. Expected revenue from reservations rose more sharply than the volume of reservations, particularly as a result of an increase in average prices, for both retail sales (see table below) and bulk sales (due to a better geographic and product mix).

With respect to their geographic distribution, 89% of the reservations recorded in 2017 were located in supply-constrained areas (the A, A bis and B1 zones under the current Pinel scheme). Reservations were strong in both the Paris region (up 27%) and the rest of France (up 19%).

After adjusting to exclude external growth transactions, a total of 15,848 units were reserved in 2017 (up 5% compared with 2016), corresponding to expected revenue from reservations of €3,093 million including VAT (up 10% on 2016).

In the fourth quarter of 2017 alone, net new home reservations in France were up 10% by volume and 17% by value year on year (up 1% by volume and 9% by value on a like-for-like basis).

Breakdown of new home reservations by client - France (number of units)
On a like-for-like basis
 2017  2016 
Homebuyers   3,814 24%   3,716 25%
o/w: - first-time buyers 2,93919% 2,84119%
 - other homebuyers 8756% 8756%
Individual investors   6,943 44%   6,555 43%
Professional landlords   5,091 32%   4,780 32%
Total new home reservations 15,848100% 15,051100%

Reservations by first-time buyers were up 3% on 2016 and 57% of these buyers had received PTZ interest-free loans (97% of which in supply-constrained areas).

There was a 6% rise in reservations by individual investors in 2017 relative to 2016, with 60% of these investors making use of the Pinel scheme (93% of which in supply-constrained areas).

Reservations made by professional landlords were up 7% compared with 2016. The announced decline in financial resources for the social housing sector was not accompanied, either in 2017 or in the first weeks of 2018, by a slowdown in bulk sales of social housing units.

Average sale price & floor area* 2017 2016 % change
Average home price incl. VAT per sq.m (€)   3,915   3,834   +2.1%
Average floor area per home (sq.m)   56.3   55.7   +1.0%
Average price incl. VAT per home (€k) 220.4 213.6 +3.1%
 * Excluding bulk reservations; reservations by iSelection, PERL, Edouard Denis and Primosud; and international operations    

The average price including VAT of new homes reserved by Nexity's individual clients at 31 December 2017 was up 3% compared with end-2016, reflecting among other factors a slight increase in the average price per square metre.

On a like-for-like basis, the average level of pre-sales booked at the start of construction work was 78% at year-end 2017 (versus 72% a year earlier), an exceptionally high level.

In 2017, Nexity launched a total of 21,607 units (55% more than in 2016). The supply of homes for sale increased by 28% to reach 8,651 units at end-December 2017 (6,872 units on a like-for-like basis, up 21% on the total a year earlier). Unsold completed stock (145 units) as a proportion of the total supply for sale remained very low.

At end-December 2017, the business potential for new homes[11] was up 14% from year-end 2016 to 47,560 units, i.e. 2.6 years of development operations (38,527 units on a like-for-like basis).

Nexity also distributes products on behalf of third-party real estate developers under the iSelection brand. This activity added 2,116 reservations to the total for 2017. From 1 January 2018, both iSelection and PERL, which sells homes for which property ownership is divided (known as démembrement in France and based on the distinction between bare ownership and usufruct), together with other Nexity structures specialising in sales and consulting, have been reclassified as part of the Services to individuals business.

  • Subdivisions

Subdivision reservations totalled 2,601 units, up 3% on 2016. Of this total, 26% were in supply-constrained areas, and it should be noted that the business activity in the remaining areas may be affected by changes in the French government's housing policy (mainly the progressive elimination of the PTZ interest-free loan scheme in non-supply-constrained areas). The average price of net reservations made by individuals was stable at €77k, while average subdivision size rose by 1%, an increase offset by the 1% decline in the average price per square metre.

  • International

In 2017, Nexity booked 420 international new home reservations, down 12% on 2016. Poland made satisfactory gains (up 7% compared with 2016). Business activity in Italy advanced less strongly, given the absence of new sales launches.

Commercial real estate[12]

In 2017, €25.4 billion was invested in commercial real estate in France - still a high figure, albeit slightly lower than the €26 billion invested in 2016. Office space in the Paris region accounted for 71% of these volumes, including prime assets, some of which traded at an all-time low yield of 3%. The market for VEFA off-plan contracts for offices remained buoyant (at more than €4 billion), representing an increase over 2016 volumes and still including a large proportion of speculative deals, which accounted for 47% of transactions in 2017 (down from 61% in 2016), showing that risk appetite remains relatively strong among investors, who continue to anticipate a shortage of high-quality supply in the rental market.
The rental market proved buoyant in the fourth quarter, with take-up in the Paris region totalling more than 850,000 sq.m, bringing full-year take-up (volume of rental transactions and user sales) to 2.6 million sq.m in 2017, up 8% from 2016.

In the fourth quarter of 2017, Nexity booked orders totalling €260 million, mainly thanks to the off-plan sale to Caisse des Dépôts and Amundi Immobilier of the first phase of the Évidence development, located at the heart of Les Docks de Saint-Ouen, a new eco-district in the Paris suburb of Saint-Ouen.

Business activity outside the Paris region was very buoyant in 2017, with orders booked totalling €151 million, notably including the off-plan sale of:

  • Palazzo Méridia in Nice, set to be the tallest timber-frame office building in France (10 storeys, 35 m), with delivery in early 2019;
  • Wooden Park in Mérignac near Bordeaux, a complex of three timber-frame buildings offering 6,000 sq.m of office space meeting high environmental performance standards, with delivery in the fourth quarter of 2018 and the second quarter of 2019; and
  • A nearly 60,000 sq.m logistics facility in the Mitra mixed-use development area near Nîmes, which will be leased to Auchan for a firm period of nine years, with delivery in January 2019.

New orders in 2017 totalled €402 million excluding VAT, exceeding the full-year target of €350 million.

At end-December 2017, the Group's business potential for commercial real estate[13] was €1.6 billion representing 3.9 years of development operations.

Services

In Real estate services to individuals (condominium management, rental management, lettings, operation of residences, brokerage), the portfolio of units under management totalled 890,000 units at 31 December 2017, thus exhibiting a strong decline in the churn rate compared to previous years (1.1% at 31 December 2017 on a like-for-like basis, versus 2.9% a year earlier[14]). This improvement in Nexity's sales performance is due above all to a lower number of agreements terminated without renewal, reflecting better client retention. Nexity Studéa, a leading student residence management firm (124 residences, i.e. 15,300 units under management at 31 December 2017), saw its occupancy rate increase to 91.5% (compared with 89.6% at end-2016). In addition, through its stake in the Ægide-Domitys group, Nexity is the leader in serviced senior residences (72 residences managed, i.e. nearly 8,400 units at 31 December 2017).

The digital transformation in Real estate services to individuals continued, notably including the introduction of new customer service tools (paperless property inspections, private interactive client spaces, etc.) and the development of connected agencies and disruptive offerings such as E-gérance (the first fully digital rental management offering).

In Franchise operations, Century 21 and Guy Hoquet l'Immobilier signed 7% more provisional sale agreements than in 2016 in an exceptionally strong market for existing real estate in France[15]. The number of franchisees grew in financial year 2017, totalling 1,292 agencies at end-December 2017 versus 1,217 at end-December 2016.

In Real estate services to companies, the floor area under management at end-December 2017 totalled 11.3 million sq.m, down 8% from end-2016, mainly as a result of the expiry of a management contract for more than 530,000 sq.m. Business is growing in value-added services (supervision of works, technical assistance, concierge and event management services).

Urban regeneration (Villes & Projets)

At end-December 2017, the land development potential of Nexity's urban regeneration business (Villes & Projets) was up 11% to 588,500 sq.m,[16] with the notable addition to the portfolio of the development programme in the vicinity of the future Bry-Villiers-Champigny station on the southern section of the new Line 15, part of the Grand Paris Express project. This mixed-use development will comprise 140,000 sq.m of space, divided between residential units and business premises.


Digital and Innovation

Nexity continues to invest around €30 million a year in digital technology and innovation, split between in-house digitisation projects and investment in new services through direct investments or through partnerships with start-ups and investment in venture capital funds (such as Demeter, Elaia and Newfund).

The Group's investments in this area totalled €28 million in 2017, including:

  • direct investments in innovative start-ups like Cowork.io (an application to manage co-working spaces), Realiz3D (a 3D modelling solution for the real estate industry), LuckeyHomes (a short-term rental management service similar to Airbnb);
  • the development of new service offerings like Eugénie (a smart home management service), which will be rolled out as part of all programmes put on the market by Nexity beginning in March 2018;
  • the development of the first fully digital sales launches, mirroring the approach used for the Vill'Arboréa programme on Rue des Girondins in Lyon; and
  • the inauguration of Startup Studio, an internal incubator housed in the Group's head office.

Initiatives launched since 2014 include the following:

  • Bien'ici - a next-generation property listings website in which Nexity has a 48% stake alongside a consortium of real estate professionals (Consortium des Professionnels de l'Immobilier) - continued to receive a growing number of membership requests from professionals wishing to place paid listings (with 7,352 member agencies at end-2017 compared to 5,800 at end-2016). The number of visits to the website has continued to grow, setting a record of 3.5 million in November 2017, making Bien'ici the third largest real estate portal in the French market a mere two years after its launch.

Lastly, Nexity will not renew the existing leases for its Blue Office workspaces in the areas closest to central Paris (première et deuxième couronnes parisiennes), but will continue developing an offering of shared offices.


2017 CONSOLIDATED RESULTS - OPERATIONAL REPORTING[17]
(In accordance with IFRS as applied by the Group at 31 December 2017, but with joint ventures17 proportionately consolidated)

Revenue

In 2017, Nexity recorded revenue of €3,506.1 million, up 14% relative to 2016. On a like-for-like basis, excluding Edouard Denis and Primosud,[18] the Group had consolidated revenue of €3,404.4 million in 2017, 11% higher than in 2016.

€ millions 2017 2016 % change
Residential real estate   2,597.5   2,267.4   +14.6%
Commercial real estate   397.2   306.9   +29.4%
Services   507.2   494.1   +2.6%
Other activities   4.3   4.3   -0.2%
Total Group revenue* 3,506.1 3,072.7 +14.1%

* Revenue generated by the Residential and Commercial real estate divisions 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 incurred construction costs.

Residential real estate revenue totalled €2,597 million, up 15% year on year. This growth reflects the strong increase in the division's backlog observed over the past several years. On a like-for-like basis, the division's revenue totalled €2,496 million in 2017, up 10% on 2016.

Revenue for the Commercial real estate division surged 29% year on year to €397 million in 2017, reflecting the ramp-up of projects signed in prior years.
  
The Services division generated revenue of €507 million, up 3% relative to 2016. The growth in revenue was due in particular to a strong increase in franchise networks (up 15%) and to a lesser degree by the increase in revenue in property management17 (up 2%).

Revenue from Other activities (stable with respect to 2016, at €4.3 million) included sales to third parties of development rights acquired through Villes & Projets.

Reported using the Group's new client-oriented organisation, now adopted by Nexity for its financial communications, revenue generated by the Individual Clients business (Residential real estate development and Services to individuals) was up 13% to €3,041 million in 2017 (versus €2,700 million in 2016). Revenue for the Commercial Clients business (Commercial real estate development and Services to companies) grew 25% to €461 million in 2017 (versus €368 million in 2016).

In IFRS terms, revenue to end-December 2017 totalled €3,354 million, up 13% relative to consolidated revenue for the year ended 31 December 2016 (€2,975 million). This figure excludes revenue from joint ventures, in accordance with IFRS 11, which requires joint ventures to be accounted for via the equity method instead of proportionately consolidated as they were previously.


Current operating profit[19]

Nexity generated current operating profit of €321 million in 2017 (compared with €266 million in 2016, up 20%). The current operating margin increased by 0.4 percentage points to 9.1%.

€ millions 2017 2016 % change
Residential real estate   247.0   203.1   +21.6%
% of revenue 9.5% 9.0%  
Commercial real estate   70.4   57.1   +23.2%
% of revenue 17.7% 18.6%  
Services   47.0   44.8   +5.0%
% of revenue 9.3% 9.1%  
Other activities   (43.9)   (38.5)   ns
Current operating profit 320.5 266.5 +20.3%
% of revenue 9.1% 8.7%  

In Residential real estate, current operating profit totalled €247 million in 2017, up 22% year on year (up €44 million), reflecting good progress on housing and subdivision development projects as well as sales performance in previous years. The division's current operating margin increased by 0.5 percentage points to 9.5%. International operations made a positive contribution to this change.

In Commercial real estate, current operating profit totalled €70 million in 2017, compared with €57 million in 2016 (up 23%). The division's current operating margin came in at 17.7%, reflecting excellent financial and technical management of ongoing projects as well as the healthier economic and financial climate. Based on the division's order book, it is likely that margins will remain appreciably higher than 10% over the next two years.

The Services division generated current operating profit of €47 million, compared with €45 million in 2016, increasing its current operating margin to 9.3% (compared with 9.1% in 2016), and mainly reflecting good control of overhead costs.

Current operating profit from property management for individuals rose 5% to €34 million, corresponding to a current operating margin of 10.8%, up 0.4 percentage points. It also benefited from strong momentum in the brokerage business. The profitability of real estate services to companies continued to be affected by the reorganisation of Nexity Conseil et Transaction. Nexity Studéa's profitability continued to improve (up 0.9 points with respect to end-2016) as a result of the strategy of repositioning its portfolio of student residences. Very strong profitability in the franchise networks was mainly driven by increased revenue, improving the absorption of fixed costs.

The current operating loss from Other activities (€44 million in 2017, compared with €39 million in 2016) includes, among other items, profit/(loss) from the holding company, research and overhead costs incurred by Villes & Projets, the development of incubated start-ups and digital projects[20], and IFRS expenses on share-based payments.

At 31 December 2017, current operating profit for the Individual Clients business amounted to €295 million (up from €248 million a year earlier), corresponding to an operating margin of 9.7%, up 0.5 percentage points. In the Commercial Clients business, current operating profit totalled €69 million, compared with €57 million in 2016, corresponding to a current operating margin of 15%, down 0.6 percentage points.

EBITDA[21]

In 2017, Nexity generated total EBITDA of €368 million, compared with €305 million in 2016 (up 21%), giving an EBITDA margin of 10.5%, compared with 9.9% in 2016. In 2017, the Services division posted EBITDA of €62 million, up 12% on 2016, with a margin of 12.2%, representing an increase of 1 percentage point on the preceding year.

Net profit

€ millions 2017 2016 Change in €m
Consolidated revenue 3,506.1 3,072.7 433.5
         
EBITDA 368.5 304.7 63.8
% of revenue 10.5% 9.9%  
         
Operating profit 320.5 266.5 54.0
Net financial income/(expense)   (29.5)   (28.0)   (1.5)
Income taxes   (94.8)   (89.0)   (5.9)
Share of profit/(loss) from equity-accounted investments   (4.9)   (7.2)   2.3
Net profit 191.3 142.3 48.9
Non-controlling interests   (5.7)   (3.2)   (2.4)
Net profit attributable to equity holders of the parent company 185.6 139.1 46.5
(in euros)      
Basic earnings per share   3.35   2.54   0.81

Net financial expense was €30 million, versus €28 million in 2016.

The tax expense (€95 million) increased by €5.9 million as a result of the higher profit figure, but was mitigated by the €7 million reimbursement of the 3% tax on dividends that Nexity had paid in 2013 and 2014. This tax was declared invalid by the French Constitutional Court in October 2017. The effective tax rate was 32.6% in 2017, compared with 37.3% in 2016. The 2017 rate comes in at 35.0% after adjusting for the reimbursement of the 3% tax on dividends.

Equity-accounted investments made a €4.9 million negative contribution (compared with a €7.2 million loss in 2016). The main components of this item are the contributions from Bien'ici and Ægide-Domitys.

Net profit attributable to equity holders of the parent company came in at €185.6 million for the period, compared with €139.1 million in 2016 (up 33%). Earnings per share[22] amounted to €3.35 (versus €2.54 in 2016), an increase of 32%.


Working Capital Requirement (WCR)

€ millions 31 Dec. 2017 31 Dec. 2016 Change in €m
Residential real estate   826   759   67
Commercial real estate   (44)   (3)   (41)
Services   (40)   (63)   23
Other activities   28   2   26
Total operating WCR 770 695 75
Corporate income tax   3   (3)   6
Total WCR 774 692 82

Operating WCR at 31 December 2017 was €770 million, up €75 million from its level in December 2016.

In Residential real estate, the positive change in WCR reflects strong business activity growth. The WCR of Commercial real estate improved by €41 million, due to rising order intake at the end of the year. The Services division's WCR was affected by one-off cash flow lags. The change in the WCR of Other activities takes into account the growth in new land positions secured by the Group's urban regeneration business (Villes & Projets).

Cash flows

€ millions 2017 2016
Cash flow from operating activities before interest and tax expenses   355.9   288.8
       
Cash flow from operating activities after interest and tax expenses   239.3   181.6
Change in operating working capital (excluding tax)   (63.6)   (27.8)
Changes in tax-related working capital, dividends from equity-accounted investments and other   9.2   37.1
Net cash from operating activities 185.0 190.9
Net cash from/(used in) operating investments   (32.7)   (23.3)
Free cash flow 152.2 167.6
Net cash from/(used in) financial investments   (10.5)   (57.1)
Dividends paid by Nexity SA   (132.7)   (120.5)
Net cash from/(used in) financing activities, excluding dividends   131.8   (112.0)
Change in cash and cash equivalents 140.8 (122.0)

Cash flow from operating activities before financial and tax expenses totalled €356 million, up €67 million relative to 2016 mainly as a result of the higher profit figure for the year.

Operating investments, particularly in IT, increased to €33 million, compared with €23 million in 2016.

Nexity's free cash flow[23] in 2017 was €152 million, compared with €168 million the previous year, exceeding the dividend payout.

Net cash from financing activities (€132 million) primarily involved the bond issue carried out in June 2017 for €151 million (see below), net of loan repayments and the partial bond redemption during the financial year.


Financial structure

Nexity's consolidated equity (attributable to equity holders of the parent company) was €1,639 million at end-December 2017, compared to €1,589 million at end-December 2016, mainly after €133 million in dividends paid and the inclusion of net profit (€186 million attributable to equity holders of the parent company).

€ millions 31 Dec. 2017 31 Dec. 2016 Change in €m
Bond issues (incl. accrued interest and arrangement costs)   703   610   93
Loans and borrowings   454   375   79
Other borrowings and other financial receivables   3   8   (5)
Net cash and cash equivalents   (817)   (676)   (141)
Net debt 343 317 26

Net debt amounted to €343 million at 31 December 2017, compared with €317 million at 31 December 2016 (up €26 million). Net cash flows from operations almost completely covered the increase in operating WCR (up €64 million), the payment of the dividend (€133 million) and investments. At 31 December 2017, net debt equated to 21% of equity and around 1x EBITDA for the year.

On 22 June 2017, Nexity successfully issued €151 million in bonds into the private placement market, comprising one tranche of €30 million in bonds, redeemable at maturity in November 2023 (6.5 years) and paying an annual coupon rate of 2.05%, and a second tranche of €121 million in bonds, redeemable at maturity in June 2025 (8 years) and paying an annual coupon rate of 2.60%. At the same time, Nexity redeemed €65 million in bonds originally due to mature in December 2018.

At 31 December 2017, the average maturity of the Group's debt was 4 years and the average cost of debt was 2.9%, versus 3.2% at 31 December 2016. At 31 December 2017, Nexity was in compliance with all of the financial covenants attached to its bonds.

Backlog at 31 December 2017

€ millions, excluding VAT 31 Dec. 2017 31 Dec. 2016 % change
Residential real estate - New homes   3,945   3,227   +22.3%
Residential real estate - Subdivisions   246   237   +3.8%
Residential real estate backlog 4,191 3,464 +21.0%
Commercial real estate backlog   562   544   +3.3%
Total Group backlog 4,754 4,008 +18.6%

At end-December 2017, the Group's backlog reached a record €4,754 million, up 19% relative to end-2016 and equivalent to 19 months' revenue from Nexity's development activities (revenue on a rolling 12-month basis).

Order backlog in the Residential real estate division totalled €4,191 million, up 21% compared to 31 December 2016. This backlog amounts to 19 months' revenue (Residential real estate division revenue on a rolling 12-month basis).

Order backlog in the Commercial real estate division totalled €562 million at end-2017, up 3% compared to 31 December 2016. This backlog amounts to 17 months' revenue (Commercial real estate division revenue on a rolling 12-month basis).


Changes in reporting standards and operational segments

IFRS 15 and IFRS 16

IFRS 15 Revenue from Contracts with Customers, which must be applied for annual periods beginning on or after 1 January 2018, has a limited impact on the Group's financial statements. The main effect of applying this standard, for real estate development activities in France, is that it makes the method for recognising revenue and margins on a percentage-of-completion basis faster than before. The percentage of completion is now calculated based on all inventoriable costs (particularly including land). Conversely, the Group's order backlog decreases due to this higher percentage of completion (down €627 million at 31 December 2017, a 14% decrease).

IFRS 16 Leases must be applied for annual periods beginning on or after 1 January 2019, but the Group has opted to apply it early from 1 January 2018. This standard requires lessees to recognise all remaining lease payments in the form of a right-of-use asset under fixed assets and a lease liability under borrowings. For Nexity, the lease payments concerned (€80 million paid in 2017) mainly involved buildings used for business operations (half of the total), with the remainder for serviced residences under the student residence management business (Nexity Studéa). The main impacts simulated on the statement of financial position at 31 December 2017 were an increase in fixed assets and in net debt of around €300 million. The impact on the income statement was reflected in an improvement in EBITDA of around €80 million, with net profit remaining practically unchanged.

New operational segments

As part of Nexity's growth strategy adopted in 2017, through which it will become a comprehensive real estate services provider, the Group will henceforth be using its client-centred organisation in all of its financial communications (with two main divisions: Individual Clients and Commercial Clients).

As such, the following reclassifications will take place:

  • The Services division has been broken down into two businesses (Services to individuals and Services to companies), reclassified under the Individual Clients and Commercial Clients divisions, respectively; and
  • The Group's business in the marketing and selling of residential developments on behalf of third parties, carried out under the iSelection brand; activities involving the division of property ownership based on the distinction between bare ownership and usufruct, carried out under the PERL brand; real estate brokerage activities, carried out by the Nexity Solutions Crédit subsidiary; and financial advisory activities, carried out by the Nexity Patrimoine subsidiary have been transferred from "Residential real estate development" to "Services to individuals" within the Individual Clients division.

The transitional financial statements are presented for financial year 2017 in Annexes 3 and 4:

  • The impact of the application of the new reporting standards, IFRS 15 and IFRS 16, is presented in Annex 3 with the restated condensed financial statements (income statement, statement of financial position, net debt and cash flow statement); and
  • The impact of the new segmentation on the Group's main indicators is presented in Annex 4, including the breakdown of the impact of the new reporting standards, IFRS 15 and IFRS 16.

Outlook

The outlook for 2018 is presented in accordance with the application of the two new reporting standards, IFRS 15 and IFRS 16, which the Group will apply starting in 2018.

In view of the current environment in which it operates, the Group anticipates the following:

  • Revenue and EBITDA[24] growth of about 10% in 2018
  • For the Individual Clients business: continued growth in Nexity's market share, in a market expected to see slight contraction while remaining at a high level (between 120,000 and 125,000 reservations in 2018)
  • For the Commercial Clients business: commercial real estate order intake of €400 million
  • Dividend per share increased to €2.50[25] payable in 2018 and at least €2.50 payable in 2019[26].

The Group will present its new medium-term strategic plan for the period 2018-2020 in June 2018 at an Investor Day event.


Financial calendar and practical information

Q1 2018 revenue and business activity Wednesday, 25 April 2018
Shareholders' Meeting Thursday, 31 May 2018
Investor Day in Paris (by invitation) June 2018
2018 interim results Wednesday, 25 July 2018
Q3 2018 revenue and business activity Tuesday, 30 October 2018

A conference call on full-year 2017 revenue and business activity will be held in English today at 6:30 p.m. CET, accessible using code 4130599 by dialling the following numbers:

-  Calling from France +33 (0)1 76 77 22 57
-  Calling from elsewhere in Europe +44 (0)330 336 94 11
-  Calling from the United States +1 323 794 2093

The presentation accompanying this conference will be available on the Group's website from 6:15 p.m. CET and may be viewed at the following address: http://edge.media-server.com/m6/p/t8zj9yse3pz6omzz

The conference call will be available on replay at http://www.nexity.fr/real-estate from the following day.

Disclaimer

 

AT NEXITY, WE AIM TO SERVE ALL OUR CLIENTS AS THEIR REAL ESTATE NEEDS EVOLVE
Nexity offers the widest range of advice and expertise, products, services and solutions for private individuals, companies and local authorities, so as to best meet the needs of our clients and respond to their concerns.
Our business lines - real estate brokerage, management, design, development, planning, advisory and related services - are now optimally organised to serve and support our clients. As the benchmark operator in our sector, we are resolutely committed to all of our clients, but also to the environment and society as a whole.



 

Nexity is listed on the SRD and on Euronext's Compartment A
Nexity is included in the following indices: SBF 80, SBF 120, CAC Mid 60, CAC Mid & Small and CAC All Tradable
Ticker symbol: NXI - Reuters: NXI.PA - Bloomberg: NXI:FP
ISIN code: FR0010112524
______

 

CONTACT
Domitille Vielle - Head of Investor Relations / +33 (0)1 85 55 19 34 - [email protected]
Géraldine Bop - Deputy Head of Investor Relations / +33 (0)1 85 55 18 43 - [email protected]

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 Registration Document (Document de référence) filed with the AMF under number D.17-0335 on 6 April 2017 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.




ANNEX 1: OPERATIONAL REPORTING

The financial data and indicators presented below correspond to Nexity's operational reporting, with joint ventures proportionately consolidated and their reconciliation with IFRS as applied by the Group at 31 December 2017. Nexity continues to apply proportionate consolidation to its joint ventures, which in its view provides a more accurate reflection of the Group's performance and risks as measured by revenue, operating profit, working capital and debt.

QUARTERLY FIGURES

Reservations: Residential real estate division

  2017 2016 2015
Number of units Q4Q3Q2Q1 Q4Q3Q2Q1 Q4Q3Q2Q1
New homes (France)   5,736 4,821 4,288 3,506   5,201 3,624 4,121 2,947   4,237 2,368 2,949 2,187
- o/w 2016 external growth 1,053638399413 547295       
Subdivisions   920 522 680 479   1,027 420 654 417   925 400 556 321
International   208 69 106 37   141 95 170 73   133 103 42 14
Total (number of units) 6,8645,4125,0744,022 6,3694,1394,9453,437 5,2952,8713,5472,522
Value (€m incl. VAT)               
New homes (France)   1,135 915 858 655   969 666 772 536   803 473 595 415
- o/w 2016 external growth 1771378275 9048       
Subdivisions   72 42 53 35   87 30 48 32   69 29 45 23
International   22 6 14 9   21 17 28 13   19 15 6 2
Total (€m incl. VAT) 1,229964925699 1,076713848581 891516646440

Revenue by division

  2017 2016 2015
€ millions Q4Q3Q2Q1 Q4Q3Q2Q1 Q4Q3Q2Q1
Residential real estate   970.3 553.6 625.8 447.8   809.9 475.4 549.3 432.8   809.3 460.3 531.5 360.5
Commercial real estate   151.2 103.6 56.7 85.8   117.5 60.6 61.3 67.6   74.2 102.8 116.5 85.7
Services   134.0 127.5 124.3 121.3   125.6 124.8 122.8 120.9   131.3 129.8 121.2 121.5
Other activities   0.8 0.6 1.7 1.1   0.9 0.6 2.1 0.7   1.3 1.2 9.0 1.0
GROUP 1,256.3785.4808.5656.0 1,053.8661.4735.6621.9 1,016.0694.1778.2568.7


CONSOLIDATED INCOME STATEMENT - 31 DECEMBER 2017

€ millions31/12/2017
IFRS
Restatement of joint ventures31/12/2017
Operational
reporting
 31/12/2016
Operational
reporting
Revenue 3,354.0 152.2 3,506.1   3,072.7
Operating expenses (3,006.3) (131.4) (3,137.7)   (2,768.0)
Dividends received from equity-accounted investments* 15.4 (15.4) -   -
EBITDA 363.1 5.3 368.5   304.7
Depreciation, amortisation and impairment of fixed assets (24.4) - (24.4)   (23.3)
Net change in provisions (4.2) 0.0 (4.2)   1.8
Share-based payments (14.3) - (14.3)   (13.3)
Borrowing costs directly attributable to property developments, transferred from inventory (5.1) (0.1) (5.1)   (3.4)
Dividends received from equity-accounted investments* (15.4) 15.4 -   -
Current operating profit 299.8 20.7 320.5   266.5
Share of profit from equity-accounted investments* 14.7 (14.7) -   
Operating profit after share of profit from equity-accounted investments 314.5 6.0 320.5   266.5
Cost of net financial debt (28.9) (1.5) (30.4)   (26.3)
Other financial income/(expense) 0.9 0.0 0.9   (1.7)
Net financial income/(expense) (28.0) (1.5) (29.5)   (28.0)
Pre-tax recurring profit 286.5 4.5 291.0   238.5
Income taxes (90.3) (4.5) (94.8)   (89.0)
Share of profit/(loss) from other equity-accounted investments (4.9) - (4.9)   (7.2)
Consolidated net profit 191.3 - 191.3   142.3
Attributable to non-controlling interests 5.7 - 5.7   3.2
      
Attributable to equity holders of the parent company185.6-185.6 139.1
(in euros)       
Basic earnings per share**3.35-3.35 2.54
      
* Corresponds to joint ventures proportionately consolidated
** Based on average number of shares outstanding over the financial year
  


CONSOLIDATED STATEMENT OF FINANCIAL POSITION -
31 DECEMBER 2017

ASSETS
€ millions
31/12/2017
IFRS
Restatement of joint ventures31/12/2017
 Operational
reporting
 31/12/2016
 Operational
reporting
Goodwill 1,213.4 - 1,213.4   1,213.6
Other non-current assets 171.5 (1.3) 170.2   154.7
Equity-accounted investments 47.0 (22.8) 24.2   28.1
Total non-current assets 1,431.9 (24.1) 1,407.8   1,396.4
Net WCR 706.1 67.5 773.6   691.8
Total assets2,138.043.42,181.4 2,088.2
      
LIABILITIES AND EQUITY
€ millions
31/12/2017
IFRS
Restatement of joint ventures31/12/2017
 Operational
reporting
 31/12/2016
 Operational
reporting
Share capital and reserves 1,452.9 - 1,452.9   1,450.2
Net profit for the period 185.6 - 185.6   139.1
Equity attributable to equity holders of the parent company 1,638.6 - 1,638.6   1,589.3
Non-controlling interests 4.9 - 4.9   4.9
Total equity 1,643.4 - 1,643.4   1,594.1
Net debt 305.5 37.2 342.7   316.6
Provisions 132.0 0.8 132.8   129.5
Net deferred taxes 57.1 5.4 62.5   47.9
Total liabilities and equity2,138.043.42,181.4 2,088.2
      

NET DEBT AT 31 DECEMBER 2017


€ millions
31/12/2017
IFRS
Restatement of joint ventures31/12/2017
 Operational
reporting
 31/12/2016
 Operational
reporting
           
Bond issues (incl. accrued interest and arrangement costs) 703.4 - 703.4   610.4
Loans and borrowings 429.0 25.0 454.0   374.9
Loans and borrowings 1,132.3 25.0 1,157.4   985.3
           
Other borrowings and other financial receivables (60.6) 63.2 2.6   7.8
           
Cash and cash equivalents (776.4) (59.8) (836.2)   (697.6)
Bank overdraft facilities 10.2 8.7 18.9   21.2
Net cash and cash equivalents (766.2) (51.0) (817.2)   (676.4)
Total net debt 305.537.2342.7 316.6
      
      


STATEMENT OF CASH FLOWS

€ millions31/12/2017
IFRS
Restatement of joint ventures31/12/2017
 Operational
reporting
 31/12/2016
Operational
reporting
Consolidated net profit 191.3 (0.0) 191.3   142.3
Elimination of non-cash income and expenses 33.4 14.7 48.1   39.3
Cash flow from operating activities after interest and tax expenses 224.7 14.7 239.3   181.6
Elimination of net interest expense/(income) 28.9 1.5 30.4   26.3
Elimination of tax expense, including deferred taxes 81.6 4.5 86.1   80.9
Cash flow from operating activities before interest and tax expenses 335.1 20.7 355.9   288.8
Change in operating working capital (24.0) (39.6) (63.6)   (27.8)
Dividends received from equity-accounted investments 13.5 (15.4) (2.0)   (0.8)
Interest paid (16.5) (1.6) (18.0)   (15.8)
Net tax paid (86.7) (0.6) (87.3)   (53.5)
Net cash from operating activities221.4(36.5)184.9 190.9
Net cash from/(used in) operating investments (net) (32.7) - (32.7)   (23.3)
Free cash flow 188.7 (36.5) 152.2   167.7
Acquisitions of subsidiaries and other changes in scope (4.4) (0.2) (4.6)   (53.1)
Other net financial investments (5.9) 0.0 (5.8)   (4.0)
Net cash from/(used in) financial investing activities(10.3)(0.2)(10.5) (57.1)
Capital increase 22.7 - 22.7   0.0
Dividends paid to equity holders of the parent company (132.7) - (132.7)   (120.5)
Other equity movements (8.8) - (8.8)   (34.2)
Change in financial borrowings and receivables (net) 89.1 28.3 117.4   (77.6)
Net cash from/(used in) financing activities (29.7)28.3(1.4) (232.2)
Impact of foreign currency exchange rate changes on cash and cash equivalents 0.4 0.0 0.5   (0.3)
Change in cash and cash equivalents149.1(8.3)140.8 (122.0)


EBITDA BY DIVISION

EBITDA (which is defined in the glossary on page 30) is an alternative indicator of performance which is reconciled with current operating profit as follows, and in Annex 3 of this press release.

  2017 2016  
€ millions Current operating profit Adjustments EBITDA Current operating profit Adjustments EBITDA % change in EBITDA
Residential real estate 247.016.8263.8 203.17.0210.2 + 25.5%
% of revenue 9.5% 10.2% 9.0% 9.3%  
           
Commercial real estate 70.40.370.7 57.1(0.3)56.8 + 24.5%
% of revenue 17.7% 17.8% 18.6% 18.5%  
           
Services 47.015.062.0 44.810.655.4 + 11.9%
% of revenue 9.3% 12.2% 9.1% 11.2%  
           
Other activities (43.9)15.9(28.1) (38.5)20.9(17.7) na
           
GROUP 320.547.9368.5 266.538.2304.7 + 20.9%
% of revenue 9.1% 10.5% 8.7% 9.9%  

HALF-YEAR FIGURES BY DIVISION

CURRENT OPERATING PROFIT

  2017 2016 2015
€ millions FYH2H1 FYH2H1 FYH2H1
Residential real estate   247.0 160.6 86.4   203.1 123.7 79.4   186.3 117.1 69.2
Commercial real estate   70.4 39.9 30.4   57.1 35.3 21.9   39.0 16.8 22.2
Services   47.0 28.3 18.7   44.8 29.4 15.4   35.4 23.3 12.1
Other activities   (43.9) (32.2) (11.7)   (38.5) (28.6) (9.9)   (40.6) (29.5) (11.1)
GROUP 320.5196.7123.9 266.5159.8106.7 220.1127.892.3

EBITDA

  2017 2016 2015
€ millions FYH2H1 FYH2H1 FYH2H1
Residential real estate   263.8 172.3 91.6   210.2 131.7 78.4   189.3 121.2 68.1
Commercial real estate   70.7 39.9 30.8   56.8 33.9 22.9   38.8 20.3 18.5
Services   62.0 38.1 23.9   55.4 36.6 18.8   46.3 32.6 13.7
Other activities   (28.1) (20.7) (7.4)   (17.7) (16.8) (0.9)   (14.6) (13.4) (1.2)
GROUP 368.5229.6138.9 304.7185.4119.3 259.8160.699.2

ANNEX 2: IFRS

The tables set out below present the income statement, statement of financial position, change in net debt and statement of cash flows for 2017 under IFRS as applied by the Group at 31 December 2017.

CONSOLIDATED INCOME STATEMENT - 31 DECEMBER 2017

€ millions 31/12/2017
IFRS
31/12/2016
IFRS
Revenue   3,354.0 2,975.4
Operating expenses   (3,006.3) (2,688.0)
Dividends received from equity-accounted investments*   15.4 21.0
EBITDA   363.1 308.5
Depreciation, amortisation and impairment of fixed assets   (24.4) (23.3)
Net change in provisions   (4.2) 1.6
Share-based payments   (14.3) (13.3)
Borrowing costs directly attributable to property developments, transferred from inventory   (5.1) (3.4)
Dividends received from equity-accounted investments*   (15.4) (21.0)
Current operating profit   299.8 249.0
Share of profit from equity-accounted investments*   14.7 13.9
Operating profit after share of profit from equity-accounted investments   314.5 262.9
Cost of net financial debt   (28.9) (25.7)
Other financial income/(expense)   0.9 (1.8)
Net financial income/(expense)   (28.0) (27.5)
Pre-tax recurring profit   286.5 235.4
Income taxes   (90.3) (85.9)
Share of profit/(loss) from other equity-accounted investments   (4.9) (7.2)
Consolidated net profit   191.3 142.3
Attributable to non-controlling interests   5.7 3.2
    
Attributable to equity holders of the parent company 185.6139.1
(in euros)     
Basic earnings per share** 3.352.54
    
* Corresponds to joint ventures proportionately consolidated
** Based on average number of shares outstanding over the financial year


CONSOLIDATED STATEMENT OF FINANCIAL POSITION - 31 DECEMBER 2017

ASSETS
€ millions
 31/12/2017
IFRS
31/12/2016
IFRS
Goodwill   1,213.4 1,213.6
Other non-current assets   171.5 156.0
Equity-accounted investments   47.0 46.6
Total non-current assets   1,431.9 1,416.2
Net WCR   706.1 665.5
Total assets 2,138.02,081.7
    
LIABILITIES AND EQUITY
€ millions
 31/12/2017
IFRS
31/12/2016
IFRS
Share capital and reserves   1,452.9 1,450.2
Net profit for the period   185.6 139.1
Equity attributable to equity holders of the parent company   1,638.6 1,589.3
Non-controlling interests   4.9 4.9
Total equity   1,643.4 1,594.1
Net debt   305.5 311.8
Provisions   132.0 128.9
Net deferred taxes   57.1 46.8
Total liabilities and equity 2,138.02,081.7

CONSOLIDATED NET DEBT AT 31 DECEMBER 2017


€ millions
 31/12/2017
IFRS
31/12/2016
IFRS
       
Bond issues (incl. accrued interest and arrangement costs)   703.4 610.4
Loans and borrowings   429.0 350.2
Loans and borrowings   1,132.3 960.6
       
Other borrowings and other financial receivables   (60.6) (31.7)
       
Cash and cash equivalents   (776.4) (631.8)
Bank overdraft facilities   10.2 14.7
Net cash and cash equivalents   (766.2) (617.1)
Total net debt  305.5311.8
    
    


STATEMENT OF CASH FLOWS AT 31 DECEMBER 2017

€ millions 31/12/2017
IFRS
31/12/2016
IFRS
Consolidated net profit   191.3 142.3
Elimination of non-cash income and expenses   33.4 25.5
Cash flow from operating activities after interest and tax expenses   224.7 167.8
Elimination of net interest expense/(income)   28.9 25.7
Elimination of tax expense, including deferred taxes   81.6 77.8
Cash flow from operating activities before interest and tax expenses   335.1 271.3
Change in operating working capital   (24.0) (15.9)
Dividends received from equity-accounted investments   13.5 20.3
Interest paid   (16.5) (15.2)
Net tax paid   (86.7) (51.7)
Net cash from operating activities 221.4208.8
    
Net cash from/(used in) operating investments (net)   (32.7) (23.3)
Free cash flow   188.7 185.5
Acquisitions of subsidiaries and other changes in scope   (4.4) (53.4)
Other net financial investments   (5.9) (2.2)
Net cash from/(used in) financial investing activities (10.3)(55.5)
Capital increase   22.7 0.0
Dividends paid to equity holders of the parent company   (132.7) (120.5)
Other equity movements   (8.8) (34.2)
Change in financial borrowings and receivables (net)   89.1 (64.0)
Net cash from/(used in) financing activities  (29.7)(218.6)
Impact of foreign currency exchange rate changes on cash and cash equivalents   0.4 (0.3)
Change in cash and cash equivalents 149.1(88.9)


ANNEX 3: IMPACT OF THE NEW STANDARDS IFRS 15 AND IFRS 16 ON THE 2017 FINANCIAL STATEMENTS

The impact of the application of the new reporting standards, IFRS 15 and IFRS 16, on the financial statements at 31 December 2017 is presented based on operational reporting.

IFRS 15 Revenue from Contracts with Customers, which must be applied for annual periods beginning on or after 1 January 2018, has a limited impact on the Group's financial statements. The main effect of applying this standard, for real estate development activities in France, is that it makes the method for recognising revenue and margins on a percentage-of-completion basis faster than before. The percentage of completion is now calculated based on all inventoriable costs (particularly including land). Conversely, the Group's order backlog decreases due to this higher percentage of completion (down €627 million at 31 December 2017, a 14% decrease).

IFRS 16 Leases must be applied for annual periods beginning on or after 1 January 2019, but the Group has opted to apply it early from 1 January 2018. This standard requires lessees to recognise all remaining lease payments in the form of a right-of-use asset under fixed assets and a lease liability under borrowings. For Nexity, the lease payments concerned (€80 million paid in 2017) mainly involved buildings used for business operations (half of the total), with the remainder for serviced residences under the student residence management business (Nexity Studéa). The main impacts simulated on the statement of financial position at 31 December 2017 were an increase in fixed assets and in net debt of around €300 million. The impact on the income statement was reflected in an improvement in EBITDA of around €80 million, with net profit remaining practically unchanged.

CONSOLIDATED INCOME STATEMENT - 31 DECEMBER 2017

€ millions 31/12/2017
Operational reporting (reported)
 Impact of
IFRS 15
Impact of
IFRS 16
 31/12/2017
Operational reporting
(restated)
Revenue   3,506.1   65.1 -   3,571.3
Operating expenses   (3,137.7)   (65.0) 79.5   (3,123.2)
EBITDA   368.5   0.1 79.5   448.1
Depreciation, amortisation and impairment of fixed assets   (24.4)   - (74.7)   (99.1)
Net change in provisions   (4.2)   - -   (4.2)
Share-based payments   (14.3)   - -   (14.3)
Borrowing costs directly attributable to property developments,
transferred from inventory
  (5.1)   - -   (5.1)
Current operating profit   320.5   0.1 4.8   325.5
Cost of net financial debt   (30.4)   - (9.0)   (39.4)
Other financial income/(expense)   0.9   -    0.9
Net financial income/(expense)   (29.5)   - (9.0)   (38.5)
Pre-tax recurring profit   291.0   0.1 (4.2)   286.9
Income taxes   (94.8)   (0.0) 1.4   (93.4)
Share of profit/(loss) from other equity-accounted investments   (4.9)   - -   (4.9)
Consolidated net profit   191.3   0.1 (2.7)   188.6
Attributable to non-controlling interests   5.7   0.3 -   6.0
        
Attributable to equity holders of the parent company 185.6 (0.2)(2.7) 182.7
(in euros)         
Basic earnings per share* 3.35    3.30
        
* Based on average number of shares outstanding over the financial year        

CONSOLIDATED STATEMENT OF FINANCIAL POSITION - 31 DECEMBER 2017

ASSETS
€ millions
 31/12/2017
Operational
reporting
(reported)
 Impact of
IFRS 15
Impact of
IFRS 16
 31/12/2017
Operational reporting (restated)
Goodwill   1,213.4   - -   1,213.4
Other non-current assets   170.2   - 300.1   470.4
Equity-accounted investments   24.2   - -   24.2
Total non-current assets   1,407.8   - 300.1   1,707.9
Net WCR   773.6   52.9 -   826.5
Total assets 2,181.4 52.9300.1 2,534.4
        
LIABILITIES AND EQUITY
€ millions
 31/12/2017
Operational
reporting
(reported)
 Impact of
IFRS 15
Impact of
IFRS 16
 31/12/2017
Operational reporting (restated)
Share capital and reserves   1,452.9   33.2     1,486.1
Net profit for the period   185.6   0.1 (2.7)   183.0
Equity attributable to equity holders of the parent company   1,638.6   33.3 (2.7)   1,669.1
Non-controlling interests   4.9   1.4 -   6.3
Total equity   1,643.4   34.7 (2.7)   1,675.4
Net debt   342.7   - 304.3   647.0
Provisions   132.8   - -   132.8
Net deferred taxes   62.5   18.2 (1.4)   79.2
Total liabilities and equity 2,181.4 52.9300.1 2,534.4
        

CONSOLIDATED NET DEBT AT 31 DECEMBER 2017


€ millions
 31/12/2017
Operational
reporting
(reported)
 Impact of
IFRS 15
Impact of
IFRS 16
 31/12/2017
Operational reporting (restated)
               
Bond issues (incl. accrued interest and arrangement costs)   703.4   -    703.4
Loans and borrowings   454.0   -    454.0
Loans and borrowings - leases (IFRS 16)   -   - 304.3   304.3
Loans and borrowings   1.157.4   - 304.3   1.461.7
        -      
Other borrowings and other financial receivables   2.6   - -   2.6
               
Cash and cash equivalents   (836.2)   -    (836.2)
Bank overdraft facilities   18.9   -     18.9
Net cash and cash equivalents   (817.2)   - -   (817.2)
Total net debt  342.7 -304.3 647.0
        
        


STATEMENT OF CASH FLOWS AT 31 DECEMBER 2017

€ millions 31/12/2017
Operational
reporting
(reported)
 Impact of
IFRS 15
Impact of
IFRS 16
 31/12/2017
Operational reporting (restated)
Consolidated net profit   191.3   (0.2) (2.7)   188.4
Elimination of non-cash income and expenses   48.1   - 74.7   122.7
Cash flow from operating activities after interest and tax expenses   239.3   (0.2) 72.0   311.1
Elimination of net interest expense/(income)   30.4   - 9.0   39.4
Elimination of tax expense, including deferred taxes   86.1   - (1.4)   84.7
Cash flow from operating activities before interest and tax expenses   355.9   (0.2) 79.5   435.2
Change in operating working capital   (63.6)   0.2 -   (63.4)
Dividends received from equity-accounted investments   (2.0)   - -   (2.0)
Interest paid   (18.0)   - -   (18.0)
Net tax paid   (87.3)   - -   (87.3)
Net cash from operating activities 184.9 -79.5 264.5
        
Net cash from/(used in) operating investments (net)   (32.7)   - -   (32.7)
Free cash flow   152.2   - -   231.7
Acquisitions of subsidiaries and other changes in scope   (4.6)   - -   (4.6)
Other net financial investments   (5.8)   - -   (5.8)
Net cash from/(used in) financial investing activities (10.5) -- (10.5)
Capital increase   22.7   - -   22.7
Dividends paid to equity holders of the parent company   (132.7)   - -   (132.7)
Other equity movements   (8.8)   - -   (8.8)
Change in financial borrowings and receivables (net)   117.4   - (79.5)   37.9
Net cash from/(used in) financing activities  (1.4) -(79.5) (80.9)
Impact of foreign currency exchange rate changes on cash and cash equivalents   0.5   - -   0.5
Change in cash and cash equivalents 140.8 -- 140.8


ANNEX 4: MAIN INDICATORS RESTATED

As part of Nexity's growth strategy adopted in 2017, through which it will become a comprehensive real estate services provider, the Group will henceforth be using its client-centred organisation in its financial communications (with two main divisions: Individual Clients and Commercial Clients).

As such, the following reclassifications will take place:

  • The Services division has been broken down into two businesses (Services to individuals and Services to companies), reclassified under the Individual Clients and Commercial Clients divisions, respectively.
  • The Group's business in the marketing and selling of residential developments on behalf of third parties, carried out under the iSelection brand; activities involving the division of property ownership based on the distinction between bare ownership and usufruct, carried out under the PERL brand; real estate brokerage activities, carried out by the Nexity Solutions Crédit subsidiary; and financial advisory activities, carried out by the Nexity Patrimoine subsidiary have been transferred from Residential Real Estate Development to Services to Individuals within the Individual Clients division.

The following tables present the Group's main indicators following these reclassifications, as well as the breakdown of the impact of the new reporting standards, IFRS 15 and IFRS 16, presented in Annex 3 by division (Individual Clients, Commercial Clients and Other activities).

REVENUE

€ millions31/12/2017
Operational
reporting
(reported)
Reclassification of Services
(Individual,
Commercial)
Reclassification of operational segments31/12/2017
Operational reporting after
new segmentation
Impact of
IFRS 15
Impact of
IFRS 16
31/12/2017
Operational reporting
(restated*)
Individual Clients2,597.5443.5-3,041.0119.5-3,160.4
Residential real estate 2,597.5   (369.3) 2,228.2 121.9 - 2,350.0
Services to individuals - 443.5 369.3 812.8 (2.4) - 810.4
Commercial Clients397.263.7-460.9(54.3)-406.6
Commercial real estate 397.2 - - 397.2 (54.1) - 343.1
Services to companies - 63.7 - 63.7 (0.3) - 63.4
Services507.2(507.2)-----
Other activities4.3--4.3--4.3
Revenue3,506.1--3,506.165.1-3,571.3

* After new segmentation and application of new reporting standards


EBITDA

€ millions31/12/2017
Operational
reporting
(reported)
Reclassification of Services
(Individual,
Commercial)
Reclassification of operational segments31/12/2017
Operational reporting after
new segmentation
Impact of
IFRS 15
Impact of
IFRS 16
31/12/2017
Operational reporting
(restated*)
Individual Clients263.859.8-323.710.472.0406.0
% of revenue10.2%  10.6%  12.8%
Residential real estate 263.8   (53.8) 210.0 10.4 13.7 234.1
% of revenue10.2%  9.4%  10.0%
Services to individuals - 59.8 53.8 113.7   58.3 172.0
% of revenue   14.0%  21.2%
Commercial Clients70.72.1-72.9(10.3)3.065.6
% of revenue17.8%  15.8%  16.1%
Commercial real estate 70.7 - - 70.7 (10.3) 1.0 61.5
% of revenue17.8%  17.8%  17.9%
Services to companies - 2.1 - 2.1   2.0 4.1
% of revenue   3.3%  6.5%
Services62.0(62.0) ----
% of revenue12.2%  -  -
Other activities(28.1)--(28.1)-4.5(23.6)
EBITDA368.5--368.50.179.5448.1
% of revenue10.5%  10.5%  12.5%

* After new segmentation and application of new reporting standards

CURRENT OPERATING PROFIT

€ millions31/12/2017
Operational
reporting
(reported)
Reclassification of Services
(Individual,
Commercial)
Reclassification of operational segments31/12/2017
Operational reporting after
new segmentation
Impact of
IFRS 15
Impact of
IFRS 16
31/12/2017
Operational reporting
(restated*)
Individual Clients247.048.4-295.410.44.4310.2
% of revenue9.5%  9.7%  9.8%
Residential real estate 247.0   (48.7) 198.3 10.4 0.9 209.6
% of revenue9.5%  8.9%  8.9%
Services to individuals - 48.4 48.7 97.1   3.5 100.5
% of revenue   11.9%  12.4%
Commercial Clients70.4(1.3) 69.0(10.3)0.259.0
% of revenue17.7%  15.0%  14.5%
Commercial real estate 70.4    70.4 (10.3) 0.1 60.2
% of revenue17.7%  17.7%  17.5%
Services to companies - (1.3)   (1.3)   0.1 (1.2)
% of revenue   -2.1%  -1.9%
Services47.0(47.0) ----
% of revenue9.3%  -  -
Other activities(43.9)  (43.9)-0.3(43.7)
Current operating profit320.5--320.50.14.8325.5
% of revenue9.1%  9.1%  9.1%

* After new segmentation and application of new reporting standards


WORKING CAPITAL REQUIREMENT

€ millions31/12/2017
Operational
reporting
(reported)
Reclassification of Services
(Individual,
Commercial)
Reclassification of operational segments31/12/2017
Operational reporting after
new segmentation
Impact of
IFRS 15
Impact of
IFRS 16
31/12/2017
Operational reporting
(restated*)
Individual Clients826.0(45.6)-780.534.7-815.2
Residential real estate 826.0   (116.5) 709.5 34.7 - 744.2
Services to individuals - (45.6) 116.5 71.0   - 71.0
Commercial Clients(44.0)5.6-(38.4)18.2-(20.3)
Commercial real estate (44.0)    (44.0) 18.2 - (25.8)
Services to companies - 5.6   5.6   - 5.6
Services(40.0)40.0 ----
Other activities28.4  28.4 -28.4
Total WCR excluding tax770.4--770.452.9-823.3
Corporate income tax 3.2    3.2 - - 3.2
WCR773.6--773.652.9-826.4

* After new segmentation and application of new reporting standards

BACKLOG

€ millions31/12/2017
Operational
reporting
(reported)
Reclassification of operational segments31/12/2017
Operational reporting after new segmentation
Impact of
IFRS 15
Impact of
IFRS 16
31/12/2017
Operational reporting
(restated*)
Residential real estate - New homes 3,945 (136) 3,810 (475) - 3,335
Residential real estate - Subdivisions 246   246 (55) - 191
Residential real estate backlog4,191(136)4,056(530)-3,526
            
Commercial real estate 562   562 (97) - 465
Total Group backlog4,754(136)4,618(627)-3,991
 in number of months / revenue     
Residential real estate backlog 19         18
Commercial real estate 17         16
Total Group backlog19    18

* After new segmentation and application of new reporting standards


GLOSSARY

Business potential for commercial real estate: corresponds to the total volume of potential business at any given moment, expressed as estimated revenue excluding VAT, within future projects validated by the Group's Committee, under options or purchased land, in all structuring phases, including the programmes of the Group's urban regeneration business (Villes & Projets). This business potential includes the Group's current supply for sale as well as its future supply.

Business potential for new homes: corresponds to the total volume of potential business at any given moment, expressed as a number of units, within future projects validated by the Group's Committee, in all structuring phases, including the programmes of the Group's urban regeneration business (Villes & Projets). This business potential includes the Group's current supply for sale, its future supply corresponding to project phases not yet marketed on purchased land, and projects not yet launched associated with land secured under options.

Current operating profit: 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): corresponds to the Group's already secured future revenue, expressed in euros, for its residential real estate and commercial real estate businesses. The backlog includes reservations for which notarised agreements have not yet been signed and the portion of revenue remaining to be generated on units for which notarised agreements have already been signed (portion remaining to be built).

EBITDA: defined by Nexity as equal to current operating profit before depreciation, amortisation and impairment of fixed assets (including lease payments restated under IFRS 16), 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.

Free cash flow: corresponds to the cash generated by operating activities after taking into account taxes paid, financial expenses, changes in WCR, dividends received from companies accounted for under the equity method and net investments in operating assets.

Gearing: corresponds to net debt divided by consolidated equity.

Joint ventures: entities over whose activities the Group has joint control, established by contractual agreement. Most joint ventures are residential or commercial property developments undertaken with another developer (co-developments).

Land bank: represents the amount of projects for which the Group has acquired development rights, before obtaining a building permit and in some cases planning permissions, expressed as an amount recognised within the working capital requirement for the Villes & Projets business.

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.

Order intake - Commercial real estate: the total of selling prices excluding VAT as stated in definitive agreements for commercial real estate programmes, expressed in euros for a given period (notarised agreements or development contracts).

Property management for individuals: management of rented properties on behalf of individual clients (management for the owner of all relations with the tenant, management of the sale of the property if applicable) as well as the management of the common areas of apartment buildings (as a managing agent) on behalf of condominium owners.

Reservations by value (or expected revenue) - Residential real estate: the net total of selling prices including VAT as stated in reservation agreements for development programmes, expressed in euros for a given period, after deducting all reservations cancelled during the period.



[2] The balance includes 2,601 subdivision reservations and 420 international reservations

[3] Forward-looking information takes into account the impact of two new reporting standards, IFRS 15 and IFRS 16, which the Group is applying from 1 January 2018, and the impact of which is detailed in Annexes 3 and 4 of this press release

[4] EBITDA guidance corresponds to a level of about €485 million, which should be compared to €448 million in 2017 restated under the two new reporting standards, IFRS 15 and IFRS 16

[5] i.e. a 75% payout ratio

[6] Compared with a dividend of €2.40 per share paid in 2017, a dividend of €2.40 per share previously announced for 2018 and pending decision of Nexity's Board of Directors and approval at the Shareholders' Meeting

[7] Targets in Nexity's 2018 guidance announced on 21 February 2017 and partially revised upward on 25 October 2017

[8] Source: initial estimates published by ECLN

[9] Source: Observatoire Crédit Logement

[10] Source: initial estimates published by ECLN

[11] See the glossary on page 30

[12] Sources of market data: CBRE MarketView: Paris Region Office and France Investment - Q4 2017

[13] See the glossary on page 30

[14] On a like-for-like basis, the churn rate was 0.9% at 31 December 2017, versus 1.9% a year earlier

[15] Market estimated at 986,000 transactions, equating to growth of 17% year on year (FNAIM 2017 overview)

[16] Floor areas are provided for information purposes only and may be subject to adjustment once administrative authorisations have been obtained

[17] See the glossary on page 30

[18] Edouard Denis has been consolidated since 1 July 2016 and Primosud since 31 December 2016

[19] See the glossary on page 30

[20] In 2017, digital projects and other innovative activities at Nexity gave rise to an accounting expense of €16 million, of which €11 million was recognised in "Other activities" and the rest was reported on a segment-by-segment basis in the income statements of the other divisions

[21] EBITDA is defined by Nexity as equal to current operating profit before depreciation, amortisation and impairment of fixed 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. See the glossary on page 30

[22] Based on the average number of outstanding shares over the financial year

[23] See the glossary on page 30

[24] EBITDA guidance corresponds to a level of about €485 million, which should be compared to €448 million in 2017 restated under the two new reporting standards, IFRS 15 and IFRS 16

[25] i.e a 75% payout ratio

[26] Compared with a dividend of €2.40 per share paid in 2017, a dividend of €2.40 per share previously announced for 2018 and pending decision of Nexity's Board of Directors and approval at the Shareholders' Meeting




This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Nexity via Globenewswire


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