01-10-2020 : Results for the first nine months of fiscal year 2020

Press release

Paris, October 1, 2020

RESULTS FOR THE FIRST NINE MONTHS

OF FISCAL YEAR 2020

• Overall backlog: €3.7 billion (+67.0%)
• Still a very solid balance sheet:
• • net financial debt reduced to €27.5 million1
  • financing capacity of €374.0 million
• Confirmation of outlook announced on July 9 2020

• Key components of sales activity (9M 2020 vs. 9M 2019)
• • Total orders:
  • €M2,175.7 (+72.0%) incl. VAT
  • • Housing: €M1,077.4 (-6.0%) incl. VAT i.e. 4,700 units (-16.5%)
    • Commercial Property: €M1,098.3
  • Take-upperiod2 for Housing:

  3.0 months vs. 5.7 months (-2.7 months)

• Key financial data (9M 2020)
• • Overall revenue: €M657.4
  • 
    Of which Housing: €M585.7
  • Gross margin: €M121.6
  • EBIT: €M30.3
  • Attributable net income: €M10.6
  • Net financial debt1: €M27.5
  • Financing capacity: €M374.0
• Key growth indicators
  (9M 2020 vs. 9M 2019)
• • Overall backlog: €M3,697.0 (+67.0%) Of which Housing: €M2,389.5 (+19.3%)
  • Housing property portfolio: 35,594 units (+6.4%)

Kaufman & Broad SA today announced its results for the first nine months of its fiscal year 2020 (from December 1, 2019 to August 31, 2020). Nordine Hachemi, Chairman and Chief Executive Officer of Kaufman & Broad, made the following comments:

"Overall economic activity may have contracted sharply in the first half of fiscal year 2020, but Kaufman & Broad saw activity at its construction sites pick up in the third quarter, as expected.

However, beyond the public health crisis, the Housing market has been penalized to date by a very steep drop in the number of building permits granted along with their associated administrative authorizations. The property supply decreased as a direct result of this, as did the number of orders, even though we can still see that investors, institutional and individuals have a great deal of appetite for all our programs.

We continue to roll out our land planning strategy by redeveloping brownfield sites and derelict business districts. Our redevelopment plans include the A7A8 project in the Austerlitz district of Paris, for which the public consultation was completed in late July.

We can see that institutional investors are increasingly interested in housing assets, including managed housing, which shows that they are placing more value on the sector's investment quality; the solid performances delivered by residential property companies are testament to this, as their revenues have been affected very little by the public health crisis.

As per our strategy, therefore, we continue to develop serviced housing programs in our capacity as a developer-investor-operator thanks to Kaufman & Broad's solid balance sheet, which includes net financial debt reduced to €27.5(1) million and financing capacity of €374 million.

As such, we are able to reiterate all our guidance targets on the back of Kaufman & Broad's solid financial structure as well as its historically large backlogs in both the Business Property and Housing segments.

For fiscal year 2020, we see revenue reaching around €1 billion, with an EBIT margin of close to 6% and virtually no net debt.

Going further forward, the backlog at end-August 2020 points to revenue growth of around 30% in 2021. This increase will be higher if the A7A8 Austerlitz project gets the full green light from the authorities in 2021.

This outlook assumes that our construction sites are able to make progress in the current economic and social circumstances, and that the pace at which building permits are granted rapidly returns to normal. "

1. Based on net debt excluding lease liabilities under IFRS 16
2. Based on the first nine months of the year

1/9	Results for the first nine months of	2020
	October 1,	2020

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Sales activity

Housing

Orders for housing in the first nine months of 2020 amounted to €1,077.4 million (including VAT) in value terms, down 6.0% on the first nine months of 2019. In volume terms, this corresponded to 4,700 units, a 16.5% decrease compared with the same period in 2019.

The take-up period for programs was 3.0 months over the 9-month period, an improvement of 2.7 months compared with the same period in 2019 (5.7 months).

With 96% of programs located in high-demand,low-supply areas (zones A, A-bis, and B1), property supply totaled 1,558 housing units at end-August 2020 (vs. 3,569 units at end- August 2019).

Breakdown of the customer base

In the first nine months of 2020, orders from first-time buyers were down in value terms (including VAT) compared with the same period in 2019 and corresponded to 7% of sales. Second-time buyers accounted for 5% of sales, compared with 9% for the same period in 2019. Orders from investors accounted for 23% of sales (of which 19% under the Pinel incentive scheme alone). The proportion of block sales increased by 52% and corresponded to 65% of sales in the first nine months of 2020, i.e. €610.7 million.

• Commercial Property
  The Commercial Property segment recorded net orders of €1,098.3 million (including VAT) in the first nine months of 2020.
  Kaufman & Broad is currently in the process of marketing or studying around 150,000 sq.m of office space and around 75,000 sq.m of logistics space. It is also currently building nearly 30,000 sq.m of office space and more than 32,500 sq.m of logistics space. Lastly, it has around 120,000 sq.m of office space transactions yet to sign.
  At the end of August 2020, the Commercial Property backlog totaled €1,307.5 million.
• Forward-lookingsales and development indicators
  The Housing backlog at August 31, 2020 amounted to €2,389.5 million (excluding VAT), i.e.
  28.7 months of activity. At the same date, Kaufman & Broad had 150 housing programs on the market, representing 1,558 housing units (compared with 208 programs representing 3,569 housing units at the end of August 2019).

2/9	Results for the first nine months of	2020
	October 1,	2020

The Housing property portfolio represents 35,594 units. It has increased by 6.4% since the end of August 2019 and corresponds to more than 4 years of sales activity.

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Financial results

Business volumes

Total revenue amounted to €657.4 million (excluding VAT), down 36.2% compared with the same period in 2019.

Housing revenue totaled €585.7 million (excluding VAT), versus €920.1 million (excluding VAT) in the first nine months of 2019. This represents 89.1% of group revenue. Revenue from the Apartments business was down 37.7%, compared with the first nine months of 2019, and amounted to €529.7 million (excluding VAT). Revenue from the Single-family Homes in Communities business totaled €56.1 million (excluding VAT), versus €69.4 million (excluding VAT) for the same period in 2019.

Revenue from the Commercial Property segment totaled €67.4 million (excluding VAT), compared with €104.7 million for the same period in 2019.

• Profitability highlights
  The gross margin for the first nine months of 2020 totaled €121.6 million, compared with €206.3 million in 2019. The gross margin ratio was 18.5%, which is 41.1% lower than in the same period of 2019.
  Current operating expenses amounted to €91.3 million (13.9% of revenue), compared with €106.8 million for the same period in 2019 (10.4% of revenue).
  Current operating income totaled €30.3 million, compared with €99.6 million in the first nine months of 2019. The current operating margin ratio was 4.6%, compared with 9.7% in the same period in 2019.
  Consolidated net income amounted to €19.6 million in the first nine months of 2020 (versus €67.2 million in the same period in 2019). Non-controlling equity interests (minority interests) totaled €9.0 million, compared with €11.8 million for the same period in 2019.
  Attributable net income amounted to €10.7 million (versus €55.3 million for the first nine months of 2019).
  In accordance with IAS 12, attributable net income at August 31, 2020 included a reduction in the tax liability due to the provisions stipulated in the 2018 Finance Law that gradually reduces the normal corporate tax rate from 33.3% to 26.5% in 2021, and to 25.0%

3/9	Results for the first nine months of	2020
	October 1,	2020

starting from 2022. If these tax provisions were to change in the future, the Company would have to increase its tax liability accordingly.

• Financial structure and liquidity
  During the Covid-19 pandemic, work on most of the group's construction sites was halted or scaled back, and sales activity was extremely sluggish. This situation had a material adverse impact on the group's financial position as cash inflows were virtually zero during this period (since no new calls for funds were issued) while payments for work performed in the first quarter became due.
  Kaufman & Broad did not request deferral or suspension of payment of its tax and social security charges, nor did it apply for the government-backed bank loans introduced as one of the measures to support the economy. In March 2020, as a precaution, the group drew down €150 million from its revolving credit facility in order to further strengthen its already sound cash position and secure funding for its general needs given the circumstances.
  Net financial debt (excluding liabilities under IFRS 16) totaled €27.5 million at August 31, 2020, compared with a positive net cash position of €3.6 million at the end of August 2019. Cash assets (available cash and investment securities) amounted to €162.0 million, compared with €154.4 million at August 31, 2019. Financing capacity totaled €374.0 million, compared with €404.4 million at end-August 2019 (and €458.1 million at end-November 2019).
  The working capital requirement amounted to €201.8 million (i.e. 18.3% of revenue on a 12- month rolling basis), compared with €150.1 million at November 30, 2019 (10.2% of revenue). The group's tight control over its working capital requirement relies primarily on the very short take-up period for its programs. At August 31, 2019, the working capital requirement totaled €174.6 million, corresponding to 11.7% of revenue.

• Outlook

Kaufman & Broad's 2020 guidance targets include around €1 billion of revenue, an EBIT margin in the region of 6% and almost zero net debt.

Going further forward, the backlog at end-August 2020 points to revenue growth of around 30% in 2021. This increase will be higher if the A7A8 Austerlitz project gets the full green light from the authorities in 2021.

This outlook assumes that our construction sites are able to make progress in the current economic and social circumstances, and that the pace at which building permits are granted rapidly returns to normal.

4/9	Results for the first nine months of	2020
	October 1,	2020