28-01-2021 : 2020 Annual results

Press release

Paris, January 28, 2021

2020 ANNUAL RESULTS

• Backlog up 42.7% at €3.6 billion
• A very solid balance sheet with a net cash surplus
• Financing capacity increased to €465 million
• Proposed dividend of €1.85 per share

• Key components of sales activity (2020 vs. 2019)
• • Total orders:
  • €2,676.3m incl. VAT (+22.9%)
  • • Housing: €1,490.8m incl. VAT

  (-12.8%)

  • i.e. 6,305 units (-23.3%)

    • Commercial Property: €1,185.5m incl. VAT
  • Take-upperiod for Housing: 3.8 months vs. 5.8 months (-2.0months)
• Key financial data (2020 vs. 2019)
• • Overall revenue: €1,163.1m
  • 
    Of which Housing: €963.3m
  • Gross margin:

€207.2m

• Current operating income: €80.1m
• Attributable net income: €40.1m
• Net cash (excl. IFRS 16 liabilities): €62.5m
• Financing capacity:

€465.2m

• Key growth indicators (2020 vs. 2019)
• • Overall backlog: €3,631.1m (+42.7%)
    Of which Housing: €2,383.2m (+15.2%)
  • Housing property portfolio: 35,086 units (+6.0%)

Kaufman & Broad SA has today announced its results for the 2020 financial year (from December 1, 2019 to November 30, 2020). Nordine Hachemi, Chairman and Chief Executive Officer of Kaufman & Broad, made the following comments:

"The results for financial year 2020 exceeded the objectives set back in July and confirm that Kaufman & Broad's growth model is capable of generating profitability and cash, with a year- end net cash surplus of €62.5 million (excluding IFRS 16 liabilities) and financing capacity increased to €465.2 million.

Sales activity in the Housing segment included a growing share of sales to a diverse range of institutional investors from both the public and private spheres. Their orders rose 45% year-on- year and accounted for 67% of total Housing orders by value.

Kaufman & Broad actively pursued its development drive throughout the year in the strategic priority areas it had decided on before the public health crisis struck.

Our development policy geared towards expanding our regional network enabled us to identify potential to develop a total surface area of 600,000 sq.m over the medium term.

Our approach to CSR has been recognized by MSCI ESG Ratings, among others, as it upgraded our overall rating from BBB to A in January 2021. Otherwise, Vigeo continues to qualify our "ESG Overall Score" as "Robust" and Gaïa has increased our rating by two points in 2020. This process will be accelerated in 2021, particularly in the areas of soil waterproofing and the reduction of carbon emissions during the development of industrial and tertiary brownfields.

The portfolio of managed student and senior residences, owned and operated by Kaufman & Broad, will include around ten operations in development in 2021.

As far as the Commercial Property segment is concerned, we obtained the required authorizations for the A7A8 Austerlitz project (already fully let) in late 2020 and hope to receive the clear building permits towards the end of the first half of 2021.

Regarding residential business prospects 2021, Kaufman & Broad has noted that the number of building permits granted has continued to trend downwards since 2019 and we therefore expect order levels to remain flat in 2021.

As announced back in July, revenue could reach between approximately €1.3 billion. In the event that the administrative authorizations for the Austerlitz A7 / A8 project are free of objections in 2021, the turnover could be increased to 1.6 billion euros. In the first case, the EBIT rate would be equivalent to that of 2020; in the second, it will return to a level comparable to that of previous years.

Based on Kaufman & Broad's 2020 results, solid balance sheet and historically large backlog, the Board of Directors will suggest paying out a dividend of €1.85 per share on 2020 earnings when the Shareholders' Meeting is held on May 6, 2021.

All these guidance targets are based on stabilization that the current economic and social situation and that any developments on the public health front do not lead to further work stoppages at the group's construction sites over the course of the year."

1/9	Results for financial year	2020
	January 28,	2021

Press release

Paris, January 28, 2021

• Sales activity

• Housing
  Housing orders in 2020 were 12.8% lower by value than in 2019 and amounted to €1,490.8 million (including VAT). By volume, 6,305 units were ordered, reflecting a 23.3% decrease compared with 2019.
  The program take-up period was 3.8 months in 2020, compared with 5.8 months in the previous year, reflecting a decrease of 2.0 months.
  Housing supply, with 95% of projects located in high-demand,low-supply areas (A, Abis and B1), totaled 1,999 units at end-2020 (3,990 units at end-2019).
  Breakdown of the customer base
  Orders from first-time buyers accounted for 6% of sales by value (excluding VAT) in 2020 and were lower than in 2019 (17%). Second-time buyers accounted for 5% of sales, versus 8% in 2019. Orders from investors accounted for 22% of sales (of which 17% under the Pinel incentive scheme alone). Lastly, block sales increased by 45% and their share of total orders increased to 67% by value (including VAT), compared with 40% in 2019.
• Commercial Property
  The Commercial Property segment recorded net orders of €1,185.5 million (including VAT) in financial year 2020, corresponding to three office complexes, one logistics platform and two property development contracts.
  End of November 2020, Kaufman & Broad signed a sale-before-completion agreement for a 42,000 sq.m logistics platform in Beaucaire (Gard) on behalf of a buyer-user. Otherwise, Kaufman & Broad also announced a sale-before-completion agreement with La Caisse de Retraite du Personnel Navigant for a 13,000 sq.m office building in Puteaux (92).
  Kaufman & Broad currently has around 136,000 sq.m of office space and around 68,000 sq.m of logistics space under marketing or under study. It is also in the process of building close to 88,000 sq.m of office space and more than 36,000 sq.m of logistics space. Lastly, it has around 110,000 sq.m of office space transactions yet to finalize.
  Leading sales and development indicators
  The Housing backlog at the end of financial year 2020 amounted to €2,383.2 million
  (excluding VAT), the equivalent of 2.5 years of business. Kaufman & Broad had 147 housing programs on the market at that same date, representing 1,999 housing units (compared with 191 programs representing 3,990 housing units at the end of 2019).
  The Housing property portfolio represents 35,086 units. It was up 6.0% compared with end- 2019 and corresponds to more than 4 years of sales activity.
  The Commercial Property backlog at the end of 2020 amounted to €1,248.0 million.

2/9	Results for financial year	2020
	January 28,	2021

Press release

Paris, January 28, 2021

• Financial results

• Business volumes
  Total revenue amounted to €1,163.1 million (excluding VAT), down 21.0% compared with
  2019.
  Housing revenue amounted to €963.3 million (excluding VAT), compared with €1,334.0 million (excluding VAT) in 2019. This represents 82.8% of group revenue. Revenue from the Apartments business reached €877.1 million (excluding VAT), compared with €1,232.4 million (excluding VAT) in 2019. Revenue from the Single-family Homes in Communities business totaled €86.1 million (excluding VAT), versus €101.6 million (excluding VAT) in 2019.
  Revenue in the Commercial Property segment amounted to €194.4 million (excluding VAT), compared with €130.4 million in 2019.
• Profitability highlights
  The gross margin for the 2020 financial year was €207.2 million, compared with €294.3 million in 2019. The gross margin ratio was 17.8%, which is lower than the 20.0% generated in 2019.
  Current operating expenses amounted to €127.0 million (10.9% of revenue), compared with €150.9 million in 2019 (10.2% of revenue).
  Current operating income reached €80.1 million, versus €143.4 million in 2019. The EBIT rate was 6.9%, compared with 9.7% in 2019.
  Consolidated net income amounted to €56.5 million in full-year 2020 (versus €95.5 million in 2019). Non-controlling equity interests totaled €16.4 million, compared with €17.6 million in 2019.
  Attributable net income was €40.1 million, versus €77.9 million in 2019.
• Financial structure and liquidity
  During the public health crisis, Kaufman & Broad did not request deferral or suspension of payment of its tax and social security charges or apply for the government-backed bank loans introduced as one of the measures to support the economy. It did, on the other hand, extend its RCF (revolving credit facility) by one year, bringing its debt maturity to 4.2 years.
  After dividend payments and share buybacks as part of a share buyback plan amounting to a cumulative €56 million in financial year 2020, the group's financial debt at November 30, 2020 resulted in a positive net cash position (excluding IFRS 16 liabilities) of €62.5 million, compared with a positive net cash position of €56.0 million at end- November 2019. Cash assets (available cash and investment securities) amounted to €215.2m, versus €208.1m at November 30, 2019. The group's financing capacity was €465.2 million, compared with €458.1 million at end-November 2019.

3/9	Results for financial year	2020
	January 28,	2021

Press release

Paris, January 28, 2021

The group had recorded a sharp increase in its working capital requirement at end- May 2020 as work at most of its construction sites had to be halted or scaled back during the first lockdown; however, as announced back in July, it had returned to normal by the end of the financial year. It thus stood at €122.1 million (10.5% of revenue), compared with €150.1 million at November 30, 2019 (10.2% of revenue). The group's tight control over working capital primarily relies on the very short take-up period for its programs.

As part of the authorization granted at the General Meeting of May 5, 2020, the Board of Directors of January 27, 2021 reduced its capital by canceling 375,000 treasury shares, for a total of value of € 12.5 million, thus bringing the number of shares making up the company's share capital from 22,088,023 to 21,713,023 shares.

• Governance

Corporate Social Responsibility (CSR) has become a core principle underlying Kaufman

• Broad's activity and the company has thus set up a CSR and Innovation Department reporting directly to the Chairman and Chief Executive Officer. Otherwise a CSR Committee of the Board of Directors has also been newly created.

The CSR Committee's role is to oversee execution of the CSR plan in accordance with the company's strategy. It is worth noting that ESG criteria have formed an integral part of the compensation metrics applicable to Kaufman & Broad's Management since 2018.

• Outlook

Regarding Kaufman & Broad's residential commercial prospects for fiscal year 2021, the continued downward trend in the allocation of building permits observed since 2019 leads us to anticipate a level of reservations comparable to that of 2020.

As announced last July, fiscal year 2021 sales are expected to be around 1.3 billion euros. Assuming that the administrative authorizations for Austerlitz's A7 / A8 project are purged in 2021, turnover could be increased to 1.6 billion euros. In the first case, the EBIT rate would be equivalent to that of 2020; in the second, it could return to a level comparable to that of previous years.

All of these prospects are based on a stabilization of the current economic and social situation and an evolution of the health crisis that would not lead to new work stoppages during the year.

4/9	Results for financial year	2020
	January 28,	2021