Nexity : With its refocused service platform and strengthened financial structure, Nexity returns to pre-Covid profitability levels

2021 First-Half Results

Paris, July 27, 2021, 5:45 p.m. CEST

With its refocused service platform and strengthened financial structure,

Nexity returns to pre-Covid profitability levels

• Strategic review process completed, with the disposals of Ægide-Domitys and Century 21
• • Service platform refocused on services maximizing value creation through cross-businesssynergies
  • Impact of €206m on net income (including capital gains) and €412m on net debt reduction
• Business activity highly resilient despite current context of supply shortage
• • 9,088 new home reservations in France (stable in value terms, down 4% by volume), with a strong recovery in retail sales
  • Target of around 20,000 reservations in 2021 confirmed
• Financial performance reflecting the profitable growth model of Nexity's service platform
• • Revenue of €2,063m on the new scope1 excluding disposed activities (+34% from 2020, +26% from 2019)
  • Current operating profit doubling to €136m on the new scope
• 2021 targets confirmed and expressed in terms of the new scope
• • Revenue of over €4.4bn excluding the contribution of disposed activities, at least equal to 2020 on the new scope
  • Current operating profit of over €360m on the new scope, equating to an operating margin above 8%

Key figures for the first-half 2021

BUSINESS ACTIVITY

FINANCIAL RESULTS

H1 2021

Change

NEW SCOPE1 (€ m)

H1 2021

H1 2020

H1 2019

21 vs 20

21 vs 19

New home reservations France

vs. H1 20

Revenue

2,063

1,537

1,643

+34%

+26%

Volume

9,088 units

-4%

Operating profit

136

66

112

x 2

+21%

Value

€2,023m

0%

Operating margin

6.6%

4.3%

6.8%

Commercial Real Estate

Net income, Group share

77

23

49

x 3

+59%

Order intake

€307m

Net margin

3.7%

1.5%

3.0%

REPORTED DATA (m€)

jun-21

dec-20

dec-19

Development outlook

vs. Dec-20

690

655

918

Net Debt2

Backlog

€6,563m

Stable

x EBITDA3 (12 months)

1.7x

1.9x

2.3x

1. The new scope of consolidation corresponds to the scope of business excluding the contribution of disposed activities (Century 21 and Ægide-Domitys) and capital gains. Disposed activities have been consolidated until March 31 for Century 21 and until June 30 for Ægide-Domitys. In H1 2019, disposed activities include Guy Hoquet l'Immobilier.
2. Net debt before lease liabilities and IFRS 5 / 3 EBITDA after lease payments

Véronique Bedague, Chief Executive Officer, commented:

"Following the 2020 pandemic crisis and its ongoing consequences, the first-half of 2021 has been a period of intense construction for Nexity including an evolution of its governance framework, the reshuffling of its Executive Committee, the strategic refocus of its portfolio on core activities and unique commitments in - unrivalled in the real estate development sector - to drastically cut its carbon footprint. We are now in great shape to step up the pace of our transformation in order to best serve our clients to support ongoing changes in their business and reinvent the way we live together in the cities of tomorrow.

Our integrated real estate operator model has demonstrated its strength and resilience in this first-half, still marked by the pandemic and continuing challenges in our environment. Amid lengthening of building permit time and rising construction costs, our highly engaged teams and our diverse range of residential real estate development products kept our commercial activity up at healthy levels, and we continued to adapt our offering to meet growing demand from institutional customers. As a result, we have reported a higher current operating profit than in the first-half 2019. In commercial real estate, we achieved a creditable financial performance given the quality of the sales in the backlog; and the range of services that we can now offer our corporate customers, combining our expertise in development with service solutions for workspaces that are either shared, or totally transformed. The launch of Nexity@work puts us at the forefront of efforts to meet the latest types of user needs now emerging for flexible and hybrid spaces. Lastly, our service platform, now refocused following the disposals of the Ægide-Domitys senior residences and the Century 21 franchise network, has returned to a growth rate of close to 10% relative to 2019. The platform's profitability has bounced back sharply compared to the first-half 2020, and the transformation plan focused on quality of customer relationships and leadership in energy renovation will keep us on this profitable growth trajectory.

Nexity confirms all of its targets for 2021, provided there are no further lockdowns in the second half of the year and despite the uncertainties of the economic environment. We are confident that we will continue to develop our service platform to serve our customers. The Group's strong financial capacity allows us to intensify our ability to intervene in a context of land scarcity."

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Note: The financial data and indicators used in this press release are based on Nexity's operational reporting with joint ventures proportionately consolidated. The definitions of the indicators used in this press release and their reconciliation with the IFRS-compliant financial statements can be found in the last pages of this document.

RESIDENTIAL REAL ESTATE DEVELOPMENT: Healthy business activity, strong earnings rebound

Reservations: Reservations recorded by Nexity were up 1.7% by volume and up 4.4% by value compared with the first-half 2020 for its entire scope, including international operations. In France, amid a persistent supply shortage with building permits issued remaining at a low level and project set-up phases taking longer, Nexity's business levels held up well, with net new home reservations dipping slightly by volume (down 4% to 9,088 units) and remaining stable by value at €2 billion including VAT, and extended its undisputed market leadership. All the indicators show that pressures are building up in the market, with supply getting scarcer and demand remaining brisk: the supply for sale remains low at 7,226 units, down a modest 0.2% compared with at end-December 2020 as the absorption rate remained historically swift, at 4.3 months. That reflects the low level of projects for sale being launched as building permit application periods have lengthened. The price of new homes reserved during H1 2021 by retail customers rose by 1.8% relative to H1 2020 to an average of €246,500 including VAT with a positive price effect on the average selling price per square meter (up 2.2%) compensated by a slight negative volume effect on the average surface area per apartment (-0.4%).Retail sales grew 31% compared with the first-half 2020, driven by the return in numbers of individual investors looking to capitalize on the still highly attractive borrowing conditions and the additional savings they had built up in recent months. Bulk sales dropped 37% compared with the first-half 2020, which had seen a favorable base of comparison given the signature of an exceptional agreement with CDC Habitat (representing 2,686 homes in H1 2020, compared with just 604 reservations in H1 2021). However, bulk sales were up 17% compared with H1 2019, reflecting the growing interest among institutional investors.

	H1 2021	H1 2020	H1 2019	H1 21 / H1 20	H1 21 / H1 19
				Change	Change
Reservations (units)	10,518	10,347	10 476	+1.7%	+0.4%
Housing (France)	9,088	9,451	9,486	-3.8%	-4.2%
o/w Retail sale	5,985	4,559	6,844	+31.3%	-12.6%
o/w Bulk sale	3,103	4,892	2,642	-36.6%	+17.4%
Subdivisions	777	657	817	+18.3%	-5.0%
International	653	239	173	x3	x4
Reservations (€m)	2,207	2,115	2,006	+4.4%	+10.0%
Housing (France)	2,023	2,023	1,923	0.0%	+5.2%
o/w Retail sale	1,455	1,083	1,516	+34.3%	-4.1%
o/w Bulk sale	568	940	408	-39.3%	+39.7%
Subdivisions	71	55	66	+27.9%	+6.3%
International	113	36	16	x3	x7
Data on the new scope (€m)	H1 2021	H1 2020	H1 2019
Revenue	1,397.7	900.9	1,105,0	+55.1%	+26.5%
Current operating profit	80.6	7.6	77.0	x11	+4.7%
Margin (% revenue)	5.8%	0.8%	7.0%	+500bps	-120bps
	H1 2021	Dec-2020	Change
Working Capital Requirement (WCR)	1,130	985	+145
% backlog	20.5%	17.9%	+2.6%

Half-yearresults: First-half 2021 revenue came to €1,398 million, up €497 million (or 55%) relative to H1 2020, a period hit by the complete shutdown of construction projects as the pandemic emerged (impact estimated at around €300 million), and up €293 million (or 27%) relative to H1 2019. Current operating profit amounted to €81 million, up more than eleven times from the H1 2020 figure impacted by the temporary halt in business activity, which meant that management costs were not able to be incorporated into operating inventories. The margin rose to 5.8% of revenue (versus 0.8% in H1 2020). This margin, which is always lower in the first-half, is in line with the full-year margin forecast by the Group. The WCR was again managed very carefully, with the €145 million increase reflecting the strength of business activity and, to some extent, expenses arising on projects currently being set up, which will pave the way for sales launches over the next quarters. The WCR-to-backlog ratio remained under control at 20.5%, in line with historical levels, reflecting the brisk absorption rate for developments. Unsold completed stock (51 units) as a proportion of the total supply of homes for sale remained very low.

Outlook: The backlog was stable compared with year-end 2020 (adjusted for the projects developed by Ægide, which was sold at June 30, 2021) at €5.5 billion, i.e 1.7 year of revenue, and the business potential stood at €11.4 billion at end-June 2021, or approximately 3.5 years of revenue. Even though the decline in building permits is again expected to curb the pace at which supply for sale is replenished in the second half, Nexity is reiterating its forecast of around 20,000 new home reservations in France in 2021 given its vibrant portfolio of projects currently being assembled, with a larger share of bulk sales than in the six months to June 30. In the second half, residential real estate revenue is expected to be slightly below H2 2020 levels given forecast construction progress and notarial deeds of sale, amid greater pressure on construction supply chains and longer building permit approval delays. The full-year margin is expected to head back above 8.5%, even factoring in the carefully controlled effects of the increase in construction costs and the shift in the customer mix.

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COMMERCIAL REAL ESTATE DEVELOPMENT: Many deliveries in a wait-and-see market

New orders and deliveries:

Nexity, France's leading commercial real estate developer both by revenue and by the uniqueness of its range of integrated services meeting the full spectrum of user needs, recorded an order intake of €307 million in the first-half 2021, up from €216 million in the first-half 2020. That figure includes €260 million in orders in the Paris region, including for Reiwa, Nexity's future headquarters in Saint-Ouen, and €47 million in orders across France's major regional cities where Nexity continues to build up its presence.

Nine projects have been delivered since the beginning of the year, and work on the flagship Olympic Village, France's largest single-site construction project for the 2024 Olympic Games, started in Saint-Ouen (mixed housing and office development, almost all of which have already been sold through bulk sales to institutional investors).

	Data on the new scope (€m)		H1 2021		H1 2020		H1 2019		H1 21/H1 20		H1 21/H1 19
					change		change
	Revenue		279.8		303.3		179.0		-7.7%		+56.3%
	Current operating profit		44.3		53.8		19.8		-17.7%		x2
	Margin (% revenue)		15.8%		17.7%		11.1%		-190bps		+470bps
			H1 2021		Dec-2020		Change
	Working Capital Requirement (WCR)		(85)		(267)		+181

Half-yearresults:

2020 was a record year for commercial real estate development with the sale of very large commercial projects, including the sale of the Influence 2.0 building occupied by the Paris Regional Council in the first-half for €219 million and the sale of Engie's green business park in La Garenne-Colombes in the fourth quarter (around €1 billion). Given these base effects and the state of progress of the various projects underway, 2021 interim results were naturally lower than in 2020. Nonetheless, the first-half 2021 margin held up at a very high level, well above that anticipated for 2021 and historical levels.

WCR, which was highly negative at -€267 million at the end of 2020, due to the first receipts following the marketing of major programmes at the end of the year, including Reiwa in Saint-Ouen and the green business campus to serve as Engie's new headquarters in La Garenne-Colombes, returned to a more normal level as anticipated (up €181 million from December 31, 2020) following payments for VAT and construction work, but remained negative at -€85 million, given that the advances received had not yet been absorbed in full.

Outlook:

The backlog for Commercial Real Estate Development totalled €1 billion at end-June 2021 (up 2.7% relative to end- December 2020), representing almost 2 years of development operations, and business potential stood at €1.7 billion (down 8.2% relative to end-December 2020), representing the equivalent of 3.4 years of development operations. Although the Office property market seems to be picking up again with a second quarter showing an increase in take-up, a number of businesses have postponed or are revising their property plans, which is slowing down office project sales.

The Group does not expect further significant order intake in the second half, and based on the outlook for the various projects currently in the structuring phase, the Group is reiterating an order intake target of €400 million excluding VAT in 2021, a level more consistent with its past performance and current market conditions. The green business campus in La Garenne-Colombes, currently under construction, will not generate significant revenue in the second half of 2021.

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SERVICES: Platform refocused on services with substantial synergies - Renewed profitable growth

Half-year results

The highlight of the first-half for the Services segment was the agreement with AG2R-La Mondiale on June 22, 2021 to sell it a majority stake in Ægide-Domitys, France's leader in senior independent living facilities, with 126 serviced residences at end-June. The deal marks Nexity's exit from the operation of senior independent living facilities, while enabling it to reinforce its business in development, a segment with great potential for Nexity, under a long-term agreement with AG2R- La Mondiale. Ægide-Domitys' results have been consolidated to June 30, 2021 (€202.1 million in revenue from the operation of serviced residences). The sale of the Century 21 franchise network during May (operations consolidated until March 31, 2021) marks the completion of the Group's refocusing drive.

	Data on the new scope (€m)		H1 2021		H1 2020		H1 2019		H1 21/H1 20		H1 21/H1 19
					change		change
	Revenue		385.3		332.6		357.9		+15.9%		+7.7%
	Current operating profit		25.8		13.7		26.8		+88%		-3.6%
	Margin (% revenue)		6.7%		4.1%		7.5%		+260bps		-80bps
			H1 2021		Dec-2020		Change
	Working Capital Requirement (WCR)		26		49		(23)

Services revenue for the new scope (i.e., excluding Domitys and Century 21) came to €385 million in the first-half, up 16% relative to the low point of 2020, and up 8% on the pre-Covid business levels of 2019. The growth was driven by all the active business lines on Nexity's service platform.

• In property management, first-half revenue rose 5% in the residential segment with the upturn in brokerage and rentals, especially outside the Paris region, and 20% in the commercial real estate segment. At the beginning of 2021, Perial Asset Management selected Nexity Property Management to manage a portfolio totalling nearly 300,000 sq.m for the next three years.
• In serviced properties, Nexity Studéa, a leading operator of student residences, recorded revenue growth of 4%, despite the pandemic, with a consistently high average occupancy rate of 93%, albeit slightly below (-1%) the 2020 average occupancy rate given that classes continued online. The activity levels of Morning, leading player in Paris- based coworking spaces, were stable compared with the occupancy rates in H2 2020. A strong acceleration is anticipated in the second half given the expansion in its portfolio (6,000 sq.m added in the second quarter with the opening in early June of its flagship Morning Concorde facility at the historic Hôtel de la Marine building). The average occupancy rate at its established spaces was 80% at end-June and is expected to rise over the remainder of the year.
• Distribution activities posted growth of 41% relative to the first-half 2020 as individual investors returned in the first- half 2021.

Current operating profit from Services on the new scope nearly doubled with respect to 2020, totalling €26 million, equating to a current operating margin on a like-for-like basis of 6.7% (versus 4.1% in the first-half 2020, on a like-for-like basis). This margin is expected to continue to improve in the upcoming quarters.

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CONSOLIDATED RESULTS - OPERATIONAL REPORTING

(in millions of euros)

Revenue new scope

Revenue from disposed activities

Revenue

Current operating profit new scope

% of revenue

Operating profit from disposed activities Capital gains on disposals

Operating profit from disposed activities and capital gains on disposals

Operating profit

Net financial income/(expense)

Income tax

Share of profit/(loss) from equity-accounted investments

Net profit

Non-controlling interests

Net profit attributable to equity holders of the parent company

Of which net income from non-current items and disposed activities

Net profit attributable to equity holders of the parent company, new scope

(in euros)

Net earnings per share

Net earnings per share, new scope

			H1 21	H1 21
H1 2021	H1 2020	H1 2019	/H1 20	/H1 19
			change	change
2,063.5	1,536.8	1,643.0	34%	26%
211.3	179.2	197.4	18%	7%
2,274.8	1,716.1	1,840.4	33%	24%
136.0	66.0	112.4	x2	21%
6.6%	4.3%	6.8%
41.3	(15.8)	13.0
184.7
226.0	(15.8)	13.0
362.0	50.2	125.4	x 7	x 3
(43.7)	(36.0)	(37.4)
(32.2)	(5.8)	(31.9)
(0.9)	(0.3)
285.2	8.2	56.0
(2.1)	(1.6)	(3.8)
283.2	6.6	52.2	x 43	x 5
206.2	(16.3)	3.7
77.0	22.9	48.5	x 3	59%
5.11	0.12	0.93
1.39	0.41	0.86

Revenue

Reported revenue was €2,275 million, or €2,063 million on the new scope. Reported revenue thus rose 33%, or €559 million, compared with H1 2020, which had seen a revenue shortfall of about €430 million due to the consequences of the Covid-19 health crisis.

In IFRS terms, reported revenue in the first-half 2021 was €2,099 million, compared with €1,607 million in the year- earlier period, thus an increase of 31%. This figure excludes revenue from joint ventures, in accordance with IFRS 11, which requires joint ventures - proportionately consolidated in the Group's operational reporting - to be accounted for using the equity method.

			H1 2021			H1 2020		H1 2019		H1 21/H1 20	H1 21/H1 19
(in millions of euros)							change	change
Development		1,677.5		1,204.2	1,284.3	+ 39.3%	+ 30.6%
Residential Real Estate Development		1,397.7		900.9	1,105.2	+ 55.1%	+ 26.5%
Commercial Real Estate Development		279.8		303.3	179.0	- 7.7%	+ 56.3%
Services		385.3		332.6	357.9	+ 15.9%	+ 7.7%
Other Activities			0.6		0.0	0.9		x 120	- 31.6%
Revenue new scope			2,063.5			1,536.8		1,643.0		+ 34.3%	+ 25.6%
Revenue from disposed activities			211.3			179.2		197.4		+ 17.9%	+ 7.1%
Revenue			2,274.8			1,716.1		1,840.4		+ 32.6%	+ 23.6%

Note: Revenue generated by the development businesses 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 all inventoriable costs.

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