KAUFMAN & BROAD SA
Kaufman & Broad SA Press release Paris, January 30, 2020
2019 Annual Results V19
115,000 and 120,000 units. However, current trends will continue to impact Kaufman & Broad's launches in the first half, leading us to anticipate stable order intake over the full year.
As regards Kaufman Broad's business and earnings outlook for fiscal 2020, out of caution and due to the municipal election context, we do not expect order intake in the Commercial segment to have an impact until 2021.
After a slower first half, full-year revenue is expected to remain stable compared with 2019. The gross margin is expected to be around 18.5%[1] and the EBIT margin[2] between 8.0% and 8.5%, both reflecting the return to normative margins in the Commercial business.
Reflecting the quality of Kaufman & Broad's financial structure and the strength of its medium-term outlook, the Board of Directors will propose the payment of a dividend of ?2.50 per share in respect of 2019 to the General Meeting of Shareholders, including an option for payment in cash, shares, or in cash and shares. Assuming a stabilized economic environment, the Board of Directors also envisages a dividend of the same amount for the financial year 2020."
Sales activity
In 2019, housing orders were down 8.7% by value compared with 2018 at ?1,709 million (including VAT). By volume, 8,222 units were ordered, a 9.9% decrease compared with 2018.
The program take-up period was 5.8 months in 2019, compared with 5.0 months in the previous year, an increase of 0.8 months.
Housing supply, with 95% of projects located in high-demand, low-supply areas (A, Abis, and B1), totaled 3,990 units at the end of 2019 (3,781 units at end-2018).
Breakdown of the customer base
In 2019, orders from first-time buyers accounted for 16.8% of sales by value (excluding VAT), 1.1 points less than in 2018. Orders by second-time buyers were also down 1.5 points, accounting for 8.0% of sales. Orders by investors increased by 3.0 points to 34.2% of sales (26.0% for the Pinel scheme alone). Block sales were stable at 41.0%, of which more than 49.2% were managed accommodation (for tourists, students, business travelers, and seniors).
Over the 2019 financial year, the Commercial Property segment recorded net orders of ?467.5 million including VAT, corresponding to three office complexes, a logistics platform and two property development contracts.
In particular, Kaufman & Broad signed sale-before-completion agreements or property development contracts for:
Kaufman & Broad (through its subsidiary Concerto) also delivered two new-generation XXL logistics platforms in 2019:
Kaufman et Broad currently has around 266,000 sq.m in office space and around 74,500 sq.m in logistics space under marketing or under study. In addition, nearly 73,000 sq.m of office space and more than 36,000 sq.m of logistics space are currently under construction.
At the end of 2019, the Housing backlog amounted to ?2,069.3 million (excluding VAT), the equivalent of 18.4 months of business. Kaufman & Broad had 191 housing programs on the market at that date, representing 3,990 housing units, compared with 203 programs representing 3,781 housing units at the end of November 2018.
The Housing property portfolio represents 33,090units. It was up 9.9% compared with end-2018 and corresponds to more than 4 years of sales activity.
The Group plans to launch 22 new programs in the first quarter of 2020, of which 11 in Île-de France (883 units) and 11 in the other French regions (742 units).
At the end of 2019, the commercial backlog amounted to ?475.6 million.
Total revenue amounted to ?1,472.2 million (excluding VAT), down 5.5% compared with 2018.
Housing revenue amounted to ?1,334.0 million (excluding VAT), compared with ?1,293.8 million (excluding VAT) in 2018. This represents 90.6% of group revenue. Revenue from the Apartments business rose by nearly 1.0% year on year to ?1,232.4 million (excluding VAT). Revenue from Single-family Homes in Communities totaled ?101.6 million (excluding VAT), compared with ?73.0 million (excluding VAT) in 2018
Revenue from Commercial Property amounted to ?130.4 million (excluding VAT), compared with ?254.2 million (excluding VAT) in 2018.
Gross margin for the 2019 fiscal year was ?283.9 million, compared with ?300.0 million in 2018. The gross margin ratio was 19.3%, stable compared with 2018 (19.3%).
Current operating expenses amounted to ?155.1 million (10.5% of revenue), compared with ?162.8 million for the same period in 2018 (10.4% of revenue).
Current operating profit amounted to ?128.8 million, compared with ?137.2 million in 2018. The current operating margin ratio was 8.7%, compared with 8.8% in 2018.
The group's adjusted EBIT amounted to ?139.2 million in 2019, down 6.5% compared with 2018. The adjusted EBIT margin was stable at 9.5% (9.6% in 2018).
Attributable net income was ?76.3 million, compared with ?73.0 million in 2018, an increase of 4.5%.
Gross debt stood at ?152.1 million, down ?51.3 million compared with end-2018. After taking into account cash assets totaling ?208.1 million, net cash stood at ?56.0 million as of November 30, 2019, an increase of ?6 million compared with end-2018. This includes ?6.6 million in share buybacks in 2019. The group's financing capacity was ?458.1 million (?353.4 million at the end of 2018).
Working capital requirement amounted to ?151.5 million (10.3% of annual revenue), compared with ?110.8 million at the end of 2018 (7.1% of revenue).
At the General Meeting of Shareholders of May 5, 2020, Kaufman & Broad SA's Board of Directors will propose the payment of a dividend of ?2.50 per share, in line with the dividend paid in respect of 2018. A proposal will also be made to this Shareholders' Meeting to give Kaufman & Broad's shareholders the option to receive this dividend in cash, in shares, or in cash and shares.
At the meeting of the Board of Directors of Kaufman & Broad of January 29, 2020, Frédéric Stévenin, a member of the Executive Committee and the Investment Committee of PAI partners, expressed his desire to resign from his position as Director, which was due to expire at the General Meeting of Shareholders called to approve the financial statements for 2020. The Board of Directors of Kaufman & Broad expressed its warmest thanks to Mr. Stévenin for his contribution to the development of the company throughout his eleven years as director.
On the proposal of the Compensation and Nominating Committee, the Board co-opted André Martinez as director on the same day. He will sit on the Board for the remainder of Mr. Stévenin's term of office, i.e. until the close of the General Meeting of Shareholders called to approve the financial statements for the 2020 financial year. The next Annual General Meeting of Shareholders, to be held on May 5, 2020, will be asked to ratify this co-optation in accordance with the provisions of Article L. 225-24 of the French Commercial Code. A graduate of HEC and Sciences Po Paris, Mr. Martinez has served notably as Managing Director of the budget hotel business and then as member of the Accor group's Management Board, Director and Chairman of global lodging at Morgan Stanley Real Estate from 2006 to 2009, Special Advisor to Minister for the Economy and Finance Pierre Moscovici, and Minister for Foreign Trade Nicole Bricq, and from 2015 to 2019 as Chairman of the Board of Directors of Icade. Since January 1, 2020, Mr. Martinez has been a member of the Board of Directors and Chairman of the Strategy and Investments Committee of SNCF SA.
After a slower first half, full-year revenue is expected to remain stable compared with 2019. The gross margin is expected to be around 18.5%[3] and the EBIT margin between 8.0% and 8.5%[4], both reflecting the return to normative margins in the Commercial business.
This press release is available at www.kaufmanbroad.fr
Contacts
About Kaufman & Broad - Kaufman & Broad has been designing, developing, building, and selling single-family homes in communities, apartments, and offices on behalf of third parties for more than 50 years. Kaufman & Broad is one of the leading French builder-developers due to the combination of its size and profitability, and the strength of its brand.
The Kaufman & Broad Registration Document was filed with the French Financial Markets Authority ("AMF") under No. D.19 0228 on March 29, 2019. It is available on the AMF (www.amf-france.org) and Kaufman & Broad (www.kaufmanbroad.fr) websites. It contains a detailed description of Kaufman & Broad's business activities, results, and outlook, as well as the associated risk factors. Kaufman & Broad specifically draws attention to the risk factors set out in Chapter 1.2 of the Registration Document. The occurrence of one or more of these risks might have a material adverse impact on the Kaufman & Broad group's business activities, net assets, financial position, results, and outlook, as well as on the price of Kaufman & Broad's shares. This press release does not amount to, and cannot be construed as amounting to a public offering, a sale offer or a subscription offer, or as intended to seek a purchase or subscription order in any country.
Adjusted EBIT:corresponds to income from current operations restated for capitalized "IAS 23" borrowing costs, which are deducted from gross margin.
Backlog:in the case of sales before completion (VEFA), this covers orders for housing units that have not been delivered, and for which a notarized deed of sale has not yet been signed, and orders for housing units that have not been delivered for which a notarized deed of sale has been signed for the portion not yet recorded in revenue (in the case of a program for which an advance of 30% has been received, 30% of the revenue from a housing unit for which a notarized deal has been signed is recognized as revenue, while 70% is included in the backlog). The backlog is a summary at a given time, which enables the revenue yet to be recognized over the coming months to be estimated, thus supporting the Group's forecasts - with the proviso that there is an element of uncertainty in the transformation of the backlog into revenue, particularly for orders that have not yet been signed.
EHU: the EHUs (Equivalent Housing Units) are a direct reflection of business volumes. The number of EHUs is a function of multiplying (i) the number of housing units of a given program for which notarized sales deeds have been signed by (ii) the ratio between the group's property expenses and construction expenses incurred on said program and the total expense budget for said program.
Gross margin:corresponds to revenue less cost of sales. The cost of sales is made up of the price of land and any related costs plus the cost of construction.
Financing capacity: corresponds to cash assets plus lines of creditnot yet drawn.
Lease-before-completion (BEFA): a lease-before-completion involves a customer leasing a building before it is built or redeveloped.
Orders:measured in volume (units) and in value terms; orders reflect the group's sales activity. Orders are recognized in revenue based on the time necessary for the "conversion" of an order into a signed and notarized deed, which is the point at which income is generated. In addition, in the case of multi-occupancy housing programs that include mixed-use buildings (apartments, business premises, retail space, and offices), all of the floor space is converted into housing unit equivalents.
Property portfolio:represents all of the land for which any commitment (contract of sale, etc.) has been signed.
Property supply:it is represented by the total inventory of properties available for sale as of the date in question, i.e. all unordered housing units as of this date (minus the programs that have not entered the marketing phase).
Sale-before-completion (VEFA): a sale-before-completion is an agreement by which the vendor transfers its rights to the land and its ownership of the existing buildings to the purchaser immediately. The future structures will become the purchaser's property as they are completed: the purchaser is required to pay the price of these structures as the works progress. The seller retains the powers of the Project Owner until the acceptance of the work.
Take-up period:the take-up period is the number of months required for the available housing units to be sold, if sales continue at the same rate as in previous months, or the number of housing units (available supply) per quarter divided by the orders for the previous quarter, and divided by three in turn.
Take-up rate:the take-up rate represents the percentage of the initial inventory that is sold on a monthly basis for a property program (sales per month divided by the initial inventory), i.e. net monthly orders divided by the ratio between the opening inventory and the closing inventory, divided by two.
Units:units are the number of housing units or equivalent housing units (for mixed projects) for a given project. The number of equivalent housing units is calculated as a ratio between the surface area by type (business premises, retail space, or offices) and the average surface area of the housing units previously obtained..
NOTES
Key consolidated data
Consolidated income statement*
*Not approved by the Board of Directors and not audited. Consolidated balance sheet*
.
[1]IAS 23 - Borrowing Costs: The IFRS Interpretation Committee has issued clarification of the standard, setting out the accounting treatment of borrowing costs. The capitalization of interest is not applicable to sales contracts involving over-time transfer of control, such as sales before completion, and the Group must adjust its treatment accordingly for the recognition of revenue and cost of sales, and the determination of the cost price of real estate inventory. These changes will be taken into account in the group's financial statements from the start of the 2020 financial year. [2]Following the change in interpretation of IAS 23, the EBIT margin will be comparable with the adjusted EBIT margin in the year ended November 30, 2019. [3]IAS 23 - Borrowing Costs: The IFRS Interpretation Committee has issued clarification of the standard, setting out the accounting treatment of borrowing costs. The capitalization of interest is not applicable to sales contracts involving over-time transfer of control, such as sales before completion, and the Group must adjust its treatment accordingly for the recognition of revenue and cost of sales, and the determination of the cost price of real estate inventory. These changes will be taken into account in the group's financial statements from the start of the 2020 financial year. [4]Following the change in interpretation of IAS 23, the EBIT margin will be comparable with the adjusted EBIT margin in the year ended November 30, 2019 Regulatory filing PDF file Document title: Kaufman & Broad : 2019 Annual Results Document: http://n.eqs.com/c/fncls.ssp?u=BXHPWYJWOS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
964921 30-Jan-2020 CET/CEST
