Kaufman & Broad: 2013 Results

Good business resilience in a waning market

PARIS--()--Regulatory News:

  • Main financial indicators of the group
    • Total revenues: €1,026 million (-0.4% vs. 2012)
    • Housing revenues: €968 million (-3.3% vs. 2012)
    • Gross margin: €197 million vs. €202 million in 2012 (-2.5%)
    • Housing gross margin: €189 million vs. €195 million in 2012 (-3.0%)
    • Attributable net income: €41 million vs. €48 million in 2012 (-14.2%)
    • Housing property portfolio: 15,200 lots (3 years of business)
    • Commercial property portfolio: 53,600 sq. m.
  • Limited drop in commercial activities over the entire fiscal year
    • Housing orders: -2.0% in volume, -9.6% in value
    • Housing backlog in value: -11.5% (12 months of business)
  • Stronger financial flexibility
    • Net financial debt: €50 million, a €31 million improvement
    • Borrowing power: €241 million (+16.7% vs. at end 2012)

The Kaufman & Broad S.A. (Paris:KOF) Board of Directors reviewed the results, which have not yet been audited, for fiscal year 2013 (December 1, 2012 to November 30, 2013).

It also noted the mutually agreed resignation of Guy Nafilyan from the office of Chairman of the Board of Directors, which was announced last June. The Board of Directors expressed its thanks to Guy Nafilyan for his commitment to serving the company and for having transformed Kaufman & Broad into a brand that sets a benchmark in the real estate market in France. It then appointed Nordine Hachemi, previously General Manager and Deputy Chairman of the Board of Directors of Kaufman & Broad S.A., as Chairman.

Commenting on these results, Nordine Hachemi stated: “In fiscal year 2013, Kaufman & Broad was able to stabilize its revenues, and its gross margin fell by only 2.5% in a waning market. At the same time, it continued to make significant progress in reducing its debt.

Fiscal year 2014 is expected to be a mixed year. The historic low levels of orders recorded in the market for the past two years will have an impact on 2014, while the launch of new commercial programs will be delayed because of municipal elections in France.

Over the entire fiscal year 2014, Housing revenue is expected to be substantially comparable to 2013 levels, while the housing gross margin is expected to drop slightly.

However, in the second half of the year, sales activities could experience a gradual upturn in orders in volume, reflecting the imbalance between a continuously sustained demand driven by demographic growth and a historic shortage of housing production, which has amplified in recent years. In this context, Kaufman & Broad is planning to increase its commercial offer by approximately 15% in 2014.

In support of this policy, Kaufman & Broad will intensify its growth efforts in two major directions: developing its property portfolio in all of its business activities and strengthening its marketing policy with institutional investors and specifiers.

  • Sales activities
  • Housing segment

During all of 2013, housing orders in volume fell 2.0% (5,379 housing units ordered versus 5,487 in 2012). In value, orders totaled €990.3 million (including VAT), down 9.6% compared to 2012. Orders in Île-de-France accounted for 46.1% in volume and 50.6% in value of total housing orders, compared to 45.5% and 46.2% for all of 2012.

In the fourth quarter of 2013, 1,436 housing units were ordered, for a 1.6% drop compared to the fourth quarter of 2012. In value, orders totaled €246.1 million (including VAT) compared to €317.6 million (including VAT) in the same quarter of 2012, for a decline of 22.5%, which can be partially attributed to the relative weighting of the managed accommodation lots.

Apartments

In fiscal year 2013, 5,031 apartments were ordered versus 5,243 in 2012 (a 4.0% drop), which was more noticeable in the Regions than in Île-de-France. In value, orders amounted to €884.7 million (including VAT), versus €1,040.3 million (including VAT) in 2012, for a 15.0% decrease.

As regards apartment orders, 46.1% in volume and 49.6% in value were made in Île-de-France compared to, respectively, 45.2% and 45.7% in 2012. The apartments share remains the largest in Kaufman & Broad orders since it reached 82.0% in value and 93.2% in volume of its total orders compared to, respectively, 93.7% and 95.6% in 2012.

More specifically, orders for managed accommodations grew 68.8% in volume and 72.0% in value (851 orders for €74.7 million (including VAT) in 2013 versus 504 orders for €43.4 million in 2012).

The group is developing a new offer of housing intended for people seeking an environment in which everything is streamlined with services and facilities and affordable charges.

Single-family homes in communities

During all of fiscal year 2013, orders for Single-family homes in communities amounted to 348 units, versus 244 for all of 2012. The increase of 104 units includes 28 orders in Île-de-France and 76 orders in the Regions.

In value, the orders amounted to €105.6 million (including VAT), compared to €55.7 million (including VAT) in 2012, for an 89.7% increase.

Customer base structure

In 2013, the structure of the group’s customer base remained unchanged. Traditionally catering to homebuyers, almost half of Kaufman & Broad orders were made by first-time homebuyers (33%) and second-time homebuyers (14%), which clearly indicate the reliability of the quality of its programs and products.

The share of orders intended as investments in rental property was 34% (including 23% under the “Scellier” and “Duflot” incentives) versus 33% in 2012. Block orders remained unchanged at 20%.

  • Commercial property segment

In the Commercial property segment, Kaufman & Broad’s strategy is still based on a very selective choice of projects and the 100% pre-sale principle.

During fiscal year 2013, the group recorded Commercial property orders in the amount of €87.5 million (including VAT), versus €13.8 million (including VAT) in 2012. This includes the office building program “YOU”, with a surface area of 9,300 sq. m., located in the EcoQuartier - Île Seguin - Rives de Seine in Boulogne-Billancourt (Hauts-de-Seine) and purchased before completion (VEFA) by Boursorama for its future headquarters.

Moreover, Kaufman & Broad will apply for building permits for two projects of significant size in Paris, representing more than 46,000 sq. m. in office space.

  • Advanced indicators of sales activity

As of November 30, 2013, total backlog amounted to €1,018.6 million (excluding VAT), down 9.3% compared to the same period in 2012. The Housing backlog totaled €965.1 million (excluding VAT), which is equal to 12 months of business.

As of the same date, Kaufman & Broad had 167 housing programs on the market, of which 44 were in Île-de-France and 124 in the Regions, compared to 163 programs as of November 30, 2012.

The Housing property portfolio represented 15,213 lots, of which 5,401 were in Île-de-France and 9,812 in the Regions, for potential revenues corresponding to close to three years of business.

The regeneration of the property portfolio is an important aspect of Kaufman & Broad’s strategy. This regeneration is done both with respect to quantity and types of products. It relies on the ability of the group to develop building complexes of significant size and mixed use (commercial, hotels, housing, etc.).

Beyond Kaufman & Broad’s leadership in the sales offices network, its enhanced marketing to private customers, particularly through the development of the institutional investor and specifier channels, should enable it to take full advantage of the strength of the Kaufman & Broad brand.

Over the next 12 months, more than 90 program launches are planned, representing 6,626 housing units (including 37 launches in Île-de-France representing 2,693 housing units and 54 launches in the Regions representing 3,933 housing units).

  • Financial results
  • Business activities

Total revenues in fiscal year 2013 were €1,026.0 million (excluding VAT) versus €1,030.0 million (excluding VAT) in 2012, down 0.4%. In the fourth quarter alone, total revenues were €346.6 million (excluding VAT), down 2.2% compared to the fourth quarter of 2012.

For the entire fiscal year, Housing revenues, which account for 94.3% of total revenues, recorded a drop of 3.3% compared to 2012 to €967.5 million (excluding VAT). Île-de-France’s share of those revenues was 44.2%, compared to 45.5% in 2012.

Revenues for the Apartment segment were down 5.9%, to 919.3 million (excluding VAT). It represents 95.0% of total revenues for the Housing business. Revenues for the Single-family homes in communities segment was €48.2 million (excluding VAT), compared to €23.9 million (excluding VAT) in 2012.

Revenues for the Commercial property business were €51.2 million (excluding VAT) compared to €21.1 million (excluding VAT) in 2012. The Showroom business generated revenues of €6.5 million (excluding VAT).

  • Elements of profitability

Gross margin was €196.8 million, compared to €202.1 million in 2012. As a percentage of revenues, it totaled 19.2%, versus 19.6% in 2012. The Housing gross margin rate remained unchanged at 19.5%.

In the fourth quarter 2013, gross margin was €66.5 million versus €71.6 million in the same quarter of 2012.

Current operating expenses amounted to €120.7 million, compared with €116.9 million in 2012. They represent 11.8% of revenues versus 11.3% in 2012.

Current operating income totaled €76.0 million for the year 2013, compared to €85.3 million in 2012. In the fourth quarter alone, it totaled €30.7 million, down 16.6% compared to the same period in 2012. The current operating margin rate was, respectively, 7.4% in the entire fiscal year 2013 and 8.9% in the fourth quarter alone.

The cost of net financial debt amounted to €2.8 million, compared to €4.1 million in 2012. This improvement may be explained for the most part by the reduction in average net financial debt.

Attributable net income totaled €40.8 million, compared to €47.6 million in 2012. In the fourth quarter alone, it was down 13.7% to €17.1 million.

  • Financial structure and liquidity

Balance sheet elements

Net financial debt was €50.0 million, down 38.4% compared to November 30, 2012 when it was €81.2 million.

The gearing ratio (net debt to consolidated shareholders’ equity) was 26.6% as of November 30, 2013, compared to 54.5% as of November 30, 2012, reflecting both the decline in net debt of €31.2 million and the increase in shareholders’ equity of €39.1 million.

Working capital requirements was down 12.2% compared to November 30, 2012 (€126.8 million vs. €144.4 million). It represents 12.4% of revenues, versus 14.0% as of November 30, 2012.

As of November 30, 2013, active cash flow (available cash and investment securities) totaled €188.3 million, compared to €153.8 million as of November 30, 2012.

Borrowing power

As of November 30, 2013, the group had €290.6 million in syndicated bank credit facilities (including the Senior B and C lines drawn in the amount of €237.7 million). The unused €52.9 million of the RCF line that was added to the €188.3 million in cash bring the group’s borrowing power as of end-November 2013 to €241.2 million.

This press release is available from the website www.ketb.com

  • Next regular publication dates:

April 9, 2014: First quarter 2014 results (after market close)

April 11, 2014: Annual Shareholders’ Meeting

  • About Kaufman & Broad - For more than 40 years, Kaufman & Broad has been designing, building and selling single-family homes in communities, apartments and offices on behalf of third parties. Kaufman & Broad is a leading French property builder and developer in view of its size, earnings and power of its brand.

Disclaimer - This document contains forward-looking information. This information is liable to be affected by known or unknown factors that KBSA cannot easily control or project, which may make the results materially different from those stated, implied or projected by the company. These risks specifically include those listed under “Risk Factors” in the Registration Document filed with the AMF under number D.13-0247 on April 2, 2013.

  • Glossary

Orders: measured in volume (Units) and in value, orders reflect the group’s commercial activity. Orders are recognized in revenue based on the time needed for the “conversion” of an order into a signed and notarized deed, which is the point at which income is generated. In addition, in apartment programs that include mixed-use buildings (apartments/business premises/retail space/offices), all floor space is converted into housing equivalents.

Units: are used to define the number of housing units or equivalent housing units (for mixed programs) of any given program. The number of equivalent housing units is calculated as a ratio of the surface area by type (business premises/retail space/offices) to the average surface area of the housing units previously obtained.

EHU: EHUs (Equivalent Housing Units delivered) directly reflect sales. The number of EHUs is a function of multiplying (i) the number of housing units of a given program for which the notarized sales deeds have been signed by (ii) the ratio between the group’s property expenses and construction expenses incurred on this program and the total expense budget for this program.

Take-up rate: the number of orders in relation to the average commercial offer for the period.

Commercial offer: the total inventory of properties available for sale as of the date in question, i.e., all unordered housing units as of this date (less the programs that have not entered the marketing phase).

Gross margin: corresponds to revenues less cost of sales. Cost of sales consists of the price of land parcels, the related property costs and construction costs.

Backlog: a summary at any given moment that enables a projection of future revenues for the coming months.

Property portfolio: all real estate for which a deed or commitment to sell has been signed.

APPENDICES

  • Financial data

Key consolidated data

In € millions   Q4   Year   Q4   Year
  2013   2013   2012   2012
                 
Revenues
346.6 1,026.0 354.4 1,030.0
-- of which Housing

307.3

967.5

345.3

1,000.7

-- of which Showroom

1.6

6.5

2.0

6.7

-- of which Commercial property

37.7

51.2

6.4

21.1

-- of which Other

-

0.8

0.6

1.6

-- of which Île-de France housing

43.6%

44.2%

43.5%

45.5%

-- Of which Regions housing

56.4%

55.8%

56.5%

54.5%

Gross margin 66.5 196.8 71.6 202.1
Gross margin rate (%)

19.2%

19.2%

20.2%

19.6%

Current operating profit

30.7

76.0

36.8 85.3
Current operating margin (%)

8.9%

7.4%

10.4%

8.3%

Attributable net income

17.1

40.8

19.8 47.6

Attributable net income per share (€/share) *

 

€0.79

 

€1.89

  €0.92   €2.21

* Based on the number of shares composing the capital of Kaufman & Broad .SA, i.e., 21,584,658 shares

Consolidated income statement*

In € thousands   Q4   Year   Q4   Year
  2013   2013   2012   2012
                 
Revenues 346,641 1,025,954 354,374 1,030,046
Cost of sales (280,131) (829,185) (282,738) (827,912)
Gross margin 66,510 196,769 71,636 202,134
Selling expenses (9,092) (30,619) (7,896) (29,242)
General and administrative expenses (18,222) (65,058) (18,190) (62,935)
Technical and customer service expenses (4,696) (18,052) (4,710) (16,301)
Other income and expenses (3,760) (7,011) (3,996) (8,375)
Current operating profit 30,740 76,030 36,844 85,281
Other non-recurring income and expenses 6 (1) 1,545 1,528
Operating income 30,746 76,029 38,389 86,809
Cost of net financial debt (2,027) (2,807) (1,342) (4,121)
Other income and expenses (959) (109)
Income tax (expenses)/income (8,868) (21,961) (13,702) (25,814)
Share of income (loss) of equity affiliates and joint ventures 288 642 (257) (61)
Income (loss) attributable to shareholders 20,140 51,903 22,130 56,704
Minority interest   3,079   11,055   2,349   9,080
Attributable net income   17,061   40,848   19,780   47,624

*Unaudited and not approved by the Board of Directors

Consolidated balance sheet*

In € thousands   Nov. 30,   Nov. 30,
  2013   2012
ASSETS        
Goodwill 68,511 68,511
Intangible assets 85,376 84,897
Property, plant and equipment 4,713 5,604
Equity affiliates and joint ventures 8,181 4,373
Other non-current financial assets 20,139 1,262
Non-current assets 186,920 164,647
Inventories 324,963 284,469
Trade receivables 291,778 268,189
Other receivables 153,404 180,141
Cash and cash equivalents 188,258 153,763
Prepaid expenses 867 1,008
Current assets   959,270   887,570
TOTAL ASSETS   1,146,190   1,052,217
         
EQUITY AND LIABILITIES        
Capital stock 5,612 5,612
Additional paid-in capital 130,932 135,910
Interim dividends - (48,455)
Attributable net income 40,847 47,624
Attributable shareholders’ equity 177,391 140,691
Minority interest 10,811 8,420
Shareholders’ equity 188,202 149,111
Non-current provisions 33,422 24,510
Borrowings and other non-current financial liabilities (> 1 year) 218,959 234,435
Deferred tax liabilities 40,365 55,586
Non-current liabilities 292,746 314,631
Current provisions 1,724 1,000
Other current financial liabilities (< 1 year) 19,340 458
Accounts payable 550,233 473,624
Other liabilities 92,729 111,777
Deferred income 1,217 1,616
Current liabilities   665,242   588,475
TOTAL EQUITY AND LIABILITIES   1,146,190   1,052,217

*Unaudited and not approved by the Board of Directors

  • Operational data
 
Housing   Q4   Year   Q4   Year
  2013   2013   2012   2012
                 

Revenues (€ millions)

307.3 967.5 345.3 1,000.7

-- of which Apartments

288.4

919.3

321.3

976.8

-- of which Single-family homes in communities

18.9 48.2

8.5

23.9

 

Delivered EHUs

1,937 5,839 2,072 5,669

-- of which Apartments

1,844

5,606

2,230

5,567

-- of which Single-family homes in communities

 

93

  233   42   102
                 

 

Net orders (units)

1,436 5,379 1,460 5,487

-- of which Apartments

1,367

5,031

1,404

5,243

-- of which Single-family homes in communities

69

348

56

244

 

Net orders (€M, including VAT)

246.1 990.3 317.6 1,096.0

-- of which Apartments

218.6

884.7

301.6

1,040.3

-- of which Single-family homes in communities

27.5

105.6

16.1

55.7

-- of which first-time homebuyers

30%

33%

29%

32%

-- of which other homebuyers

10%

14%

18%

15%

-- of which investors / block

60%

53%

53%

53%

-- of which Île-de France

53.9%

50.6%

42.9%

46.2%

of which Regions

46.1%

49.4%

57.1%

53.8%

Commercial offer at period end (units)   3,550   3,222
                 
Backlog end of period
-- In value (€M, excluding VAT) 965.1 1,091.1

-- of which Apartments

870.4 1,037.6

-- of which Single-family homes in communities

94.7 53.5
-- In months of business 12.0 13.1
Property portfolio end of period
-- Number of lots 15,213 16,049

-- of which Île-de France

5,401 6,188

-- of which Regions

9,812 9,861
-- In years of business   3   3

Commercial property

  Q4   Year   Q4   Year
  2013   2013   2012   2012
                 
Revenues (€ millions) 37.7 51.2

6.4

21.1
Net orders (€M, including VAT) 76.0 87.5 - 13.8
Backlog end of period (€m, excluding VAT)   52.7   31.0

Contacts

Chief Finance Officer
Bruno Coche
+33 (1) 41 43 44 73
Infos-invest@ketb.com
Press Relations
Delphine Peyrat - Wise Conseil
+33 (6) 38 81 40 00
dpeyratstricker@wiseconseil.com

Sharing

Contacts

Chief Finance Officer
Bruno Coche
+33 (1) 41 43 44 73
Infos-invest@ketb.com
Press Relations
Delphine Peyrat - Wise Conseil
+33 (6) 38 81 40 00
dpeyratstricker@wiseconseil.com