Kaufman & Broad: First Quarter 2014 Results

Results in line with expectations:
stabilizing revenues, gross margin on the wane
and property portfolio gains

  • Main financial indicators in line with expectations
    • Total revenues: €205.2 million vs. €205.0 million in Q1 2013
    • Housing revenues: €198.4 million vs. €198.7 million in Q1 2013
    • Gross margin: €37.8 million vs. €39.3 million in Q1 2013
    • Attributable net income: €6.3 million vs. €8.3 million in Q1 2013
    • Housing property portfolio: 18,275 lots vs. 16,434 lots at the end of February 2013
  • Orders unchanged in volume, up in value
    • Housing orders: +0.2% in volume, +12.4% in value
    • Housing commercial offer: 3,507 housing units vs. 2,888 housing units at the end of February 2013
    • Housing backlog: €954.6 million vs. €1,058.7 million at the end of February 2013
  • Stronger financial structure
    • Net financial debt: €66.7 million vs. €50.0 million at the end of November 2013
    • Signature on March 19, 2014 of an agreement for the refinancing of the senior debt in the amount of €200 million and with a five-year maturity

PARIS--()--Regulatory News:

The Kaufman & Broad SA (Paris:KOF) Board of Directors reviewed the results, which were not yet audited, for the first quarter of fiscal year 2014 (December 1, 2013 to February 28, 2014).

Commenting on these results, Nordine Hachemi, Chairman and Chief Executive Officer of Kaufman & Broad, stated: “Our results for the first quarter, which is the quarter in our fiscal year when performance is typically lowest, are in line with our expectations.

On the one hand, they reflect the effect of the drop in orders in our Housing business over the past two years. As announced at the end of January, over the entire fiscal year 2014, this trend is expected to materialize in Housing revenues that are substantially comparable to those of 2013 and a Housing gross margin slightly on the wane.

On the other hand, the growing property portfolio and commercial offer are an illustration of the Kaufman & Broad strategy to give a new dimension to its development capacities in both its Housing and Commercial Property businesses. This strategy, which was already implemented in the second half of 2013, will be actively pursued and nurtured by, among other things, increasing the commercial offer by approximately 15% in 2014.

At the same time, the developments with the Housing orders will continue to depend on the time required by the new municipal teams to process permit applications.

Finally, on March 19, Kaufman & Broad successfully refinanced its July 2007 senior debt. A new Senior Facilities Agreement was implemented on March 31 for a total amount of €200 million with a five-year maturity. During this period, Kaufman & Broad’s majority shareholder, Financière Gaillon 8 SA, successfully refinanced its entire acquisition debt.

This agreement adds significant strength to Kaufman & Broad’s financial structure and benefits the development of its operations.”

  • Sales activities
    • Housing segment
      In the first quarter of 2014, 1,085 housing units were ordered, versus 1,083 in the first quarter of 2013. In value, housing orders totaled €218.1 million (including VAT), up 12.4% compared to the same quarter in 2013. This increase is due to product mix developments, such as the decrease in the share of managed accommodations within housing reservations, and, at the same time, the increase in the average value of single-family homes ordered. Orders in Île-de-France accounted for 40.8% in volume and 41.6% in value of all housing orders, versus 47.6% and 52.8% for the entire first quarter of 2013.

      Apartments
      In the first quarter of 2014, apartment orders totaled €207.9 million (including VAT) for 1,052 units, an increase of 2.6% in volume and 16.1% in value compared to the first quarter of 2013. Of those orders, 41.1% in volume and 41.3% in value were in Île-de-France, versus 48.7% and 54.4% respectively in the first quarter of 2013. The share of apartments represents 94.9% in value and 96.2% in volume of group orders, versus 92.2% and 94.4% respectively in the first quarter of 2013.

      Single-family Homes in Communities
      For the entire first quarter of 2014, orders totaled €10.2 million in value (including VAT), compared to €14.9 million (including VAT) in the first quarter of 2013.

      Customer-base structure
      In the first quarter of 2014, orders from investors were unchanged compared to the first quarter of 2013, at 38% (including 26% under applicable tax incentives). Orders from homebuyers were 39% of which 31% from first-time homebuyers and 8% from second-time homebuyers. Block orders were 23% (27% in the first quarter of 2013).
    • Commercial Property segment
      Kaufman & Broad has applied for two building permits for projects of significant size in Paris representing more than 46,000 sq.m in office space.
      In addition, construction work on the 9,300 sq.m “ YOU ” office building 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 started in December and is progressing on schedule.
    • Forward indicators of sales activity
      At February 28, 2014, total backlog amounted to €1,002.8 million (excluding VAT), down 7.6% compared to February 28, 2013.
      Housing backlog totaled €954.6 million (excluding VAT), or nearly twelve months of business.
      The Commercial Property backlog remained at a high level, at €47.6 million (excluding VAT).

      As of the same date, Kaufman & Broad had 175 housing programs on the market that contain a total of 3,507 housing units, of which 1,149 were in Île-de-France and 2,358 were in the Regions, compared to 157 programs that contained a total of 2,888 housing units at the end of February 2013.

      The Housing property portfolio represented 18,275 lots, of which 6,389 were in Île-de-France and 11,886 in the Regions, for potential revenues corresponding to close to three years of business. It was up 11.2% compared to the property portfolio at the end of February 2013, in accordance with the strategy implemented in the second half of 2013.

      In the second quarter of 2014, the group plans to launch 31 new programs including 8 launches in Île-de-France representing 607 lots and 23 launches in the Regions representing 1,759 lots.
  • Financial results
    • Operating activities
      Total revenues remained unchanged compared to the first quarter of 2013 and totaled €205.2 million (excluding VAT).

      Housing revenues, which represent 96.7% of total revenues, amounted to €198.4 million (excluding VAT) compared to €198.7 million (excluding VAT) in the first quarter of 2013. Île-de-France contributed 48.5% of it, compared to 41.8% for the same period in 2013.
      Apartments business revenues totaled €176.5 million (excluding VAT), down 7.5% compared to the first quarter of 2013. Single-Family Homes in Communities revenues totaled €21.9 million (excluding VAT), versus €8.0 million (excluding VAT) for the same period in 2013.

      Commercial Property revenues totaled €5.3 million (excluding VAT), up 16.8% compared to the first quarter of 2013. The other business activities generated revenues of €1.5 million (excluding VAT).
    • Profitability indicators
      The gross margin totaled €37.8 million, compared to €39.3 million as of the first quarter of 2013. The gross margin rate was 18.4%, versus 19.2% for of the same period in 2013.

      Current operating expenses totaled €26.5 million (12.9% of revenues), versus €26.0 million in the first quarter of 2013 (12.7% of revenues).

      Current operating income totaled €11.3 million, compared to €13.2 million as of the first quarter of 2013. The current operating margin rate was 5.5% compared to 6.5% for the first quarter of 2013. Attributable net income totaled €6.3 million versus €8.3 million in the first quarter of 2013.
    • Financial structure and liquidity
      Net financial debt totaled €66.7 million, up €16.7 million compared to November 30, 2013, when it totaled €50.0 million.

      Gearing (the “net financial debt/consolidated equity” ratio) was 34.5% at February 28, 2014, versus 26.6% at November 30, 2013.

      Working capital requirements totaled €152.5 million (14.9% of revenues over 12 months rolling), compared to €126.8 million at November 30, 2013 (12.4%).

      At February 28, 2014, active cash flow (available cash and investment securities) totaled €152.8 million, compared to €188.3 million at November 30, 2013.

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

  • Next regular publication dates:
    July 10, 2014: first half 2014 results (after market close)
  • 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 forecast, which may render 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.14-0121 on March 6, 2014.
  • 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 necessary for the “conversion” of an order into a signed and notarized deed, which is the point at which income is generated. In addition, 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 the said program and the total expense budget for said 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, which enables a forecast 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 € thousands       1st quarter
2014
      1st quarter
2013
Revenues       205,197       204,988

- of which Housing

198,372 198,718
  • of which Île-de-France
96,194 83,150
  • of which Regions
102,178 115,568

- of which Commercial Property

5,323 4,556

- of which Other

1,502 1,714
 
Gross margin 37,777 39,256
Gross margin rate (%) 18.4% 19.2%
Current operating income 11,277 13,224
Current operating margin (%) 5.5% 6.5%
Attributable net income 6,250 8,308
Attributable net income per share (€/share)*       0.29       0.38

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

Consolidated income statement*

                 
in € thousands       1st quarter
2014
      1st quarter
2013
                 
Revenues       205,197       204,988
Cost of sales -167,420 -165,731
Gross margin 37,777 39,256
Selling expenses -5,848 -6,567
Administrative expenses -12,134 -9,711
Technical and customer service expenses -4,444 -5,520
Development and program expenses -4,074 -4,234
Current operating income 11,277 13,224
Other non-recurring income and expenses 135 -7
Operating income 11,412 13,217
Cost of net financial debt 236 522
Other income and expenses - -
Income tax -3,274 -3,118
Share of income (loss) of equity affiliates and joint ventures 293 211
Income (loss) attributable to shareholders 8,667 10,832
Minority interests       2,417       2,523
Attributable net income       6,250       8,308

*Unaudited and not approved by the Board of Directors

Consolidated balance sheet*

                 
in € thousands       Feb. 28, 2014       Nov. 30, 2013
ASSETS                
Goodwill       68,511       68,511
Intangible assets 84,942 85,376
Property, plant and equipment 5,187 4,713
Equity affiliates and joint ventures 7,661 8,181
Other non-current financial assets 20,227 20,139
Non-current assets 186,528 186,920
Inventories 324,034 324,963
Accounts receivable 265,261 291,778
Other receivables 139,091 153,404
Cash and cash equivalents 152,826 188,258
Prepaid expenses 1,463 867
Current assets       882,675       959,270
TOTAL ASSETS       1,069,203       1,146,190
                 
EQUITY AND LIABILITIES
Capital stock 5,612 5,612
Additional paid-in capital 169,408 130,932
Interim dividends - -
Attributable net income 6,250 40,847
Attributable shareholders’ equity 181,270 177,391
Minority interests 11,885 10,811
Shareholders’ equity 193,155 188,202
Non-current provisions 33,291 33,422
Borrowings and other non-current financial liabilities (> 1 year) - 218,959
Deferred tax liabilities 44,703 40,365
Non-current liabilities 77,994 292,746
Current provisions 1,201 1,724
Other current financial liabilities (< 1 year) 219,503 19,340
Accounts payable 501,690 550,233
Other payables 74,530 92,729
Deferred income 1,130 1,217
Current liabilities       798,054       665,242
TOTAL EQUITY AND LIABILITIES       1,069,203       1,146,190

*Unaudited and not approved by the Board of Directors

  • Operational data
                 
Housing       1st quarter
2014
      1st quarter
2013
                 
Revenues (€ millions, excluding VAT)       198.4       198.7

- of which Apartments

176.5 190.7

- of which Single-Family Homes in Communities

21.9 8.0
 
Delivered EHUs 1,212 1,117

- of which Apartments

1,135 1,078

- of which Single-Family Homes in Communities

      77       39
                 
Net orders (number) 1,085 1,083

- of which Apartments

1,052 1,025

- of which Single-Family Homes in Communities

33 58
 

- of which Île-de-France

443 515

- of which Regions

642 568
 
Net orders (€ millions, including VAT) 218.1 194.0

- of which Apartments

207.9 179.1

- of which Single-Family Homes in Communities

10.2 14.9
 

- of which Île-de-France

90.7 102.4

- of which Regions

127.4 91.6
 
Commercial offer at period end (number)       3,507       2,888
                 
Backlog end of period

- In value (€ millions, excluding VAT)

954.6 1,058.7
  • of which Apartments
873.5 999.8
  • of which Single-Family Homes in Communities
81.1 58.9

- In months of business

11.8 12.8
 
Property portfolio end of period

- Number of lots

18,275 16,434
  • of which Île-de-France
6,389 5,795
  • of which Regions
11,886 10,639
                 
Commercial property      

1st quarter
2014

     

1st quarter
2013

                 
Revenues (€ millions, excluding VAT) 5.3 4.6
Net orders (€ millions, including VAT) 0.6 0.2
Backlog end of period (€ millions, excluding VAT)       47.6       26.4

Contacts

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

Sharing

Contacts

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