(News Bulletin 247) – The real estate developer observed dynamic commercial activity over the half-year, with an increase in its reservations over the period, in a market that is still depressed. The performance of Kaufman & Broad, which confirmed its annual objectives, is described as “solid” by TP ICAP Midcap.

The half-year results season officially kicks off next week and, unlike on Wall Street where the big names in the banking sector are getting the ball rolling this Friday, it is the “midcaps” that are having the honour of the first publications in Paris.

And in a real estate development market still reeling from an unprecedented crisis, one player listed on the Paris Stock Exchange is still managing to stand out: Kaufman & Broad. In the first quarter, the developer had already created a surprise by revealing dynamic commercial activity, with a 10% rebound in reservations in volume. A more than notable performance in a depressed market.

On Thursday evening, Kaufman & Broad delivered its full performance for the past half-year. The first-half results are still penalized by an unfavorable base effect, linked to the start of the first phase of the Austerlitz project construction site in spring 2023.

This large-scale program led by the developer aims to build a major real estate complex between the Gare d’Austerlitz in Paris and the Pitié-Salpêtrière hospital, with housing, shops and a hotel. The project is due to be delivered in 2027. This explains the 47% drop in half-yearly turnover over one year to 452.5 million euros.

“Excluding the Austerlitz effect, activity logically fell by 12%, reflecting the drop in residential reservations in recent years,” specifies TP ICAP Midcap.

“Solid” results for TP ICAP Midcap

Otherwise, the research office considers the results “solid”. The current operating result has certainly decreased, in connection with the drop in revenues, to stand at 34.5 million euros against 67.7 million euros a year earlier. The corresponding margin, at 7.6%, is even higher with the group’s annual objective (between 7% and 7.5%), and also clearly above the expectations of the research office (7.3%).

“This good performance is mainly explained by the group’s ability to maintain its gross margin levels (21.6% in the first half, stable compared to last year excluding the Austerlitz impact) against the current trends observed in the rest of the market,” says Florian Cariou, the analyst in charge of monitoring the file at TP ICAP Midcap.

This is a “new sign of the group’s rigor in launching its programs in recent years,” he continues. The group’s net profit, meanwhile, fell from 38.5 million euros to 21.1 million euros, which is also “close to Florian Cariou’s expectations.”

The company’s balance sheet remains solid, with cash generation that was “once again excellent”, according to the analyst, and thus allows the group to improve “further its exceptional net cash position” to 224.9 million euros at the end of May, compared to 177 million euros at the end of November. A situation that is “against the trends expected among competitors”, adds TP ICAP Midcap.

In addition to a comfortable cash cushion, the group’s other strength is its ability to sell its products very quickly. Kaufman & Broad claims a reduced flow period of 4.1 months, whereas the market currently takes 26 months to sell new products.

“This ability to quickly sell our programs also demonstrates that demand for new housing remains strong in France, fueled for many years by demographic, sociological and environmental factors,” stressed the group’s CEO, Nordine Hachemi, in a press release.

Commercial activity on the rise

Kaufman & Broad also maintained the good sales momentum of the first three months of 2024. Over the entire half-year, the developer reported an increase in its housing reservations, which can be assimilated to the group’s “orders” and therefore its future sales, of 7.2% to 2,400 homes in volume. In value, the increase is more significant, at 11.5% to 561.2 million euros.

This performance is to be welcomed in a market that is still complicated. According to estimates by Kaufman & Broad based on figures from the company Adéquation, bookings in volume have plunged by 15% for the entire market over the same period.

“While it is appropriate to remain cautious about this start of recovery, particularly given the political uncertainty in France, the signal is obviously very positive,” notes the research office.

“Let us remember that the group’s ability to always sell very quickly allows it to adapt much more quickly than its competitors to changes in demand and therefore to be among the first able to bounce back,” he appreciates.

The group is renewing its forecast figures for 2024. Its turnover should be around 1.1 billion euros, after 1.4 billion in 2023, with Kaufman & Broad attributing this “gap” to an unfavorable base effect linked to the Austerlitz transaction. It is expected to be “virtually stable” excluding Austerlitz, specifies TP ICAP Midcap. The group also expects its current operating profit rate to be between 7% and 7.5%, and a net cash position that remains positive.

TP ICAP Midcap thus confirmed its buy recommendation and its price target of 36 euros, considering Kaufman & Broad “as the most solid player on the market”.

On the Paris Stock Exchange, the publication of Kaufman & Broad was also appreciated with a share price rising by 3.2% at around 10:40 a.m. to 28.80 euros.