Kaufman & Broad: Results for the first nine months of 2014

Regulatory News:

Kaufman & Broad (Paris:KOF):

• Key sales activity items
  • Housing orders:
    +0.2% in volume, +3.5% in value
  • New program take-up rate:
    43.8% vs. 39.8% in Q3 2013
• Key financial items
  • 9-month revenues:
    €654.5 million vs. €679.3 million in 2013
  • 9-month gross margin:
    €122.5 million vs. €130.3 million in 2013
  • 9-month attributable net income:
    €19.5 million vs. €23.8 million in 2013
  • Net financial debt at August 31:
    €42.3 million vs. €50.0 million at end-November 2013
• Key growth indicators
  • Housing backlog at August 31:
    €1,002.2 million vs. €965.1 million at end-November 2013
  • Housing property portfolio at August 31:
    19,550 lots vs. 15,205 lots at end-Nov. 2013

Expanding our commercial offer and continued growth of our property portfolio

The Kaufman & Broad SA Board of Directors reviewed the results, which were not audited, for the 3rd quarter of fiscal year 2014 (June 1 to August 31, 2014) and Nordine Hachemi, Chairman and Chief Executive Officer of Kaufman & Broad SA, made the following statement:

“In the 3rd quarter, the Housing business posted a steady level of orders and a satisfactory take-up rate for new programs, which confirms that our commercial offer is well positioned.

This offer should benefit from the opening of 30 new programs in the 4th quarter.

Furthermore, the increase in our Housing backlog and the significant growth of our property portfolio are confirmed.

In the Commercial property business, an agreement to sell was signed for a 23,000 sq.m. office building in the Paris Rive Gauche Mixed Development Zone (ZAC); the conditions precedent related to it are expected to be fulfilled by November 30.

Also, the measures announced by the Government – if they become effective very quickly – could have a positive effect on our business activities.

Based on these assumptions, Kaufman & Broad expects revenues very similar to those of 2013 and a slightly lower gross margin for the fiscal year as a whole."

• Sales activity
  • Housing segment
    In the first nine months of 2014, housing orders were up 0.2% in volume and totaled 3,950. In the 3rd quarter of 2014 alone, 1,349 housing units were ordered, versus 1,348 in the 3rd quarter of 2013. In value, they increased 3.5% to €770 million (including VAT). Orders in Île-de-France accounted for 33.8% in volume and 38.7% in value of all housing orders, versus 46.7% and 49.5% for the first nine months of 2013 taken together.
    
    The average take-up rate of new programs launched in the 3rd quarter of 2014 was 43.8%, compared with 39.8% in the 3rd quarter of 2013.
    
    Apartments
    Over the nine-month period, apartment orders totaled €728 million (including VAT) for 3,813 units, down 4.1% in volume and 9.3% in value compared to the same period in 2013.
    
    Single-family homes in communities
    Over the entire nine-month period in 2014, single-family homes in community orders totaled €42 million (including VAT), compared with €78.1 million (including VAT) in the first nine months of 2013.
    
    Customer-base structure
    In the first nine months of 2014, investors’ orders in value rose 2 points to 33%. Orders from homebuyers were 41% (29% from first-time homebuyers and 12% from second-time homebuyers). Block orders totaled 26.3%.
  • Commercial property segment
    Kaufman & Broad applied for three building permits for projects of significant size in Paris, whose Paris Rive Gauche Mixed Development Zone (ZAC), representing more than 54,000 sq.m. of office space.
    
    It is anticipated that the conditions precedent related to the agreement to sell an office building, signed in august, in the Paris Rive Gauche Mixed Development Zone (ZAC) will be fulfilled by November 30, 2014.
  • Forward indicators of sales activity
    At August 31, 2014, total backlog amounted to €1,045.8 million (excluding VAT), up 2.7% compared to November 30, 2013.
    
    Housing backlog totaled €1,002.2 million (excluding VAT), or nearly 13 months of business. The Commercial property backlog totaled €43.2 million (excluding VAT).
    
    At August 31, Kaufman & Broad had 165 housing programs on the market representing a total of 3,382 housing units, of which 1,295 were in Île-de-France and 2,087 were in the Regions.
    
    The Housing property portfolio included 19,550 lots, of which 6,322 were in Île-de-France and 13,228 in the Regions, for potential revenues corresponding to more than three years of business and an increase of close to 30% compared with the total of 15,200 lots at end-November 2013.
    
    In the 4th quarter of 2014, the group plans to launch 30 new programs, including 14 launches in Île-de-France representing 1,193 lots and 16 launches in the Regions representing 1,351 lots.

• Financial results
  • Operating activities
    Total revenues were €654.5 million (excluding VAT) in the first nine months of 2014, compared with €679.3 million (excluding VAT) in the same period of 2013. In the 3rd quarter of 2014, revenues totaled €227.9 million.
    
    Housing revenues, which represent 96.0% of total revenues, amounted to €628.3 million (excluding VAT) versus €660.2 million (excluding VAT) in the first nine months of 2013. Just in the 3rd quarter, that figure was €218.3 million. Île-de-France’s share of those revenues was 48.5% compared with 44.5% for the same period in 2013.
    
    Nine-month revenues for the Apartment business totaled €569.4 million (excluding VAT) versus €630.9 million for the same period in 2013. Revenues for Single-family homes in communities was €58.8 million (excluding VAT) versus €29.3 million (excluding VAT) in 2013.
    
    Commercial property revenues totaled €21.3 million (excluding VAT) compared with 13.5 in the first nine months of 2013. The other business activities generated revenues of €5.0 million (excluding VAT).
  • Profitability indicators
    Gross margin for the first nine months of 2014 totaled €122.5 million compared with €130.3 million in 2013. This drop can be explained for the most part by the decline in revenues and, to a lesser degree, by the fact that older programs were brought to the market faster. The gross margin rate was 18.7% versus 19.2% for the same period in 2013.
    
    Current operating expenses amounted to €84.0 million (12.8% of revenues) versus €85.0 million in 2013 (12.5% of revenues).
    
    Nine-month current operating profit totaled €38.6 million compared with €45.3 million in 2013. The current operating marging was 5.9% versus 6.7% in 2013. Attributable net income was €19.4 million versus €23.8 million in 2013.
  • Financial structure and liquidity
    At August 31, 2014, gross financial debt was €147.7 million, down by more than €90.0 million compared to November 30, 2013. Net financial debt was €42.3 million, down €7.7 million compared to November 30, 2013.
    
    At August 31, 2014, active cash flow (available cash and investment securities) was €105.4 million, compared with €188.3 million at November 30, 2013.
    
    Working capital requirements totaled €150.5 million (15.0% of revenues over 12 months rolling) compared with €141.7 million at August 31, 2013 (13.7%) and €126.8 million at November 30, 2013.
    
    Gearing (the “net financial debt-to-consolidated equity” ratio) was 21.3% at August 31, 2014 versus 26.6% at November 30, 2013.

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

• Next regular publication date:
  January 22, 2015: 2014 Annual 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, for 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 used for forecasting 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

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

*Unaudited and not approved by the Board of Directors

*Unaudited and not approved by the Board of Directors

• Operational data