Earnings call transcript: Coffmane Broad sees revenue rise in Q1 2025

Coffmane Broad reported a strong start to 2025, with Q1 revenue increasing by 9.7% year-over-year to €250.1 million. The company demonstrated robust growth in both housing and commercial property segments. Despite economic challenges, Coffmane Broad maintained its market leadership and strategic focus, resulting in a 2.61% rise in its stock price, closing at €31.40. According to InvestingPro data, the company maintains a GREAT Financial Health Score of 3.05, supported by strong fundamentals and a conservative debt-to-equity ratio of 0.56. The company reaffirmed its revenue growth guidance of 5% for the year.

Key Takeaways

• Revenue grew by 9.7% in Q1, driven by strong housing and commercial property sales.
• Stock price increased by 2.61%, reflecting positive investor sentiment.
• The company is developing new student and senior residence projects.
• Coffmane Broad maintains an investment-grade rating, supporting its competitive position.
• Revenue growth guidance remains at 5% for the year.

Company Performance

Coffmane Broad experienced significant growth in Q1 2025, with total revenue reaching €250.1 million, a 9.7% increase compared to the previous year. The company’s housing revenue rose to €205.6 million, up from €197.2 million, while commercial property revenue surged to €40.3 million from €27.2 million. This growth underscores Coffmane Broad’s ability to capitalize on market demand despite broader economic uncertainties.

Financial Highlights

• Revenue: €250.1 million (+9.7% YoY)
• Housing Revenue: €205.6 million (up from €197.2 million)
• Commercial Property Revenue: €40.3 million (up from €27.2 million)
• Gross Margin: €49.2 million (19.7% of sales)
• Net Income: €11.6 million (up from €11.0 million)

Outlook & Guidance

Coffmane Broad maintains its revenue growth guidance of 5% for the fiscal year. The company aims to achieve an EBIT target of 7.5-8% while keeping a positive net cash position. The proposed dividend stands at €2.20 per share, reflecting confidence in its financial health and future prospects.

Executive Commentary

CEO Nordy Nashemi emphasized the essential nature of housing, stating, "Housing is an essential good. Supply in France doesn’t cover actual demand." CFO Bruno Koch highlighted the company’s unique position, noting, "We are the only developer in the continent with an investment-grade rating."

Risks and Challenges

• Declining building permits could impact future project pipelines.
• Economic uncertainties and interest rate changes may affect demand.
• Municipal elections might delay or complicate regulatory approvals.
• Competition remains intense, requiring continuous innovation and adaptation.

Coffmane Broad’s strong performance in Q1 2025, coupled with its strategic initiatives and robust market position, leaves the company well-positioned to navigate the challenges ahead. For deeper insights into Coffmane Broad’s valuation and growth potential, InvestingPro offers exclusive access to detailed financial analysis, including the comprehensive Pro Research Report available for over 1,400 US equities.

Full transcript - Kaufman Et Broad (KOF) Q1 2025:

Nordy Nashemi, Chairman and CEO, Coffmane Broad: UNIDENTIFIED Good morning. This is the first quarter results and outlook for Coffmane Broad. Now there’s one thing we’d like to say is that as far as Q and A is concerned, we’ll take oral questions first and then the written questions. If you want to ask a question, please use the questions tab on the webpage. Now we’ll listen to Mr.

Nordy Nashemi, Chairman and CEO of the group and Bruno Koch, CFO, who will talk you through current business and outlook. Thank you. Good morning. Thank you for being with us for the first quarter results. As you probably know, this starts on the December 1 and ends at the February.

I suppose that everybody’s received access to the link to have the first quarter presentation that is the full deck or slideshow. Let’s move to Page two. Those are the usual indicators that we use. And we have short term and midterm indicators and we look at their development over the years. If we look at housing land portfolio, the figures have been stable for two or three years.

And well, we update the numbers permanently that is the housing units that we have here will keep on changing from one year to the next. Some will become projects, others will be becoming orders and then revenue. In other cases, the projects will not come to any fruition because we think there’s no good no return. We can’t break even. And then, of course, we have a pipeline of new projects.

That’s thanks to our development leg. So as I was saying, the numbers have been stable since 2022. There was a drop though in 2021. Then if we look at housing orders and volumes to start with, we’re up 6%. That’s only for one quarter of course.

The numbers are not exceptionally high. And then in terms of values, the numbers are stable. This is due to the product mix that have been ordered during the quarter. We still have a very good take up rate and our backlog is quite stable as well. So stable backlog for housing and a mechanical drop, if you will, still for the backlog for company property, business property.

As we move on and recognize revenue for these activities, the backlog, of course, tends to go down. On the following page, we can have a look at building permits and new housing starts. The curves cover more or less twenty years. And as you can see, there are cycles. By the way, we tend to say that property development is cyclical.

One could wonder about the origin of the cycles. As I keep on saying, we can’t say that people, at a moment in time, need a house and then no longer need a house. It’s not a seasonal business, so it shouldn’t be cyclical. Because by definition, the needs remain the same or there’s a growth due to population growth or due to sociological reasons. So these cycles are purely artificial cycles.

Usually, it’s due to government intervention, policy intervention on the markets or changes in the interest rates. Even though usually, well, if for instance, you look at 02/2005, the interest rates were quite high, but orders which are high level and the interest rates at the time were a lot higher than the interest rates that we have today. So we can adjust to the fluctuation of rates. But then, of course, there’s a policy intervention, new lawmaking and this is the main reason why we have these cycles on the markets. It’s policy or government intervention that creates those cycles.

Otherwise, the trends shouldn’t be cyclical. Now one of the main difficulties on the market apart from these headwinds I mentioned before, that is the many political changes, which are probably necessary, but this is done in an erratic way. It is not coordinated when the law changes. And there’s another reason, which is the high level of rules that are produced. This plus a drop in building permits, and that’s our number one concern today, which is what we can see on Page five of our presentation.

We have the trends for building permits. What’s the take home message then on that page? It’s that we follow the trends. We do like the other players on the market. We’re not doing better in terms of getting building or construction permits.

I suppose we’ll do better than our peers. But for the time being, as you can see, it takes time. Even though we have advantage position, our stance is good and solid on the property market in France. Yet, as you can see, there are more and more transactions that come to us because we, as a group, are a solid group, economically sound. Page six, the number of orders.

This is based on our market studies. It’s an independent agency that does these that produces these reports for us. And it looks like we are outperforming the other players on the market so far, which as an average was the case over the past twelve months. So look at our performance with orders. And on Page seven, the main reason is shown, which is the good take up rate.

Take up rate is good compared to the other players and the market trends. And that’s quite simple because quickly. And our housing units include a number of parameters such as economic and lawmaking parameters and tax parameters. Since our products products are good, meet the standards, we can sell them quickly. Whereas if you look at the other players, the peers, it’s difficult for them to sell the housing units because of the penal schemes when interest rates were quite low and therefore takes them quite some time to sell their units and to adapt.

Whereas our group philosophy is based on a clear strategy. We say we need to sell quickly so that we are agile, that we can adapt to these many legal changes. Sometimes, they’re very sudden turnarounds. And as you can see, this is quite positive if you look at the trends, the take up trends. Then on the following page, what have we?

Well, there’s a relative decrease in block sales. There’s an increase in what we call accession. And then individual investors are more or less stable, going from 9% to 10%. They were using the penal scheme in the past, but it’s no longer the case. And then if you look at the first quarter twenty twenty four, penal schemes were still valid at the time.

And look at our take up pace. As of Q1 twenty twenty four, P and L schemes only represented 2% of our sales. So we didn’t wait for this P and L law to come to its end to react and which means that today we can do without the P and L schemes. In terms of values, the numbers are more or less the same except for what we call the first buyers, the accession first buyers usually or second buyers in values, the numbers are higher. And if we look at the pace at which we get these orders and let’s start with volumes.

I was looking at the sales numbers this morning, which is what I do every Monday morning. Look at our sales today, the sales numbers, it’s half what we had in 2018 or 2019 per week. We had twice as many orders at the time in 2018 or 2019, which really shows that people want to buy housing units. Even though the general backdrop is quite complicated, people still want to buy what we produce. So the problem is not demand, but supply.

That’s for our products. Then on the following page, we will have a look at the land position, total land portfolio and backlog. We don’t need to spend too much time on this. We’ve talked about this already. So let us move on and talk about the development of managed residences.

We’ve developed two portfolios, if I can say, with two different offerings for which we’ve taken two different positions. First, residences for students and the other category is for senior people. For students, we work with subsidiary and operations of senior residences with CozyDM. We have more than 50% of the shares, 51% as you can see on the slide. We are investors and operators on the one hand and we are operators for student residences and to some extent also a little extent, if I can say, for senior residences.

And we are investors and operators with the Banque de Teritoire organization, both for both markets, students and seniors. 40 nine percent in the hands of the Bong des Terretoire and 51% for us. Page 13, these are the currently developed projects. At present, we have five residences in co investments in the hands of Kaufmann Broad and Banque Deterritoire for the student market and student residences and two for senior residences. Here again, we share this with the Banque de Teritoire and our objective is to continue and develop that business as you can see on Page 13.

That’s our intention for student homes or residences. There’s a good ramp up on the senior market, Yet, we’d like to wait a little before doing anything. We want the business to be quite stable before we continue and develop that activity. But we are committed to developing the pure operator business for student residences and also we’ll continue and develop the portfolio. On page 14, you will see how we value our portfolio.

For the first two student residences with Labonte Deterritoire, the rates have gone down by 0.4%, forty basis basis points. If there’s a student residence that generates €1,000,000 of rent net for the investors, the total value will be 21,000,000 that’s the value that will be financed through debt and equity, half half, so €10,000,000 for equity. As I said, the rates have gone down by 0.4, So euros will be €23,000,000 and you can add €20,000,000 in terms of valuation on equity. That’s what we did with the first two residences. That’s what we worked on with the Banque de Terretoire and we’re still developing this portfolio, which will create which does create value as we speak.

And for the time being, I don’t think that we’ve factored in this value in our books in terms of company valuation. Yet given our future developments, you will see that this business will be gaining clout and it will have to be booked in. Page 16, you have two examples of projects. We were the best bidders because we have a good balance sheet and we are a company that has different business lines. The first one is in the town of Corbeauvoir.

That will be a managed residence for students. It will be acquired by the Bonc des Teritois and ourselves. The district is really a nice one close to La Defense in the town of Corbeauvoir. It’s a buoyant type of place. There are schools over there.

It will be a major student center, if I could say, and we’ll have all sorts of things over there, shops and housing units. And there’s another project in the town of Norte, still to the West of Paris. That’s brownfield that’s been turned into hotels, schools, sports areas, sports and leisure and also student managed residents. Now let’s move on. Let’s continue with commercial property.

That’s the Austerlitz project as usual. And then as far as the Mars sales project is concerned with EDF, as you’ve probably noticed, the management team has changed. But I’m not worried about the future of the project because this is a very important project for EDF. But there’s a new management team. So the effect of that is there’s a slight slowdown even though the discussions are still very positive.

Maybe the project is going to be enforced this year or perhaps next year, and we’ve not yet included this in our outlook this year for your information. Now I’ll hand over to Bruno, and I’ll be with you again for the Q and A. Bruno, Thank you, Nordin. We’ll have a look at the financial results. We’ll start with revenue for the first quarter, which started on the December 1 and ended February 28.

So the first quarter, revenues at €250,100,000 therefore, 9.7%. This is in keeping with our guidance. In absolute values versus last year, 22,000,000 and that is more or less 50% for housing at €205,600,000 to be compared to €197,200,000 last year. And on the other side, commercial property at €40,300,000 to be compared with 27,200,000.0 in 2024. So these are the two legs, if you will, of our business and there’s been an improvement.

Bruno Koch, CFO, Coffmane Broad: So if have a look at the gross margin, I’d like to remind you of the fact that gross margin of the difference between the sales and the cost of land and construction. Here you have a plus €49,200,000 compared with 45 point something euros in same quarter twenty twenty four. So slightly below the increase in revenue, bearing in mind that the gross margin rate is still 19.7% of sales, but it’s still very satisfactory even though it’s slightly lower than last year. So in absolute terms, you have a plus EUR 3,300,000.0 for the gross profit. And regarding current operating expenses, EUR 29,900,000.0, so a slight increase compared with last year, twenty nine point one million.

And we have an EBIT or current operating income of 7.6% in absolute terms, plus €2,500,000 So the difference between the gross profit at €3,300,000 and operating expenses are slightly increasing €200,000 over twelve months. So this operating margin 7.7% is in line with our guidance. It’s within the brackets. We had said between 77.58% throughout the year. So we are really within the brackets for the first quarter.

Now if we have a look at the other figures, you will see that the cost of debt 2,200,000.0 compared with €2,400,000 last year, so slightly down. Attributable net income is €11,600,000 and last year we had €11,000,000 Bearing in mind that the minority share is slightly below that of last year, 2.9 compared with €3,200,000 So if you have a comparison line by line, you will see that we are achieving very good performance, a really good slight increase compared with last year at the same time of the year and it is fully in line with our guidance. Now let’s have a look at the balance sheet. Let’s have a look at the working capital requirements. This is a key line for a developer, so it’s negative for the second year in a row minus €250,000,000 And I’d like to remind you of the fact that WCR, which is really, really low is due to the environment, for example, the current situation with the sales project and also it’s due to the decisions that are being made ahead of time in order to make sure that we sell our products faster and that we turn our sales into cash very rapidly also.

So we’ve been working on this for the past ten years, even more. And we are implementing this rule in a very strict way and this is really bearing fruit. Now if you have a look at say the balance sheet equity, we have EUR 248,300,000.0 and the dividends were approximately EUR 43,000,000 for 2024. So what has been paid out is being offset by the money earned in the same time. So €376,100,000 that’s for the net cash position, slightly below compared with closing, but still at a very good level and slightly higher than what we had at the end of first quarter twenty twenty four.

So this is fully in line with our guidance again, because for the entire year, we intend to have a net cash position of and so we are fully in line with our guidance. Now the debt maturity is zero point two years, so stable again compared with the November 2024. If we include the own used RCF, it would be three point six years. Cash and cash equivalents, say of 4 and 82,700,000.0 compared with EUR 502,900,000.0. Bearing in mind that when it comes to the cash and cash equivalents, some of it will be used in order to pay back in for the PPP Eurobond, the Metro will be in May.

So we’re going to pay up that money and this bond was issued in 2017. And also would like to remind you the fact that €200,000,000 will be used for the Oslo project by the time it is completed in 2027. And also as a reminder, we are the only developer in the continent that has an investment grade rating by Finch ratings, BBB minus. And obviously, we are fully in line with the various financial ratios and no specific waivers. Now on the next page, you have the net gross financial debt and our net cash is improving.

It’s been improving over the past eighteen months. So this is very satisfactory again. And by the of this year, we should keep our net cash at a significant level. And then you’ve probably read it in a press release, we keep our guidance for the year, say plus 5% for our revenue, EBIT of something between 7.58% and net cash position that should remain typically positive throughout the year after having paid out a dividend of €2.2 and this dividend obviously will have to be approved during the next Annual Shareholders Meeting on the May 6. So that’s for the first quarter of twenty twenty five.

I will now hand over the floor back to Nordin and we’ll let you ask questions if you have some. Well, you, Bruno. So if you have questions, please do not hesitate. First question from Marilynne Faubert Bernstein. Good morning.

Thank you. I’d like to ask about the average decrease in the for the decrease in the average sales price, it’s not significant. But that being said, the mix in my view is a bit more favorable now with a higher number of first time buyers. So is this due to any specific breakdown between various regions or anything else? And regarding the two new projects that are now entering the pipeline, how confident are you when it comes to obtaining the building permits bearing in mind the fact that municipal elections will take place in approximately a year or a year and a half now.

Now for Bruno, EUR2 million of the net financial costs, is this the Euro PP? So how is the repayment of the Euro PP going to allow you to achieve some savings when it comes to financial costs? Thank you. So to answer the first question on the average price, it’s about the mix. If you have a look at, say, dividend investors, price levels are flat.

Now regarding first time buyers or second time buyers, it’s slightly increasing. Now we have a look at block sales. In this case, prices are slightly down and you will see some of slides. And this due to the fact that within those blocks, have what I call free blocks and also social housing and we have more social housing units in this category. So the average price is slightly down, but it is really due to the block sales section.

As for other prices, they are either stable or slightly increasing when it comes to first time buyers, for example. Well, if I may add to what Bruno just said. Please bear in mind that institutions that used to be social landlords previously, they have been purchasing intermediate housing units and also what we call free housing units. In other words, those housing units for which there are no specific rules regarding the rents. And for intermediate housing, things are a bit different.

Really, it’s those free units that are more numerous in the first time buyers category and this translates into the prices that you saw. Now regarding the building permits, the Courbouvoir project, this is a project that already has a building permit. We needed to amend it. We need to amend the building permit. And it was mainly the financial operators that had purchased the property some years ago.

There was also a there had been a bid and but we were not chosen, we’re not awarded a project, but their prices were not reasonable. And now we were awarded the project and the conditions, I mean, are even better than the one we had submitted a few years ago. So we are going to have an embedded building permit in order to really make sure that it is in line with our criteria, especially when it comes to what we call free housing units. Now for the Nanterre project, was a bid organized by the Structor de Menagement de la Defense. So this is the la Defense planning authority.

And it’s going to require more So an urban planning document will have to be amended also. But I mean, the pace is slightly different and until now has been quite resilient. And it’s actually quite good when it comes to issuing a building permit. Doesn’t really depend on who’s in power.

And now also a question for you regarding financial costs. Well, so that you really understand things clearly, euros 1 hundred percent of the 2,000,000 are made up of financial costs calculated based on IFRS standards. So if we’re talking about cash only, we would be slightly positive. Now as for the Euro PPs that we are reimbursing, the interest rates was 3% because they were issued in 2017. So and over the past twelve months, we were investing those funds and we had interest rates that was slightly greater than 3% and the maturity is mid May with the investment with the interest rate of slightly more than 3%.

So this month is going to be reimbursed. And mechanically, we should save pro rata temporaries EUR4 million during the coming quarters. Thank you. So I would like to remind you that you can ask your questions after having dialed dash sorry, star one on your phone. Next question by Emmanuel Parrot from Gilbert DuPont.

You have the floor. Hello, good morning. I hope you can hear me well. I have two questions. First, regarding the commercial launches.

Could you remind us of your ambitions for the entire 2025 quarter by quarter? Because I think you have 31 launches during Q2. Could you maybe give us the numbers for each quarter forecast? And also a question regarding the current situation and current political environment and tariffs, the custom tariffs and the stocks, falling stocks. Is this impacting your prospects or the contacts that you have using?

Anything that would indicate that vision is becoming more difficult? Well, thank you for asking those questions. Indeed, we haven’t talked about any planned launches on a quarterly basis. So we don’t do this because this varies quite a lot. We have approximate numbers for the entire, but it’s difficult to provide any more specific forecast on a quarterly basis because there are lots of things that could impact those launches and lots of uncertainties.

Now regarding the presentation, what I said is that when we had eight or 9,000 housing orders per year, We had regarding those free units, approximately 100 or 120 units that were ordered every week. Now it’s approximately sixty fifty or 60 housing units. So it’s half what we had in 2018 and 2019. And the penal scheme is no longer and are they things to take into account. So what we see is that despite increased interest rates, our customers are still interested in our products.

I’m really talking about our products, not a market generally speaking. So there is still a strong demand. Now regarding the current economic and chaos, starting with the situation in The U. S, How is this going to impact how our customers behave? Well, we’ll see the consequences when everything happens in the real economy.

And I think this will happen rather sooner than later. So we’ll know customers will be less confident when it comes to the future because the unemployment will go up. Now we’re talking about an essential good, and housing is an essential good. And supply current supply in France doesn’t cover the actual demand. So many customers were renting, but they are there’s a lack of rentals or rental accommodations.

And with the fact that the P and L scheme is no longer existing. Are going to be even fewer rentals and people are going to want to buy the housing unit and people who are already owners will stay where they are because there’s lack of new buildings also. And if there aren’t sufficient building permits, there is an unmet need that is only going to grow. And we believe that it will be quite interesting for us in the mid or long term. It is another factor that the number of developers is going down or at least they are becoming more reasonable and more realistic, which is good news because we had been warning people about this during the past five or six years.

So it’s quite good and positive to see that things are evolving in the right direction. One last question, if I may. I have the feeling that the recognition of the revenue for Austalit hasn’t been modified. I don’t know if it was a Austerlitz one or before that, but I have the feeling that the recognition is a bit faster than anticipated because it seems that for 2027 recognition number is slightly lower. Yes, but there’s only a slight differences on page 18 of our presentation.

So this was a modified for Austria One Point Zero, is this correct? Yes, exactly. I mean, it’s in line with the actual works because they are progressing faster. This is why the recognition of it is also faster. If you go there, you will see that the building that is lining the street already has four floors.

We’d like to remind you that you can ask your questions after having dialed star one on your phone. There are no more questions. You have the floor, gentlemen. Well, thank you so much. Thank you for having been with us this morning.

And we’ll meet again in July, beginning of July for the Q2 results. Thank you. Have a good day, everyone.

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