Kaufman & Broad SA : FIRST QUARTER 2017 RESULTS, P

Press release

Paris, April 25, 2017

First Quarter 2017 results

• Solid sales and financial performance
• Annual targets confirmed in a new-housing market that remains buoyant

Marketing and sales activity

• Housing segment

During the first quarter of 2017, housing orders by volume totaled 1,800 housing units, up 19.0 % compared to the same period in 2016. In value, housing orders totaled €336.6 million (incl. VAT), up 18.5 % compared to the same period in 2016.

In Q1 2017 1,748 apartments were ordered for €325.2 million (incl. VAT), or an increase of 18.5 % by volume and 19.1 % by value.

Distribution of customers

Overall in the first quarter of 2017, the number of orders by first-time buyers displayed strong momentum, with a 45 % increase  whereas block sales were up 53.0 %.  Otherwise, Investors rose 13% compared to the same period of 2016, and represent 48 % of orders in Q1 2017.

• Business property segment

In February 2017, Kaufman & Broad won the tender organized by EPA Bordeaux Euratlantique for the completion of a 26,000 sq.m building at the foot of the future TGV train station. The Group also won a tender in Lille for a 7,000 sq.m project in the Eurasanté complex. Work was begun on the Polaris building in Nantes (6,500 sq.m), sold before completion in 2016, and on the new EDF headquarters of the Aquitaine commercial branch in Bordeaux (5,000 sq.m)

Finally, in Logistics, Kaufman & Broad signed three lease-before-completion contracts.

• Leading indicators of marketing and sales activity and growth

As of February 28, 2017, the Housing backlog totaled €1,400.4 million (excl. VAT), i.e., almost 13 months of business activity. As of the same date, Kaufman & Broad had 215 housing programs on the market, representing 4,195 housing units, compared to 189 programs, for 4,126 housing units as of end of February 2016.

The Housing property portfolio included 27,580 lots, up 25.9 % compared to end-November 2016. This represents a potential revenue of approximately four years of business.

In the second quarter of 2017, the group is   planning to launch 42 new programs representing about  2,581 units.

The Business property backlog totaled €190.0 million as of end of February 2017.

• Financial results  

• Business activity 

Total revenues amounted to €287.7 million (excl. VAT), up 25.2 % compared to Q1 2016.

Housing revenues totaled €247.0 million (excl. VAT), versus €206.8 million (excl. VAT) in Q1 2016. This  represents 85.8% of group revenues.

Revenues from the Apartments business were up 20.6 % to €199.5 million (excl. VAT) compared to Q1 2016. Revenues from Single-family homes in communities totaled €6.3  million  (excl. VAT) versus €7.3 million (excl. VAT) in Q1 2016. Revenues from the Business property segment totaled €39.6 million (excl. VAT), compared to €21.6 million (excl. VAT) in the same period of 2016.

Other activities generated revenues of €1.2 million (excl. VAT).

• Elements of profitability 

The gross margin for the first quarter of 2017 totaled €54.7 million, compared to €43.7 million in the same period of 2016. The gross margin rate came to 19.0 %, unchanged year-over-year.

Current operating expenses for the first quarter of 2017 totaled €35.5 million (12.3% of revenues), versus €26.1 million for the same period in 2016 (11.4% of revenues).

Current operating income for the period totaled €19.3 million, versus €17.6 million in Q1 2016. The current operating mark-up ratio amounted to 6.7 % versus 7.7 % for Q1 2016.

Adjusted EBIT ^[1] for the group totaled €20.7 million in Q1 2017 (vs €19.2 million in the same period of 2016). The adjusted EBIT margin amounted to 7.2 % versus 8.3 % for Q1 2016.

Attributable net income stood at €7.4 million, up 14.9 % compared to Q1 2016 (€6.5 million).

• Financial structure and liquidity

As of February 28, 2017, net financial debt totaled €85.0 million, compared with €85.1 million at the end of November 2016.

Active cash flow (cash and marketable securities) totaled €115.9 million, compared with €118.1 million at end of November 2016.

Working capital requirements totaled €140.7 million (10.9 % of revenues over 12 consecutive months), versus €129,2 million at end of November 2016 (10.4% of revenues).

• Dividend

As announced in 2016, a dividend of €1.85 per share will be paid in 2017 for the 2016 fiscal year (ended November 30, 2016), subject to the approval of the Shareholders' Meeting to be held on May 11, 2017.

The Shareholders' Meeting will also vote on giving Kaufman & Broad shareholders the option of receiving their entire dividend in cash or shares. Following the dividend payout, and in order to maintain the same number of shares on a fully diluted basis, the Company will cancel the same number of treasury shares as those that will have been created to meet shareholder demand.

• Guidance for 2017

In fiscal year 2017, the group estimates that revenues will grow by 8% to 10%, with a gross margin rate of about 19 % and an adjusted EBIT margin of 8.5 %. Net financial debt will remain close to €100 million.

This press release is available on the website www.kaufmanbroad.fr

• Next periodical reporting date:
  • May 11, 2017 Annual Shareholders' Meeting
  • July 11, 2017 First half 2017 results (after market close)

Contacts

About Kaufman & Broad - For nearly 50 years, Kaufman & Broad has been designing, developing, building and selling single-family homes in communities, apartments, and offices on behalf of third parties. Its size and profitability, combined with its strong brand name, have made Kaufman & Broad one of France's leading developer-homebuilders.

Kaufman & Broad's Registration Document filed on March 31, 2017, with the French financial markets authority (Autorité des marchés financiers - AMF) under number D.17-0286 (the "Registration Document") on the AMF website ( www.amf-france.org ) and Kaufman & Broad's website ( www.kaufmanbroad.fr ). It contains a detailed description of the business activity, results and outlook of Kaufman & Broad, in addition to the associated risk factors. In particular, Kaufman & Broad draws investors' attention to the risk factors described in Section 1.2 of the Registration Document. If one or more of these risks should materialize, it could have a significant negative impact on the business activities, assets, financial situation, results or outlook of the Kaufman & Broad group, and on the market price of Kaufman & Broad's shares. This press release does not constitute and should not be construed as a public offering, an offer to sell or an offer to subscribe. Nor is it intended to solicit a purchase order or subscription in any country.

• Glossary 

Adjusted EBIT: corresponds to the current operating income adjusted for the "IAS 23 revised" borrowing costs which have been capitalized and removed in the gross margin.

Backlog : also called the order book, this is a summary of orders at any given time which can be used to estimate expected revenues in the coming months.

Commercial offer : The total inventory of housing units 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).

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

Gross margin : corresponds to revenues less the cost of sales. The cost of sales comprises, in particular, the price of the land, the associated property costs and the construction costs.

Lease before completion: Lease before completion is a contract whereby a user leases a building even before it has been built or remodeled.

Orders : measured by volume (in Units) and by value, these reflect the group's marketing and sales 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. Moreover, for multi-occupancy housing programs that include mixed-use buildings (apartments/business premises/retail space/offices), all floor space is converted into equivalent housing units.

Property portfolio : comprises all the land for which any commitment (such as a contract for sale, etc.) has been signed.

Sale before completion: Sale before completion is a contract whereby the seller immediately transfers to the buyer its land rights and ownership of existing buildings. Works to come become the property of the purchaser as and when they are executed, and the purchaser must pay the price as work progresses. The seller retains the powers of the project owner until the acceptance of the work.

Take-up period: The inventory take-up period is the number of months required for the available housing units to be sold if sales are maintained at the same pace as in previous months, i.e., housing units outstanding (offer available) per quarter divided by the number of orders per quarter ended and with orders in turn divided by three.

Take-up rate : The take-up rate (Te) represents the percentage of initial inventory sold per month in a real estate program (sales / month divided by initial inventory); i.e., net monthly orders divided by the beginning of the period inventory ratio plus the end of period inventory divided by two. NB: The reverse of the take-up ratio (1 / Te) gives the projected duration (in months) of a program's promotion and marketing, in other words the take-up period. For example, a 4.0% take-up ratio corresponds to a projected promotion and marketing of 25 months.

Units : 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 determined by comparing the surface area by type (business premises/retail space/offices) to the previously obtained average surface area of housing units.

NOTES

• Financial data

Key consolidated data

•   At its meeting on January 26, 2016, based on the number of shares which comprise the Company's authorized capital, the Board of Directors of Kaufman & Broad decided to cancel 747,619 treasury shares, reducing the number of Company shares from 21,584,658 to 20,839,037

• Adjusted EBIT corresponds to the current operating income of the group adjusted for "IAS 23 revised" borrowing costs which have been capitalized and removed in the gross margin.

Consolidated income statement

•    Not approved by the Board of Directors and not audited.

Consolidated balance sheet

•    Not approved by the Board of Directors and not audited.

• Operational data

^[1] The adjusted EBIT represents the current operating income of €19.3 million adjusted for capitalized borrowing costs of €1.4 million as of February 28, 2017, versus a current operating income of €17.6 million adjusted for capitalized borrowing costs of €1.6 million as of February 28, 2016.

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