Nexity SA (NXI) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Nexity 9-Month 2020 Business Activity and Revenue Conference Call. For your information, this conference is being recorded At this time, I'd like to turn the call over to Julien Carmona, Deputy CEO. Please go ahead, sir. Your line is open.

Thank you, everybody, and thanks for attending this conference call. Before going through the quarterly figures and business activity and revenue, I want to tell you that Alain Dinin, Nexity's Chairman and CEO, has joined us on this call, and we'll make a general introduction in French. Many thanks to that, Alain, and you have the floor.

Okay. Thank you, Julien. As you know, my English is not very good, so I want to point some points on the strategy of Nexity in French. And after that, at the end, we'll comment everything you need. And I would stay with you all the meetings and I will be able to answer your question at the end of this meeting. [Foreign Language]

[Foreign Language] So I will take over and we'll now comment on business activity, then give the mic to Eric Lalechère on the revenue and backlog; and finally concluding the new guidance on which Alain already gave us a lot of substance. So sorry, there may be some tedious repetition, but perhaps it would be helpful for the non-French speakers among you. Starting on Page 3 with a quick overview of our business activity. New home reservations in France were strong. 13,635 units booked during the first 9 months of the year, showing a very limited decrease compared to last year, minus 3%, and with 4% growth in value on the back of an increase in our average selling prices. We increased our market share very significantly from 12% to 16%. I'll come back to that later. And on the Q3 bookings, we are slightly down compared with Q3 '19 but nevertheless, showing growth in euro terms. So in the backdrop of the worst economic crisis we've all ever known, I believe it's a very strong performance. Services are showing a steady performance. We have very low churn in our property management mandate portfolio, the strong rebound of the transaction market since May and good occupancy rate in our managed residences. In terms of Commercial Real Estate, the total order intake for the 9 months ended at EUR 230 million. But as Alain said, with the signing of some large office deals coming soon, we are on track to achieve a very strong order intake this year. Backlog is showing a healthy growth, plus 12%, compared to year-end '19, and the combined pipeline backlog plus business potential is above EUR 20 billion, close to 5 years of revenue, giving us a very good visibility. Finally, the revenue booked during the first 9 months of the year reached EUR 2.737 billion, down 2% only compared to the same period last year. As you remember, at [ end in '20 ], the year-on-year decrease stood at minus 7%, so the latest figure shows that we are catching up and that revenues bounced back during Q3. If we move to Page 4 on the French housing market. In the first 6 months of the year, the French new homes market, retail sales and bulk sales, was down 26% compared with H1 '19. Within this total, there is a substantial shift between demand from private clients, which went down, and demand from professional landlords, which was absolutely buoyant. For the full year '20, we anticipate around 125,000 units, down 25% compared with '19 for the market as a whole. The decrease in demand is mainly due to the first lockdown between March and May and also due to the economic and psychological impact of the crisis. First, we perceive a kind of wait-and-see attitude from individual investors who are showing a strong preference for liquidity at the moment. And there are also some increasing concerns on mortgage availability restrictions for first-time buyers due to the directives of the French banking regulatory authorities. But overall, given that the institutional investors are eager to buy more and that most of the private demand hasn't been destroyed but is only deferred, our position is that demand is not really an issue today in France. The real issue is supply. And this is clearly shown by the fact that house prices are increasing, whilst they should logically decrease in the context of a shock on demand. The signs of its supply deficit are everywhere. If you look at the latest data on building permits, they are down by 10% year-on-year. It's easy to understand the reasons. The first lockdown considerably slowed down the granting of building permits as a lot of municipalities simply shut down during 3 months. Second, the municipal elections had a larger-than-usual impact in many French cities with, of course, [ effort from the greens ] but also general tendency of the new local political teams to reassess the local planning rules delaying the approval of real estate projects. This situation could last a few more months, a few more quarters. However, things should start to gradually improve after that. First, the mayors and city halls will feel the increased pressure of household growth and demographics, and they will have to deal with that by granting new building permits. Second, the developers who have green building credentials and Nexity is really a leader in this field as you know. Those developers will really be able to build an advantage and to keep expanding in the new context. So we think that the supply shortage is more a temporary hindrance and not a structural change. And we should start seeing an improvement next year. On Page 5, Nexity new home reservations. In this context and against this challenging backdrop, Nexity had a very good performance. New reservations, as I said, in the first 9 months of the year were almost equivalent by volume to those recorded in 9M 2019, minus 3%, and they were up 4% by value. The increase in reservations was mainly concentrated in bulk sales, plus 55% relative to the same period last year and more specifically, in the growth of reservations made by institutional investors, which trebled multiplied by 3 compared with last year. Conversely, retail sales were lower by 28%. If we include subdivisions, which are down 28% and international sales up 29%, business activity for Residential Real Estate came to close to 15,000 units reserved and EUR 3.1 billion booked, plus 3% by value relative to 2019. We have, as you can see, the positive pricing effect. The average price including that of new homes reserved by Nexity's individual clients at the end of September 20 was EUR 241,000, plus 6% compared to the same period last year. That's due to both the increase in the average floor area per home and to the average price per square meter including that plus 4%. With respect to bulk sales, proportion of nonsocial sales compared with social sales rose very strongly, leading as well to higher average prices. On Page 6, as you can see on the chart, our market share evolution has been very positive and is showing a steady growth. Between '14 and '19, we gained about 4 points of market share. And this trend of market share gain acceleration accelerated between June 30, '19 and June 30, '20. Our market share soared by 4 points to 16.4% compared with 12.1% in June 2019. So why are we outperforming? And why do we think that we can keep doing so? The first answer is connected with the institutional investors. Those players do not buy the market, but instead, they favor large framework agreements with big national operators, such as Nexity. So in this market, size matters. It has to do with the strength of the balance sheet, solvency, credibility, reputation, and above all, the ability to source a large pipeline. Our agreement with CDC Habitat represents about 20% of the total number of new homes planned by this big investor to be compared with our initial national market share of 13%. So it's a big driver of market share expansion. And on top of CDC Habitat, we are discussing about selling a lot of units to in'li, Action Logement. And our recently announced agreement with Gecina, 4,000 new homes to be developed together, confirms the fact that we are really the #1 natural partner for the institutional investors. Second reason, we are very diversified in terms of geography and in terms of products. This year, the worst hit part of the market was the Greater Paris. Even in this area, we are doing better than our competitors. But more importantly, we are a national player, and we are the strongest operator in the large regional cities. And in the region, the market is holding up much better and Nexity's bookings grew by 11% year-on-year. So let's not be too much impressed by the new green mayors in Bordeaux and Strasbourg. Of course, they do not encourage construction, but even if they manage to freeze a market in those cities, we are doing a lot of business elsewhere and that will go on. Finally, as you know, we have an unmatched diversity of products, student housing, senior housing, multi-generational residencies, office to housing conversion, co-living and so on. So it helps us to capture demand wherever it is. On the supply, Page 7, the supply deficit issue is clear on this slide. I will not comment every figure, but as you can see, our supply dropped by 18% from its level at the end of December '19. So in the current conditions, whatever we put in the market gets sold very quickly with a very, very low take-up period, 4.1 months, and a very high preselling ratio, 76%. But the reality is that we would like to have more products to offer, and we are limited today by the slowdown in building permits. On the right side of the page, business potential, we have a portfolio of more than 51,000 units. It's down 7%, and this decrease is due to the same factors: impact of a lockdown, impact of the local election and the preparation of projects. However, we are expecting this indicator to gradually improve and resume growth quickly. On the services to individuals on Page 8. I commented on that. We have a steady performance in terms of our portfolio of units under management. Brokerage activities are gradually -- have gradually returned to a much better level of business activity with a strong recovery observed in June 2020. And finally, distribution activities, PERL and iSelection, recorded 2,700 reservations minus 21% compared with '19, which is in line with the contraction of the individual investor market. Further again, we have a positive outlook for this business, which is mainly centered on offering distribution solutions to other developers. And when the retail market is tight, benefits for, let's say, a midsized developer of selling through the iSelection network becomes really compelling. Page 9, serviced residencies. As you can see, the performance of Studéa, student housing, has been extremely positive in the current market. The occupancy rate of the student residencies remained very high during the lockdown and after that, despite the cancellations of some foreign students, and the marketing campaign for the 2020-2021 university year was not affected by the crisis. So today, we have a very, very high occupancy rate of 98%. For Domitys, the occupancy rate also went up by 1 point to 85%. On Page 10, Commercial Real Estate. Clearly, in contrast with the very good resilience of housing, the office market will be affected by the crisis. It's a cyclical market. Nothing new. So today, the take-up of office space in the Paris region and the investment market are decreasing, minus 46% and 33%, respectively. And for Nexity, the order intake in the first 9 months was EUR 230 million, relatively low due to low level of activity. But as we said, we are confident that significant new orders will be signed in the coming months. Business activity -- sorry, business potential is still very high, giving us a good visibility on this market. So clearly, today, if we look at all our large office projects in the structuring phase, we have confirmation by users, investors, and it justifies our stand, which is to avoid speculation. We don't do projects [Foreign Language], as we say in French, and we are focusing on high-quality and low-risk locations. At this stage, I will leave the floor to Eric, the CFO, who will tell you a bit more about revenue and the backlog.

Thank you, Julien. Slide 11, 9-month 2020 revenue. Nexity recorded a strong revenue in the third quarter plus 6% relative to Q3 '19. Revenue of the quarter reached more than EUR 1 million, the best performance ever seen for Q3 from Nexity. In Residential Real Estate, which is a nice contributor, revenue was up 12% with respect to Q3 '19 to EUR 75 million, and it reflects business activity starting up again after the lockdown period. In Real estate services for Individuals, revenue was up 6% to EUR 15 million and reached EUR 241 million due to the growth of the portfolio of services residences and the strong recovery in distribution activities. Conversely, Nexity recorded lower revenue in 2% in property management for Individuals. Revenue for Commercial Clients was down EUR 33 million and reached EUR 90 million due to less projects under construction in Commercial Real Estate and lower occupancy rates in the shared workspace activity. The good performance in Q3 to 6% enables a nice [ end to 9M 2020 ] to [ particularly ] mitigate the slowdown linked to the lockdown period. The first 9 months of 2020, Nexity reached revenue of EUR 2,737 million, only down 2.4% relative to 9 months '19. Residential Real Estate stands at 1,640, means 9% relative 9-month '19. Real estate services for individual is stable, and commercial clients are up by EUR 93 million, up 26% compared to last year, mainly from the sale of the completed Influence 2.0 building in Saint-Ouen the second quarter. On Slide 12, Nexity development business potential with backlog and land plus under option is stable compared to 31 December 2019 with more than EUR 20 billion, our order book kept rising by 12% in the first 9 months of the year, reaching EUR 5.7 billion, EUR 5.4 billion for residential real estate and EUR 0.3 billion for Commercial Real Estate due to the [ pessimism of reservation ] in Residential Real Estate. Furthermore, [ development business potential ] end-December (sic) [ end-September ] 2020 totaled EUR 14.9 billion in potential revenue, providing the group with high visibility on its future business levels. I will now let Julien conclude his presentation.

Thank you. And I will go to Page 13, the last page of the slide show about the guidance. As you remember, back in July, we said that it was not prudent to give a new guidance for 2020. You didn't like it, I mean, the market in general. But in a sense, we are right because we are not ruling out a new outbreak in the pandemic, and unfortunately, here it is. However, the year is now almost complete, and even with the impending lockdown and tightening of health rules, we are confident enough to give you a new guidance for 2020 as well as some trends for 2021. These targets take into account the fact that the new lockdown will be imposed in the coming days, and that, as Alain said, we expect it to last at least until year-end, let's say, 2 months. Our vision is that this 2 lockdown should be less stringent and less detrimental to business activity than the first one. For us, the key difference is that, based on our information, it is not planned to shut down the construction sites, and that's a huge difference in terms of the impact on our numbers. The other critical items will be the confirmation of a remote signing of notarial deeds as well as the assumption that local authorities will maintain a normal level of business continuity and will keep delivering building permits. We'll monitor that and keep you updated, of course. So we see these points as realistic assumptions, and fundamentally, we think that there is a learning curve. We are better prepared today to manage our business through a lockdown compared with where we were in March and I think true for every one of us. So moving on to the guidance. We expect to book around 20,000 new home reservations compared with 21,800 last year, therefore, a limited decrease, minus 8% and a strong outperformance compared to the market as a whole, which should be at best to minus 25%. Revenue should reach at least EUR 4.2 billion, and this includes a big haircut compared with our, let's say, normal forecast of the signing of the deals at the end of the year. The current operating margin rate EBIT should be around 5%, which means an EBIT of at least EUR 210 million. That's in line with what we said in our H1 results about the improvement of EBIT in H2, much stronger than H1 but lower than the H2 of '19. Compared with 2019, the last normal year, pre-crisis year, the decline in margin will not be negligible, 5% versus 8% but is almost entirely due to the one-off impact of the lockdown. That's why we describe this as a low point. The net financial debt at the end of 2020 should be less than EUR 1.2 billion, lower at year-end compared to the midyear level. And last but not least, the business potential should at least hold to its current level of EUR 20 billion. If we make a quick calculation and if we assume conservatively the 7.5% EBIT margin on average in this portfolio, that means that we have a total of EUR 1.5 billion of future EBIT embedded in the portfolio, only for real estate development, excluding services. And I will just observe that this EUR 1.5 billion is above Nexity's current market cap. With respect to 2021, we expect a growth in revenue of at least 10% and a recovery in the operating margin rate to 7% at least. That means that we won't completely catch up with the pre-crisis operating margin rate, 8%, 8% plus, but we should be on the road to recovery. So in a nutshell, in spite of a very tough environment, we are confident and we will manage. These are the key points we wanted to make. Thank you for your attention, and we'll be happy to take your questions.

[Operator Instructions] And we'll take our first question today from Christophe Chaput with ODDO.

Three for me. The first one is you say that you should benefit from a big contract in commercial real estate in Q4. Is there a chance that you could book the sales related to this contract in Q4 2020, obviously not fully but probably related to land? The second one is on dividend. So because you have a great visibility on margin and debt, could you give us as well a guidance on dividend for 2021 -- I mean for 2020 delivered in 2021? Or in another way, what is the reason why you didn't give guidance on dividends, if I may, or reaffirm the dividend policy? And the last one is on new quarter. I'm not sure to fully understand the reason why you sell some share, but as it seems to be related to a specific reason for a bank, is it possible to replace the bank by another one? I mean it's -- sorry for the question. It's direct but -- and it's nice but just to understand.

Thank you. We like direct questions. Maybe...

Julien, Alain. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] So on the commercial real estate, as we said, we expect large deals, large orders in Q4. And of course, these orders will contribute the revenue because, as you rightly said, when we have a deal where the land component is large, after IFRS 15, we have to book the land component immediately as soon as we sign the order, the firm order with an investor. So of course, we still have the Engie campus deal, which is likely to be signed this year. But we have other deals as well, including one quite large, which we were not expecting so early. So what we did in our, let's say, guidance for revenue and profit, we made a sort of prudent probability assessment and the weighted probability that we have results in this EUR 4.2 billion. So it's not an overly optimistic target. It assumes that some of these large deals will be signed. Others won't be signed or will be just deferred. And this is the -- really the driver of the revenue and profit guidance concerning Commercial Real Estate.

But it means that if Engie and other deals are signed in 2020, the guidance should be above EUR 4.2 billion sales.

You're right. This is why the guidance says at least EUR 4.2 billion, which means it could be higher than EUR 4.2 billion. But clearly, we are publishing today with a visual of a quite difficult environment, so we prefer to be prudent.

Okay. And the very last one, please, is a follow-up. If you sign this deal, so you are going to book the sales related to the land. Is the normative margin of the land is the same than, let's say, the full project?

Eric. Regarding the margin, of course, we have also some carefulness at the beginning of the project. So we always said that we will be an average margin for this project even if the big project [indiscernible].

So clearly, it means that our attitude is not to maximize the profit at the beginning but rather to have something linear and if possible, to have some positive surprises at the very end of the project.

Next, we'll hear from Nicolas Tabor with MainFirst Bank.

I hope you can hear me well.

Yes.

Yes.

So the first question, it's quite simple. I wanted to know how confident you are on the 10% revenue growth for 2021. And how much of that is already secured by the backlog that you've shown in your slides? The second question is, I've read at the bottom of your -- the second page of your press release that you're currently doing an assessment of the performance of some of the group's business lines. Could you give us some more clarity? Is -- could there be some impairments of goodwill? Are you considering some potential divestments? Is Domitys, for example, something you would be looking at because it is maybe closer to your historical business and Domitys is a bit more different? And then third -- and last question on the Commercial Real Estate on which we've already talked about. I wanted to know what part of the business potential that is not already in the backlog could be at risk. You said that for those contracts, which are in the backlog, you've discussed with the investors and the users, and you have had good message. But what about the future potential additions to backlog? How much of them between what we would have expected before COVID and now what -- how much is decreasing and maybe fading away?

Okay. [Foreign Language] I might explain to -- speak in French, yes, for you? [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] Eric?

That was the forecast for revenue for 2021. You know that the revenue of next year comes from the backlog. And as of 30 September, our backlog is [ up ] 12% compared to 31 December 2019. You see that we have a good visibility for our activity for the next year. And this is the main reason why we can forecast with higher degree of good visibility that our revenue will increase next year about 10%.

Without giving you -- yes, without giving you a percentage, most of the revenue expected next year is already in the backlog regarding development activities. But for services, it's already, in a way, embedded in our long-term management mandate. Your last question is a good one. It's about, if I understood correctly, the renewal of the business potential in commercial real estate. In a way, the EUR 2.8 billion that we have today, we should see a decrease in the coming quarters because this business potential will first convert into backlog and then into revenue, which is a good thing because it means that we will have high sales in our Commercial Real Estate. But today, with users being very, very prudent and reluctant to announce the take-up of new square meters, with investors being also wary about offices as an asset class, it is likely that the business potential will decrease, but it will not decrease forever. Offices are a cyclical asset class. There is a high point. There will be a low point, and we expect in the coming months and quarters to identify good land plots, if possible, at lower prices compared with what we saw before. Have in mind that we said no to a lot of land opportunities in commercial real estate since 1 year or 2 years and Alain was really leading the investment committee. And now we said no to a lot of proposals, for instance, for new towers in La Défense. I think we were right that the renewal of the business potential will happen when we believe that we have hit the bottom in terms of land prices and it's time to launch new projects based on land options at reasonable prices.

Our next question will come from Emmanuel Parot with Gilbert Dupont.

I have 2 questions, please. The first one is considering your guidance 2020, you are expecting Q4 declining by around 8% compared to plus 11% in Q3. Why is this inflection? Are you maybe a little cautious? First question. My second one is concerning the JV with Gecina. I do understand the desire to boost the volumes, but why did you decide to share 40%, if I remember well, of the margin? It was not possible to set up maybe a different scheme. And the last question for Alain Dinin. [Foreign Language]

[Foreign Language] Julien?

[Foreign Language] On the guidance for reservations for Q4, yes, we expect at this stage, and again, considering all the announcements and potential announcement about the lockdown, that we should have a limited decrease in reservations in Q4 '20 compared with last year. Honestly, it's -- minus 8%, it will already be a strong performance. First of all, we have made good reservations in October, so there are only 2 more months to come. And our position is that the bulk sales with institutional investors and social landlords will be signed. The one that we expect will be signed almost 100%. And on the retail side, we expect prudently that we might have a sort of increase of cancellations from retail clients because of their uncertainty about the future economic position, savings and all that. So if there had been no lockdown, yes, we might have announced more, but we are taking into account the current situation. Gecina, every joint venture is based on how to align the interest. Here, in this case, the basic relationship is between a provider of new home, Nexity, and a buyer of finished new homes, Gecina, which is a property company but the basic -- the basis of a relationship. But Gecina, which has its own requirement for return on capital employed, internal rate of return and all that, they asked to get share, minority share of the real estate development margin. And I guess, we -- it was a way to have this interest alignment, which is a recipe for success of all joint ventures. And in this case, we are the majority partner. We provide the know-how. And the good point for us is that we are dealing -- we will be dealing with projects essentially inside Paris or in really premium areas. So having this 60-40 split, it means that we will be able to buy relatively expensive plots with a sharing of the burden, a sharing of the effort with Gecina. So it helps us to do more with the same amount of capital. Is that clear?

Yes. clear.

[Operator Instructions] We'll now hear from Pierre Clouard with Kepler Cheuvreux.

So my first question is on the reservations. As you mentioned it -- the market should be down by 25% this year. But you expect reservation -- your reservations to be flat next year. Maybe can you give us maybe more color on your expectation for reservation? Are you expecting actually a decline of institutional sales next year or not or just not coming back of individuals in the market maybe? So that's the first one. The second one, just to come back on building permits. Maybe can you give us your view on when the deliverance of building permits will improve? Is it before the end of the year, maybe in Q1, Q2 next year? And my final question is on the financial part. Maybe can you give us the evolution of the working cap over the quarter and maybe your expectation for the end of the year.

Thank you. Alain, do you want to answer on the building permits? [Foreign Language]

[Foreign Language]

Okay. So in terms of the supply and building permits, what I said in the presentation is that we should see a gradual improvement starting next year. It's difficult to give you the precise amount for the precise quarter when it will happen. There are 2 things. First of all, there is the pre local election freeze, which is well documented and which we clearly saw last year and the beginning of this year. And there is also when a new team gets elected. And we had really a lot of local political changes, including the same party, but the mayor stands down and we have a new mayor and so on. The tendency today for a new team, as we said, to sort of reassess everything, we will do an audit of the building permits. We might consider changing the PLU, the local planning rules and so on. So this may take 3, 6, 9 months. It depends on the cities and local situation. But at the end of the day, the new team will want to get some things done to have some urban projects being realized. And they will realize that they have used 1 year of their mandate thinking about it. And they know that during the last year of the mandate, they will not be able to act with the pressure of the future election. So it means that instead of 6 years, the real mandate, the real useful part of a local mandate is 4 years. And what we are expecting is that, after 1 year, they will see the pressure to act, to launch some new projects, to put their -- to be recognized as a mayor, as a city hall with changing things in the city. And then we expect to see a lot of new projects being launched and being approved at some point next year. And as I said as well, even for both new mayors and city halls who are really reluctant to give building permits, there will be the strong pressure of the household formation, demographics. And particularly all the households who are waiting and have been waiting for years for an apartment in the social housing and the pressure will be, what, when do you start building. And in the French system, as you very well know, Pierre-Emmanuel, there is no free market project without a social housing component. And conversely, there is no social housing without free market. So they will need to have the developers onboard at some point next year. Reservations, the outlook, which Alain gave was prudent as well to say 2021 should be in line with 2020 for the market and for Nexity. We will give you more information and a more detailed guidance early next year. But clearly, against some rumors or some maybe a bit too fast analysis or forecast of the market, there is absolutely no reason why the market should go down. And at some point, the growth trajectory will start again, again, because of the demographic, metropolitanization and all these big trends you are familiar with.

Okay. But so far, you are not expecting any growth for the market in 2021?

At this stage and based on the idea that the COVID crisis will not be over on the first of January, unfortunately. Eric, on the working capital?

Yes, we expect for end of year a little decrease of working capital requirement compared with the June, and it is quite normal, as we said, that net debt will be lower in terms of the [ demand ]. You can say that as we still have a big backlog and a good residential activity, and we still have a working capital, which enable us to make our development.

Clearly, our key resource is land. Today, we have land, we have in our plan land to answer the demand. We'd like to have more. And if and when we find really attractive land opportunities, whether through options or through other acquisitions, we will put money on that. That's really the key pillar of our strategy, as decided by Alain Dinin. So honestly, we -- normally, it will decrease, but we don't feel compelled by our financing constraints. We have completely renegotiated our debt. We have no short-term pressure on that. So if we can buy land at really attractive conditions, this may be a factor which could lead the working capital on the way up.

Okay. And just to come back on the debt and the working capital, you are expecting a debt of EUR 1.2 billion, so almost EUR 200 million less than in June. It will mainly come from the decline of the working cap.

Yes. But it's also explained by our usual seasonal pattern where we do a lot of our cash receipts, cash inflows at the end of the year. So this year, it will be, of course, a little bit hampered by the surge in the COVID and the new lockdown. But normally, what we see every November, every December is cash receipts, which are much higher than the cash outflows, which is land acquisition or the payment of subcontractors. So just based on the seasonal pattern, which you will find in the usual -- the past Nexity's accounts, there's a sort of natural tendency of the debt to decrease, to improve in the final month of the year.

[Operator Instructions] And we have a question from Patrick Noel with Aviva.

Yes. I have a question regarding the renegotiation of your debt because you were -- you had a net debt-to-EBITDA ratio trigger of 3x. I know it was suspended and the new trigger is 3.5 but only for 2021. What is the situation regarding this ratio and the future of this ratio?

Very simply and then Eric can add some comments. At the end of June, the ratio was respected, were slightly below 3.5, which was the original ratio. 3x was really much older. And we got this covenant holiday, covenant ratio exemption until the end of '21, which means the beginning of '22 in practice. So our objective is to meet this ratio to be below the ratio at the end of 2021. Based on our forecast, we will be able to manage that. And of course, given that the crisis is still there, but it's still unpredictable, we think it's quite comfortable and positive for the strategy and the development of the company not to have any kind of short-term pressure. But we will respect this ratio at the end of '21 or earlier if we can, of course.

That will conclude today's question-and-answer session. I will turn the conference over to Mr. Carmona for any additional or closing remarks.

I don't have any additional remarks personally. I don't know if our Chairman -- if you had some. Okay. So in that case, we will conclude the call, and we will be connected at 8 p.m. to hear what our President announces us. Thank you.

Thank you for being with us. Thank you. Bye.

That will conclude today's conference. Thank you for your participation. You may now disconnect.