Nexity SA (NXI) Earnings Call Transcript & Summary

Good day, and welcome to the Nexity 2020 Full Year Results Conference Call. For your information, the conference is being recorded. And at this time, I'd like to turn the call over to Julien Carmona, Deputy CEO. Please go ahead, sir. Your line is now open.

Thank you. Good afternoon, and thanks all of you for being connected. Today, I'm sitting with Véronique Bédague, who is the Other Deputy CEO of Nexity. She's in charge of all Real Estate Development activities, both Residential and Commercial. Also attending Eric Lalechère, the Group CFO; as well as the IR team; Géraldine Bop and Thierry Cherel, our new Head of Investor Relations, who joined us a few weeks ago from the buy side. 2020 was a remarkable year for Nexity in terms of business activity and a solid year or resilient year in terms of financial results. As we guided in July last year, our operating performance bounced back in H2 '20, confirming the resilience as well as the growth potential of our business model. We managed to sign some large deals in December, which helped us achieve an annual performance at the high end of our expectations. I would like to start on Page 3 about some key reporting and accounting changes. Last year, we got some feedback or some pushback from the market about our financial reporting and financial communication, with some of you thought to be overly complicated or sometimes confusing. So we heard you. And we decided to make some changes and actually improvements. First of all, we simplified our segment reporting across 2 business lines, Real Estate Development and Services. Two businesses with different economics, 2 sets of metrics, 2 P&L. We also decided to replace the EBITDA by the current operating profit or EBIT, if you prefer, as our key performance indicator. That's meant, likewise, to simplify our reporting and to better track our performance. Last but not least, having initiated the sales process of Ægide-Domitys, we reclassified this business as held for sale, in line with the IFRS 5 standard. The disposal, which should occur this year, will have a massive and healthy deleveraging impact on our balance sheet, around EUR 880 million in total net debt. Eric will come back to that later. And it will come together with strategic partnership agreement, enabling Nexity to continue to play a leading role in the development of senior service residences. Moving on to Page 4, we provide an update on the COVID-19 impact. The current health crisis had a significant impact on the economy, and naturally, our business was not immune. As displayed on these graphs, which show the comparison between 2019 and 2020, we were hard hit by the first lockdown, March to May '20, with the halt on construction sites. But starting from June, the activity bounced back and is now running overall at pre-crisis levels. The graphs show progress on construction sites, the cash inflows of the residential business, our student residences occupancy rates, and finally, the number of sales in the secondhand market for our Century 21 network. Each of them shows a visible recovery. Let me now go to Page 5, with the key figures for 2020. Starting with Residential Real Estate, 2020 was a record year for Nexity despite the crisis, with more than 21,000 new homes presold close to the volume achieved in '19, minus 3%, and actually higher in value. On the back of a better mix, order book -- order intake going up by 4% to EUR 4.5 billion. Against the backdrop of the French housing market expected to decline by 25%, the outperformance of Nexity was massive and we grew our market share by 3 to 4 percentage points. In Commercial Real Estate, 2020 was an absolute record with EUR 1.5 billion of order intake. The development pipeline grew by 5% to EUR 21.4 billion, with an impressive 34% growth for the backlog at EUR 6.8 billion and a quasi-stable business potential. On the right-hand side, you can see our key financial indicators. Starting with a positive 8% top line growth at EUR 4.85 billion, mainly driven by a very strong year for Commercial Real Estate. The current operating profit declined by 19% year-on-year to EUR 285 million, lower than the pre-crisis level, but above the guidance. The operating margin is close to 6%. And H2 '20 was actually slightly higher than H2 '19. The decline in profitability is almost exclusively explained by the impact of the first lockdown, which weighed more heavily on the businesses like services, which have a high level of fixed cost. The 7.5% margin achieved by the group during the second half of the year shows that we are gradually moving back towards our historical margin. Net profit was down 27% at EUR 118 million. Net financial debt before lease liabilities decreased to EUR 655 million at year-end after peaking in June, and is today 30% lower than the December '19 mark, EUR 918 million. And let's turn the page and go to Slide #6 about our CSR commitment. We are making progress on an ambitious ESG strategy, which is not another strategy, but which is the strategy of Nexity. For us, ESG means business and business means ESG. On the environmental side, Nexity consolidated its position as France's leading low-carbon developer for the second year in a row, and Véronique will give you more details on where we are and what's the way ahead. As an employer, Nexity is proud to be rewarded with a Great Place To Work certificate obtained in 2020. We foster, among other things, gender equality. We now have 46% of women sitting at our Executive Committee. Finally, on the S side of ESG, the society, Nexity is a very active partner of social landlords, local communities, bringing its contribution on issues like the homeless, affordable housing, urban renewal and providing jobs for young people from disadvantaged neighborhoods. This is what we call the inclusive city. And finally, to ensure our stakeholders that Nexity is treating ESG and financial targets on an equal footing, ESG criteria represent 20% of Nexity's management team's incentive plan. On the next page, 7, I would like to provide a brief update about the strategy. Last year, at the request of our Board of Directors, we performed a comprehensive review of our business portfolio. What were the conclusions? Well, we concluded that, first, all our businesses are healthy and sustainable. None of them was really impaired by the crisis. All of them is fundamental needs, housing in particular, or meet long-term trends, such as the need for flexibility in office space. And finally, that it was logical to choose to divest Ægide-Domitys. Domitys is a great business, a high-growth business. But even if we put aside the financial considerations like debt, the leases and the lack of short-term profitability, we believe, we considered that the business of personal services to elderly people is too far from our core competencies. And as we have many growth options in our core businesses, we decided not to overstretch ourselves. After the sale, we do not contemplate any other significant changes to the perimeter of the group. Going forward, we will concentrate on our core businesses, real estate, combining development and services. We stick to our core strategic vision to be a real estate services platform for each of our clients: private clients, corporate clients, institutional clients and also local authorities. We think it's a winning model. And for just one reason, being a services company gives us an edge as a developer and is probably the main reason why we outperform our peers. So we will increase the intensity of the cross-selling and synergies between our different business units. And finally, we see this crisis as an opportunity to create new competitive advantages, among which leadership as a preferred real estate partner of institutional investors, leadership in sustainable and low-carbon real estate, leadership in services, leadership in digital transformation, and finally, creating new growth engines, among which our international expansion, in Germany and Poland in particular, which we expect to generate about 10% of Nexity's EBIT by '22 as well as other initiatives, which we can discuss in the Q&A. And now, Véronique will give you an overview of our achievements in real estate development last year.

Good afternoon. To start, I would like to highlight 2 facts, which explain our robust performance for 2020. The first point is the strong investors' appetite for Residential. Last year, risk-free rates have continued to slide, as you all perfectly know, pressing investors to allocate further capital into income return assets such as real estate sector. The current crisis makes clear that the residential property rental income was more solid than other subsectors, such as office, retail and hotels. This resilience favored the trend for institutional investors to allocate even more capital into this outperforming subsector, which reached 24% of investment volume in '20 in Europe. It's about 15% in France, doubling over the past 5 years. The second point I would like to keep in mind is Nexity's environmental performance, as Julien said earlier. To go even further with our CSR commitment, we have shifted, for instance, our commercial products range towards exclusively low carbon, flexible and reversible office space. This enables the buildings Nexity developing to dramatically reduce their carbon footprint over their full life cycle. Last year, we completed 29 low-carbon projects, including the Palazzo Méridia project. Maybe you have heard about this project. It's the French tallest timber frame office building. It's a 9-storey building. It has already won several awards such as the France's first commercial bidding to achieve E3 C2 certification. It's the highest certification we can get right now, and we got the first one. This way, we are aligned with our ambition to reach our 2030 goals in terms of carbon footprint reduction. As you can read on the top right-hand side of the slide. As Julien said, Nexity is not the cherry on the cake, the 3 core business. Let's have a word about the French market for new homes on Page 10. Last year, the French market for new homes reached around 125,000 reservations, down 25% in comparison to 2019. In term of demand, some client segments were, of course, impacted by the health crisis and credit condition, such, of course, first-time buyers and individual investors. The fundamental issue remains, in France, the lack of supply, partly caused by the 15% decrease in planning license last year. This is due to the long delay before the new municipal teams were in place, remember there were election last year somewhere between March and July, and the review of municipality planning policies following the shift in power that took place in many big cities in our country. Such a trend resulted in lengthening delays to grant planning permissions, exacerbating the supply shortage and increasing price for new homes. Page 11. In this context, Nexity demonstrated its resilience, as Julien said earlier, with new home reservations in France totaling 21.77 apartments for EUR 4.5 billion. It's almost the same level as the previous year, which is really a great performance. In terms of number of bookings, we are in line with the previous year. And in terms of value, we are up by 4%. This strong outperformance is once again proving the accuracy of Nexity's real estate services platform value proposition. As of year-end 2020, Nexity's market share surged close to 17%, up around 3.5 points higher than a year earlier, which definitely explains what we have done last year. A word about the client mix, Page 12. As you understand, the client mix significantly evolved in line with underlying market trends. Indeed, the 27% decline in retail sales are partly being offset by bulk sales, spurred on by institutional investors' appetite for residential properties. Part of the outperformance can be explained by Nexity's ability to address this institutional investors' need. Indeed, bulk sales were 38% higher than the previous year for the first time, accounting for over half of Nexity's new home reservation. This was due to an increase in sales to institutional investors, which doubled relative to 2019. A quick word about location fleets. The Paris region accounted for 32% of the new home reservation. In value term, the breakdown of reservation is made of 40% for the Paris region and 60% for the rest of France. This breakdown reflects Nexity's strong position in regional markets, in large as well as in midsized cities, which are going to be more and more important for real estate in the coming years. The average price included VAT of new homes reserved by Nexity's individual clients as of December 2020 was EUR 239,000, up 3.4% year-on-year due to the increase in both the average surface area per home, up 1%; and the average price per square meter, up to 2%, reflecting the supply shortage we discussed earlier. The strong growth in bulk sales price per apartment at 25% year-on-year is due to the rising share of non-social residences acquired by institutional investors. A word in Page 15 about residential pipeline. As of year-end 2020, the residential pipeline is still on the rise, reaching EUR 18.5 billion, mainly driven by the strong backlog growth of 25% year-on-year. The business potential for new homes in France was up 3% year-on-year and came to EUR 12.8 billion. And of course, all in all, this residential pipeline provides 6 years of visibility on revenue. However, despite the shortage of visible land, which is likely to continue this year, Nexity has the ambition to show growth this year in its planned potential, namely by working on new products, such as, as you may guess, office to residential conversion, renovation, co-living and land banking. A quick word about Commercial Real Estate Development, Page 16. Business was very buoyant towards the end of last year for Nexity, boosted by the launch of major developments, including, of course, the sale of the Engie Eco-campus in La Garenne-Colombes for around EUR 1 billion, enabling Nexity to achieve its highest ever volume of order intake at EUR 1,472 million. For me, in the context, where a lot of people are talking about the office crisis or even the end of the office, it's a very positive signal to see that a great company like Engie decides to sign a lease close to 100,000 square meter to create their new headquarters. And that investor, which is Swiss Life Asset Management, was as interested in doing this deal as they were before the pandemic. We can come back on that in the Q&A, if you want, but I don't believe at all in the end of the office. Office properties will have to chance to become more flexible, more sustainable, much more user-centric, and Nexity has the capacity to remain a leader in this field. Aside from the Engie campus, we signed close to EUR 500 million of other orders, particularly in the Greater Paris region. So over last year, Nexity has more than doubled its Commercial Real Estate backlog, providing visibility during the period, which could be defined, and I think you will agree on that, by uncertainty around the office leasing market.

Thank you, Véronique, and I will conclude the presentation of business activity before moving into the numbers, financial numbers with our services business, property management and distribution. Property management for individual clients showed a limited churn at minus 0.9% year-on-year with a portfolio of 876,000 units managed. We have the same resilience and stability with respect to property management for companies, close to 20 million square meters under management. And both these businesses are undergoing and will continue to undergo significant transformation, digitization, focus on customer satisfaction, focusing on the changing needs of clients and putting a strong focus on new ESG-related offers, like energy efficiency and energy renovation in particular. And let me remind you that the new management team was appointed in October for services who will lead this strategic and operational turnaround. On our student residences business units today, the performance was very good. Despite the pandemic, occupancy rates remained good at 94% at year-end 2020, highlighting how students appreciate our product. Coworking, and Morning, our coworking business unit, which is a leader in the Paris market. Obviously, the crisis had an impact. But given the context, our occupancy rate at year-end is quite decent at 70%. Morning made a positive EBITDA last year and stands ready to restart its growth strategy with demand for flexible office space set to rise. Finally, for distribution activities, brokerage of new homes, performance was subdued, down 17% compared to the previous year, but relatively good compared to the overall decline of the individual investors segment. I'd finish with a few words on Domitys, the status of this business. But as I mentioned, high growth, still continuing on its growth path with 13 residences opened last year, from 100 to 113, and more than 20 openings expected in 2021. The occupancy rate also increased from 84% to 85%. Would have been even better without the crisis. But in the context, again, that's a good performance. And at this stage, I will leave the floor to Eric, who will take you through the financial statements.

Thank you, Julien. Let's start with the P&L on Page 19. Our P&L slide, our resilience is our model with a top line growth of 8%, a decent 6% operational margin. Financial expenses increased at EUR 86 million compared to EUR 80 million, mainly due to higher level of debt. Income tax decreased at EUR 74 million compared to EUR 104 million due to a lower tax base. The effective corporate income tax rate, excluding the CVR, is 30% against 33.7% in 2019 due to the lower tax rate in France. Our net profit came to EUR 118 million, down 26% relative to '19, but still represents EUR 2.14 earnings per share. Let's see the revenue details on Page 20. On the left-hand side, you can see the 18% revenue growth compared with second half 2019, highlighting the magnitude of the strong recovery at the end of the year, resulting in an 8% revenue growth for the entire year. Looking at the activity breakdown, you can see that the largest contributor of revenue growth is the Commercial Real Estate Development, which was in 2020, more than twice as big as it was in 2019. The increase comes mainly from the 2 big orders of the year, with Saint-Ouen at Saint-Ouen and Engie at La Garenne-Colombes. Residential Real Estate Development is only 5% down compared to 2019 due to strong activity in the construction side and signings of notary deeds at very satisfactory levels. Services had a limited decrease of 2%, but the decline from the brokerage fees and additional services in property management represent about EUR 45 million with a strong effect on operating margin. On Page 21, you can see the current operating profit and margin breakdown by activities. The current operating profit ends up at EUR 285 million as of year 2020, a 19% decline mainly attributable to the first lockdowns impact. Once again, the year 2020 has been split into, with the first half 2020 margin dropping at 2.9%, whereas the business recovery in the second half of 2020 fueled a strong margin improvement to 7.5%, resulting in a full year margin of 5.9%. Real Estate Development activities, both Residential and Commercial, show a good resistance in margin rate. On the other hand, the services businesses suffered more, given a high level of fixed cost structure, the high base effect with the disposal of Guy Hoquet l’Immobilier in 2019 and one-off restructuring costs. Let's go on Page 22 to go on to balance sheet. The main evaluation exercise is application of the IFRS 5 for Ægide-Domitys due to the process underway for the sale and the likelihood that it will be carried out in the next 12 months. Assets held for sale at EUR 955 million, came mainly from goodwill and right-of-use of leased assets. Liabilities held for sale at EUR 882 million came from net debt, both financial debt and lease liabilities. This reclassification has a huge effect on the amount of the right-of-use of leased assets, which is only EUR 431 million compared to EUR 963 million end of '19. And on the other side, the liabilities decreased from EUR 1,043 million to EUR 465 million at 31 December 2020. Compared with 2019, the total debt is significantly reduced after the reclassification of Ægide-Domitys activity, and the net debt is only EUR 1,015 million compared to EUR 1,961 million at 31 December, 2019. Please turn to the Page 23 to talk about the working capital. Working capital strongly decreased in 2020, minus EUR 393 million. Most of the working capital decrease is due to the very significant improvement from the Commercial Real Estate Development with the first receipts of major projects of Engie Eco-campus in La Garenne-Colombes and REIWA in Saint-Ouen. This negative working capital is expected to return to 0 in 2021. On the residential development, the working capital increased with international business mainly caused with the pantera AG acquisition in Germany for EUR 76 million. The percentage of working capital for residential development compared to backlog remains below historical levels, less than 20%. It shows the rigor of our operational management. On Page 24, you can see the working capital impact on our net debt. We are pleased to show you a sound balance sheet will give us the flexibility to grow our business going forward. Our net financial debt decreased by about 30% to EUR 655 million. Here, we are talking about the net financial debt before lease liabilities and excluding the liability of assets held for sale. After reclassification of Ægide-Domitys, net debt -- Nexity has a net financial debt at about EUR 550 million, which is a very low level. The net debt-to-EBITDA ratio, excluding the IFRS 16 and before IFRS 5 classification is 1.9, well below the bank covenant hold of 3.5, making the covenant to renegotiate with Bruneseau and Porte de Montreuil residence. Let's now see the free cash flow statement on Page 25. Cash flow from operating activities before interest and tax totaled EUR 532 million versus EUR 544 million in 2019, close to EBITDA. We reclassify from financial investments, the repayment of lease liabilities EUR 207 million in 2020, to show cash flow after lease payment so that the free cash flow reflects more the operating performance. The increase in CapEx is coming from more IT spending and investments from Domitys in senior residence. Our free cash flow is at a very high level of EUR 558 million against EUR 60 million in '19. Thanks again to the change in working capital from favorable client payment on Commercial Real Estate projects. The investment cash flow is considering the pantera AG acquisition payment for EUR 47 million. I will leave the floor back to Julien, who will describe our confidence for the future with the group pipeline and 2021 guidance.

Yes. Thank you. Well, the group pipeline, which you can see here on Page 26 is really the addition of the residential and the commercial pipelines, which we have commented on before. So I won't go too much on these figures. Just well, reminding you that this pipeline grew by EUR 1 billion last year in the midst of a, let's say, strong crisis. And insisting on the very high visibility, which this pipeline is providing us with. Two years of revenue completely secured in the backlog and 4 years of revenue in the business potential. Not the land bank, but the land plots under option as per Nexity's model, which you know well. So to conclude on the guidance, let me go to Page 27. We have short-term challenges to face, a lack of buildable land, a trough of the cycle for the office market, a transformation challenge for services and, of course, lingering uncertainties about the pandemic and the timing of the recovery. We've taken those uncertainties and challenges into account in our 2021 guidance. We are cautious, as usual, but we're fundamentally confident. So on to guidance for '21. In Residential Real Estate, we prudently expect the French new homes market to be flat in '21 compared to '20 on the back of this challenging supply shortage, which Véronique described, with Nexity's reservation being around -- being stable around 20,000 bookings. In Commercial Real Estate, we set a target of at least EUR 400 million in new orders, in line with the average order intake of Nexity in recent years, but quite decent in the current market for new offices in France. In terms of revenue, we expect to reach at least the same level as in FY '20 at constant parameter, so around EUR 4.9 billion. So you could say no top line growth, yes, indeed. But please keep in mind that our 2020 figures include an exceptionally high contribution from Commercial Real Estate, which will move back to a more normal level in '21. So that means actually double-digit revenue growth expectation for resi and single-digit growth for services in '21. In terms of the current operating profit, we expect to reach in '21, the same profit level at the one we had in '19. So our guidance is at least EUR 350 million, roughly plus 25% growth, and an operating margin above 7%. We expect, as I said, to finalize the disposal of Ægide-Domitys this year. This would reduce our revenue base but will be accretive short term to the group operating margin and will significantly, as we said, deleverage our balance sheet. Based on that, the Board of Director of Nexity set the 2020 dividend at EUR 2 per share, same level as last year. This amount is just below the 2020 net income, so a high payout ratio. But it's far, far below the very, very strong cash -- free cash flow, which Eric described a couple of minutes ago. So it's a level which is very sustainable in light of the deleveraging of the company and of its financial structure. Thank you. I guess that's all, and we are now ready to take your questions.

[Operator Instructions] We'll now take the first question from Pierre Clouard at Kepler Cheuvreux.

So I have several questions. So how do you want to proceed one by one or...

One by one. And maybe you can announce the total number of questions, so we are mentally prepared.

Let's say just 20, don't worry. Don't worry. No, no, 3. So I'll start with the first one. So just to make sure of one thing in Domitys, so you want to sell Domitys and keep the development part of Ægide-Domitys. But Domitys has never been profitable over the past 3 years now. So I see that the net assets for Ægide-Domitys were at EUR 73 million. Is it included Ægide or not? And are you confident to achieve this level of price for the business, so for Domitys? And just to make sure one thing, what is the targeted operating margin on the Domitys today?

Okay. So to be clear, we are selling the whole business, Ægide-Domitys, which comprises a development arm, which is currently consolidated by Nexity under the development business; as well as Domitys, the services company. To make things a -- things are a little bit complicated. So I would say that 50% of the development is, today, made by Nexity, consolidated by Nexity, with Ægide being the minority partner. So in a way, what we will sell for this part are the minority interest of our own development. Ægide is also doing development of its own. And this part is going to be sold as well. It's important because it's an integrated company. It would have been complex and probably -- yes, it's self-defeating to sell only the services part. So the -- their own development arm will be sold, but it will come together with the strategic partnership, which I mentioned. And then it will depend on the negotiations with the ultimate acquirer. But overall, the idea is that Nexity will at least keep its own part, what it's doing today and what it consolidates today. And maybe it will play a larger role in the development, which is today, carried out by Ægide on its own. Don't hesitate if it's complicated to ask some further questions. Second, Domitys, the pure services part has never been profitable. That's true, and that's really explained by the very high-growth model of this company, which we discussed several times. And with this, let's say, important proportion of young residences, residencies which have been recently opened, which are operating at a loss. But whereas the major residences, which have been opened since more than 2 years, are actually profit making. As time goes by, and I'm quite certain of that, we will see a mechanical improvement in the operating margin of this business, just because the share of the major residences will increase year after year and, therefore, will dilute the negative impact of a younger residencies. What's the EBIT target for, let's say, this services part, it's at least 7%, with EBITDA targeting something like double digit. And finally, what was -- oh, the price. We won't give you the price expectations. You can refer, of course, to the previous deal, which we made in 2018 when we acquired the majority of the capital. So our price including -- included quite logically, a control premium. You can also look at the historical price of the asset in our financial statements, which is pretty low. But we have expectations, of course, normal expectation in terms of pricing. It's more a mix between the price, finding the right partner and getting the best strategic partnership for Real Estate Development going forward. Okay. Is that clear or do you have...

Yes, yes, it's clear. So the EUR 73 million is not the best case, it's the worst case then.

EUR 73 million? No, it's on the -- it's a minimum case in our assets held for sale. So...

It's the worst case then.

We are not compulsory to make the disposal of this sale. And that's only for the classification of IFRS 16 that you can see that's a figure, but not the price to be sale.

Okay. Okay. Okay. Just a question on the building permits and on your expectations for 2021. It would be nice to have probably your view on the building permits as it's been very difficult, let's say, in 2020. So are you expecting any improvements in 2021?

I cannot say exactly in which size we expect an improvement. But for sure, there's an improvement. We see more permits coming since last November. So the situation is improving. The reality of the situation is that really we get -- mostly, we get our permits, but it just takes much more time to get them. That's the reality of the situation right now.

Exactly. So if you want to be a bit bullish, you can take into account the fact that in 2020, we filed the highest number of building permits ever, that's for building permit filings or building permits being actually obtained and clean building permits, which means that the -- all the potential claims of third parties have been voided. We had a relatively low number, but which makes sense, first of all, on account of the pandemic; and secondly, on account of the very long and protracted process of a municipal election and the fact that many local teams changed. So today -- well, the situation was bad in 2020. Give you the overall figure for the market, minus 15% building permits obtained by the market. The figure was better for Nexity. If you look at what we filed, there should be an improvement. So we are not saying there will be less building permits, we're saying it's going to take a longer time to fully get them. But we are optimistic. The new teams, with maybe a few local exceptions of mayors, which may take a very ideological stance, but there are not that many, actually. And Véronique can provide some background on that. But overall, yes, it takes time, but the pressure of the demand is very strong and will be strong. To give you an example, the demand for social housing is a necessity in some cities, including some cities which are led by local councils, which are, let's say, green or green plus red or whatever. They may not like new construction from a sort of political point of view, but they know that they have to build more social housing for their local citizens. And in the French model, there is no social housing, there's no free housing done by developers. And the opposite, there is no pre-market housing if there's no social housing. And we're actually very good at combining the 2. So we cannot tell you, and we -- as I said, we made a prudent guidance. We cannot tell you when there will be a surge, but it will come in due time.

Okay. Okay. And my final question is on your strategy. So your level of debt has been largely reduced over the year. So are you searching on M&A today? Or are you expecting new things to be done in 2021? And if yes, in which area?

Too early to tell. We don't have any hot M&A topics on our radar. We did consider that this level of debt, which is a bit flatter at year-end with what Eric mentioned, with the, let's say, schedule of payment being quite favorable. It gives us a lot of options. First of all, it secures our dividend policy and potential further returns to shareholders. It gives us the ability to buy more land. And land acquisition is really the name of the game. If including doing a bit more of land banking, we're controlling the risk as usual, but doing some land banking in order to push forward our business potential in prime areas which may be a little bit challenging at the moment. And yes, M&A could come on top of that. No big acquisition. But at the moment, nothing that we're really looking at.

[Operator Instructions] We'll now take the next question from Christophe Chaput at ODDO.

Again, I've got 2 sets of questions, please. The first one is on the residential margin. What was the impact related to the shift of the client mix and the higher share of institutional investor? And then when I look at 2021, basically, you say that you should be back to the normative. Is that -- I mean, the impact of the institutional investor will be more or less the same than the one we saw in 2020? Is it correct in terms of assumption? That's for the first one.

Maybe let's start with the first one. Thank you, Christophe. I guess, Eric will start and if we have some other comments we will chip in.

So far, we have no real impact of the change in our mix client in our P&L, because as we localize the result with the completion method, we have not had a lot of deals from some newer bulk sales. So that has no impact in our P&L. Our P&L was much more impacted in 2020 with COVID-19 crisis, so that it can have a little impact in P&L. So in 2021, we think that we have less impact from the sanitary crisis. And yes, we can have the slow impact in our operating margin from the clients with more bulk sales. As we said before, about 20% more sales in bulk sales with normal clients can be a strong -- a slow impact of about maybe 0.5 point level of margin. So we think that in long term, we can also have improved mix in our rate of margin because we have better deal with investors, and we can also have remediation in our cost so that we can keep our margin at the same level.

Absolutely. H2 was -- well, H1 was poor, but H2 was pretty good in terms of margin for Residential Real Estate, you can make the calculation, but it's something around 10%. The normative or normal level, which we are targeting, that's our previous level, that's still 9% to 10%. It's something that we've achieved in the past. It's something that we aim to achieve again in the future, in the near future, when we are really past the impact of the crisis. Something important to mention is that we didn't change the minimum margins, which are set by our comité d'investissement, investment committee. So we have different hurdle rates, and we didn't change them. We don't think that because the market has changed, we should make a lower margin. And the last point is that, yes, of course, we don't -- I don't deny the fact that, normally, the level of margin is a bit lower for institutional clients compared to individual clients. But we're not staying idle. And the first reason why we may be cautiously optimistic on that is that there are not many products and there are many buyers. Today, well, we won't give you the client list, but we sold a lot of plots to CDC Habitat, Action Logement in'li, a bit to Gecina, a bit to Swiss Life, people like that. But many other investors are, how could I say, queuing in front of Nexity's office virtually. And we can try to use positively this competition in order to keep up our margins in this -- with those clients. Do you want to add something to that, Véronique? Another way -- another reason why we can work on the improvement of the margin with both clients is if we go not only for a pure transactional approach, if we move into partnerships. I briefly mentioned that we have an institutional client group, which is now fully formalized. Véronique is chairing this committee. We are setting up an organization. And when we have partnerships, well, then we have the possibility to define very, very upstream, the way we are going to work with institutional partner. We set the specifications together. We try to source land, which is really ideal for this kind of product. And in a way, we can work in a more standardized fashion, which is normally good for the margin. It's difficult to make some really long-term forecast for the different drivers of the margin, what will be the evolution of land prices. So these are not going down in prime areas, but for sure, construction costs -- we did not have a question yet. So very, very short term, they are more stable than before, but we're going to have the new energy efficiency standards, which will go into the other direction. So many parameters playing a role. But on the institutional clients, we strongly believe that their comeback to the market is not just cyclical, it's structural. It's a real shift in the demand. And we are doing everything we can to take this into account and to defend our margins.

Okay. And just a quick follow-up on the EBITDA. So you seem to already booked 5,000 units in 2020. And so the balance of the contract, which is higher than 7,000, will be booked in 2021. That is...

Excellent question. But the reality is a bit complex with EBITDA. There is the framework contract, indeed, a bit more than 7,000 units which we signed in April '20. On this contract, we booked close to 4,000, something like that. And the rest came from the past contract signed in '19. And we tend to sign to have a perpetual renewing of contracts. So on the most recent one, we have still more than 3,000 units to be booked in '21, which will support our business.

We'll now take the next question from Marie Fort at SG.

Yes. My first question is again on Ægide-Domitys. Shall we factor some exceptional costs this year linked to the sale of Ægide-Domitys? First question.

Exceptional costs. Well, there will be some transaction costs, if the transaction happens, but we sincerely hope that they will be offset and more than offset by the potential capital gain, which we can't give you because we didn't give the target price to your colleague. But we really believe that it's likely. And just, by the way, in our operating profit guidance, it's a current operating profit guidance, which means that if we managed to make some capital gains on the sale of the assets, it's not part of this EUR 350 million figure, it's on top of that.

Okay. And also for the services division, do you expect at some point to present new strategy or a new road map back to your new management?

It's not really a new strategy, actually. First of all, well, getting rid of the impact of the crisis. But normally, as time goes by, this will move away. And it's just, I would say, better execution of the previous strategy on different levels. First of all, client satisfaction and new client conquest, gaining new clients. We are conscious that we still have a churn and we said in 2019 -- 2018, sorry, at the Investor Day, and you were with us on ID that the churn was behind us and that we would be in a positive organic growth mood. We didn't manage that. So we are changing the team and changing the tools in order to achieve that. We are confident. Secondly, indeed, achieving the transformation of the business, but which is not purely cost-cutting. It could be even investing in the first year and then reaping some gains, efficiency gains. It's something that we believe we can do. And it's also about developing new products, particularly on the environmental side of the business. And of course, as I said, having a higher intensity of synergies and cross-selling between services and development. So we are not pleased with the margin for services, which we are showing for 2020. A large part of it is linked to the crisis and another part to restructuring cost or transformation cost. We should be better off, of course, in '21. But for '22, '23, there is -- certainly to come back again to our normal margin level for services, 9% to 10% EBIT, the ones we achieved in '18 and '19.

Okay. Also, could you come back on the Engie project? I saw that it has been a bit downside by 30%. Just -- I'm not sure, but was it already in your backlog at this level? And is this move from institutional investors to downside the program are shared by other clients on the commercial side?

On this business question, I will let Véronique answer you. But frankly, it's not because we are in a good mood today, but frankly, we are really seeing the half-full glass, which is the fact that we didn't lose any single investor and any single user on any of our commercial projects. And I don't think many of our competitors can say that today in Commercial Real Estate. You can think about some very, very mediatized project, which was launched without user and without investor, close to La Garenne-Colombes, but very detailed. Secondly, in terms of the Engie campus, yes, it's smaller and it makes sense. Every user is asking themselves this sort of question, what's going to be the impact of remote working, what's going to be the post-COVID office. And the fact that on top of that, Engie changed its governance and changed its group perimeter, selling about 2/3 of the group businesses. And despite that, half-full glass again, they kept close to 80% of the total square meters. In terms of the backlog, well, it was in the business potential and now it's partly in the backlog and partly it's been already invoiced. So it's partly in the 2020 revenues. There were really 2 things. First of all, a slight reduction in the size of the campus. But secondly, we renegotiated our agreements with Engie. And beforehand, we were codevelopers, joint developers and joint owners of the land plot. And they decided, as part of their new strategy, to be only a user. And therefore, Nexity took over 100% of the project. And overall, I think Eric, we had EUR 1 billion in the potential and it's still EUR 1 billion, the 2 effects offsetting each other.

Yes, if you are talking about the figures, we make order intake for EUR 1 billion, EUR 400 million in revenue 2020, so that we have more than EUR 600 million in our backlog. And for the next development in potential, we have EUR 300 million to EUR 400 million potential revenue when we make the commercialization for the following of the existing program.

Exactly. That's the good news, is that we have more square meters to develop in the future, but not necessarily going to come in the next few months. But we are really in a prime place, which is going to gain in attractiveness with the coming -- with the start of the building of the Engie campus this year. So despite the current crisis, we think it's a great place to build offices, and it's also a great place to build housing. But it's something that will be part of a long-term dialogue with the local authorities.