Nexity SA (NXI) Earnings Call Transcript & Summary

Good evening. Thank you for being with us. Around the table, we find the same people that were here last time, Jean-Claude Bassien, Deputy CEO; Helen Romano, Vice President of Nexity Residential Real Estate division; Nadia Ben Salem, Deputy CEO in charge of Finance. And of course, we have the entire communications team here with us as well. Allow me to introduce this webcast. We don't always do that. But I think it's a good idea. This time, we need to talk about the macroeconomic context. I want to define that macroeconomic context in the following 2 ways: we're going to say a few words about the economy at the end of the day. Today's economy, today's world is different than what they were last time we spoke. And of course, as you will know, there is so much uncertainty these days. So I think that in economic terms, in recent years, this hasn't happened very often. I think that the level of uncertainty has reached its peak. So if we look at GDP and inflation, here, we're looking at OECD's forecast at the end of last year, sorry, in March and then again in June. So what's interesting to note is that -- okay. So the red line is June. And the gray line is March. And what you can see right away is the growth prospects have been reduced by half since March, but the forecast for inflation have doubled by 2022 and almost tripled by 2023. So the world has changed, particularly when it comes to inflation. As you well know, in our line of business, at the end of the day, inflation and unpredictability because that's what we've been through, unpredictability of inflation has an impact. And in particular, this is increasing the level of complexity and slow it down quite a bit work this slowdown or sales and the pace of works. So we have addressed this level of unpredictability. And then we'll get back to that in a minute. So we decided to be cautious. At the end of the day, we reviewed all of our operations, and we started only those projects for which we have secured the construction costs. So you probably remember that at the end of the day, we don't really work with major construction companies. We only do it when we absolutely have to. But most of our projects are meant for SMEs, not in Paris, but also in the Greater Paris area. And in April and in May, those SMEs were faced with actual or expected rises in commodity prices, the president of the French construction of Federation actually talked about it. So we took the time to work with all of our partners and whenever possible, we worked on prices as well. In other words, we renegotiated whenever that made sense. We've renegotiated bulk sales prices so that we could pass on part of those rising construction costs, we also increased the sales prices for individuals whenever possible. Obviously, all of that took time in Q2. And I think we can safely say that in Q2, the crisis in Ukraine has had deep consequences on the projection of new housing, but we hope that, that "hot streak" and there has been some occasional speculation. We're hoping that impact is going to subside in terms of calls for tender. I'm hoping that the response will be more normal in the future. So we're hoping that "the river is back in its own bed". So construction starts a stagnating in the entire market. So -- but we did a little better than the market, so plus 4%. And also, what's important is that sales of new homes have dropped by nearly 20% in Q1 2022 because of a number of factors, but all of those factors have a common denominator, and that's the high level of uncertainty. So on the demand side, so I'm talking about household, there has been a succession of crisis and shocks. The epidemic, the geopolitical and economic problems have caused a strong erosion in consumer sentiment which reached a low point in June. So inflation reduced the real estate purchasing power of the most vulnerable households, so real estate credit rates are going back up. This stood at 1.38% in May, 1.48% in June for 20-year loans and 1.59% for 25-year loans. So what does this mean in terms of our market today? The disenfranchised and the younger generation are stopped from buying homes. So there is a paradox in this context. But it's also important to note because, obviously, we always look at that from the point of view of our property management services. There's a chronic shortage of production in terms of new and renovated housing units. So there was a crisis, and there's an uncertainty, an immense efficiency, and this is creating tension and we're seeing this in the existing home market. And the uncertainty is spreading very quickly. And because it's harder and harder to buy your own home, the tenants are more and more reluctant to leave the apartment that they're renting in order to buy their own home. So the supply of apartments is dropping minus 13% over the past year. And if you look at 1 room apartments, which are highly sought after, the drop comes to 17.5%. So whenever you have something a property to rent, you find that the level of demand is 32% higher than last year. So that's the trend on the market, more and more demand and less and less supply and reduced purchasing power for the entire society, particularly the younger generation and the [indiscernible] franchise. We'll get back to that on Investor Day. Obviously, we try to bridge both markets and we will discuss that at greater length next time. So a number of key figures. I'm sure you took a look already. Those figures confirm the trends in to 1 the new home market is down by 20%. Our bookings are down 9% in volume in H1 and commercial real estate, as still at low point as expected, services are increasing quite a bit, plus 9%. The pipeline is constant 5 years. So we are at a time of consolidation. And this brings in a new project, small property developers who were unable to finish their projects, and we are now stepping in. So if we look at our financial performance, our first half sales were down 5% compared with last year. Obviously, last year, you probably remember in terms of commercial real estate, we sold our [ huge ] headquarters in January last year. So sales increased by 1% if we exclude that impact. So margin is down to 5.6%. It was 6.4% last year at the same time. And that's because we decided to be cautious in terms of our balance sheet in detail. Sales in residential real estate are down slightly. And in commercial real estate, we are doing services are doing pretty well increasing by 9%. Commercial real estate is down by 43%. So what about the guidance for 2022? There's the level of uncertainty with the next 2 months, which is rather high. It is true throughout the economy. We want to bring our prices under control on margins as well and our operations. As you all know, the property, the [indiscernible] market is all about risk management. And that's what we did in the first half, and we will do that in the second half of the year as well. It all depends on the level of revenue of our customers. But within this context, the guidance stays at 14% market share. But our assumption is that the market will no longer account for 150,000 housing units, but rather close to 130,000 housing units, of course. We will take our own market share out of that of EUR 4.6 billion constant relative to last year and also our recurring operating margin is about 8%. A little bit of background information, if I may, what [ if a thunder ] is striking over and beyond the figures, is that push the need for housing in our country. That's something we can discuss. And as soon as we stop building new homes, this looks the rental market. So there's a structural need for homes between 500,000 and 600,000 housing units a year. And so we're talking either new homes or renovated refurbished homes because in real life, Nexity operates in a continuum of housing units. Some of them are new and the others are fully refurbished. And we can [ rebuild ] about 380,000 housing units on average, have been doing over the past 10 years. So because of population growth trends we expect over 3 million households by 2040. But substandard housing is also a problem. The Aditya Foundation [ cheaters ] to those our people. We have 2 million of social housing seekers. And between 3 million and 4 million people have substandard housing and we've been saying from the very beginning that the climate and resilience legislation is going to be a problem. We think we need to move fast. And when it comes to that legislation because we provide property management services. We know that time is short. We know that you can no longer increase rent for FNG-rated housing units from 2025 unless you've done the refurbishment work. So we find that there's a lot of people who have homes that they want to refurbish and they can never afford that refurbishment. It's a risk. We've said that from the very beginning, this will crowd out a lot of potential clients. And we're starting to tell ourselves that those problems need to be addressed, because there are existing homes that will be crowded out of the market. So there's more seepage between new homes and older homes, between new homes and refurbished homes. And we are ready to do whatever it takes because, as you know, we do property development. We do new homes, we do refurbished homes, and we do property management services. We do it all. So unfortunately, you know how the government works. I know that I spent some time on the other side of the fence, so I need to be careful what I say. But there are growing constraints on the market. And at some point, the government will need to get the job done. So all of these crises can also serve as opportunities and I firmly believe that we are at a time when the market is being consolidated. We have taken an equity holding in the Angelotti group. It's very much in line with our strategy, a strategy that was defined last year. And we want to focus our M&A in strategy, in property development, in areas where there's a lot of activity. Occitanie is 1 such region. So Angelotti is a group that provides excellent products. They have a great presence in Occitanie. They have a pipeline that is worth 6 years of revenue. And so we are very happy that we made this acquisition. At the end of the day, this gives us a foothold in the South of France because we really work in the North, right? And we are busy to welcome Angelotti's culture into the fold. Now the market is being consolidated, as I said, but it's not just down to M&A, to my mind. Today, property development is a market that is becoming increasingly complex. When it comes to work and supply, we managed to get the job done. We're very busy. Our construction business back in April and May were extremely clear. When it came to wood frame buildings, we had framework agreements that we had signed before that time. So whenever we had a supply problem, we were able to shift back [ a fall ] between different contracts. So that's because of our scale. That's because of our size. And also what helps is that we understand the RE 2020 environmental legislation or regulation, which is not necessarily the case of smaller players also, and this was extremely useful and will be even more useful. In H2, we have a lot of salespeople at subsidiary level. We have a portfolio team that deals with prescribers. And we have our services business because we sell new homes directly to some of our tenants that we believe are ready to buy new homes. Also, clearly, we will need more and more equity. And at the end of the day, how should I put this? We have around us a real network of small property developers who come to us. They want planning permits. They want our help, securing those permits. And over the next few months, there's going to be a real movement, a movement that is inevitable. The property development market is being consolidated. It's inevitable, and we're getting ready to take our share and even more than our share. So that's what I wanted to say to you. Over to Helen when it comes to the residential market.

There was an expected rebound in building permits, and that rebound in building has -- did take place for collective building permits. There was an increase by 18% of building permits grants between January and May of 2022 versus the same time last year. And this curve shows that beautifully, although we haven't yet reached the peak we saw in 2018, but there's significant increase. Increase in building permits for new housing and rent new housing in Nexity has gone up a bit faster than market, up 19%. This means a very good potential for supply. But this is being held back due to the increased inflation we heard previously about the inflation point. Supply, there could be increased supply due to this good momentum in building permits, but will help this back was inflation, construction costs went up by 7% over 1-year period, April '21 to April 2022 after many years of relative stability in construction costs. Therefore, that's the backdrop. And as Véronique said, we decided to do as best we could to negotiate our works contracts to preserve our margins. We optimize projects at framework agreements, partnerships with small and medium-sized companies and so forth. We decided to secure the cost price of our deals before launching them commercially to be sure of the cost price and be sure that we could pass on any price hikes to the selling price. The commercial offering was slightly weak and lower than expected beginning of 2020, down by 12% compared to H1 2021, due to the postponement of some of the marketing. The postponed production from the half year, the production was postponed for the same reason to renegotiate construction costs. And this meant we had to negotiate selling prices, particularly selling prices for reservation contracts that have already been signed with the social housing operators. These were postponed in the time to renegotiate the contract. But there's a resumption now to the tune of 4% in Nexity now versus as Véronique said, a stable housing starts market in collective housing been a minus 4%. So we've got plus 4% Nexity collective housing versus housing elsewhere. We're being even more selective in our operations, which is then we've abandoned some of the projects when we felt that their profitability was jeopardized by increased selling prices and problems due to changes in rates and loans. We saw other products with small and medium-sized developers that were more in line with the building permits. So our estimate is the market will be down versus 2021, 150,000 housing units at the time. We feel that due to the drop in the loan applications were around 14% over a 1-year period. And due to the figures given that the AFP in the first quarter, we're seeing a drop of minus 20%. We're thinking we'll have around 130,000 housing units, which would bring us to a similar number of units as in 2020. I'd like to talk to you briefly about the customer mix. It's well balanced. Selling prices continue ticking up. Reservations stood at 7,639 new houses or renovated houses, down 9% volume. But remember, in Q1, the market had gone down by 20%, 5% in value. Retail sales representing 63% of the reservations proportion is very similar to last year, where it stood at 66% in the first half, down by 11% due to -- retail down by 11% due to constrained supplies engine previously. The cancellation rate, we should keep a careful eye on has remained stable, the same as we observed in recent years. Selling prices up by 3.7% in Zones A and B 1 where we've got the bulk of our production, 80% of it. Bulk sales down 3% in earlier, as mentioned, due to the length it takes to negotiate sales prices with the social housing operators. Most of these do come to fruition, though, and we're expecting things to speed up in the next half of the year. Commercial real estate, there's not a whole lot of completed stock and commercial offering. And we got a similar amount of works in the pipelines in previous years. So very little risk in terms of our offering and no warning in WCR. 70% of operations still in project. Work not started yet, which means we keep it careful handle on pace of production to keep this in line with customer demand WCR in line with our WCR of H1 of last year. Over to Jean-Claude to talk to you about commercial property. Véronique talked to us about trends for our profits in this segment, revenue down 44% -- up 41% and let us say that on this point, we are exactly where we thought we would be considering market trends. The real question in terms of commercial property is where the market is taking us, where it's headed and how we can position ourselves in the marketplace. Firstly, what we're observing in this market as the outlook for commercial property is at a trough, a low point, end of 2022. This will remain at a low point probably throughout 2023. Why, therefore, when we're seeing indicators for market trends, why do we think there's going to be recovery when we initiated that? Well, if we look at the rental market, we see this as a rebound of 23% in terms of place demand for the half year period. The market is highly focused, though. There's a strong premium for central locations. The central business district, downtown areas up strongly, but not -- the entire marketplace is up strongly. So there's a split in terms of overall recovery. If you look at the granular way, the recovery is happening for small services. 70% of demand is for small areas below 5,000 square meters. Another observation we've made, investments in market up 29%. This is an indicator that would appear to look good. We're coming close to the 10-year average, the variance is only 4%. But in the market, if we're talking about owners, commercial owners, they haven't been repricing for the property risk. The liquidity is also [ less than ] vacancy rate. None of that's been repriced. So broadly, we're seeing a market where in terms of the commercial owners, they're in a wait-and-see mode. They're waiting to see what the repricing is going to be and that time will come because where property companies, they're going to have expert opinion given the end of the year, and there's going to be realigning of risk premiums and that realigning will continue in 2023 as well at the beginning of the trade-off of portfolios and arbitrages in subsequent years, this could be beneficial to a resumption in our activity in commercial property development. Now this issue of repricing remarking is 1 observation in mix. We're seeing a slight shift in value from products towards service as a slow shift from products to services. So we naturally, the question is, for us, what's our position going to be in these services. [indiscernible] of services, the major figures, you're familiar with them, you can see them on the screen and it's also in the press release, totaled EUR 421 million, up 9% compared to last year. We have to also remember a few additional figures, EUR 421 million, 22% of the group's revenue. Services activity only consumes 5% of our WCR. And if you look at current operating profits for this activity, EUR 36 million, that's a 1/3 of the group's profits in H1. So we can say that this is an activity where the group is being very dynamic. What are the drivers in the various areas here for services? First of all, property management. You know that property management is, first and foremost, to private individuals. Our lease is rental management and so forth. The first half is very strong here, 49% rents in revenue stable and up 2%. We're continuing to see the benefits of traction in transactions in the scope [ up ] 12% scope. As we said in the first quarter, we're continuing to see an improvement in the penetration rate, the monetization of the clients, particularly providing them with the insurance policies, and we're continuing to see good contribution rates here. Now property management, both commercial and stores. We've got 2 offer here. We [ MTMN access seat ] we're pretty much in line with our overall trajectory, slight delay in development -- sorry, in Commercial Property Management, which is offset by growth in stores, property management, social property management. Under distribution, second division here, distribution as you can see on the screen representing 30% of all of our services. Revenue up by 2% here. Now the important thing to observe under distribution is -- we can say that we've got a high level of performance in a number of marketplace, which is still a record high. We're seeing private investors or individuals. And this is a market that's still high, but we're starting to see the beginnings of a turnaround. What's the beginning of the turnaround? Well, in the first quarter, we saw that the market dropped around 15%. We're expecting a drop in H1 in the neighborhood of 15% to 20%. So in this marketplace, Nexity's performance in terms of our reservations in the scope is only down 10%. So the relative performance is much better than the market performance for pretty straightforward reason. We see some third-party developers, some inventory liquidation of the stocks, the company see us to market to liquidate their inventory is [ able ] to enhance our performance. To talk about service properties here, we've got 2 main activities, student residences studio, 129 residences, 16,323 units, revenue up strongly, up 13%, profit up 15%. This great performance, thanks to the improvement in occupancy rate, up by 4% from [ one half year to next half year ], occupancy rate minus 7%. We're outperforming better than the first half of 2019, which is the usual benchmark here. We're doing better occupancy rate than we had back then. A growth in profit was driven by the improvement in occupancy rates, but also driven by growth in overall facilities. We opened 6 additional residences which is equivalent of around 1,000 units. Morning co-working office spaces, this is an activity which is growing strongly as Nexity. The marketplace with the flexibility and leases and flexibility in office space offerings. Morning's offering is 34 operator spaces, 75,000 square meters, around 8,800 working positions. Revenue multiplied by 2.5 and profitable. The strong solution Morning driven by 2 things, core-business is co-working, which explains 50% of growth in revenue here. The other thing that's boosting Morning's growth in derivative product diversification such as offering outfitting to the client. These are 2 activities which explain the growth at Morning. One thing was the illustration of Morning's great business model effectiveness. Morning divided by 2 got have a ramp-up, but used to take on 12 months on average to retain an occupancy rate above 90%, mostly open to space. Now it only takes 6 months even more significantly during Q2, the 3 most recent sites we opened Q2 2022, has been speaking already full to the tune of 80%, 8-0.

Thank you, Jean-Claude. My name is Nadia Ben Salem-Nicolas, now our financial performance. But with introduction, I would like to remind you that Nexity finalized the strategic review in the first half of 2021 with the disposals of the Century 21 in Ægide-Domitys scripts. The H1 2021 results included the contributions and proceeds from those disposals and are, therefore, not directly comparable with the H1 2022 results. So those effects have been isolated in order to allow for a comparison of results between the 2 periods on a like-for-like basis. And that is those figures that I'm going to comment upon in the next few slides. Let's start with our income statement, line 1, revenue. So reported revenue were EUR 1.964 billion, down EUR 100 million from last year's revenues. This included the one-off contribution of the Reiwa order intake in commercial real estate for an amount of EUR 124 million, without which [ refund is ] a 1% increase, which reflects several dynamics work on the 1 hand, a slight down decline, a 2% decline in revenues from residential real estate, which is explained by lower volume of revenues from production due to the delay in our commercial launches and the start of construction, which has delayed backlog conversion into revenues. And here, I'm talking of a delay, it's a lag effect. There's no actual loss of revenue. And on the other hand, there is a very strong increase in services plus 9%. I won't get back to that. Jean-Claude did a great job of detailing, that services account for 1% of our revenue, 30% of our profits, and there's very good continued momentum. So profitable resilient growth over the past 18 months. So by and large revenue remains high and is increasing, excluding the commercial property effect, but this increase is lower than our pre-Ukraine expectations due to a cautiously slower start-up of production, [ which leads us ] just to clarify our outlook for revenue forecast at the beginning of the year. So that should remain stable or at least equal to the 2021 level on a like-for-like scope basis. Now moving on to operating profit, EUR 110 million. Next slide please. So EUR 110 million at June 30. The restated for the EUR 60 million base effect of the Reiwa transaction was down slightly by EUR 7 million on a like-for-like basis with again, 2 strong dynamics at work. On the 1 hand, there's a decline in development activities, so minus EUR 23 million, which is partially offset by an increase in services. And other activities corresponding mainly to holding company expenses. So in terms of residential property, operating income is the direct consequence of the delay in the Studéa operations. This has led to less revenue recognition, and therefore, lower coverage of fixed costs. And -- when it comes to continued operations, the margin rate remains in line with the normative margins for [ Cassadee ] Commitment Committee. So no difference here. In terms of commercial property, results were down as expected. In margin rate remained very high, 15%, still above the normative and expected levels for the year. And on the services side, as Jean-Claude rightly said, operating income is up by EUR 36 million, and the margin rate is increased by 180 basis points to 8.5%. Growth was driven by a triple effect operating businesses, a higher occupancy rate, a reduced shorter start-up occupancy at times. But this is lower this semester. By and large, operating margin was 5.6% at June 30. As you know, it is not representative of annual performance because in our lines of business, the margin rate in H1 is usually lower and given the different dynamics of our businesses, we are confident that we will be able to deliver in 2022 and operating profits with a margin maintained at around 8%. Now moving on to our net profit. As I said before, the operating income is the first line, and it comes to EUR 110 million, down by EUR 23 million. The net income group share comes to EUR 54 million, down by EUR 21 million. And most of the items in between are what you can see on the screen. But the net income has improved by EUR 5 million relative to last year. This a twofold impact, the drop in debt due to the sessions we made last year and also the drop in financial debt cost and that has dropped from 2.1% last year to 1.8% this year because of our active refinancing policy in 2021. And the tax charge was stable at minus EUR 24 million with an effective current tax rate of 27% at the end of June. This is a [ normal denominated ] tax rate. So after getting to account the results of equity in an -- company's minority interest, noncontrolling interest, net income group share was EUR 54 million, representing an EPS of almost EUR 1. So very few changes here relative to the balance sheet structure at December 31, except for the working capital requirement and our debt, which I will now comment upon. I'll start with the WCR. At the end of June, it came to EUR 1.3 billion, at June 30, mainly concentrated. As you can see on the left-hand side in the housing sector, so it increased by EUR 200 million compared to December 31, mainly concentrated in housing. This increase, as Helen readily said, is comparable to what we usually see in the first half of the year, which is always marked by a flow of expenses and construction sites that exceed receipts from customers during that period. And as you can see on the right-hand side, the WCR to backlog ratio is the indicator that we monitor to make sure we keep things under control, and this ratio remained stable relative to previous year, 18%. I believe it is important to clarify that over and beyond the occasional cash inflows and outflows, those figures reflect good structural control of our WCR considering the fundamentals of our business. Our commercial offer is low risk. As I said before, it does not include any inventory of completed housing units. In many concerns operations that have not been launched and therefore, they require little working capital or lead timer, time to market is very short, 5.4 months, and we are rigorously managing our land bank. And our land bank is not expected to increase significantly between now and the end of the year. As you can see, EUR 250 million at the end of June, and we have set a maximum envelope of EUR 300 million. Therefore, we are confident that the increase in working capital will be highly contained in the second half of the year.

I'd like to talk about net debt for the group before lease liabilities, EUR 878 million as of end of June, up about EUR 280 million versus the low point that we booked at the end of December 2021 of EUR 598 million. This increase is mainly due to 2 things. I'm not going to go through each of the bridge lines, but there are 2 main points. First of all, increase in WCR around EUR 200 million, I just mentioned that plus second point, 100% impact of dividend payment, EUR 138 million for less than 50% of the EBITDA generated per annum. So it's a sound debt level. The leverage -- financial leverage is 2x -- 2.3x EBITDA as of June 30, in line with expectations already announced, well below thresholds of our bank covenants, which is at 3.5x EBITDA, as you know. This level of debt is a high point of annual debt. End of year debt will be under control. The order of magnitude of 30 June due to our expectations for the second half, acquisition of Angelotti expected by the end of the year should impact our net debt to the tune of less than EUR 100 million. Last point on our financial structure. As I said, it's very sound. Change in net debt was mainly financed by reducing cash-on-hand going from, as you can see on the chart, on the left-hand side, EUR 1.1 billion at 31 December to EUR 914 million at 30 June. This is still a very high level over EUR 900 million in cash. In addition to this, the EUR 600 million in credit lines that are confirmed and not drawn. Gross debt mainly is at fixed rate, I would specify 56% of it is fixed rate, which very much reduces our group's exposure and to any financial expenses, if there are any increases in interest rates in the future. As you can also see on the right-hand side here, there are no significant repayments, no maturities over the next 2 financial periods. Cash flow, this is Slide 31 to wrap up the financial portion of the presentation. Cash flow after rent payments, EUR 125 million as of end of June, overall comparable to the contribution in the first half of last year, mainly due to the income WCR. Free cash flow, briefly negative, minus EUR 137 million. Correct for some of the nonrecurring last year related to customer advanced payments and the major orders in commercial, Reiwa and also Garenne-Colombes. Also due to the full effect, EBITDA effect and less consumption of WCR in the second half, we're highly confident that we will generate cash flow yet again by the end of the year, positive cash flow generation. Those were the financial points, the highlights for this half year. I'll give the floor back to Véronique for conclusions.

Briefly, by our conclusion, we've understood that we've really tackled the points from Q2. We've been firm, clear sited. We set up the necessary precautionary actions to contain risk. We didn't do commercial launches without knowing full -- well, what the construction costs would be. You also saw -- we don't have inventory of built housing that hasn't been sold, no inventory. So we've really contained risk. We've worked on margins and also on our ability to recover. We've got the resources, significant resources to speed things up when the time comes. And as you realize, we very much intend to benefit from any and all opportunities as they arise. So the conclusion, the upshot, Investor Day will take place, you received the invitation, I believe, already, on 28th September at Paine Gabrielle. We'll also go out to Santua to show you what we're up to out there to build the city. That was our presentation. We'd be very happy to field any questions you might have now after our presentation of our half yearly results.

[Operator Instructions] First question, Gilbert Dupont.

Just a couple of quick questions. The first one, you're saying that net debt is stable end of the year compared to 30 June. I didn't fully understand. Does this include the cash out Angelotti, EUR 20 million? That was the first question. Second one, what about H1 reservations? Give us an idea, what's the gross margin or operating margin inherent in these reservations to check that these are in line with the previous situations? Another question for clarification. In H1 commercial launches, were any of them abandoned? If so, what were the related costs gave up things that had already been launched commercially? One last point, if I may, on commercial property, EUR 900 million. Could you specify how those translate into revenue over the next 3, 4 years?

To talk about net debt, yes, fill that question. First of all, what I was saying is that end of June, we had that figure EUR 878 million due to the full year effect of EBITDA and then were consuming [indiscernible] in the second half in likelihood, end of your debt should not be above the debt of 30 June. Like-for-like, same scope. Leverage ratio, therefore, should remain well around 2x. That will be the impact of the Angelotti acquisition. This should make a strong contribution to results due to the timing of closing. The impact on the income statement, but in terms of the net debt, the impact would be just under EUR 300 million -- EUR 3 million, sorry, impact, EUR 3 million. Yes, we talked about other points as well.

Now to talk about operations that may have been launched -- commercial operations launched, should we actually give up abandon anything that already been launched?

The answer is no. But Helen will really explain this.

Nothing abandoned with building permits compared to previous years. Anything given up was in very early stages, mainly, it was just some research costs, lower research costs that we gave up or lost. Asking about margin loss, I believe Véronique and myself did already comment on the point. No doubt about it. We've decided to actually market operations when we had full control of cost to price the jury as possible that led to a slowdown in our overall product offering precisely to preserve the margin to no full all the cost price to go to pass on the increased cost in construction costs to the final clients, whether you're talking about retail clients or social housing managers. Yes, backlog for commercial about 3 years' worth is construction operations that are underway, mainly backlog for construction, La Garenne-Colombes in line with our forecast. Short term, in terms of revenue in 2022, we're expecting a low point around EUR 400 million in commercial real estate. The backlog will then be reduced over subsequent years improvements in 2023, significant improvements, thanks to La Garenne-Colombes in our figures. Are there further questions?

No.

There are no further questions in the queue. [Operator Instructions] We have a question. The next questionnaire from Kepler Cheuvreux.

I'm from Kepler. A question on your guidance. I'm not sure I fully understood guidance, revenue equivalent, excluding sold activities, divested activities, around EUR 4 billion -- EUR 4.6 billion last year. Now if the premises operating margin, 8%, that's EUR 370 million. So there's a drop in guidance on operating income, right?

There's a drop in guidance on revenue, which has an impact on margin, but we're also seeing around 8% or approximately 8%.

But just to be clear on that one, follow-up. There is an adjustment in profitability for 2022?

No, absolutely not. We explained this to you. Overall, yes, the profitability -- we're not in the same meaning of the word. I think we explained at length that we are taking the time it takes to control risk and to preserve our profitability and our margins as we did in Q2 consequences, some revenue necessarily will be postponed and shifted to 2023. Broadly, we're seeing that our revenue will remain stable versus last year, but the margin on that revenue remains the same.

We have no further questions in the queue. I'd like to give the floor back to our speakers to conclude.

Thank you very much. Thank you, one and all, and we'll all meet together at Paine Gabrielle [Audio Gap]