Nexity SA (NXI) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the Nexity Full Year Results for 2022 for Nexity. [Operator Instructions] And now I'd like to give the floor to Véronique Bédague, who is our Chairman and CEO. Véronique, over to you.

Hello, everyone. Thank you for joining us this evening. Here, we have Jean-Claude Bassien, Nadia Ben Salem; Eric Lalechère, and Stephane Dalliet, who is in charge of Residential Real Estate, and he will be participating in our conference call this evening. And of course, we have our regular teams who are with us this evening, as I'm sure you would. As usual, it's part of our DNA really to discuss our objectives. We have achieved our 2022 objectives, but the economic conditions were quite different from 2021, of course. And despite the fact that the market turned around in October, Nexity was able to achieve all of our objectives with historically good results. You know very well the market started out before the war in Ukraine. In Ukraine, we thought that we would have a stable market with regard to 2021 with 157,000 units. And in July, I said I thought it would be closer to 130,000 and you thought that I was pessimistic, but we will probably actually have achieved 120,000. So you can see that the market has fallen off 26%. We have -- we talked about the new home market share. We expect it to be above 14%, and we achieved 15%. We talked about revenue, we looked at more than EUR 4.6 billion, and we reached EUR 4.7 billion and then we looked at the operating margin. We estimated, I think, around this time last year that you had a lot of questions about that, we anticipated 8%, and we have achieved 7.8%. So we consider that we have met our objectives. At the time, I didn't know much about what our indebtedness would be, but you know this is a subject that came under scrutiny in September. And we have reached 2.1x EBITDA, which is well below our strategic plan ceiling and much far below the 3.5% EBITDA level that we had talked about earlier. Last year, you showed a special interest in capital allocation. We talked about stopping international development, and we have halted some of this business. And we are slowing down in Poland, Italy and Germany. And we're looking at indebtedness of about EUR 200 million related to this international extinctive management. We looked at acquisitions as well, purchased cash. The landbank, the landbank remained stable at EUR 280 million. We brought in EUR 100 million new parcels of land, and I won't come back to this, but we did focus also on external growth in the French region of Occitanie, and so we have integrated this into the group as of last fall. A very important sheet. A very important point here is the indebtedness, which is under control. I told you that in September, when we met, I told you that I would ensure that indebtedness would not go beyond what we had experienced in June despite the purchase of Angelotti. And so indeed, as of 31 December 2022, it is EUR 820 million, that is 2.1x EBITDA. Today, there has been a loss of the speaker. The interpreter cannot hear the speaker. We seem to have lost the connection. I think that it's important to mention some of these points that our bankers are well aware of our business operations and our accounts have agreed to extend our credit from EUR 500 million to EUR 800 million. So this credit line extension is proof of their conviction that we are a solid group. And another important point is that our traditional banks [indiscernible] BPCE, and I think I've forgotten some and 2 new banks have asked to join the pool of lenders. This is very interesting. So we now also have BNP Paribas, which is a very solid bank and also the [indiscernible] which is a very cautious bank. So I think it's interesting to see that our pool of lenders ensures that our -- we will be able to continue our financing because we have a very good group of French banks backing us. We can talk about this later. It's also interesting to mention that our corporate and social responsibility has also been reinforced. And the debt leverage, which is included in our covenant is 3.5x EBITDA. But as I said in September, we have agreed not to go beyond 2.5x. And as you can see, indeed, at the end of the year, we were at 2.5x EBITDA. Then we're looking at the pipeline in France for visibility. You can see that we have some tertiary. Most of the backlog is in France. So we can see there's quite a bit in the pipeline about EUR 22 billion and that is that we are really reloading our capacity to do business. The market is changing. Real estate is changing, and we are quite ready to engage in this new market because we do have land and real estate that we will be able to put on the market and put the products on the market that will be welcomed. And I would say the last point in my introduction is a very important point. We achieved our objectives and so naturally, we have offered the Board and the Board will extend to the general assembly for 2022, EUR 2.5 per share in dividend. This will be suggested at the meeting in May 2023. Stephane, would you like to step in now?

Turning now to the residential market in 2022, you need to look at it at 2 periods, different effects, but the same consequences. First time half with weak offering for all developments, difficult to obtain planning permits but also difficulty to identify the cost of deals with construction costs rising sharply since the Ukrainian crisis that has shifted certain marketing plans. And in spite of sustained growth of volume lower than that of the first half of '21 minus 16% in Q1 and minus 22% in Q2. The rebuild demand very much wait and see approach a major reason, a sharp hike in mortgage rates times 2.5 in a year, offset by an extension of the mortgage loan the year -- the loan period has increased by 6 months, but also with the granting conditions that are a lot more constraining than on the reservations market, a very sharp drop in acceleration of the decline in Q3 and Q4 lending. First estimate, a market at around 100,000 reservations versus 162,000 in '21, minus 26%. Next, at the end of Q1, we saw a decline in the number of contracts, a decrease in the conversion rate, revealing a financing issue and a certain wait-and-see on behalf of our buyers. We immediately anticipated the market difficulties and shifted part of our commercial offering to individuals to our institutional partners, be they social or private landlords. And so retail sales, we were able to outperform on bulk sales and to outperform the market and to gain market share. For over 10 years, Nexity has always grown its market share. Whatever difficulties at the moment even now performing when the market becomes even more challenging, and we see that in 2020 result of our agility anticipation allows us each and every time to face these difficulties and there's no reason for us not to have the same ambition going forward. If we look at the product, we're at 54% of bulk sales, retail sales, as I said, we followed the market trend, but we limited the impact in value only minus 19% linked primarily to the rising average cost of home in the first half, 2.4% in the Paris region, 3.2%, the region. That's an increase of 2.5% on average. Bulk sales or partnerships with institutional clients, but also new private investors allowed us to outperform by offering products, meeting their needs, outperforming both in volume but above all in value. We're seeing an increase in the average price of 13% linked to a different geographic mix and a new offering, including the build -- increasing rents, delivering expected profitability, improving the average sale price of the home since we have rebuilt our commercial offering, thanks to an increase in delivering a planning permission because we've seen the 16% in planning permission versus '21. We have a sound commercial offering, really not exposed to market fluctuations. 70% of this offering rests on deals that have been land that has not been acquired and construction not started on all these transactions. We can either redirect our bulk retail mix or to reconfigure transactions if needed. Over Jean-Claude.

Thanks. So I'll start with Commercial Real Estate, which since the COVID crisis, as you know, is experiencing a significant market dip that continued into '22. Now just to illustrate this as a metric, we have the investment trend, which overall is down 2% versus the previous year, but still not back to its this senior average. And in Q4 the year was down 49%, which really puts a stop to this activity sector. With different lens for investment and investment that is more driven on regional cities and in the Paris region and a second trend that's underway on this business set is that of transformation of usage is very profound that forecasting over the next 4, 5 years in anticipation of a decrease in traditional leases, 369 in favor of co-working space is set to rise sharply over the next 5 years, and we're in a situation to be able to capture this trend, and this trend really does illustrate something that we posted when we presented our Imagine '26 start-plan a shift of value from the product to usage of course in this residential market. Our commercial activity is suffering, our revenues down 23%. And our order intake on this activity EUR 190 million full year with a distortion reflecting the current market situation, regional predominance representing 70% of order intake. Now just to illustrate the fact that we're still in a position to deliver to the market, the products that they're expecting. We're moving forward on La Garenne-Colombes expected to be delivered in '24. We recently delivered a regional headquarters at Lyon Vaise. Final point on this activity segment. The fact that we have in the same activity, how both development and coworkers will be able to capture the market recovery will to mix as we announced as part of Imagine '26, our strat-plan, our product expertise and our usage expertise in terms of coworking. On service activity as well, here, we see a very strong growth momentum, up 10% top line, if I review the 3 segments: property management, distribution and services property by order of the revenue side. On property management, very good resilience of the business that in '22 began to reap up the impact of cost inflation offset as regards ADB by net growth in the number of units under management, which is an historic performance and good performance in terms of transaction offsetting the slowdown in rental in the second half. So ADP activities that is stable up 21%. Property management. Here, we're seeing competency between property management for companies, slightly down in revenue owing to customer demand that leading to a revision of scope and through an acceleration of commercial property management. There again, flat revenue. Distribution reflects very fine performance achieved. Now the reservations booked minus 17% as against the market, down 26%, very fine performance in terms of transformation of deeds for selection and pallets. So growth in revenue of plus 7% full year. The serviced properties growing strongly as we'd already stressed for H1. It's a confirmation of this very strong acceleration driven essentially by co-working on co-working. The prime activity, Morning activity has really -- has seen its revenue doubling. We're now operate 2038 spaces, average occupancy rate of 27%, making this activity growing strongly and profitable on student. Residence is very strong. Rise occupancy rate up 4 points, reaching 97% and the occupation level was almost closer to 100%, never seen before. So that's a revenue growth totaling 38%. The final point really just to illustrate our ability to deliver our commitments to the market and to adapt to the current market changes we identified as part of our Imagine 26 that the acceleration of eco renovation and ever-increasing demand for that. We're really well positioned to capture our leadership position for residential. We're very active for condominiums, 75 condominiums being renovated or under renovation, over 500 buildings in the study phase that we put in place. And for the landlords who rent, we have over 500 energy audits underway, all this to say that we have expertise recognized by the market that's meeting the demand of our clients. We have the same thing for tertiary where we're supporting 400 buildings, 2 million square meters to ensure that they're compliant with the tertiary sector scheme. It's a strong signal of our build to capture significant market share in a new demand expressed by our clients. Over now to Nadia for the financials.

Good evening, everyone. I'd like to begin by looking at the consolidated income statement and we will be able to easily compare with last year for 2021. It has been restated, including nonrecurring items and including Century 21 which came in last year. So 2021 included Angelotti, which took place in October, as Véronique said, but for insignificant amount -- nonsignificant amount because it only affected the last 2 months of the year. So the revenue was EUR 4.7 million -- EUR 4.7 billion, which was above what we had anticipated and 2% above last year. The operation -- operating profit EUR 367 million, which is stable with regard to last year's historic levels, with a margin of 7.8% was an objective around 8%. With regard to the income statement, we have an improvement of EUR 10 million given the active management of our indebtedness, and we've also improved our income expenses -- income tax expenses, with 28% compared to 38% in the previous year. We have about EUR 8 million in performance. And these are among the highest historic results of the year. 2022 has seen a strong turnaround in the market. And we have net earnings per share at EUR 3.40, which will be approved in the next Annual General Meeting in May. We have some key figures by business lines. And in particular, we see the growing share of Services 22% of the revenue. This is 4x greater than the previous year. And so we can see this is a growth sector. And we also have increased our income in regard to transformation. So we can see that the income is up 2% with different results in different business lines. Residential is up 3% over the year with a very dynamic fourth quarter, up 15%, and this is in particular with regard to reservations and transformation. International activities contribute for EUR 200 million to this, and this will not be the case in 2023 because we have stopped these activities. They have been extinguished. With regard to Commercial Real Estate. It has dropped as expected, just below EUR 400 million given that there was a very high basis in 2021 and that there were very few orders taken in 2022. But we can see the great operations that are currently in our backlog and the Eco Campus activity will certainly bring growth to this sector next year. And finally, for Services. Once again, this has been a driving force for our Nexity growth, and we have seen a good dynamic in -- this includes management and this should continue through next year, whereas distribution will certainly be facing a much less prosperous situation. When we look at operating profit by different business lines, we can see that all will have -- all business lines will have profitability. With regard to development, we have reached a stable level of profitability up 8% for residential, almost 12% in Commercial Real Estate and Services up 9.8%. And we have seen that the levels are higher than they had been expected. For Services, the profitability is in strong increase which is now almost at 12%. All of the service activities, management and distribution and operations have all seen their profitability increase in 2022. After that, now let's look at the balance sheet. As of December 31, we have a very good end of the year with more than EUR 2 billion. This is EUR 5 million more than 2021 and net indebtedness at EUR 820 million. So we have just about 2.2x EBITDA, as we had expected. The balance sheet is at a gearing rate that's 40%, which is considered moderate. Our needs for operating funds are about EUR 3 billion. Then here, we see working capital requirements. There are 2 messages here concerning the changes in this working capital requirement. The change, we see that the stable WCR, but it has increased. In Residential Real Estate, which is the main WCR for the group. This increase is related to a delayed starting of building projects and delayed offering of rental properties. And this is in the context of the current inflation rates. You can see that we're at a very reasonable rate for our backlog ratio. In the second half of the year, it remained stable for working capital requirements, and this is a reflection of the good management of our projects and the increase of collections at the end of the year, thanks to bulk sales, in particular. This working capital requirement includes the landbank. This is the last line of the table. And it remains stable around EUR 280 million within the EUR 300 million envelop that we had established with acquisitions around EUR 500 million, which is equivalent to the land that received authorization for building. Now we look at net debt. We can see that despite acquiring Angelotti, we have managed to maintain a reasonable level of indebtedness. We had EUR 280 million use of cash in the first half and for the second half, the cash flow was -- free cash flow was up to EUR 138 million, so much higher than the first half of the year compared to EUR 142 million. And this decreased indebtedness, while enabling us to focus on external growth and acquire Angelotti for about EUR 80 million, which is the main part of our investments, our financial investments over this period. And finally, we can see that applying IFSR to the [ Polish ] entity has led to the reclassification for about EUR 8 million. So overall, we have a financial structure that is very healthy. More than 50% of the debt is at a fixed rate, which limits our exposure to the current rate. You can see up on the left, of 53% of the debt is long-term debt at a fixed rate. And so we have been able to keep our indebtedness at a stable rate of 2% for 2022 and 2023, we expect a moderate increase around 3%. We also have an indebtedness structure, which is very healthy because without any repayment of bonds over the next 2 years, as you see on the right, we have a maturity schedule that will enable us to continue to be active on the market in the years coming. And I would conclude by saying that overall, as Véronique said, we are quite happy to be able to renew our banking contracts that have accompanied the growth of the group. This financing has been secured for the next 5 years for very high amounts, about EUR 3 billion overall, EUR 800 million in the credit line, EUR 2.1 billion engagement through signatures and this involves all the major French banks, which shows that they are convinced that Nexity will be a good actor on the market and that we do have the means to continue to grow. I'd like to pass the microphone back to Véronique for her conclusions.

Thank you, Nadia. So first of all, let's have a quick look back at what we said in September. We had an objective to become a leading operator and a global real estate operator. And in the short term, we have been really able to accelerate this strategic goal. We are a premium leader with regard to construction costs, and bulk sales, in particular, because as Stephane said, we had 54% of bulk sales. And you can see that we have had very significant partnerships that have enabled us to achieve this. We are also a leader in sustainable cities and real estate sector decarbonation. We have a new green deal with the state. In 2022, as we had committed ourselves to, we have improved by 10% with regard to the permits that we were granted, and we are really the leading low-carbon real estate developer in the sector. And the green value of our business will only increase in the coming years. We talked about new offers and stepping up managed real estate, which is very interesting to investors, whether they are individuals or institutional investors. And we have done very well in those fields. With regard to the outlook for 2023, in the context, we have -- I'd like to quote an economist who I think has a good understanding of this market. There will be fewer constraints on monetary activity in 2023, we will see that the central banks will certainly be taking their foot off the gas. And this means that our projections for 2023 are based on this type of a wait-and-see market. As the leader of your company, my way of working is to work towards achieving the objectives that have been set. I think next year at the same time, I would like to be able to tell you that we were able to what we had promised you. It's a real challenge in such a period of transition as we're living through now, especially because we've seen that the rates will certainly rise in the weeks to come. And nonetheless, markets probably expect the rates to be even higher than the -- than some predictions have said. So in the coming weeks, I think that our customers will be losing purchasing power. So I think that for the first half of 2023, we could have sales that would be similar to 2022, excluding international, so it should be stable and we expect it to be above EUR 4.5 billion. That is staff table, excluding international. And the operating profits, which take into account the need of adjustments for this transitional year because there will be an increase -- a very quick increase in interest rates. But nonetheless, we expect to surpass EUR 300 million. So we plan for 2023 that our margins will reflect. First of all, we will see production of projects that began in 2021 and '22. And it will now be on the market with more bulk sales, more operations also that will be abandoned because they're not viable. And also, we will see that it will be harder to generate upside given the increase in costs and with the lower purchasing power, we'll continue to plague our customers. So I feel comfortable with these financial targets. And I think this is something that we will be able to achieve, in particularly when I look at our backlog. And now I think the questions are open.

[Operator Instructions] First question comes from Christophe Chaput from ODDO. Yes. [indiscernible] was stable excluding international. Just like to know, could you specify once we get '22, how much international the disposed scope contributed to the recurring operating profit? And then on the guidance items that you just set out notably, operating profit above EUR 300 million. There were items of pressure on this, if I read you right, Residential Real Estate, we do understand that on the operating margin for the Services and Commercial Real Estate, it will be at least stable. These are my questions.

Christophe. Perhaps I can answer the first question with regard to international. As I said, the sales for 2022 by international affairs was about EUR 200 million sales with regard to Europe. This operating profit and profitability contributed to 2022. And the main effect in Europe, and this is, of course, the weight on the ROC. There was the shock of inflation, of course, on Services and sales. Services, of course, were really hit by the inflationary cost of insurance and others. Yes, and Services...

Yes, in Services, we have 3 have activities: management, distribution operation and focus on operations really doesn't pose a problem going into '23. And of course, on management services with the fixed cost business, there's an inflation impact in part resolved by passing through in our service prices, but we have a regulated business. So we don't have full ability to do that. We can't pass through everything. So there will necessarily be an impact on us on the management activity with regard to the profitability in '23. And on distribution, while the issues elsewhere, which is that the retail investment market has, individuals has dried up in '22, and this is projecting into '23. So the activity is going to see its revenue and earnings as the slow down. Okay. So next question. Just to help us on -- a bit more on the Residential Real Estate. So you're above 8% in terms of operating margin, that's a very good performance. Maybe on '23, could you give us some target of profitability or range because I assume that the target must be very challenging at the start of the year, but to see kind of the landing as you progress?

Well, I'd like to say that the guidance that you've just been given is that at this phase, it's really the beginning of the year. where there's a lot of uncertainty and the guidance that we can give you cannot go any further than what I've already said. As I indicated, in 2022, we had high levels of profitability for development for both residential and commercial buildings. And these were levels that were higher than normal for both activities. And in terms of sales and marketing, I think that we will be integrating the margins on these 2 activities in 2023.

Thanks. Next question comes from Emmanuel Parot from Societe De Bourse. Yes. I hope you can hear me. Sorry, might cut you because my line is cutting out. I can't hear very well. My first question on international, if I've understood, we're talking EUR 200 million consolidated revenue in 2020 and cash that you expect EUR 200 million during the course of '23 right?

In total, yes. The impact of the indebtedness is EUR 200 million, about EUR 1 million or half of that on assets in Portugal and Poland that have been extinguished and another half on assets that are in management.

And the goodwill associated with that $200 million. I mean, there's no risk of a goodwill impairment on their note.

No risk.

My second question was more on the expected debt evolution to be expected in '23. Net debt-to-EBITDA, is that point -- is that metric going to be kept in '23, if we don't take into account the EUR 200 million of cash hit is a likelihood that, that might be exceeded or putting my question perhaps more bluntly, will net debt continue to rise in '23, if we don't take the EUR 200 million of cash in.

That's a good question. We're confident in our capacity. I'll give you the short version. We are confident that we will be able to remain below the imagine plan of 2.5x established. And I think the leverage ratio will be comparable to 2022, although it may from time to time, go beyond that on the 30th of June, in particular, given the level of activity between the first half and the second half of the year. We expect to have free cash flow over the period with a good management, a significant external growth is expected in 2023 because we will be focusing on the integration of Angelotti, and we will be finalizing our extension of the other international projects. This will consolidate.

And that's with or without the EUR 200 million on international?

That includes the EUR 200 million and the first figure is without -- and maybe I could also add that throughout the plan, we should not go beyond the 2.5x EBITDA and we should end at 2.1.

And maybe just one final question. You haven't really mentioned, but on the limit of dividend of '23 versus version '24. So a target of maintaining that EUR 2.5 per share. Can that be an adjustment variable to really maintain that 2.5x EBITDA multiple, are you confident you'll be able to distribute that?

We will look at this in due time in next February during the general -- during the Board meeting. But there's so much uncertainty with regard to the evolution of rates, about the inflation. I think that we'll have to look at this again in September.

Okay. One final question on the change in construction costs. How has it been trending? One of your peers mentioning stability maintain at a kind of a rather high level since last summer. Do you agree with that, Stephane? Yes. So it's true that [BT0 ] [indiscernible] the construction index posted plus 6% at the end of '22. We're seeing a rise slightly below. That's due to our volume effect and everything we put in place in bulking up purchasing and the strong industrial partnerships. What we're seeing since early '23 and one kicked off. At the end of '20 is kind of a leveling off of prices, construction costs remain high. We haven't planned in our forecast a decline, a decrease, but more kind of leveling of tracking inflation and energy prices fluctuate all our new projects configured with these new construction on the balance sheet, the prudential role should allow to offset a slight fluctuation. But yes, we're seeing a slight stabilization. So final question comes from [indiscernible] from LLM. I've actually got 3 questions. I think I missed the pace at which you're exiting international. There's an acceleration in your exit from international ops. Could you repeat why you decided to shut down everything? And my second question, you're explaining very clearly that prices per square meter on bulk sales were more than held because they're sharply up versus retails, it seems counterintuitive. Could you explain this? I know the question was asked earlier. I didn't understand the answer. I understand there's kind of a geographic mix and new services, if you could perhaps explain that in graded final question. The market for land is changing. Previously, one of your peers who reported before you listed the plant prices are declining. I don't know if it's a fantasy or reality, some of the developers who jettisoned their operations paid the money coming back to more interesting prices. Could you give us your feedback on this take?

Thank you for these 3 questions. I'll answer the first. With regard to international, there's not necessarily an acceleration. On the contrary, I would say that we're a bit behind because last February, we had made announcements and then the war in Ukraine came along, and our projects were postponed. We had to evaluate the environment we were working in. And so we really began working on the second half of the year. And today, for Poland and Portugal, we have advanced quite well. We have our first offer, our first offer for some of these assets.

Why are you exiting all of a sudden, even if you announced it a year ago?

Well, this is a choice. International was much riskier. And then if we focus on France. It's much more complex. It's hard to control the risk, the PFR is much higher. And I believe and I have always believed that with the green value and all the transformation and urban regeneration that will be taking place, we really have markets that will be opening here in France, and it was important to dedicate our resources to that. That was the first choice that I made as of last year. So perhaps it took us a while to make this decision about stopping some of these international activities, but...

Turning now to the average price of plus 13% on bulk sale. So it's linked to 2 facts, a different geographic mix. Let me explain versus the year 2021 or institutional investors and notably, our social landlords have faced the housing units in Abis that have a higher value than those in Zones B and C. So that drives upwards the average price and a new offering we put on the market itself to institutional investors from the private sector, making build-to-rent that increases the expected rent with the same expected profitability increases the price of housing unit. So we can have an average value of about 13%. You have a rental guarantee for the build-to-rent. What's that mean? No, there are actually Services that we put in place within a building and allows the investors to offer the same home but with higher rent, including service. We also sell the service because we're a global real estate operate and for build-to-rent on deals, we sell this -- it's an urban campus that assures them. And in addition to that, we can obtain fees at group level. It's not a double [indiscernible]. It's actually the double benefit. And turning now to the price of land. We'd all like to see a decline. Of course, we're seeing not a decrease. But since the construction costs are leveling off because property developers are increasingly cautious on the exit value, which avoids a fierce competition on land prices. We've heard some of our peers say that prices were decreasing in Paris, we're seeing, but actually in real life, it's more stagnating that an increase. It's true that versus '19 pre-COVID, we're seeing that there's been an acceleration in the price of land. And we're all calling for a return to a pre-COVID situation with more reasonably priced land plots, which is obviously a key factor in our cost price because on average, it represents 25% of our cost price. So the price of land decreases, we should have home prices way below those today.

And I think that it's important that these -- that the housing be available to citizens. So this will be part of the market regulation. But I agree with you when you say that land prices will drop off.

Okay. And can we imagine that there will be small property developers who might be in a stressed situation. You might have a portfolio where you could do some M&A or is that not really in the cards for you? Well, it was the case already back in '22, we see that there was a consolidation of players, more than market consolidation because many small property developers no longer had a clear take on the cost price brought transaction to us. It's really easier for us because our size in terms of construction that we can really generate an acceptable cost price, we've been able to recover some deals. Thank you. Your explanations are already crystal clear. Meeting is very well-organized. Congratulations to all who organize these sessions. And thank you to have the meeting in both languages. That's always very useful. So we have further questions. The next question comes from [indiscernible].

My first question concerns Commercial Real Estate. Do you think that the market for business buildings will pick up again? And I think you have significant deliveries this year. And do we have an idea of what your lending will be in 2023, '24. And beyond that, what type of cycles can we -- will we be looking at? And then also, would it be possible to have an idea with regarding the margins for EBITDA? And could we have more granularity with regard to that? Given the provisions that we have to prepare for 2023? And the final question with regard to your guidance for ROC. What will be the contribution of Angelotti in 2023? And is this included in your guidance? [ Mylin ], I can answer the first question with regard to. And then Jean-Claude can answer about business or real estate and Service picking up. [indiscernible], this is a record order for us, about EUR 1 billion and we're 50% completed at this. There's EUR 500 million that will be coming in, in 2023, 2024 with regard to that operation. So it's about 50-50, a little bit more in 2024 when it will be delivered a bit more in 2024 than 2023.

Turning to the commercial property sector, it'd difficult to give you a firm date for the exit of the tunnel. What I can say is what I presented in market development is such that today, the market players that we are working on the offering proposals that are consistent with usage change. There's place demand out there that exists. It's up 10% this year. It is set out very clearly what is asking for flexibility. It wants low carbon. It wants regionalization and Services. And so we're working on such offerings that we're proposing to investors. I think the product, when investors will be able to decide because there's an issue they have to -- the trade-offs in their asset portfolio. What we're seeing on the Paris region where investment collapsed in the second half of the year. What is it, which is the prime French mark just says, there's an issue of market structure and repricing of the activity portfolio. The once investors have done their repricing homework on the portfolio, the issue of renovation of their properties will open up genuine prospects for operators, offering mix in both capacity on the products and also onboarding new usages. And if that happens, we're the best placed.

With regard to Angelotti, [ Mylin ]. Angelotti, when we acquired it, we represented about EUR 200 million in sales. And I can confirm that it has been integrated into our 2023 objectives for the full year.

Service margin is around 10% margin that we have on that segment. And then there are disparities for example, in '22, what distribution were driving the margin upwards because it's breakeven activities. We outperformed in revenue terms. That is the highest -- higher level on that distribution activity. But for the half, we can indicate that co-working activities for someone EUR 100 million this year are positive, that good news, and it confirms the strategy of the model, good occupancy rates. And in '23, we should reach our normative margin of around 8% on this segment. And the final question comes from Pierre Clouard from Kepler. I've got 2. I don't think I saw your anticipated reservations for the market -- your market share. I know there's a lot of uncertainty and for several years that you've been sticking your neck out there. Could you -- you're ready to do the same in '23? And my second question on the guidance on the margin. I was looking at the past history, EUR 300 million of operating profit, that's about 6.7%. It's a margin rate that you never reach, say when -- even you shut -- we shut down the construction sites in '20 for 2 months. So since '17, you never reach our margin rate, trying to understand to the extent you're being a bit prudent on this operating margin?

Yes, it's a very perspicacious question. And indeed, I think we can say that the market in 2023 will be lower than in 2022, but there is such a degree of uncertainty that I would not like to give an estimate of the market at this point. And the second subject was the margins. I think that these are evaluations and estimates that we make at the beginning of the year based on the 3 main elements that we have, as I expressed them to you. And if during the year, things improve, we will communicate that. And I continue to believe that was 2020 was COVID that was -- had a big impact. And I think the rapid increase of interest rates that have intervened over the past 6 months is an event that is rather rare and that really has a hard impact on us and a hard impact on our customers with regard to their purchasing. We shouldn't forget some of the simplest things. We did calculations. And if I remember well, someone who wants to borrow EUR 400,000 today over 25 years has to have EUR 1,000 more income per month than he needed 5 years ago. So this is huge in order to have access to real estate loan. So this has really been a shock to the market. Maybe things will calm down in September. This would be good news, but we all know that interest rates will continue to rise and the impact on household purchasing power has been huge. And the margins are calculated quickly. I think, honestly, with these margins, we will be overperforming our market and our competitors.

Thank you all, and have a good evening.

Thank you for taking time in today's call.