Icade Sa Ord

Good day and welcome to today's ECAD Fouvier 2024 results presentation. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. You may register for questions at any time by pressing star 1 on your telephone keypad. And now, I'd like to hand the call over to your host, Mr. Nicolas Julli, CEO. Please go ahead, sir.

Thank you. Good morning. Nicolas Julli speaking. Thank you all for being here today on this call. Along with Christelle de Robillard, we are delighted to present this morning our 2024 earnings. This presentation will be, of course, followed by a Q&A session. So let's start to slide four for an overview of the main messages for the full year 2024. In 2024, the good net current cash flow amounts to 3.98 euros per share above the guidance. This is mainly explained by the resilience of the property investment division, with revenue growth supported by indexation. The operational performance of property development is contrasted with the first half, marked by an exhaustive review of our operation to adjust to market conditions, and a second half, more positive, with an upturn in individual orders. One year after the announcement of Richette's strategic plan, we will be happy today to share with you the first concrete steps taken in 2024. In addition, at the end of 2024, the BRICS balance sheet remains solid with reasonable LTV and high level of liquidity. For 2024, we will be proposing a dividend of 4.31 euros per share at the annual general meeting, including 2.54 euros per share coming from the dividend due following the completion of the first step of the sale of health care business in 2023. For 2025, we remain cautious in a still complex market, which leads us to estimate a good net current cash flow between 3.40 and 3.60 euros per share. We will come back, of course, to this later. On page 5, you will find the key figures for the year 2024. At group level, ECAD posted a solid net current cash flow equal to €302 million. Cash flow from strategic activities, i.e. property investments and property developments, was slightly down at €223 million. NAB and TA decreased by around 11% to €60.1 per share, reflecting in particular the falling value of the property portfolio. In terms of liabilities, the ITV ratio reached 36.5% at the end of the year, versus 33.5% one year before. Net debt to a VBA stood at 10 times at the end of December 2024. In the car investment business, gross rental income came to €369 million, up 2.5% on a life-or-life basis, driven in particular by the effect of indexation. The gross asset value of the portfolio came to €6.4 billion, which reflected a minus 7.1% decline on the land for land basis. The EPRANET initial yield was roughly stable at 5.2%. In the property development business, economic revenues were stable at €1.2 billion. The margin was negatively impacted by impairments accounted in H1-2024. Let's look now at performance by business division starting with property investment. Let's move on to page 8 about the latest market trends. In 2024, the commercial investment division continued to operate in a complex living environment, totaling 1.75 million square meters less in 2024 in the Paris region. As we reported last February, three criteria in the choice of office assets remained. Location is the need to be close to a transport hub, alignment with the best environmental standards, quality of service offering, and flexibility. We are also seeing increasing price differentials for prime assets between the central areas of Paris, above 1,000 euros per square meter, and other more peripheral but well-connected areas at around 550 euros per square meter. These areas are comparatively enjoying a recall of interest, which explains the greater dynamism seen in 2024 in an area such as La Défense. In this context, ECAD recorded a good level of leasing activity with around 133,000 square meters signed or renewed in 2024. These signatures and renewals represent an annual rental income of 35 million euros and a world of 6.4 years. First of all, the leading activity demonstrated the upside for ECAD's well-positioned offices, meeting the highest standards in quality location. The dynamic rental activity also illustrated the good level of demand for our business parts and an opportunistic approach we have on the to-be-repositioned assets. As expected, The financial occupancy rate was down to 84.7% as of December 31st, 2024, given the departure of tenants in 2024. On slide 10, one of the highlights of the new year has been the relating of the entire process set in Sony for 29,000 square meters. Barely three months after the departure of the Olympic Games Committee, ICAD's team successfully relets this emblematic asset to the Departmental Consulate of St. John. This pre-let agreement, at 12 years, was signed on the basis of an economic rent in line with the market. Deals to be signed in June will take effect from late 2025, early 2026. Taking into account the relating of terms, the occupancy rates for well-positioned assets is 90.7% versus 88% at the end of 2024. Let's move on to page 11, related to the additional rents coming from deliveries and current pipelines. In 2024, ICA delivered two office assets representing a total of 5.8 million euros of annualized headline rents. The pipeline represents additional reviews of 45 million euros on an annual basis. We have good visibility over these revenues as are secured following the continued marketing of the SMB team to Schneider Electric. The pipeline represents relatively limited capex of less than 300 million euros by 2027. We now turn to page 12, devoted to asset rotation. The office investment market remained very calm in 2024, with an investment volume of around 15 billion euros stable compared with last year. Against this backdrop, we succeeded in concluding the sale of four assets for 82 million euros. These core assets, located in Marseille, Lyon, and Neuilly, were sold above their last price value with an aggregate yield of 5.8%. At the beginning of February, ICAD also exited early from the perfect private partnership with the Nancy Hospital by terminating the hospital long list and transferring the associated debts to the hospital. This transaction enabled ECAD to sell a non-strategic asset at NAV or E55 million euros. Let's now move on to the operational performance of the development business line. 2024 was a complex year, with an uncertain and changing economic and political environment interests. Against this backdrop, however, the volume of orders remained stable thanks to a good momentum in the second half of the year among individuals. ICAD recorded 5,300 units orders for 1.3 billion euros, relatively stable compared with 2023. This momentum was supported by a 17% increase in volume and a 7% rise in value in individual orders. Improvement in this segment was driven by the decrease in interest rates, the adaptation of our commercial offer, and the purchase of some operations from developers. In 2024, the contribution from social and intermediate housing institutional investors to the activity was more limited, with both volume and value decline. On page 15, we present some emblematic projects launched this year that have met with rapid success. In particular, the Ketini Reef Cromwell development on the outskirts of Dijon, which achieved a pre-sales rate of 94% in less than nine months. Project Time had already been presented in our capital market day one year ago. This is a residential program developed on our land readers in the north of Paris, in place of former office projects. Marketing is doing very well, with 68% pre-sold in six months. Finally, a platform which has been 100% sold illustrates our ability to manage large-scale, niche-use projects, a digital and emerging technology campus, and a student residence. The success of these new projects has helped us to maintain our residential backlog at 1.6 billion euros at the end of 2024, partially securing our 2025 revenues. Now let's jump to the section that reshaped that. First of all, and in line with the pillars of ReShape's strategy plan, we've made some good progress in 2024 in analyzing the office portfolio to be repositioned and in carrying out conversion projects for certain assets. During the year, the Property Investment Division sold two assets in Lyon and Plessis-Robinson to the Property Development Division at their appraised value for conversion into others. As of December 2024, the portfolio of the to-be-repositioned assets represents a growth asset value of roughly 600 million euros, or 11% of the office portfolio, compared with 14% at the end of December 2023. It accounts for an annualized IFRS rental income of 38 million euros. To be noted that future projects have already been identified for roughly 70% of the growth asset value. In 2024, ICAP has also taken the first step towards diversifying its asset portfolio, particularly in standard residences and data centers. On page 18, we are happy to announce a new partnership we just signed in February with Cardinal Campus. The objective is to operate our future asset portfolio under a wide level through management contracts. The partnership agreement is due to be signed in H1 2025. At this stage, our ambition is to develop between 500 and 1,000 beds a year through organic growth. The chief goal will be relying on our development business, which benefits from an excellent national coverage and a very good track record in the development of 700 densities. Our portfolio of assets to be repositioned will also provide us with some development opportunities. Slide 19 shows the progress we've made up to now, on data centers project during the year. Firstly, the data center to be led to Equinix and located in the Porte de Paris business park has well progressed. Works started indeed in 2024 and the delivery scheduled for June to 2026. Secondly, we've reached new milestones in the hyperscale data center project located in the Paris business park. We have indeed requested the development and secured access to energy from RTE for the requested 130 milliwatt hour by 2031. Let's move on to slide 20 and 21 to illustrate our commitment to building the 2050 city, which is more mixed-use and more sustainable in our view. In particular, the group confirmed in a white paper titled Entrez-Ville, Quartier-Ville, its intention to work on transforming the city fringes, which represents a pool of opportunities to address the challenge of housing crisis reindustrialization, and the adaptation of cities to climate change. Having this in mind, ECAD signed a firm agreement with Casino in December 2024 for the acquisition of a portfolio of 11 real estate sites for 50 million euros. These sites have a development potential of approximately 3,500 housing units and over 50,000 square meters of retail space. On the energy side, ETI posted in 2024 a very solid performance in terms of reducing carbon emissions. Indeed, between 2019 and 2024, the property investment division reduced its carbon intensity by minus 43%. The property development division reduced its carbon intensity by minus 20%. And the corporate carbon emissions went down by minus 20%. In absolute terms, the ECAP Group's greenhouse gas emissions fell by minus 44%, thanks to, on the one hand, the contribution of all divisions, and on the other hand, the impact of lower activity, of course, in the property development division. Given these strong results, we reaffirm our ambitious pathway for 2030. I now turn the floor over to Christelle to present the financial results.

Thank you, Nicolas. Now, let's move on to the presentation of our 2024 financial results. The group's net year end cash flow amounted to €302 million, or €3.98 per share, above the guidance. Net year end cash flow from strategic operations fell slightly to €223 million, compared with €233 million in 2023, due to differences in performance between the business lines. Net current cash flow from property investment rose by 30 million euros compared with last year, thanks in particular to higher rental income and lower financial expenses. The property development dividend net current cash flow fell by 36 million euros compared with 2023, mainly due to working permit losses and projects in the portfolio. I'll come back to this in more detail later. Let's move on to slide 24. As of December 2024, EFRA NAV per share was equal to €60.1, declining roughly by 11%. This year-on-year change is due in particular to the evolution in the value of the private investment portfolio, in presenting 5.8 euro per share and the dividend paid in 2024 for 4.8 euro per share. Let's dive into the financial performance of property investment division in slide 26. There are three messages to take away from this slide. Firstly, the property investment division revenues came to 369 million euro in 2024, 5 million euros versus last year. Secondly, the light-for-light growth stood at plus 2.5%. It is supported by the positive impact of indexation, plus 5.1%, that was partly offset by the effect of cement departures and negative reversion and renewals. Lastly, growth was driven by the performance of the one-position offices and light industrial segments, which saw revenues rise respectively by plus 5.3% and plus 4.6% on a late July basis. We have also updated the reversionary potential on well-positioned assets. As anticipated, this has deteriorated slightly as a result of indexation rising from minus 8.7% at end 2023 to minus 11.3% at end 2024. As already mentioned, net terms cash flow from the Property Investment Division increased by 30 million euros compared with last year. The improvement in net rental income is coming from the positive life-for-life contribution and a combined effect of increasing penalties for resurfacing premises and departure of certain tenants, reduced energy costs, and, thirdly, limited customer risk. The strong net financial income also contributed to the improvement of the net current cash flow over the years. Slide 28 focuses on changes in the value of the investment portfolio. As Nicolas mentioned, the decrease in value amounts to minus 7.1% on a life-for-life basis. The APRA net initial yield was 5.2%, marginals lower than in December 2023, reflecting notably the impact of the increase in vacancy and effect of franchising. The APRA top-top net initial yield is 6.3%. Page 29 shows the slowdown in value adjustment in our portfolio per asset class. For well-positioned offices, The adjustment over the year corresponded to minus 6.7% after a fall of almost minus 70% in 2023. The slowdown in the falling values has been confirmed half year after half year. Light industrial assets are proving resilient with their value rising by 1.9% this year. Let's turn now to the results of the property development business on slide 31. In 2024, natural cash flow from private development fell sharply to minus 30 million euros. This was mainly due to the impairment boost in the first half, following a complete review of the portfolio of operations. This write-down had a negative impact of 34 million euros on natural cash flow. Excluding the impact of this impairment, the natural cash flow would be relatively in line with last year, at €4 million compared with €6 million in 2023, thanks to the close monitoring of operating costs and financial results. The major effort to streamline the property development portfolio has resulted in a very tight management of working capital, which was at an optimized level at the end of the year. Working capital improved sharply and amounted to €300 million, or 25% of economic revenue, at the end of 2024, versus 44% of revenues last year. This improvement is the result of a rigorous management at several levels, such as decrease in landholding operations, close monitoring of the collection of receivables, and a selective policy in launching new operations, resulting in a minus 28% year-on-year fall in work path. To be noted that a commitment to sell the total debt assets for 19.5 million euros was also signed early 2025 as part of this ongoing effort to control working capital. Let's move now on to debt management. The 2024 performance was marked by a very good financial result. Apart from income coming from the residual state in the healthcare business imposed of interest on the loan to IHC Healthcare Europe and dividends received from this entity, the increase in the financial results reflects a rigorous management of cost of debt and an optimization of cash management. Only one, the cost of debt remains very low and has even improved in 2024 to 1.52% compared with 1.60% last year, thanks to additional hedging. The projected 2025 debt is hedged at 92%. On the other hand, the group recorded substantial income this year, up by €12 million compared with 2023, with an average cash volume of €5 billion invested at around 3.90%. Let's move on to slide 35. ECAD maintained a very strong liquidity position of 2.6 billion euros, covering its debt maturities until 2029. In 2024, we successfully bought back 350 million euros of bonds, enabling us to proactively manage the debt maturity schedule and reduce the next 2025 and 2026 bond maturities. We also issued €149 million of new bonds maturing in 2013 and 2031, allowing us to benefit from good financial conditions and to extend slightly the maturity of our debt. Slide 36 presents our key balance sheet ratios as of December 31, 2024. STV was up 3 points at 36.5%, reflecting the change in the value of the property portfolio in 2024. The net debt to EBITDA ratio rose to 10 times. This deterioration is not only due to the impact on EBITDA of impairment losses recorded in the property development business. This impact accounts for 2.2 points of the improving the ratio. Let's move on to slide 37 for an update on the disposal of the healthcare business. We confirm the group's strategy of selling the healthcare portfolio in its entirety, despite the absence of any new deals concluded in 2024. In an investment market that has deteriorated in 2023, ECAL has been working on alternative solutions to continue the investment of the healthcare business. In January 2025, the group signed an agreement with PREDICA, the life insurance subsidiary of Credit Agricole Assurance, to extend shares in Premier Health Care for shares in a one-position office asset in New York. The transaction would allow ICA to reduce its exposure to Premier Health Care to 21.7%. The transaction is scheduled to close in June 2025. of conditions present. At IHE level, the process of saving the Italian portfolio of a diamond is still underway. Two factors are encouraging the disposal process to continue. On the one hand, the gradual recovery of the investment market in the healthcare sector with some transactions completed in 2024. On the other hand, the resilience of the second class which recorded a value decrease of only minus 1.7% in 2024. In this context, we are continuing discussion with Prime RM, sub-party investor, and current shareholders of Prime LSK. However, the current market environment has led us to postpone the timetable for completion. The sale of the French and international portfolio is planned to take place progressively in 2025 and 2026. At December 31, 2024, the value of ICA's stake in the healthcare business was stable at 1.3 billion euros. I hand over to Nicolas for the conclusion and details on the dividend and 2025 outlook.