Icade Sa Ord

Good day, ladies and gentlemen, and welcome to ECAD 2025 half-year results presentation. Please note this event is being recorded. At this time, all participants are in listen-only mode. We will be facilitating a Q&A session towards the end of today's prepared remarks. If you would like to ask a question, you might do so by pressing star 1 on your telephone keypad. I will now turn the call over to your host for today, Nicolas Joly, CEO, and Bruno Valentin, CFO. You may begin. Thank you.

Good morning. Nicolas Joly speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning ECAT 2025 offshore results. This presentation will be, of course, followed by a Q&A session. Let's move on to slide four for an overview of the key messages for the first half of 2025. ECHAT delivered strong living activity with nearly 80,000 square meters signed or renewed, contributing to an improved occupancy rate for well-positioned office and light industrial assets. In parallel, The property investment division secured over €100 million in disposal of non-strategic and core assets in line with NAB. In the first half of 2025, ECAD posted a resilient net current cash flow from strategic activities compared to the same period last year. However, the contributions from the property investment and development businesses differed from 2024. Indeed, while rental income declined, the profitability of the development segment improved following a deep review of our operations in early 2024 to adapt to evolving market conditions. Against this backdrop and in a complex market environment that calls for caution, we are confirming our full year guidance for GroupNet current cash flow. This semester, we proactively manage our balance sheet and further strengthen our liquidity position with the successful issuance of a 500 million euro 10-year green bond in May and the closing of 290 million euro in backup credit times. On the ESG front, ECAP distinguished itself in 2024 as the first publicly listed company in Europe to submit two separate shareholder resolutions on climate and biodiversity. At our general meeting held in May 2025, we once again put these resolutions to a vote, presenting the group's performance in reducing carbon intensity, lowering CO2 emissions, and contributing to biodiversity preservation. Both resolutions received overwhelming support, with approval rates above 99%. On pages 5 and 6, you will find the key figures for the first half of 2025. At group level, ECAD reported a net current cash flow of 2.03 euros per share. Cash flow from strategic activities, namely property investment and property development, was nearly stable at 1.44 euros per share compared to 1.47 euros per share in H1 2024. NTA NAV declined by around 6% to 56.6 euros per share, mainly reflecting the decrease in the value of the property portfolio and the payment of the interim dividend. On the liability side, the loan-to-value ratio stood at 38.1% at the end of June versus 36.5% at the end of December 2024, reflecting the decline in asset values, and a still limited volume of disposals. The net debt-to-ABDA ratio improved to 8.3 times thanks to a recovery in development margins this semester. Interest coverage remains very solid at 7.4 times, with an average cost of debt stable at 1.6%. In the property investment business, gross rental income amounted to €178 million, down 4.3% on a like-for-like basis, mainly due to tenant departures. The gross asset value of the portfolio stood at 6.2 billion euros, reflecting a minus 2.8% decline on a like-for-like basis. The EPRANET initial yield remained stable at around 5.3%. In the property development business, economic revenue declined to 501 million euros, versus 583 million euros in the same period last year. However, the operating margin turned positive again, reaching 2.3%. Let's look now at performance by business division, starting with property investment. Let's move on to page nine, which covers the latest market trends. In the first half of 2025, the rental market remained challenging with take-up in the greater Paris region down 12%, a persistently high vacancy rate of both 10%, and incentive averaging around 28%. In an uncertain economic and political environment, tenant decision-making processes have become longer. However, the trend toward more affordable, peripheral and well-connected areas continues to gain traction, particularly in locations like La Défense. On the investment side, market conditions appear to be slightly improving, with a modest increase in transaction volumes and greater investor liquidity, especially for larger deals, notably in the core plus and value-add segments. That said, liquidity remains mostly concentrated in central locations for now. In this context, each had recorded solid leasing activity with approximately 79,000 square meters signed or renewed in H1 2025 compared to 133,000 square meters over the full year 2024. These leases represent annual rental income of 20 million euros with a world of 7.4 years. This performance highlights the strong demand for ECAT's well-located office assets that need high standouts. A standout example is the full relating of the Pulse building in Saint-Denis, totaling 29,000 square meters. We also demonstrated our ability to effectively manage business parks, such as the Mauvin site in the north of Paris. Following the signing of two leases this semester, for over 7,000 square meter of light industrial space. The 21,000 square meter park is now fully lit. Thanks to this strong commercial momentum, our occupancy rate improved to 88.8% for world position offices and 89.5% for light industrial assets. It's worth noting that these figures does not yet reflect the positive impact of the pulse relating attendant occupation will begin later this year. We now turn to page 11, which focuses on asset rotation. In the first half of 2025, ETIAD secured over 100 million euros in disposal of non-strategic and mature assets, including, firstly, the disposal of the Nancy Regional University Hospital, CHRU, representing a value of 55 million euros, following the early termination of the public-private partnership and the transfer of associated liabilities back to the CHRE. Secondly, the sale of a portfolio of five BNB hotels to a leading investor for 36 million euros at an average yield of around 7% in line with the NAV as of December 31, 2024. A third transaction is under a signed promise to sell a mixed-use office and retail building in Marseille, covering 3,300 square meters and valued at 14 million euros. This deal, also aligned with the Navy, illustrates the continued liquidity in the market for core and smaller-sized assets with yields of approximately 6%. Let's move on to page 12, which highlights our current project pipelines. We have a diversified pipeline with limited capex of around 300 million Euro planned over the next three years. This pipeline is expected to generate approximately 50 million Euro in additional annualized rental income. The first half of 2025, we'll launch three new core office projects delivering attractive yields on cost above 7%. These include two developments, Seed and Bloom, located in the heart of Lyon-Pardieu Business District, as well as Centreda, an office project in Toulouse, fully pre-led to Sopra. In line with the group's CSR ambition, ECAD is fully committed to ensuring that all ongoing developments achieve top certifications, such as HQE and BIM Excellence, all aligned with the EU taxonomy criteria. In the first half of 2025, ECAD continued to advance its strategy to diversify its asset portfolio. Notably, in the student housing segment, ECAD signed a partnership agreement in July 2025 with Cardinal Campus, a student residence operator who will manage a future portfolio of assets on ECAD's behalf under a white label arrangement. In June 2025, the Profit Investment Division already positioned itself to invest in a student residence in Ivry-sur-Seine, a joint development with the Filia Group. The project includes 194 units, totaling approximately 3,600 square meters, with construction set to begin in June 2026 and delivery planned for 2028. Additionally, two to three other student residence projects in the Paris region, representing around 750 beds by 2028, have already been identified in collaboration with the Property Development Division. Let's now move on to the operational performance of the development business line. The first half of 2025 remained challenging for the industry, especially in the second quarter. The Development Division recorded a stable orders volume with 2,116 units totaling €496 million down by 8%. Activity in the individual segment declined by 11% in volume, in line with the overall market. This decline occurred in an unfavorable tax environment marked by the end of the PINEL tax scheme, which led to a sharp contraction in individual investor activity. with a minus 35% compared to H1, 2024. The momentum was more positive for owner-copier orders, which increased by 10%, supported by favorable measures promoting homeownership. Bulk orders showed a 10% increase in volume, but an 8% decrease in value. The discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to drive business activity, as they accounted for 54% of orders in volume terms in H1 2025. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year, with over two thirds of bulk sales made in H2 in both 2023 and 2024. During the first half of 2025, the group demonstrated its commitment to building the city of 2050, in line with its ambitions outlined in the Reshape Strategy Plan. Notably, ECAD, together with SET, published the first barometer on French city fringes. The study's findings highlight the potential of 1.6 million housing units 15,000 hectares of economic land, and 10,000 hectares here marked for ecological restoration. ECAD aims to play a significant role in the transformation of these commercial areas. In this context, during the first half of 2012-2035, ECAD acquired a portfolio of 11 real estate sites from Casino for €32 million. The portfolio consists of parking lots, and developed land, building, and ancillary units related to stores. Two of these sites were co-invested with CDC Abita. These sites offer a total development potential of approximately 3,500 housing units and over 50,000 square meters of retail space with an estimated potential revenue of around 1 billion euros. These development projects will take between 10 and 15 years to be completed. They include a holding phase of the assets prior to obtaining administrative approvals and relocating tenants, followed by the launch of traditional off-campus development programs. And I will turn the floor over to Bruno to present the financial results.

Thank you, Nicolas. Let's move to the financial results. Please find the group's main P&L KPI on slide 20. For the first semester, ECAP's consolidated IFRS revenue was down by minus 10% to 630 million euros, including a 5% drop in gross rental income from the property investment division and a 12% fall in property development revenue. EBITDA stood at 145 million euros, up on the same period in 2024, when 85 million euros of impairment losses were booked following the review of the property development portfolio. The broke net financing expense increased to minus 22 million euros from minus 7 million euros due to lower short-term investment income and lower dividends from the healthcare business. The group's net current cash flow amounted to 144 million euros. Net current cash flow from strategic activities remained relatively stable at 109 million euros compared with 111 million euros in H1 2024. The key takeaways about the net current cash flow from strategic operations are as follows. lower return income from the property investment division for minus 17 cents per share, an increase in the net property margin of property development activity for 39 cents per share, and a decline in finance income for 21 cents per share. I will come back to this in more detail in the following slides. Let's dive into the financial performance of property investment division in slide 22. Growth return income decreased by 5.1%, mainly due to tenant departure recording in the recent months and the gradual capitalization of negative lease renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated and still contributed plus 3.4% as well as early termination fees, mainly related to the to-be repositioned offices. It's also worth noting that the net return income was negatively impacted by higher vacancy costs. On property development side, economic revenue amounted to 501 million euros as of June 30, 2025, down by 14% year-on-year. This declined many results, from a decrease in residential book sales, down by 32% in value terms, and a sharp drop in commercial segment, with revenues down by 39% year on year, due to the completion of a major project at the end of 2024, coupled with the low volume of new contracts signed in 2025. The net property margin improved mechanically in H1 2025 following the impairments booked in H1 2024. However, the declining volume and the continued margin pressure of certain projects launched prior to 2024 has negatively impacted the overall margin of the business. Let's move on to slide 25. The half-year financial results extended to normalize after a 24-year marked by a very high volume of finance income. Specifically, financial income for investment declined by more than 10 million euros due to both volume and interest rate effects. Additionally, dividend received from outskirts in healthcare activities decreased by 10.5 million euros, reflecting the absence of dividends paid by IHE this year. The cost of growth debt remains stable, with the average cost still low at around 1.6%. The debt projected for H2 2025 is to the edge, and the average cost of debt for the full year 2025 is expected to remain below 1.8% factoring in the new bond issue completed last May. Let's turn to ECAD's balance sheet. Slide 27 focuses on change in the value of the investment portfolio. As Nicolas explained, the fair value of property investment portfolio stood at 6.2 billion euros given a decrease in value of minus 2.8% on LIFO-like basis. The APRA net initial yield was 5.3% pretty stable versus December 2024. The APRA TAPRAT net initial yield was 6.2%. Slide 28 shows the slowdown in value adjustment across our portfolio by asset class. For web position offices, the adjustment over the semester stood at minus 2.7%, confirming the slowdown in the declining values semester after semester. Light industrial assets continue to show resilience, with their value increasing by 0.4% this semester. As of June 2025, ETRA A Navy per share was equal to 56.6 euros, declining roughly by 6%. This year-on-year change is mainly due to the lower value of the property investment portfolio, representing 2.7 euros per share, and the interim dividend paid in March 2025 amounting to 2.2 euros per share. Let's move on to debt management. The first half of 2025 was marked by strong achievements. Firstly, a 10-year green bond insurance of 500 million euros. Secondly, a bond bank of medium-term notes maturing in 26, 27, and 28 for a nominal amount of 268 million euros. Finally, the signing of $290 million in credit facilities included $190 million in additional lines. Together, this transition has enabled us to extend the average maturity of debt, reinforce our liquidity position to anticipate upcoming debt maturities, and increase our share of sustainable financing. As such, we have achieved our target of having 35% of our financing green or linked ESG objectives more than a year ahead of plan. Slide 31 is dedicated to our debt maturity schedule and liquidity position. At the end of June, ICAD has a strong liquidity position composed of $1 billion in net cash and $1.8 billion in in unused committed revolving credit facilities. This liquidity covered would date maturity to 2029. Now, I will hand over to Nicolas for the conclusion and detail on the 2025 outlook.