Icade Sa Ord

Welcome to the ECOD first quarter 2026 trading update conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers. Nicola Jolie, CEO, and Bruno Valenting, CFO. Please go ahead.

Good morning, everyone, and thank you for joining us today. Bruno, Valentin, and I are very pleased to present ICAD's first quarter 2026 trading update. As usual, the presentation will be followed by a Q&A session. So let's start with slide 5 and the key messages for the quarter. First quarter was marked by the successful completion of the disposal of Marignan Building on the Champs-Élysées for 402 million euros. This operation is fully aligned with our reshaped roadmap as it reflects our disciplined approach to crystallize value while maintaining strong balance sheets. In particular, this transaction had a positive impact of around 3 percentage points on the LTV ratio and on the group's liquidity position that increased to around 2.8 billion euros, enabling us to anticipate upcoming maturity with confidence. In property investment, living activity was broadly in line with our expectations, with around 25,000 square meters found all renewed during the quarter. Rental income was down 2.1% on a life-for-life basis, and the financial occupancy rate stood at 85%, reflecting expected departures at the beginning of the year. In property development, the year started well, but activity slowed in March, especially in the individual segments in a more volatile environment. Based on the information available today, we confirm our 2026 guidance, while remaining attentive to the evolution of the conflict in the Middle East and the further impact on the group activities. So let's now turn to slide 6. As I mentioned, we completed the sale of the Marignan building early April for €400 million. This asset was acquired 20 years ago, and we were able to create value through building a project, evicting tenants, and obtaining the permit. We took advantage of an increased market interest for this type of value-add asset to conduct a highly competitive bidding process, which allowed us to achieve 20% premium above NAV as of December 2024. The disposal of these assets fully illustrates the group's ability to create value through active asset management and strategic portfolio rotation. Let's now move to slide 8 and review the performance of property investment. In a leasing market that remains softer, with stake-ups in the previous region down 15% year-on-year, ECAD signed or renewed around 25,000 square meters in the first quarter. This leasing we present 7.3 million euros of annual headline rental income with a road of 5.9 years. One of the key achievements of the quarter was the renewal of around 13,000 square meters with the French Ministry of the Interior in Le Prérial building in Nanterre. This major transaction once again confirms the attractiveness of La Défense and Pays Défenseria for our large clients. The financial occupancy rates queued at 85% as of March 31st, 2026, compared to 86.8% at the end of 2025. This trend was expected and mainly reflects departures that materialized at the beginning of the year. The financial occupancy rates remained the top priority for our asset management teams and should gradually improve over the course of 2026. Let's now move to slide 9 for property development. The first quarter showed next performance across the property development business. At the end of March, total orders stood at 727 units, up 4% year-on-year in volume terms, but decreased by 21% in value terms at 165 million euros. In the individual segments, orders were down 10% year-on-year in volume terms. This reflects a marked slowdown in March as the deterioration in the international environment widened market sentiment and led to a more cautious stance from customers. On the institutional side, investors remained active. Indeed, bulk orders were up 27% year-on-year in volume terms, although first quarter order values were wiped down by a 10% product mix that is not representative of expected full-year trends. I will now hand over to Bruno for the review of first quarter earnings.

Thank you, Nicolas. Let's move to slide 11. Total IFRS consolidated revenue came in at 278 million euros in the first quarter, down 40.7% year-on-year. In property investment, gross relative income decreased by 3.3% year-on-year. In property development, revenue fell by 19.3%, reflecting lower activity in the eventual and commercial development, along with the base effect from the disposal of the public asset completed in Q1 2025. Let's now turn to slide 12, for a closer look at retail income. Gross retail income from property investment amounting to 91 million euros compared to 94 million euros at March 31, 2035. On a lifelong basis, it declined by 2.1% mainly due to expected cement departure and gradual systemization of negative aversion on the new walls. These trends were tapped the offset by positive effects of indexation counting for plus 1.1%. On phase 13, economic revenue from property development was 11.4% lower in Q1 2026 versus 2025 data adjusted from the sale of subject assets accounting for circa 20 million euros. Residential revenue was the 9% year-on-year, reflecting a lower backlog for previous years. Revenue for the commercial segment fell by 31% due to the absence of every significant new project secured. And we now head back to Nicolas for the outlook and conclusion. Thank you Bruno.

Let's move to slide 15 for the 2026 outlook. Since late February, the conflict in the Middle East has contributed to a sharp increase in geopolitical and macroeconomic uncertainty. At this stage, it remains difficult to assess the full extent, duration, and actual impact of this new environment on both the global economy and the domestic market. Subject to these caveats, And based on the information currently available, as well as the group earnings as of March 31st, we confirm our 2026 group net current cash flow guidance of between 2.90 and 3.10 euros per share. As a reminder, this 2026 guidance includes net current cash flow from strategy cooperation of 2.25 to 2.45 euros per share. That is expected to mark low points. and net current cash flow from this continuous operation of approximately 65 cents per share. In conclusion, in a volatile and uncertain context, we remain fully focused on execution and on pursuing our transformation with rigor, discipline, and a clear strategic direction. While 2026 will still bring challenges, we are determined to keep moving forward, to stay close to our markets and clients, and to deliver on our roadmap. Thank you very much for your attention, and we are now ready to take your questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. If you wish to withdraw your question, please dial pound key 6. The next question comes from Stefan Afonso from Jefferies. Please go ahead.

Yes, hi Nicolas, Bruno, thank you for the presentation and for taking my questions. I'll take them one by one. So first on the guidance and the draft. You're commencing to suggest that you could potentially revise your targets and I just wanted to better understand the operational sensitivity behind that. In particular, how should we think about orders volumes in ICA promotion for this year? And should we expect a higher level of departures in 2026? So that's my first question.

Okay.

Thank you, Stéphane. Well, if we take a look at the first quarter, you see that on development, we were impacted in March with a slowdown in all the volume. Well, one said that. However, the Q1 volumes are traditionally low. and not to be a representative of the figure activity. And on top of that, as I said, it's still too early for us to assess properly the market impact precisely all over the 2026 and 2027 year on development. So that's why we remain cautious and we keep having a close eye on the situation. Well, as for the investment markets, More globally on the markets, you saw that Q1 was a quiet quarter, both in investment and living markets. On the one hand, for the living market globally, the take-up fell by roughly minus 15% year-on-year in the Paris region. However, you saw in the results that we are in line with our expectations on the living activity. with those roughly 25,000 square meters that were left during the first quarter. And as for the departures expected in 2026, we are still in line with what we've shared two months ago on the result, i.e. 30 million euros expected out of the potential 60 million euros. So we are in line with what we expected for the leading activity on investment division. That's globally what we see. Under guidance, clearly, as I said, the conflict in the Middle East clearly widened the international environment. It's contributed to heightened geopolitical and macroeconomic uncertainty. So that's the reason why we are closely monitoring the development. In our view, this will affect, of course, the global economy, so credit markets, interest rates, inflation. raw material costs and supply chain, especially on our domestic market. So, it's difficult at this stage to assess the full extent and duration of the impact on both 26 and 27. But as I said, once said that, and based on the information we have today, as well as the group results at the end of March, we reaffirm today the 2026 guidance on the group net current cash flow. So between 2.90 and 3.10 euros per share.

I understand that the sensitivity of the 2026 guidance is more related to the ICA promotion. So what would it take in terms of volumes to make you revise your guidance?

We'll keep on looking closely at the development. As you said, this could wire the demand, clearly, due to the impact on high interest rates. We'll see if what we have looked in March shall last all over the year or shall recover. And once again, it's too early to tell on this. But clearly, that's on the property development where you could have the largest impact, of course.

And post-2026, for departures, where do we stand regarding Veolia, AXA, and also Thales?

Yeah, if we take them one by one, so starting 2027 with AXA, no major news to be shared today on both of them, clearly. Otherwise, we would have shared that with you. As we said two months ago, there's no emergency on those. but we keep on having a discussion with these long-standing clients. We are not so worried about break-option of AXA at the end of 27 and the expiry of Veolia in 28, clearly. What we saw in Nanterre, where the AXA asset is located, is clearly a sustainable positive living dynamic this quarter, including for ICAD. So all of that are quite good news. We keep on discussing with them, and we will, of course, address you in due course on any development, but not so worried, clearly, about the break option on Agda or Viola.

And for Thales?

For Thales, we are also having some discussion. I think the highest probability for them to gather in a much larger headquarters they have in development. So that might be the one that could vacate the building. Clearly, that's how we are getting prepared and already are looking for any potential tenants should they vacate the building. But it's much lower range for Thales than Aix-en-Gueule.

Okay, but what is the timeline if they were to leave?

N27, in line with Aix-en-Gueule. Okay, okay.

And maybe one last question on health care dividends. I have in mind that usually you receive notifications from IHE in April. Therefore, should we expect any dividend from them this year? And if so, hopefully, how much?

Well, as we shared two months ago, there's no dividend expected from IHE. So the main part of the 65 cents per share included in the guidance on discontinued activities come from the dividend expected from Premier Healthcare, which is the French part of the business, which is still suspended to the General Assembly that should take place during the dispute.

Okay, thank you. Just maybe one last question on interest rates. I just try to quantify the cash flow sensitivity to rate this year. So for instance, what would be the annualized impact of 10 bps increase in the yield chart?

There are no issues for 2026, and the effects were aging for 100%. So nevertheless, the curve of the interest, we have no impact on the cash flow for 2026. Okay.

Thank you very much. Thank you, Stefan.

The next question comes from Florent LaRoche-Hubert from AutoBHF. Please go ahead.

Hi, Nicolas. Hi, Bruno. So thank you to take my question. So I have two questions, so I can ask one by one. So my first question would be on the property investment activity. So we can see that your like-for-like growth is at minus 2.1%. You expected notably at the beginning of the year some departure of tenants. So could we expect that the like-for-like growth for the rest of the year could be higher than your like-for-like growth for 2021? That is your sentiment today on your IOS with discussion of tenants for the rest of the year.

Okay. Thank you, Laurent. Well, on the like-for-like, well, really overall, I'd say that performance remains in line with 2025, clearly including the progressive crystallization of the negative reversion on the one hand On the other hand, the impact of tenant departures. So, globally, that's where we stand. We are not seeing any major reason for improvement over the year, but the performance shall be in line with what we saw in 2025. And more globally, about the discussion we are having with the tenants, well, it's in line with what we see on the market. Clearly, discussions take longer and longer. That's why it's advantage to know quite well our long-standing clients. You saw in the Q1 figures on the Paris region that were very low volume of transactions signed or renewed. Most of the tenants stayed in their existing premises. Clearly, that's what we see. And we are globally in line with the major trend we saw at the end of 25 and this early Q1. More specifically on our investment division, we are in line with what we were expecting and what we felt two months ago. That's what we saw in the figures that have been crystallized during the Q1 and what we expect over the course of 2026. And we try to anticipate as much as possible The potential expiry is in 27 and 28, but this has to be done in a satisfactory way for both the tenant, but also for ECAP. So there's no need to anticipate recorption. We are not so worried about and grant very large incentive if there is no need to.

Okay? Okay, yes, okay, thanks for that. And maybe, so my second question on property development, so we have been able to see that the month of March was very difficult on your reservation for individual people. So now we are careful. Maybe you have been able to discuss with your operational teams. And do you see any improvement or any confirmation of what you have seen in Marcha?

Well, what we see now is in line with what we saw in March, because all of that is related to the overall environment. That's the reason why we remain cautious in our assumption. As I said, really early to draw any conclusion at this stage. We are also waiting to see what the banks will do regarding the individual investors. That's also... might have an impact on the demand. Clearly, we will see what could wire on the cost of raw material also. But today, globally, there has been an impact on the mulch activity. We will see if it lasts or recovers.

Okay, thank you.

And hopefully in July, we'll get a clearer view.

Okay, I hope. Okay, thank you very much.

So do we.

The next question comes from from Van Lansch at Kempen. Please go ahead.

Hi, team. Thank you for the presentation. Three questions from my side. I was just wondering if there's been any discussions lately with the credit rating agency and, yeah, how those are going regarding your outlook at the moment?

Well, as you know, the decision regarding action of the rating, it's the responsibility of S&P. So we have an annual meeting with S&P, but it's a normal way for discussion with S&P. So no special discussion with S&P.

Okay, that's good. Thank you. And my second question is, Is there any update or involvement in the discussions around the potential disposal of the remaining healthcare assets?

Yeah, well, there is no major news to be shared today on this, but we stick to the plan and the strategy we've shared. So, we have no intention to sell under unfavorable conditions with a large discount. I think We could benefit from the positive vibes, I would say, on the market in this asset class, clearly, but we want to keep on doing what we did last year with the Italian portfolio, for example. This was a major deal managed in satisfying conditions. So our objective remains gradual exit from our minority state over the Luce Plano region. More specifically, I'd say the first priority is focused on the most liquid assets that are, in my view, the possibilities assets. Clearly, we have already some interest on those assets. And then after, the residual portfolio in France and Italy. We will, of course, keep you posted as soon as we have something to share. But no major news to be shared today.

Okay. Thank you. And then my last question is... Thank you. I was a bit surprised to see the negative life-like on the logistics segment, despite the occupancy remained pretty stable year on year. I appreciate that there's some negative indexation linked to it, but could you give some figures around that to get a bit of a feeling what it exactly consists of?

Yes, that's exactly true. Thanks for highlighting that. There are negative life-like on light industrial, why it was positive on the office thanks to the relating of the pulse. But on light industrial, there's a double effect, a negative indexation effect due to the fact that most of the levies are linked to ICC. um on the light industrial premises this taxation effect was roughly minus one percent and on top of that we had an impact on departures i mean on the day-to-day business i would say that on the q1 wide on minus three percent so you have also to have in mind that we are talking um so every time you have on the daily basis a normal departure, it can rely on some percentage points at the deal. But this is the double effect coming from negative indexation from the ICC and expected departure.

Okay, that's helpful. Thank you.

Okay, thank you very much.

The next question comes from Jonathan Conator from GS. Please go ahead.

Good morning. Thank you for taking my questions. Two, if I may, please. One, you talked about briefly construction costs. Can you just help us understand what you've seen in terms of increase of construction costs over the last sort of month and a half? And the second question, you were highlighting a renewal with a government agency from a leasing perspective. Can you help us understand that? the sort of renewal condition in the sense what was the reversion and then how much incentives you had to add on top of the reversion. Thank you.

Okay. Hello Jonathan. Thanks for your question. Well, the first one, honestly, on construction costs, too early today to crystallize anything and see anything in the discussion we had. The main question mark is what to expect in the months to go, clearly. But today, we haven't seen yet any major impact. So, clearly too early. And what are you expecting for the next month? Sorry, I didn't get you.

What are you expecting for the next month, then, in terms of construction continues?

We are running several scenarios. Any options are on the table. What is the base case? Pardon? What is the base case? We'll see. Today, what I say is the base case in which we are able to reaffirm the guidance, clearly. But there are several scenarios that are plausible, depending on the potential evolution and inflation, clearly. On your second question, regarding the... renewal on the prim prairie it was related on the existing condition for a six year uh from duration with the uh with the ministry of entire so it's on the 13 000 square meter so this is the city of families with no great corruption with the usual uh amount of incentives, so no specifically large incentives, crystallizing the same level of rent than the historical existing ones. So clearly, in our view, this is a very satisfactory transaction that still highlights the appeal of La Defenseria.

Sorry, just to come back on one of your comments. You know, it's usual incentives. I mean, the incentives, I mean, depending on the district exactly and, you know, appreciate some bills are different than others, but some of the incentives can go up to 40%. I mean, maybe not in Montréal, but, you know, what kind of incentives are we talking about here?

No, no. We are clearly and definitely much less than that. Okay.

All right. Thank you. Thank you, Russell.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Well, thank you all for attending the call. Looking forward to talking to you for the action results soon. And have a good day. See you soon. Bye-bye.