Earnings Call: H1 2021

Jul 27, 2021

Good day, and welcome to the H1 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Nadia Bensalem Nicola. Please go ahead, ma'am. Thank you, operator. Good afternoon, everyone. Nadia Bensalem Nicola speaking, to Co CEO in charge of Finance. I'm very pleased to meet you through this call today, and I hope we'll have soon the opportunity to meet for it. Thanks for being with us for Nexity Health Year Results. I'm here with Veronique Bedard, new CEO of Nexity as well as our CFO, Eric Clacher and the IR team. We'll first go through the presentation before taking your questions in a second step. Before we start, I draw your attention to the disclaimer on Page 2 related to forward looking statements and also to the definition of financial indicators. Notably, given the change in scope we experienced during the semester, we decided to provide distinct disclosure for the disposed activities of Egid, Dominis and Century 21 on one side and the so called new scope that we'll continue to manage to help you to better understand our numbers. So we hope you'll appreciate this effort in our communication. With that, let me hand it over to Veronique. Thank you, Nadia. Hello, everybody. Good afternoon, and thank you for joining us today. Today is an important milestone in our dialogue with you with me taking part in my new role of CEO and Nadia in a new role for finance. We'll really focus today's call on the numbers for the semester and the outlook for the rest of the year, and we are pleased to present you a very strong set of results and that's probably the main point of our call today. Let me begin with the key highlights for the first half, which has been a period of intense construction for us. The first achievement I would like to highlight on slide 4 is about the completion of the Strategic review launched at the end of last year. Following the sale of Century 21 and Domitice, we now have a platform clearly refocused on services, maximizing the potential for cost business synergy opportunities. This move has also contributed to increase our financial capacity since the transaction led to an overall decrease In net debt of €1,200,000,000 €70,000,000 €72,000,000 in IFRS 16 debt and €400,000,000 in net financial debt. It has also an accretive effect on operational margin Since the discontinued activities, as you well know, were loss making. On top of everything, And it's very it's a point which is very important for us. We have reached a long term agreement with AGES Desir La Model. We are committed to produce service senior residences for Domitice. And AGI Des Herla Mondiale is now a key shareholder of Nefiti, part of the Concert Group with 3% of the capital as end of June. We are very satisfied with the outcome of the strategic review, which has been concluded in less than 6 months, and I think it's really an achievement, with terms maximizing creation value for our shareholders. Let's turn to to page let's turn the page and go to Slide 5 concerning the reshuffling of the Executive Committee, which has been, As you can imagine, a top priority for me since I have been appointed CEO. In addition to Nadia, now leading Finance, Jean Claude Bastien is becoming my deputy. Helene Romano, who is a very experienced housing real estate developer and has been with Nexity for the last 15 years, has been appointed as VP of Housing Real Estate. I have also recruited Stephane Dalier, who was the Chief Executive Officer of PEACH. This is a strong and experienced team, mixing people who have been with Nexity for a long time and people who have more recently arrived, they will together steer the transformation ahead while nurturing the specific Nexity culture. The 3rd highlight for the 1st semester is our strong delivery as indicated on Slide 6. Our new home reservations are stable in value compared to last year, and all the signs show that we are back to a profitable growth path. We experienced a strong revenue rebound, up 34% versus 2020 26% versus 2019. And our percentage of current operational profit at 6.6 Spent in the 1st semester for the new scope is consistent with the levels we have in the 1st semester of 2019. And of course, our balance sheet is present. Our net debt went further down to 1.7 times EBITDA at the end of the semester. So as I told you when I began my intervention, we have a very strong set of results to show you today. Finally, on Slide 7, and it's the 4th highlight for this webcast. I am particularly pleased and proud to remind you that Nexidia has been selected as the number one developer in France in 2020 in residential real estate, and it has been the case, as you remember, for the past 6 years. But this year, We have also been nominated as the number one developer in commercial real estate as well, which is the first time in Nexity's history. We also stand out for our commitment to an inclusive and low carbon city, as you can see with the Innova Press classification. After having set the stage with the key highlights, let's now move to the detailed business review for our main lines of activity, and that will be Slide 9. So let's begin with residential real estate, Which represents 70% of our revenue, sorry. The main topic of concern in this area is, of course, the shortage of building permits. We are Facing a very unusual political cycle with why the number of granted building permits usually rebound 6 months after the local elections, usually in September. And it almost happened last year, as you can see on the graph. This didn't really happen in last year. On the graph in the left part of the slide, you can see a rebound in May from the low point of February, but the trend It still needs to be confirmed. This shortage has become a political issue, and the Prime Minister has set up a commission called Commissionaires of which I am a member. We plan to make a list of propositions in September to try and solve the problem. In this tense environment, we were able to keep our sales supply stable. The number of granted permits remains steady compared to last year, and we were able to solicit twice as many permits, That's very important for us. We therefore are a very dynamic portfolio in the making, which gives us the strength to deliver this year again around to 20,000 new home reservations for the full year. Moving to the demand on Slide 10. You can see in the graph on the left side of the slide that we faced a strong retail demand, up 31% Compared to 1st semester 2020, we expect a boost in bulk sales, which are nonlinear throughout the year during the 2nd semester. The consequence of lack of supply and strong demand is that price are still rising, up 4% compared to last year, as you can see on the right side of the slide. Now moving to commercial real estate on Slide 11, which represents 10% of our revenue. You are aware of the main features of this market, of course, which is cyclical and indefinitely at the bottom of the current cycle. The vacancy ratio is peaking And the office rental demand remains tepid. In this context, we signed €307,000,000 worth of order intake. We are counting on our product offer called Nefiti at work, geared towards helping companies to hear their transformation through their office layout to stay very close to our clients during this period. On the next two slides, You will find example of what we are doing, for instance, on Slide 12, to illustrate Nexity know how in connecting its here together to build the city of the future. You can see the office building name new, which has been completed during the first half Of 2021. On the following slide, you can see that we are part of the largest ongoing French urban project, Le Village Des Atlet, And it's really a nice time to talk about it because it will be for the next Volendec. So it's a district development named the Atlas Village. Let's conclude this business review with the key figures on Slide 14 for Services, a 3rd business line, which represents 20% of our revenue. In a nutshell, property management is growing, distribution is buoyant And operational recovering. The student residences are 92% full, but the occupancy rate is still 80 Thanks for co working yet quickly improving. Speaking about co working, you will find in slide Still an interesting project offering by morning. It is operating in Clichy an entire building for L'Oreal. Over to NeXity. At Nexity, we are convinced that co working per se or building managed by a co worker for a sole company will be part of the solution the companies will choose in the wave of the planetary crisis. Now I will let the floor to Nadia for the financial review. Thank you, Veronique. So let's start this review with the P and L on Slide 17, for which we provided comparative numbers not only for 2020, which was impacted by COVID-nineteen crisis, but also for 2019 as a more normative point of reference, I would say. So reported revenue was €2,300,000,000 for the semester, €2,100,000,000 if we exclude the €211,000,000 Contribution from AG Dominique and Century 21 sold in the first half. This represents an increase of to 34% against the low point of 2020 and of 26% versus the pre COVID level of H1 2019. I'll go through the details by business in the next slide in a minute. Operating profit, as you can see, was €362,000,000 breaking down into €136,000,000 for the current operating profit for the new scope, plus EUR 226,000,000 primarily related to the very, very, very nice capital gain we made on the disposals of the semester. As a reminder, AG Dimitris was a loss making business with an operating loss of minus €3,000,000 in 2020. The net financial expenses were up to €44,000,000 mainly reflecting the rise in interest expense on these liabilities, but the reduction in debt following the disposals will help to cut net financial expense from H2 onwards. Tax expense, it was €32,000,000 representing an effective tax rate of 28% compared with 30% last year. Our net profit came to a record level of €283,000,000 If we exclude the one off effects related to the change in scope, net profit amounts to €77,000,000 so the last to number the bottom line. It's 3 times the level of last year and an increase of more than 50% against 2019 levels. So overall, a very strong set of results and an excellent financial performance as Veronique highlighted. So let's see the details of the revenues with the bridge on Slide 18. So you can see that the largest Contributor to revenue growth was the residential real estate development, sorry, in blue, up by almost €500,000,000 versus last year, out of which we estimate on one side A sort of catch up impact of around €300,000,000 from COVID base last year and on the other side, around €200,000,000 from Business growth implying more than 20% of organic growth, I would say. For H2, We are at this stage of the year cautious and we currently expect slightly lower revenues compared to the strong H2 of last year, Given the forecasted progress on construction and less notarial deeds as a consequence of longer approval times for building permits. Nevertheless, residential real estate development should post a nice double digit growth for the whole year. For Commercial Real Estate Development, so the box in green, revenues were slightly down given the high base of last year from the sale of the Paris Regional Council Building. Please keep in mind that H2 will also be a semester of revenue decline for this business, given the exceptional €400,000,000 revenue impact from the sale of the Eco Compuise in Lager en Colomb end of last year. And finally, services, so the box in purple, also contributed to revenue development of the semester. So with revenues up 16% versus 2020 and plus 8% versus 2019 over to Mr. Florentic. With all activities in the platform growing, as Veronique highlighted in the highlights in the first section, Services should post the high single digit growth for the full year. Now moving on Slide 19 to the current operating profit. Current operating profit reached, as I said, €136,000,000 It's the double of last year level in terms of absolute amount in euro term, and it represents a margin of 6.6%, A strong rebound, which put us back to our pre COVID level, as you can see in the red U curve on the left, showing our quick recovery and boding well for the rest of the year. Looking at the details by business on the bridge on the right, The largest contributors to profit growth were the residential real estate development with margin rebounding from 0 last year to almost 6% at the end of the semester, and we expect full year margin to be back above 8.5%, taking into account the managed impact of rising construction costs and change in client mix. Regarding the commercial real estate development. So in green, margin was down given the base effect of last year and the progress of the various projects underway, but still pretty high, very high level at 15.8% margin, above the level we anticipate for the year as a whole, which should be closer to our historical levels. To a lesser extent, the services also contributed to profit growth. Their margin increased from 4% to 6.6% benefiting from top line recovery and from the exclusion of the loss making business of Agil Dominique. Now moving to cash flow with a focus on the working capital on Slide 20. Working capital increased by almost €400,000,000 in the semester as the mechanical result of 2 distinct effects. On one side and you can see that on the second column of the table, an increase of almost €240,000,000 related to the anticipated reverse effect of the significant down payment we received end of last year for programs in REWA at Saint Trois and Lagarin Colombe, which led the commercial real estate to end, you might remember that, the year with an exceptionally highly negative working capital at minus €267,000,000 This working capital also returned to a more normal level end of June, but it remained negative as you can see minus €85,000,000 and it is expected to continue to increase for the rest of the year in respect of the continued consumption of the down payments. Adjusted for this, the increase in working capital was €161,000,000 comparable with what is usually recorded in H1. 1. In residential, the working capital requirement to backlog remained under control at 20.5%, in line with our historical levels. So overall, the message here is that the working capital continues to be managed very carefully and with almost new unsold units remaining in portfolio, looking ahead, given the pipeline of CAG, working capital should continue to increase by year end. Let's now see the impacts of those various building blocks on our level of debt with the bridge in Slide Thank you, Juan. Here, we're talking about net debt before any lease liabilities. So from left to right, We opened the year with €655,000,000 net debt on the balance sheet, representing a leverage ratio of 1.9x EBITDA. Then you see the green boxes. The strategic review contributed overall to decrease the net financial debt by almost to €400,000,000 You have €100,000,000 that were already booked in full year 2020 statements with debt reclassification under IFRS 5. And then you have an additional and extra €300,000,000 reduction in the semester with on one side €200,000,000 cash proceeds from the disposals and around €100,000,000 of cancellation of the commitments to buyout minority interest. Then the boxes in purple, The business generated a negative free cash flow of around €320,000,000 which is a very common feature in the first half in this period of the year, which has been accentuated by the change in working capital I just mentioned. Then taking into account the dividend paid to shareholders in May, so the blue box, this brings the net debt as of end of June to €690,000,000 which means 1.7 times EBITDA, which is down from a level of 2.3x only 2 years ago. So 1.7x is a very comfortable level that gives us room to look at the future with confidence, with serenity, with ambition. Keep in mind that given the slight increase in working capital I mentioned earlier, this leverage ratio should increase reasonably by year end. In slide 22, we are All the more confident when we look at our financial structure since we issued last April a new bond at a very low and very attractive rate, allowing us to extend to 2028 to €140,000,000 debt, leading to actually very limited debt reimbursements over the next 3 years, as you can see on the graph in the right. So to conclude this financial review And before I hand it over to Veronique for the outlook and for the conclusion, a look at our balance sheet, a balance sheet that is strong, that is healthy, that is sound, with the level of equity growing to €1,900,000,000 and net debt only 30% of that amount. Thank you, Nadia. Let me finish with our strong confidence for the future. As can be seen on Slide 25, we're enjoying a high visibility on future revenue. Backlog is worth 2 years of activity and our Global Pipeline 6 years. It is stable, but I want to draw your attention on the fact that the stability has significant moves in and out of the pipeline. Revenue rising, which means that there is a high outflow from the backlog, but at the same time, The flow of projects coming into the business potential is high too, allowing the pipeline to remain stable. Of course, we are operating in an uncertain environment as highlighted in the next Slide 26. I am sure that in the Q and A session, you will mention the uncertainty of the economic recovery, the bottleneck of building permits, The rise in construction costs, the environmental constraints, the risk of increase in interest rates and the phasing out of the penal Skin, everything is here, but Nexity is organized in a way that allows us to face with confidence all these risks because our core business has been from the very beginning about dealing with uncertainty. That's what about to Real Estate Development is about. We have strong assets to address this and make the difference in a competitive manner. First, our wide and overextending range of products, comprehensive territorial coverage. In a nutshell, we are everywhere. A step ahead on low carbon construction and finally, size and scale purchasing power. Having said that and in the light of the strong results we are posting for H1, we are pleased to confirm the guidance we set at the beginning of the year And to precise, it reflects the expectations of our new scope of activity for the rest of the year. Beyond business indicators, in terms of revenues, we expect to reach €4,400,000,000 for the full year for the new scope, excluding any contribution from disposed activities. Keep in mind that compared to 2019, This guidance implies a revenue growth of around 10%. In terms of current operating profit, we expect to reach €360,000,000 for the new scope, representing a 25% increase versus last year and an operating margin above 8% back to our 2019 levels on the same scope. We are cautious. You know us as usual, given the uncertainties of our environment, but fundamentally confident given our performance year to date on our strengthened financial structure and organized to fight and win in a transforming market. So to conclude this presentation, let me remind you that our commitment is to create and share value for all our stakeholders. This is our value proposition. We offer our clients an integrated real estate platform, our employees a Strong and meaningful culture and our shareholders a performing and responsible investment proposition. And that is for today. And keep in mind that we are working with my team on an updated midterm road map on which we will expect to get back to you at at some point by the end of H1 next year. And with that, I think we can now open the floor to Q and A. Thank The first question comes from Nicolas Tavor at Stifel. Yes, good evening. Can you hear me well? Yes, very well. Good evening, Nicolas. Good evening. Thank you very much for taking my question and congratulations on your nominations, obviously. I had a first few questions on the working capital just to clarify how it should evolve. Within the short side, obviously, if building permits are picking up and so on, we should see an increase. Can you give us some kind of idea in terms of percentage of the backlog, what you target for the year and for H2? And then also looking at the commercial real estate development, we've seen a start of a normalization in H1 as expected. And how much more normalization can we expect in H2? Or is there not much change because there would be not much revenue Recognition related to the ENGIE Eco Campus. I mean, how should we think about that? And same for the line called others, obviously, which is a More difficult to track. And then on the second question, the dividend policy, can you remind us of what You guide for 2021 dividend to be paid in 2022. Is there already some kind of Range guidance percentage we can look at? Thank you. That's fine for you. I suggest Eric take The first one related to, I would say, the outlook for working capital. And I might take the second one on dividend policy and overall Capital allocation priorities, if I may. Okay. Good evening, everybody. About our working capital requirement, I will just say that for residential estate, we think that it will kind of have a slight increase. It is not about a key housing at the rate of commercialization is still very good, but it is with the delay of mounting new operations that we can have to have more expenses before launching commercialization, So that we can have some faith in our working capital requirement. I think it's not so point to be worried as it's quite a good Wait to see that as our backlog is increasing, it's quite normal that our working EBITDA requirement is still increasing. And we said that If you look like at the historical level, we can be always around 20%. So that's quite the normal way to say the thing, but it's not a point to be worried if you can go maybe up to to 23% as it's more important to see the quality of our working capital requirement and what it is made of and what I point out is that it's not about And so the housing. As for commercial, we have a very particular situation with a big down payment and then 2020. And of course, we are consulting this down payment until this year. We think that the working capital comment will stay below 0, but of course, we have still expenses to do The phasing of the corporation for the Garen Colombe project with ENGIE, the Process is going well as we make the agreement with the construction so that we can have a good construction and we have no worry about The budget and of course, this year is much used for the first work, but not really representative in revenue, So that the revenue will start more important in 2022 until completion in 2024. So this is for the question related to working capital outlook. And when it comes to dividend, I think what we can already say is that regarding returns to shareholders, Nexity priority has always been to establish to solid distribution policy. We have a good track record. We have always been careful to the level of dividend. At last AGM, Which was end of May. I think we already took the commitment that next year dividend would be above €2 Per share, but returns to shareholders will be I mean, it's a Board decision, and it's discussed and reviewed by the Board Every year and then it will be discussed in due time after the full year results. Maybe more broadly when it comes to capital allocation priorities, which I think is Maybe your underlying question behind the question on dividend level, what we can say to To put things in perspective is that maybe first when it comes to the strategic review, it's now complete. So there are really no other major disposals to be expected in the midterm. Then when you look at our balance sheet, we have a debt ratio today That is at 1.7x at the end of the 1st semester. As I said, we think it's a low point. It's a very comfortable level that gives us room to look at the future with ambition, as I said. And given the further increase in working capital that Eric Just to elaborate, this ratio should increase reasonably by year end. I said reasonably, We said overall, consistently with what we said in the past, we're comfortable with the level of debt net up to a range of 0.5x, 3x EBITDA, But obviously, it won't reach this level by end of this year. And then when it comes to M and A, I would say very big Transforming M and A is not on top of the list of our immediate capital allocation priorities. We see investment in land bank at something more critical in the short term, given current scarcity of land as well as investments in our transformation, And notably in the digitalization of tools and services to respond even more effectively to our customers' demand. So that being said, we don't exclude external growth opportunities, but it will be more around targeted bolt on opportunities complementary to our Service platform, so targeted bolt on, but not transforming. And so the consequence of that is that it should Leave still enough room to maintain a very attractive policy of returns to shareholders. Sorry, it's been a long answer, but I think that was the underlying meaning of your question behind dividend level. Thank you very much. Over to Mary Forte at SG. Yes, good evening. Over to Eric. Just a very simple question and perhaps to Pete, just I will try to reconciliate your new guidance in In terms of operating income, you were targeting before €350,000,000 Does this target was including the impact of ACHI Dominis or not? It's just to compare egg by egg. Yes, you're right, Maibin. The previous target was with comparable perimeter, so that we participate a part of the losses of Egypt and Haiti's contributions and territories at the beginning of the year. We think that now this is solved. It's more simple to speak about the Newscorp. The Newscorp is without this sold disposal activities. That's why we explained that our guidance that is with the same forecast there is no evolution, but it's a clarification on a new scope. We now target €360,000,000 EBIT at a minimal level for 2021. Okay. So in fact, if we reintegrate the EBIT from IHITO meetings during the H1. Your new guidance should have been €400,000,000 is it correct? Not at all because you have specific treatment with IFRS 5 and IFRS 16. With IFRS 5, we can have no more amortization of the right of use for asset. So the operating income of first half of twenty twenty one is forced because we have no amortization from This asset, so it's about €55,000,000 you don't have in the recognition. That's why we prefer to speak on the whole of the impact of the disposal that's about EUR 226,000,000 on our Indeed. That is more simple to see and not to focus about what the component as far as we have sold and has no more in mind for us. Long story short, also just if I may rephrase it, Eric, The €40,000,000 that you see as a result of sold disposal activities for Egird, don't take it as an economic value. It's really the technicalities of the accounting norm of IFRS 5. But economically speaking, Editas was still a loss making business as of end of H1. But if you take into account the technicalities of IFRS 5 and the end of the amortization of the lease, It brings a positive number. Okay. I don't know if those technicalities of IFRS five folds Our clearer, but long story short, no, you should not have taken the contribution of Asia and the Middle East economical contribution to €40,000,000 in the first half. Reinsuring. Okay. Thank you very much. The next question comes from Laurent Gilibert at Exane. Good morning. Good evening, liquidity team. Laurent speaking. So I do have one question regarding sorry, good evening. Regarding the number of permits being filled in this H1. So you mentioned it is 2 times the number of H1 2020. But if I'm not wrong, in net one 2020, it was very difficult to fill permits because of the lockdown. So Can you give us the data? So how many permits have you been filling in this H1? And how does it compare to H1 2019, for instance? I think you have much more to understand that as a dynamic. Of course, 2020 Maybe low level because of the election, but we still have permit. And what we just I want to mention that the Didymek is here and we have a good forecast and we have to put that in mind because we would just want to ensure That's our forecast for 20,000 reservation new home this year is quite reachable because we have the potential to do that. So what would be the number of comments you have been filling in this H1? That's not an information we'll disclose. It's obviously, I would say a sensitive information vis a vis competition notably. But I think the point here, as Eric Said is that it's really an accelerated dynamic from a 2020 level that was not such a low point actually And actually also very good dynamic versus 2019 levels. We could say that it's the double of maybe the average of the last 3 years. Yes, of course. But it's also to see with the larger size Of Nexity, we are increasing our sales. And of course, we have a natural increase in our permit. Okay. Thank you for this. And regarding the as you have been mentioning the risk at the end of your presentation, The evolution of construction costs and stuff like that for the Eco Campus from AMG. So now you have been able to To set up the contract with the companies, we have subcontractors. So you have 100% visibility on this? Yes. You can confirm that, yes. And for the implementation of the new norms regarding In low carbon activities for next year and so on. So are you still seeing a potential increase of cost reduction cost of 5% to 10% at some point? Or Are you able now to be more comfortable on this risk? Well, I don't know exactly what you are talking about. The specific details of the new 2020 Energia Regulation Since you know they have not been decided yet, but so it's difficult to measure the impact it could have. But however, we believe like all regulation project, as you know, because we are really committed to low carbon for a long time. Projects already go beyond what will be required by this regulation, as far as we know, And the additional costs will be remained marginal. As I told you last time, you are we are really working hard on our Construction and mode constructive, which would be Constructive mode. Constructive mode. Constrictive mode, sorry, to be able to produce low carbon buildings at an affordable price. That's really at the heart of what we are doing today at Nexity. Thank you very much. The next question comes from Pierre Clouard at Kepler Cheuvreux. Yes, Good evening. And just to come back on the guidance, just to make sure that I understand everything. The €4,600,000,000 that you gave in Q1 Was excluding HD Dimitris, so the 4.6%. And now you are guiding on 4.4%. Can you give us The bridge between this 4.6% and the 4.4%, given the fact that you were saying that So you are already excluding HDDs. No. Nadia speaking, and thank you for the question, and that's a fair question. The guidance of last time, so in Q1, €4,600,000,000 for the full year was including actually one semester of contribution from the SOL activities, right? So it was including the contribution until the assets were disposed. Now what the guidance is reflecting is just the new scope without any contribution of those disposed activities. So excluding so long story short, it was 4 point the overall revenues of the disposed activities on a full year basis, It's about €400,000,000 The previous guidance, the €4,600,000,000 was including half of that, to €200,000,000 The new guidance excludes anything from the disposed activities and so €4,400,000,000 Are the math clearer for you? Yes, yes. And in terms of IFRS rule, with you communicating on the half year basis you're taking into account half year of HDWTs or not? Yes. For IFRS rules, we have the half year, the committee's and our published figures It will be about €4,600,000,000 but we prefer to speak about our news scope because we speak about the Operating income about €360,000,000 on the News Corp. So we just want to focus that the Revenue of the News Corp will be about €4,400,000 but of course our real revenue will be about €4,600,000 Including €211,000,000 from the half semester of Egypt and Centenary 2021. Okay. That's much clearer. And then coming back on your expectations on margin, You are seeing in a positive in your report that you are expecting a nice because I have margin for the Residential business. Can we expect in H2 coming back to 2018 2019 level In terms of margin? What I indicated that's a fair question. What I indicated is that We're confident to have the residential real estate development margin for the full year Margin close to above 8.5%, so which implies indeed double digit Margin level for the second half of the year, mechanically, given that we closed this one at 6. Okay. And whatever the recovery of building permit? Yes. This is will have more and more an effect on the level of revenue. Yes, than on over to the margin itself. Thank you. Thank you. The next question comes from Nicolas Davao at Stifel. Hello again. Can you hear me well? Hello again. Yes. Sorry, I had one more question. Just on the you mentioned Your company and maybe other competitors will enter discussion with the governments in how to help Have a rebound in the number of building permits. My question is, what can be done and is already known That can that could be done potentially other than just the PREFER granting building permits For social housing, I mean, and how much can the President, I mean, be involved in the mayor's territory when It could, let's say, trigger pullback from, let's say, some political parties and so on and could be, It's difficult to manage. I mean, what are the discussions? Where are you? And what can you already tell us? I don't know what you can share exactly in terms of what is Currently being discussed in the commission, Veronique, but We are still in the first step of the Discussion, of course, there is a strong pressure on us from the government to be able to reach some proposition at the end of September. There's, of course, always a fiscal proposition. That's one part. There's something the other proposition about the local Municipalities revenues because with the suppression of the tax debitation, new inhabitants Doesn't don't give more revenue to local authorities, which is a very big problem for local authorities and also reflection about simplification of the law concerning building permits. But I mean, all the everything is on the table, and we still have to work on that and make Priorities. I think that The effect of the Rep 7 Commission, the first effect is that now the question of The building permits is becoming a political problem. And I can also I see mayors almost every week, as you can imagine. And they now feel the pressure from the inhabitants to get new housing. So I think that something is moving in the local authorities. So I hope that The rebound we saw in May will be strengthening at the on H2. I think really there's something happening there. I couldn't put real figures on that, but honestly, we saw permits we are seeing these days permits for Significant operations coming back. So something happening. I cannot tell you exactly The range and the strength of this movement that something is happening. Thank you very much. And maybe I could add something. I think the more I think about it, It's really about field work. It's I mean, So it's a culture at Nexity. We go, we see the mayors, their teams, we discuss with them. We have a really incredible range of products, and we are very open to suggestion. And I think it doesn't really it does really help us to get the statements at the end of the day. But it's really work. So it's hard work, it's field work, it's groundwork, But that's what we are doing these days. And I'm taking my part in that work, honestly. Thank you very much. And the door is not and honestly, the doors of the mayor are not closed. You can go, you can see them, you can discuss with them. Okay. Maybe I could come back. Sorry, Nadia. It's the end of the very, very long day. So on Lagerie and Colombe, I told you that the contract we have made the contract for the construction. I could add that we are below what we expected in our operations financial balance. Because I think it gives you an idea of how we built this operations, financial balances, generally speaking, at Nexity. I think we were prepared for what's happening here now. So it gives you an idea of what's happening on our main projects right now. You mean notably in terms of construction cost? Construction cost, yes. Yes. Okay. Do not underestimate our purchasing power tool. I don't think it's a good example to give because it's a big contract. Well, we are below what we expected. Yes. Probably the best example of our ability to anticipate This type of evolution. We are a cautious company. So I'm afraid, looking at the IR team, that we'll have to stop here. Maybe I will reiterate that we are very pleased with Veronique with this strong set of Our results are slightly ahead of expectation. Congrats to all the teams that contributed to make those numbers happen, the teams on the field, the M and A team for the strategic review. If someone did not ask During this call, the IR team is here at your service as usual tonight and tomorrow. Have a good evening. Good luck for the marathon of the reporting season and have a nice summer everyone. Bye bye. And maybe Nadia if you could add something. Don't remain stuck with Figures you don't understand, the new scope is something difficult to understand. I can tell you we spent a lot of time with Eric Telling us everything about the figures. So if it's complicated for you, be reassured it was complicated for us. So don't remain stuck and just call us and we will explain these figures again if you need us to do that. So good evening. Thank you very much for listening to us and being with us tonight. Bye bye.