Evening and welcome to this presentation of the half-year results for 2024. This presentation is being recorded. If you wish to put any questions, please press star one on your keyboard, star one for questions. I'll now give the floor to Mrs. Véronique Bédague, who is CEO and Chairman of the board.
Good evening, welcome, and thank you for joining us on this webcast for our half-year results. As usual, I have with me Jean-Claude Bassien, Pierre-Henry Pouchelon, and the team of Investor Relations. I'll share with me the highlights of this half-year presentation. Jean-Claude and Pierre-Henry will give you details about business activity and financial performance, and of course, you'll be able to put questions after the presentation. First of all, a few key take-home messages on each one of you is about the market itself.
As you know, this industry has been operating in what has been a downward market on housing, on new property. We have a downward trend to the tune of about 15% according to FPI after Q1, 27% on retail. Adéquation indicates -21% on retail. On the first six months of the year on commercial property, we see investment down 39% for office property after 56% in 2023. But after the publishing of the Q1 results, we have some encouragement, and I'll get back to that. Nonetheless, in operation terms, we were very busy. We are rolling out our roadmap step by step, and I can tell you that our transformation plan is well underway. The four Rs, refocusing, deleveraging, resizing, recalibrating, and redeployment on H1 to highlights significant deleveraging to the tune of EUR 264 million. That's down 31%. Positive operating profits.
Taking on board the transformation costs worth EUR 128 million, these costs were completely offset by the capital gains generated by the disposal of the PMI business, EUR 183 million. Sales and financial performances are in line with our expectations, and our outlook remains unchanged. I think we should also indicate the sequence of operations in the market. Our leadership position was confirmed, and for the fifth year running by the Le Moniteur ranking, the fundamentals tend to confirm this position. Regarding the retail market, we had encouraging signs from the macro and regulatory viewpoint. Since January 1st, 2024, there's been a constant decline in interest rates for property. This is down 54 points over six months, which of course means the purchasing power of our customers has been up 5%.
In line with higher nominal income, plus 12% or 13% over three years, plus the price efforts that we allowed to the tune of minus 2 to minus 10, minus 5%, minus 10%, the loss of purchasing powers of 25% was fully compensated. And thanks to that, reservations for detail remain stable, which is better than market. The second good news, in spite of the lack of majority in government, the second decree on zoning extension was published in July. That means 700 additional towns that are now eligible to the LLI or the zero interest rate loan or intermediate rental investment. And so that's as much as 87% of our supply that is eligible versus 81% after the first extension and 70% before the first extension.
Now, irrespective of the outside context, this was a very busy period in line with our roadmap, whose implementation is not depending on any outside help. This is essential for the lines of action needed to accomplish this in-depth conversation. We're perfectly clear that teams have been working relentlessly on this roadmap. We've confirmed this, well, the disposal of the PMI in Q2. Last night, we published just before these results a press release regarding our exclusive negotiations with Crédit Agricole Immobilier to dispose of this property management business. This puts an end to this search for strategic and financial partners on our management business. The deleveraging is well underway, and we are well underway to cut down on our debt.
On the first half year, we have a 30% reduction of debt with, of course, the help of the disposal of PMI, but also keeping WCR well under control. We are also resizing our cost base, and we have again the plan that was published at the beginning of Q1. Indeed, the redundancy plan is going according to plan with reduced headcount and reduced wage bill, together with the cutdown on SG&A. We are looking at savings to the tune of EUR 100 million for 2026, down 16% compared with end 2022. Regarding recalibrating our offer, we are adapting this to new deals on the market. There are national campaigns, there are some highlights, targeted price cuts, and of course, we have to take on board the higher construction costs. Pierre-Henry will give you details about this because, of course, this will have consequences on our accounts.
But these adaptation measures mean that we can sell our supply and not end up with unsold property. Finally, the redeployment of the new offer in line with the new market deal, as it were, means that in practice, we are moving towards an agile model as an urban operator, which will be fully operational by year's end. This is again way down the road. We had more than 130 engagement committees that took place in H1. So as many as 9,300 units, including 33% in urban regeneration, were being up for sale. Our partners, including our partnerships, including Carrefour and Mirabaud, enabled us also to step up this urban regeneration without effect on the balance sheet in its initial phase. On this slide, you can see the main indicators, and of course, Jean-Claude and Pierre-Henry will give you details.
Business activity and financial performance are in line with our expectations, and the outlook remains unchanged for the year. Regarding business activity, you have to see that retail sales are being stabilized, which confirms the idea that we are now pulling out of the low point, and on the financial part, operating income positive to the tune of EUR 55 million, deleveraging to EUR 164 million, -30%. This is in line with our plan. So once again, we were confirmed as being the number one developer by Le Moniteur. Our balance sheet is very robust, especially because the deleveraging is, as I said, well underway. We have an undrawn credit line of EUR 100 million, of which only EUR 50 million were used. Our partnerships remain unchanged. You may remember that Crédit Agricole, AG2R La Mondiale, Arkéa, and Crédit Mutuel de l'Est, of which three are on our board.
There's the fourth partner, of course, is in close contact with us. This is important that we have also partners in the banking business, but also the financial partners. This has been important. We have Carrefour, the business partner, Caisse des Dépôts, financial partner, but also Mirabaud for what we call urban regeneration. Number four, we are cutting down on our cost base and adjusting our offer for 2024 so as to offer an affordable product range. So we will be in a position to confirm a position as leader in this property development business in H2.
Thank you, Véronique. Regarding business activity, Q2 was very much in line with Q1, so we are hitting, of course, a crisis again. Nonetheless, as many as 5,000 reservations were signed up. It's down 70% compared to last year. However, on retail, we're doing better than market. We're stable.
Whereas Adequation announced for the market as a whole, a decline of 21% over the first six months. This confirms the diagnosis we set out at the end of 2023. 2023 was going to be the low point, as it were, the low point of that cycle. The client mix is not significant because the bulk business, which is the main driver of the market, is not linear over the year. And so therefore, we maintain our target, i.e., a client mix with bulk sales accounting for 65% towards the end of the year. This pie chart will evolve over the year. A few words about this business of intermediate rental housing. We've multiplied by 2.5 the business compared to last year. Now, the market is under pressure. Nonetheless, we have to be disciplined in keeping our commercial offer well under control. Recalibrating has been efficient.
We are selling off our stock of units, and this is doing well. You have to keep in mind that including bulks, we are looking at 85% of all units sold. Another effort we've been making, cutting prices down a bit to adapt to the new purchasing power of our customers. And that should be reflected, of course, in the transformation cost. Pierre-Henry will tell you more about that. All in all, our offer has rather low risk. The key indicator of the number of unsold completed property is non-significant, about 100 units. And of course, the offer remaining to be delivered on H2 is rather low. It's less than 8% of the entire volume. Nonetheless, as Véronique said, we had 87% of our property being offered in a tense context.
Let me say a few words about the development of our brand, Nexity Héritage.
For this particular business, we're seeing a strong growth relative to 2023. We have brought together various areas of expertise, which we previously operated via a number of entities under the heritage brand. These efforts are bearing fruit. On the screen, you're seeing two examples of projects carried out by us. One project in the Paris area is about rehabilitating an office building, turning that into a mixed-use building, including office space and co-living space. Also, we have a project in the historical center of Cherbourg, returning that into a mixed-use program, including retail and housing space. Now, regarding the commercial market, this tends to reverse. But after a 55% fall in Q1, over this half year, the drop in investment is 39%. The trend seems to be improving.
Order intake, although still low at EUR 46 million, is higher than the four-year level for 2023 over six months. This is a low-intensity sign. We're holding on to all of those favorable signs in this sector. We have two off-plan sales contracts that were signed during the period for 10,000 sq m , including 8,000 sq m for a higher education building in the Lyon Confluence development. Five iconic projects delivered in H1, the Athletes' Village, 60,000 sq m , Reiwa Future Head Office in Saint-Ouen, the 21,000 sq m co-living project in Puteaux. At the end of June, we had 14 projects underway, representing a backlog of EUR 208 million.
Now, regarding our service business, this continues to be driven by service to properties, student residences, and co-working spaces, with sales at 4% driven by growth in our managed portfolio, but also by high occupancy rates above 90% at Studéa and Morning. Distribution continues to be impacted by the crisis affecting individual investors. So -52% in a market that's collapsing. But we need to bear in mind the competitive environment. With regard to property management businesses, the group is pursuing a three-pronged approach. We're selling our PMI business, property management for individuals, to Bridgepoint. And we have entered into negotiations with Crédit Agricole Immobilier, as already announced, for the sale of NPM, Nexity Property Management, handing over to Pierre-Henry, who will detail our financial performance over the period.
Thank you, Jean-Claude. Hello, everyone. Let's now discuss our financial and non-financial performance.
As you can see on this slide, slide 18, this reflects the transformation plan, which is now underway, with its full impact on the first half of 2024. The slide shows all our main indicators, which I will now detail one by one. Let's start with sales. At the end of June, total sales amounted to EUR 1.7 billion, down 14%, excluding divested activities, or EUR 267 million. Obviously, this is due to property development, both residential and commercial, and this reflects the progress of operations underway, as well as a drop in bookings. With regard to services, serviced properties are up 4%, offset by a downturn in distribution due to headwinds in the new build market for individual customers, and also a decline in bookings in 2023. As we said in the introduction, the group's transformation involves resizing, with key announcements made on the occasion of the Q1 results.
Expected savings by 2026 amount to EUR 95 million. That's an expected reduction in the cost base of at least 16% in full year 2026. So EUR 75 million of this plan will be saved by reducing payroll, and the implementation of the redundancy plan is on schedule. EUR 20 million will be saved on overheads and real estate, where operational action plans are in place to achieve this. Now, operating profit was positive at EUR 55 million, in line with our annual guidance. It was heavily impacted by a transformation cost of EUR 128 million, which was fully offset by the EUR 183 million capital gain from the sale of our PMI business. Now, current profit factors in our cost of adapting and recalibrating the offer design in the previous cycle, which amount to EUR 57 million.
Let's bear in mind the price effect, the cost price, as well as construction costs, mostly in connection with corporate failures. So non-current items include EUR 30 million of abandonment costs and impairment of land put up for sale. These are all projects which we, together with our operational staff, have decided not to develop. So EUR 41 million of reorganization cost provisions, including redundancy plan costs. And lastly, EUR 183 million capital gain on the sale of our PMI property management for individuals business. Now, slide 22, we show the breakdown of recurring operating profit by activity. Of course, it's heavily impacted in property development by the adjustment costs described previously. For services, recurring operating profit is impacted by distribution activities and weighed down by the drop in bookings in 2023. WCR, excluding tax, fell by EUR 23 million to EUR 1.315 billion, with a EUR 102 million decrease in the residential development business.
As we told you from the outset, that reduction relies on two pillars: refocusing our efforts via divestments, but also working capital discipline and reduction. The actions undertaken since 2023 are bearing fruit in the first half of the year. This explains the significant drop. Continued sales activity in our operations. Land purchases are down by EUR 60 million compared with the first half of 2023. The land bank is down 14% to EUR 143 million as of June 30, 2024. I should point out that no acquisitions on the land bank have been authorized since the beginning of 2023. Also, we're optimizing the period between land acquisitions and cost of funds. This involves working on the timing of land purchases, the signing of deeds, and also the start of constructions. This has less of an impact on our WCR.
Speeding up collection of customer receivables, we have also affected the favorable effect on WCR of abandoned costs to the tune of EUR 30 million. Working capital is penalized by a deferred cash inflow of EUR 85 million from our key project in La Garenne-Colombes. Adjusted for this impact, WCR is down by EUR 108 million. I would like to add that this reduction occurred in the first half of the year, which structurally represents a peak in working capital for developers. I'm talking about residential property management. Net debt fell by EUR 264 million, so minus 31%, mainly due to the sale of our PMI business for EUR 400 million. The negative impact of free cash flow from operating operations for EUR 95 million, which is impacted by the deferred cash inflow from the La Garenne-Colombes project to the tune of EUR 85 million, and also interest expenses for EUR 47 million.
Adjusted for the deferred cash inflow, the reduction in debt would have been nearly EUR 350 million, or more than 40%. I'd like to remind you of our history with net debt. At June 30, we had over EUR 1 billion net debt, EUR 843 million at the end of 2023. Now, we're still at slightly under EUR 500 million at the end of the first half. The debt profile of Nexity has significantly been decreased. Now, the financial structure remains balanced. At the end of June, 60% of gross debt is at fixed rates. With our hedging instruments, our gross debt is 96% hedged. The group's liquidity remains very solid at EUR 1 billion, including EUR 750 million in underwritten confirmed credit lines. The total amount of the line maturing in 2028 is EUR 800 million, and there are no restrictions on its use.
There was no change in this half year in the long-term debt maturity schedule. As a reminder, our banking partners and Euro PP bondholders have shown unanimous support for our transformation and have waived our financial ratio obligations for June 30 and for fiscal 2024. The next test date for financial ratios is June 30, 2025. I'd like to show you a slide on non-financial performance, which is at the heart of our business challenges. The group's low carbon trajectory is ambitious. As a reminder, we're aiming for a 42% reduction in our carbon footprint by 2030, a level that's 10% better than current RE2020 energy efficiency regulations. And this is equivalent to being two years ahead of the regulatory thresholds.
In the first half of the year, we did even better, outperforming by 30% on average the RE2020 energy efficiency requirements for projects at the building permit stage. This has been made possible by the continued deployment of heat pumps and low carbon construction methods, as well as by growing share of refurbishment in our production portfolio, all the while keeping our cost prices under control. One example of Nexity's lead in low carbon development is the Olympic Athletes' Village. I'd like to remind you, this is a project of around 60,000 sq m , including 40,000 sq m of residential space developed in just five years and designed to emit as little CO2 as possible, with less than 700 kg of carbon per cubic per square meter.
This was made possible by a number of technical service innovations that Nexity is now capitalizing on in future projects. Finally, a word about our outlook. Based on the successful execution of the roadmap, in particular the implementation of measures to adjust and transform the organization, and assuming the macroeconomic environment does not deteriorate further, we maintain our outlook unchanged. This includes positive operating profit in 2024, marking a financial low point. This level of profit factors in capital gains on disposals, the cost of adjusting the offering to the new market environment, and the cost associated with the group's reorganization. Net financial debt at the end of 2024 will be significantly lower than what it was at the end of 2023, improved profitability for 2025, and consequently, continued debt reduction with a maximum net debt of EUR 500 million by the end of 2025.
Thank you very much for your attention. Of course, the three of us are happy to answer any questions you may have. Thank you very much, kind sir.
Ladies and gentlemen, if you'd like to ask questions, please press star one. Christophe Chaput, from Oddo BHF. Go ahead, sir.
Hello, everyone. I hope you can hear me okay. Thank you for taking my question. Or rather, questions. I have four of them, if that's okay. In reference to slide 21, you discussed the transformation rates, EUR 128 million over the half year. Could you please tell us more about the costs you'll have to post for the entire year? Could you break it down between current costs and non-current costs? Recurring and non-recurring costs, that would be very helpful. Second question, regarding bookings.
You said this trend is not linear from the first half to the second half, so -30% for the first half, if I understand correctly, and for the full year. Do you expect better stability of bookings? Third question, property management. You have entered negotiations for selling NPM. So we're talking revenue of EUR 80 million and about EUR 3 million in operating profit. Could you give us some color when it comes to the surprise? Because the range is pretty broad, between EUR 50-€100 million. That sounds consistent. And lastly, at the end of 2025, I understand that you expect your debt to be lower than what it was a year before. What about the landing at the end of 2024? Thank you so much.
I'll take questions 1, 2, and 4, and I'll let Jean-Claude answer the question regarding Nexity property management, regarding costs of adapting the offering. Now, non-recurring items. We have provision for reorganization costs for EUR 40 million, including a provision for the redundancy plan. That's been done. In the first half, we have also posted abandonment costs, as well as the sale, the divestment of land that we don't intend to build, because we have agreed with our operations teams to not develop certain projects because we are unable to reach satisfactory profit margin levels. When it comes to the cost of adapting offering, as I've been saying all along, we're working program by program, apartment by apartment, delivery day by delivery date. It's daily management we're doing. That's what we've been doing in each one. We want to make sure we're always working in line with our priority.
We're selling our inventory, and we don't want any unsold completed homes on reporting date. As Jean-Claude rightly said, we have very few homes to deliver that have yet to be marketed in H2, but we will make adjustments later on. But our priority remains debt reduction and optimizing WCR, and also, of course, maintaining profit, operating profit. Regarding net financial debt, yes, our guidance remains unchanged. We want a debt trajectory that is significantly lower than 2023. In the first half, as you saw, we can safely say that our debt is significantly lower than it was in 2023. But you know that there's a strong seasonal effect in our line of business, and this gives you some idea of our debt profile at the end of the year. Now, in terms of Nexity property management, we made an announcement regarding our NPM subsidiary.
I'd like to remind you that when it comes to our property management business, we have two subsidiaries. NPM caters to the commercial sector, and Accessite is different. Accessite is not involved, but NPM, the revenue is lower than what you said, Christophe, about EUR 55 million. When it comes to bulk sales, yes, the trend is not linear over the year, and that happens every year. It all depends on what contracts we sign. Now, we signed an agreement with Caisse des Dépôts for a little over 10 units, and 50% of those are LLI eligible. But we're sticking to our target. When it comes to bulk sales amounts, we want that amount to be pretty much the same as what it was last year. Thank you.
What about the transformation costs and capital gain at the end for the year as a whole, the balance between transformation and capital gain? I mean, you will come out with a surplus, even though there are additional costs for adaptation. Well, yes, well, we're doing this very carefully, line by line, and we have priorities in terms of selling our inventory and try to keep down the number of units completed and yet unsold. All this will be calibrated depending on our needs to sell off property and to see how many properties remain unsold. Well, this is very much in line with our plan. Thank you so very much.
The next question comes from Marie-Line Fort from Bernstein .
Yes, good evening. Can you hear me loud and clear?
Yes, we can. Yes, we can.
I have a couple of questions.
Number one, on your efforts to cut prices down to anywhere between -6% and -10% at the beginning of the year. For Q1, you said that you were close to the lower end of that bracket. Is it still the case? The other question, and I'm sorry to insist, but the adaptation costs for the offer on H1, do you expect the same for H2? I mean, you have less in terms of commercial property, and because you have less of that left, there should be less of a cost in adaptation. What about Morning and coworking? Where do you stand in your strategic terms? You decided to sell off NPM. What about that coworking? And if you look at the net debt on slide 25, you see that the cash position was about, what is it, EUR 130 million.
How much of that can be used to reimburse the debt due in 2025? Good evening, Marie-Line , and I'll start with the last question about the cash position. Of course, we include the cash available from Nexity, about 2/3 is held in co-development, so it will be only available after a certain timetable. That depends on the co-developer to get the funds ready. But you have EUR 150 million immediately available, and you add that to the EUR 750 million of undrawn credit line. So all in all, you arrive at EUR 1 billion. So it was EUR 250 plus EUR 750, sorry. But of course, as to the use of that credit line, there's no limitation. As to the adaptation costs, just to give you a few words of context, this is done in line looking at three items.
Customers lost 25% in purchasing power, but they regained about 5% because interest rates came down 54 basis points since the beginning of the year. Then we'll be monitoring this very carefully to see how this continues or not, the interest rates. Of course, they got 10%-12% in purchasing power because of wage increases. All in all, as we point out in our announcements, we have prices that can come down anywhere between -4% and -6%, and that depends on how advanced the construction is and the delivery date. All these parameters are considered day by day, and that's why on our guidance, well, we don't have a fixed amount, but we say positive operating income. Of course, we try to resize this as carefully as possible.
We want to make sure that we sell our property and there's no completed housing unit unsold. Regarding the second question, property management is a, sorry, Morning is a growth business, but that growth comes at a cost. And so we told the markets that we were considering a deconsolidation of Morning from our scope, and so therefore we need a strategic or financial partner to take that up. We're still looking. Thank you. As to the proportion of, yes, on your calculation, you said that you will have less offer being sold in H2, and that's the abandonment cost would be less in H2. Well, that is true, but in any case, the amounts will be adjusted. You have three parameters that fluctuate on a month-to-month, a day-to-day basis, and of course, our own customers take their own positions based on that.
So we'll have to assess this in H2, but it is true there is room for maneuver ahead of time, and this is in line with the guidance just to make sure that our inventory is being sold in real time, and we want to complete the year without any units remaining unsold. And this is being considered project by project. There's no one rule fits all. There are various ways of making sure that the units end up being sold. Yes, and of course, the property market varies depending on location, and that's yet another parameter that comes into line. Yes, we have to be very pragmatic about this.
Well, many thanks indeed.
Thank you.
Ladies and gentlemen, if you wish to put a question, please press star one on your keyboard. Next question comes from Izel Mescendi from Roca Capital.
Good evening. I hope you can hear me.
Yes, we can. Yes, I had a couple of questions about the debt level and the trajectory of the deleveraging trajectory. The disposal you announced today, I believe that you're looking at about EUR 55 million. Would a multiple of 1x revenue, I mean, would that multiple be in line with your expectations? Although, I mean, this is an industry facing challenges. The landing at N25, you want the debt to be less than EUR 500 million, but it's already there if you take into account the lag in WCR. Surely, you can do better than that if you complete 2024 as planned with a positive free cash flow leading out, of course, any one-off items. Surely, with the disposal you announced today, surely there will be more. I get the feeling that this EUR 500 million number could seem very conservative indeed.
And then, a question or suggestion: since there's so much cash floating about, do you have the convertibles that are being traded at a 50% discount since their initial issue? One way of deleveraging would be to sell that off and get these 2028 convertibles that are now selling at 33 versus 60, the issue price. I mean, that every EUR 1 million you spend on that would mean that you could cut down your debt by as much.
So on the last points, I'll take that. Jean-Claude will tell you about NPM. Our guidance at the end of 2025—well, there's one word. We say a maximum of EUR 500 million. And indeed, we are focusing on this, and we are being very conservative indeed, even though what you said is quite true. But now we're focusing on that target.
Regarding the convertible bonds of 2028, you may remember that we shared the efforts between our shareholders and employees. We didn't pay out any dividends. We're protecting our cash supply. So if we were to buy back issues of the 2028 bond when we have shorter-term deadlines, and that bond isn't costing much because the rates are back to the old good days of low rates. So there's no point in doing that. Transformation adaptation costs plus coming out with a strong rebound in 2024 means that we have to protect our cash, our immediate cash, that is, first and foremost. And regarding NPM, we said that we are starting exclusive talks, and so we will not discuss the price element because that will be something we'll be discussing with our partner. We will disclose this in due time. So I cannot tell you anymore.
Regarding the multiples, I'll refer to the market as it stands. Regarding such businesses, revenue should be taken into account, but also the maturity of customer portfolio.
Well, thank you nonetheless.
Thank you, sir.
And so, ladies and gentlemen, once again, if you have any question at all, please press star and one. Hello. It looks as though we have run out of questions, so Madame Bédague will say the closing words.
Well, thank you all for attending this presentation, and we look forward to seeing you soon again. Goodbye. Goodbye. [Foreign Lanuage]
Ladies and gentlemen, this completes the session. You may now hang up.