What about 2024-25?

Q3 23 was almost ‘decent’ but Nexity is becoming very dependent on orders from institutional investors, which accounted for two-thirds of its bookings in this quarter. Reservations by individuals will soon reach historically low levels, in terms of the number of units. We expect a downturn in 2024, or even 2025.

(Expected) warning about 2023 targets

Nexity has substantially adapted its FY 23 guidance despite having confirmed this at the time of the Q1 23 at the end of April. The 2026 targets are “suspended” and should be recalibrated in early 2024. Nexity is starting to take note that the crisis will last longer than it had estimated in April 2023.

Forward warning about 2026 targets

As Residential reservations were down 20% in Q1 23, the French government is working on a couple of measures to rescue Housing development, once again.

Look at the bottom line too

Reservations were down in Q4 22 with the low contribution of households in the orders. The cautious FY 23 guidance focuses on EBIT but investors shouldn’t neglect anticipating changes in the bottom line, the latter supporting dividends.

French end-market adjustment accelerated further

In an end-market down 21% yoy in 9M 22, Nexity’s performance showed significant resilience that was mainly attributable to institutional investor orders. It remains to be seen whether the latter will hold up in the face of rising constraints during 2023.

"This is not a profit warning" (à la Magritte)

Nexity adopted a more cautious stance by postponing some developments on top of a significant adjustment in reservations in Q2 22. The structure of the FY 22 guidance was “adapted”, thus paving the way to potential further cuts later in 2022, in our view.

Unclear growth pace

Reservations are admittedly volatile data. However, the outlook of both rising construction costs and interest rates is a significant forward concern. At pixel time, the FY 22 guidance has been confirmed, but what about FY 23?

Flat market in FY 22?

Thanks to affordable-living landlords’ orders, the backlog was stable sequentially. At the consolidated level, it was almost flat or slightly decreasing since its peak in Q4 20. FY 22 guidance is of a stable operating profit in euros. Not that bad, indeed.

Negative base effect in Q4 21; what about FY 22?

Following the bump in reservations in 2020 mainly attributable to public orders, Nexity has progressively delivered apartments. Top-line growth pace is slowing. Q4 21 top line will be revealed as negative.

Running revenue vs. stabilising reservations

Catching-up in revenue began in H2 20 and was still on track in H1 21 with a strong lfl performance vs. the low H1 20. We believe it should normalise as reservations are much more stable.

A tougher FY 22 after a decent FY 21?

Following Icade’s pre-announcement (read-across Nexity in our 26 April Latest), Nexity released a remarkable set of Q1 21 figures. Could FY 22 turn out to be tougher? Explaining why some disposals occurred in FY 21?

Much to say about FY 20

Nexity’s strong resilience in FY 20 was explained in full by public support schemes. The end-market was down 25% (c.-35% when restated from public support) and Nexity’s Residential revenue was down 4%. Despite such a bright year, the number of reservations was down 10% in Q3 20 and 4% in Q4 20.

Bulls are back. Keep calm.

The pleasant surprise was not the good Q3 20 figures but the bullish FY 21 guidance (+10% in top-line vs. FY 20, not lfl due to Pantera integration). The substantial investment plans of institutional investors, with the Government scheme as a sweetner, should support Nexity’s business. We detect increasing prices per sqm leading to an improvement in Nexity’s margin. This could reduce Nexity’s competitiveness in the near future: is a 16% market share sufficient to transform the company into a pri

No full reovery in H2 20

H1 20 showed the first stigmata of the crisis. The public-owned CDCH (one half of Q2 20 reservations) will help Nexity to pass through the trough and stay profitable in FY 20 and FY 21 (ex-goodwills). However, we fear that profits will not reach the nominal year 2019 any time soon.

Before playing the recovery, wait for the trough

The Q1 20 figures were positive but it don’t provide us with a clear picture as far as FY 20-21 is concerned. Should something like the conditions in 2008 return, Nexity’s revenue could lose c. 15-20% over 2020-22. However, the recurring portion of its profitability (services) should be a material cushion. But maybe it is time to question the resilience of some intangibles.

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