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.

How will the individual French investor react to Coronavirus?

Nexity released a nice Q4 19 with reservations up 18%. Following Icade’s FY 19, Nexity confirmed that residential construction should begin to recover in H2 20. We confirm our positive opinion even if 2020 could be a bit more tricky than expected due to the consequences of Coronavirus.

God save the negative interest rates

Q3 19 was not as good as the exceptional Q2 19 but Nexity continued to outperform its end-market. Thanks to the well-known extraordinarily low interest rates, individual investors fuelled the reservations. They account for around half of Nexity’s homes reservations.

CMD - Broadening & deepening client relationships

A dose of morosity

No change in the narrative. Aviva’s ship sails on as usual. The PRT business is still going well, inflation remains an impediment to a strong P&C improvement, retail customers seem more interested in the rising cost of living than savings’ products and Aviva investors see no real signs of an improvement. This is the same story as in recent quarters and, in that context, our thesis remains the same.

Rising signals

'Airlines will be shocked when Covid leases run out and rates go up’

Morning Note – 24 May 2023

The Opportunity in Short-Termism

Fears vs Fundamentals (again) For 2 years, European banks have enjoyed potent earnings upgrades. For 2 years, valuations have been trapped between ''unease'' and ''outright panic'' multiples. This note looks at the latest fears and fundamentals behind this ongoing struggle. We extract lasting lessons from Q1, a record profit quarter, and extend our work on the fears of the moment: ''peak NIM'', CRE and credit contraction. Peak NIM - no, not yet We refresh our top-down margin work for the late

NAHL Group plc: AGM update: Continued progress in scaling the business for future growth

NAHL’s AGM statement released today, is encouraging as management continues to scale the businesses for further growth. As a result, the Board’s expectations for the full year remain unchanged and we make no alterations to our forecasts. As a reminder, these still call for a c.13% increase in adjusted PBT in 2023, c.170% in FY24 and a further c.70% in FY25. Our current fair value remains at 65p but this is likely to rise as the Group delivers on its significant potential.

WH Ireland: Avation - Market tailwinds highlighted in Bloomberg Intelligence event

Avation is a lessor of 35 commercial aircraft to a diversified client base of 17 airlines. Yesterday's Bloomberg Intelligence webinar event entitled ‘Aircraft Lessor Recovery and Innovation' reaffirmed a number of positive market trends for aircraft lessors at the present time. Key points included: i) structural deficits in the supply of turboprop aircraft in the coming years, with aircraft retirements expected to outpace limited production of new aircraft; ii) the strong recovery in air travel

This Week's AIM Highlights 19th May

Early Mover in UK Lab-grown Meat

BSF Enterprise Plc (BSF) is a biotechnology company focused on acquiring, combining, and building businesses in the lab-grown tissue space. It aims to achieve this through an acquisition-led growth strategy and has already acquired the tissue engineering and cellular agriculture company, 3D Bio Tissues.

An Asian exploration

We spent last week with HSBC and STAN in Hong Kong and Singapore, delving into the detail of structural drivers for Asia. Both banks have a good story to tell, with business models that are well positioned and being enhanced further. In isolation we did not learn enough to warrant a change in recommendation but tailwinds from the region are not to be overlooked. A deep dive into a core part of the investment case Asia sits at the core of the investment case for both HSBC and STAN given its share

c.60% discount to NAV... Can deep value prevail?

Petershill (PHP) reported a Q1-23 double digit % headline miss on FRE/DE mostly driven by cyclical factors. However, fundraising was resilient including more closings after quarter end and PHP reiterated FY2023 guidance ($220-250m FRE). We remain outperform, 250p target price. Weakness on headline earnings amid a muted industry backdrop Private markets are being tested in 2023 with private equity deal activity down c.50-80% y/y. In this context, the headline Q1 miss was mostly driven by cyclica

Trading update indicates strong FY23 performance

Very strong CY22 - CY23 upgraded 10%

XPS CMD articulates growth potential