(News Bulletin 247) – The real estate developer has managed to post results in line with its objectives and market expectations. But in 2023, the group’s margins will be “temporarily” under pressure, as Nexity finds it difficult to pass on the rise in construction prices to its customers.

The current context is not favorable for new real estate. If in 2022, Nexity managed to achieve its 2022 objectives, the current year presents itself as “a year of transition” for the promoter. In other words, the 2023 financial year will be more difficult for Nexity as the rise in interest rates reduces the real estate purchasing power of aspiring buyers. Disappointing prospects which are at the origin of the releases on the title of the promoter on the stock market. The Nexity share shows the biggest drop in the SBF 120, with a fall of more than 9% to fall back to 24 euros, around 10:30 a.m.

In 2022, the leading French property developer published a turnover increase of 2% over one year, to 4.7 billion euros, higher than its forecast of 4.6 billion euros and the anticipations of TP ICAP Midcap.

“After a more dynamic fourth quarter than expected (+13%), annual revenue came to 4.7 billion euros, up 2%, above our expectation (4.6 billion euros)”, indicates the design office.

Operating profit stands at 367 million euros, showing an operating margin “around 8%”. This is also in line with the group’s own expectations confirmed last November on the sidelines of the presentation of its Imagine 2026 strategic plan. close to 8% (7.8% -20 basis points) or an operating profit of 367 million euros”, notes Florian Cariou, the analyst who provides coverage of the title.

An “honorable” commercial performance

In terms of commercial activity, Nexity managed to hold its own despite tough market conditions. Home loans are more complicated to obtain, which had consequences on the level of reservations at the end of the year. In the promotion of new housing, which is Nexity’s core business, the company recorded 10% fewer reservations, at 18,015 units, doing better than the market which fell by 26% over the year 20222.

For TP ICAP Midcap, the group thus achieves an “honorable performance” with reservations down only 10% in volume and 5% in value. An outperformance that allows the promoter to strengthen its market share, to almost 15%, above the announced target of 14% for 2022. By 2030, Nexity intends to increase this market share to more than 20%.

Another good point for Nexity is the control of its debt level in a context of rising interest rates. The net financial debt before rental obligations is 2.1 times the gross operating surplus (Ebitda) after rents. “The leverage remains under control”, underlines Florian Cariou, which authorizes Nexity to continue its “generous distribution policy with a dividend of 2.50 euros per share, i.e. a yield still higher than 9%” which adds that “this high level of return is almost guaranteed until 2026 in accordance with the announcements of the strategic plan Imagine 2026“.

Profitability “temporarily” under pressure

If Nexity has therefore managed to resist over the past year, the 2023 financial year will be more difficult for the promoter to negotiate. For 2023, it is counting on a turnover of more than 4.5 billion euros, stable compared to 2022 excluding international activities. The group is indeed refocusing on France, with the planned sale of its activities in Poland and Portugal.

Nexity’s profitability will be “temporarily” put under pressure, with expected current operating income of more than 300 million euros, “i.e. a margin down by 1 point”, specifies TP ICAP Midcap. Nexity reports that inflation on construction costs will be more difficult to pass on in selling prices given the decline in real estate purchasing power, due to the rise in interest rates.

“Given the very high yield and the attractive medium-term outlook”, TP ICAP Midcap maintains its buy opinion with a target, however, adjusted to 34 euros against 38 euros previously.