EuroBusiness Media (EBM): Nexity, the leading provider of fully integrated real estate solutions in France, has announced its results for 2015. Alain Dinin, welcome. You are Nexity’s Chairman and CEO. So, my first question is: what were the key events in 2015?
Alain Dinin: Three things stand out in particular. First, reaching €3bn in revenue, a record for Nexity, up 16% on 2014. Secondly, the 20% rise in operating profit, which outstripped our revenue growth. This shows we run our company efficiently, and that we’re a solid business. Thirdly, we, Nexity’s senior managers, plus Arkéa, acting in concert, are now the company’s main shareholder. As you know, BPCE has been gradually disposing of its stake and Nexity’s senior executives, alongside Crédit Mutuel Arkéa, decided to acquire a substantial shareholding. We now hold about 20% of the share capital, which has given us the impetus to move forward with plans not only for further growth but also for organisational change, making us even stronger and more dynamic than in previous years.
EBM: How do you see Nexity’s prospects for 2016?
Alain Dinin: Apart from these three things, there is a fourth: we have net debt of just over €100m and we generated free cash flow, so we have the capacity to achieve our goals across all our markets. And as you said, Nexity is a provider of real estate solutions, with a number of different business lines, each of which has its own growth strategy.
For example, we are France’s number one operator in residential real estate. I think the market is fairly buoyant. All stakeholders and market analysts agree that real estate in France is on quite a good footing, because there’s no excess inventory, the market isn’t overvalued, there’s no bubble and interest rates are low. We will continue to grow market shares in this segment.
In commercial real estate, we’ll continue to think about changes in our strategies for the different business lines, about the best approach to offices, with the new possibilities opened up by information systems. New ways of working are transforming just building offices into a services-led business.
In property management, where we’ve been active since 2007, margins are finally improving, and we’re moving into areas such as online rental management, focusing on paperless processes for all administrative aspects, to further strengthen our client-oriented approach.
Our group’s many strengths, its financial capacity, relatively buoyant markets, and the fact that we mainly work in France, where production of homes and property in general is part of a sector that receives government support because it creates jobs – all this enters into our outlook. So we anticipate that 2016 will be fairly stable in terms of revenue because, given the structure of our order backlog. There are cyclical concerns, but on the other hand, once again we expect to improve our operating margin, with earnings growth in the region of 7%-8% and operating profit of around €235m, while keeping our financial capacity intact.
EBM: Your strategic plans are focused in part on digital and innovation. What does this mean for your business lines?
Alain Dinin: It is important not to misunderstand innovation. Innovation isn’t only about using objects built on new or digital technologies, as you’ve just mentioned. In my view, innovation is a whole set of behaviours drawing on technological advances. Like digitisation and paperless invoices. But innovation also means the new types of partnerships, such as the one we’ve announced with a real estate operator, which will remain a shareholder although we have taken a majority stake, doing business under a different brand to approach our clients in a different way. This is also a form of innovation.
Smart buildings and remote work solutions – which is what we’re talking about with Blue Office, where people don’t have to commute in to their company’s premises, but can work closer to home, which makes their lives easier – those are all areas of innovation.
It’s important to keep in mind that not everything will work. I’d even go so far as to say that, on the whole, not everything should work. If everything worked, that would mean we weren’t taking any risks. If we want to be leaders, if we want our company to be a trailblazer, we’re going to have to take those risks, and so we’re going to invest. Last year we invested just over €20m and for the next 4 to 5 years we’ll be investing another €20m annually in these new areas, these new customer approaches. What are the best ways for families to manage separate living situations? How should we prepare for population aging and diverse populations sharing living spaces? Those are all the things I’m talking about under strategy and digital issues.
And external growth, with new partners in open architecture business models – that’s also part of innovation.
EBM: Your ambition is to achieve operating profit of €300m in 2018. How do you plan to meet this target?
Alain Dinin: First, as you know, our business as a real estate developer is built around order backlog. We already have 18 months of order backlog, which means we know exactly where 85% of our revenue and results are coming from for the next 18 months. We also know we can improve margins – not because we’ve put prices up, because if you look at Nexity’s property prices, they’ve remained broadly stable – but because since we’ve started using new marketing methods, a new customer service approach, data, etc., we’ve been able to bring down our costs, what it costs us to make contact with the client. And we’ve also seen the improvement in Services. Some external growth. In these market situations, size really does matter. We’re France’s leading real estate solutions operator, meaning we’re a bit like a magnet on a certain number of issues, so I’m quite confident as far as that’s concerned.
The real question is now that we’ve said that €300m in 2018 is feasible, there’s still work to be done, so will we have things to announce in 2017, 2018, 2019? And that’s where our strategic plan comes in, which is all about moving us toward a strategy based on growth, on profitability, and on achieving both at the same time. That’s another reason why this year, beyond the growth in our results as we forecast, we also said to ourselves that we needed to boost our yield. Our share price also went up a little, so a yield of over 5% suits us just fine, and €2.20 could become our new dividend guidance, like the €2 we’ve had for the past 5 years.
EBM: Things are obviously going well now, but isn’t there a major unknown for you in 2017 with the elections in France, given that politics and real estate are often linked? Any comments?
Alain Dinin: Two comments, actually. On the political level, I’m not worried. I’ve seen 20 housing ministers come and go. Over the past 30 years, we’ve seen a lot of discussion, and every time there’s a pendulum swing, and then it swings back. So in 2017 things might be a little up in the air again, but Nexity has clearly benefited from these pendulum swings, and we’ll continue to do so. Nexity’s strategy in these kinds of situations is to start insulating ourselves from political aspects and having enough business lines in our toolkit and our portfolio to be less dependent and more resilient. Over the long term, going back to Nexity’s IPO in 2004, you see that through good years, bad years, political issues, global growth, the financial crisis, interest rates and so on, we met our targets. Nexity’s strategy has always been about announcing our targets and sticking to them, even over the long term, and offsetting a certain number of lower earnings certain years with a stabilised dividend. And that’s how we’re going to lead this company for the next 3 to 5 years.
EBM: Thank you very much, Alain Dinin.
Alain Dinin: My pleasure.
