Chairwoman & Chief Executive Officer, Nexity
Véronique Bédague (Nexity) : "On est au creux de la crise"
Ce jeudi 29 février, Véronique Bédague, présidente-directrice générale de Nexity, s'est penchée, entre autres, sur la lourde chute de Nexity en bourse et la crise du logement, dans La grande interview dans l'émission Good Evening Business présentée par Hedwige Chevrillon. Good Evening Business est à voir ou écouter du lundi au jeudi sur BFM Business. 👋 Bienvenue sur la chaîne YouTube officielle de BFM Business, première chaîne d'information économique et financière de France.
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About Véronique Bédague
Véronique Bédague, Chairwoman and CEO of Nexity, has described the current state of the French housing market as a "perfect storm" and stated that the sector is "at the bottom of the crisis." She attributed the downturn to a sharp rise in interest rates, a 50% drop in mortgage production, and a significant decline in private investment in housing, which she said was accelerated by the government's decision to end the Pinel tax incentive, calling it a "bad decision." Bédague noted that the company reduced its debt by half in 2024 and renegotiated banking covenants through 2028, which she described as providing financial security for the coming years. She has expressed cautious optimism for a rebound in 2025, citing lower interest rates and government action, while stating that the company's focus is on "profitable development." Bédague has also spoken extensively about the need for affordable, sustainable housing. She stated that "green housing must not be reserved for an elite" and argued that construction methods must be rethought to make it affordable. She identified land costs as a major factor in housing prices, accounting for 30-50% of the price in metropolitan areas. Bédague has advocated for a "flat tax on real estate" and called for a comprehensive national housing policy, noting that "4 million French people are poorly housed" and that housing is a "technical and budgetary subject" that affects citizens' daily lives. She has also highlighted Nexity's internal transformation, including a new organizational structure and a focus on digital services and modular construction, which she said can reduce costs by 4-5% and shorten construction times by two months.
Transcript (37 segments)
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Interviewer0:00
BFM Business presents. Good evening, welcome to the big interview. My guest tonight is someone whose stock price has fallen by more than 20%. Good evening, Véronique Bédague? I am delighted to be with you this evening, thank you for being here. You are the CEO of Nexity, the leading French property developer. Indeed, after the announcement of your results, and perhaps above all of the suspension of your dividend for 2023, you lost more than 20% today on the Paris stock exchange. Did you expect such a fall or how do you explain it?
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Véronique Bédague0:40
Listen, I think we are leaders in a market that has lost 40% in 2 years. That is, with the rise in interest rates, the decline in mortgage production, we are intervening in a market that has shrunk by 40%, and that is essentially the consequences of this withdrawal that we see today. The good news is that I think we are really at the bottom of the crisis and we are starting to see some important glimmers. We don't know when things will trigger, but evidently there will be a drop in interest rates. On BFM Business, we saw that inflation in France and the US was better than expected, so at some point rates will start to fall. Analysts think around 1 point this year. 1 point is 10% more purchasing power for our clients, which is enormous. And you know how critical I have been in the past, but my feeling is that the government has really understood the scale of the crisis and its impact on employment and the French people, which was not the case before. You know that it wasn't the case before, or not to this extent. The Prime Minister made housing a priority in his general policy statement, which hasn't happened in 7 years. We'll go get it with our teeth. That says something. And we have a Housing Minister who I think is now completely in line with the diagnoses we make on needs, the causes of the crisis in demand, and the crisis in supply.
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Interviewer2:20
Véronique Bédague, let's go into a bit more detail. Just regarding your results, you said our market has... we are the leading property developer, so you take the full hit obviously. If I look at your net profit, it fell by 82%, so you have doubled the market decline, if I may say so. But net profit is less significant than operating profit, which fell by a third. And I remind you that we did what we said in 2023. Our results are on track. We said we would deleverage, we said we would accelerate urban regeneration and operations, we did all that. Our debt, which was closely watched, was lower at the end of the year compared to the previous year. Yes, and you also announced a social plan, we'll come back to that. Just one more point: your turnover fell by 9-10% to around 4.27 billion. Did you expect such a fall? And is it the suspension of the dividend that explains everything, and why did you make that choice? Because all the results are coming in, I think you are the only one today...
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Véronique Bédague3:31
Yes, but again, we are completely at the bottom of the crisis. So why did we choose to suspend the dividend? Because we have a very important deleveraging objective at the moment, and secondly, we decided to launch in the coming weeks a consultation with our trade unions on a job protection plan. And you know very well that in a company, good practices consist of sharing the effort between employees and shareholders. It's a good practice that we find in many companies, even though some say we should increase dividends to retain our shareholders. Listen, the choice we made is to share the effort and deleverage. It was a choice that was in the market, we had said it since the end of the year that it was the choice we were going to make.
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Interviewer4:21
That saves you how much? About 140 million.
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Véronique Bédague4:33
Yes, of course, it's something important. Is this crisis unprecedented? Yes, by its magnitude and its ramifications. It is a supply shock and a demand shock. What hit you the most? It is a perfect storm. It affects office real estate, there is an oversupply of offices due to changes in habits, and there is a very significant withdrawal of mortgage loans. So it's a crisis of both housing and offices. The old-timers say they have never seen this. It's a supply crisis because we still have problems obtaining permits and densifying cities, even though there is a policy of protecting the environment and thus less artificialization, and we have this problem of demand which is very important. So we have everything.
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Interviewer5:35
You say we are at the bottom of the crisis. Why do you have this optimism? You'll say it's good for you, Véronique Bédague.
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Véronique Bédague5:41
No, for once, I think I have never been pessimistic or optimistic. You can say that I have always said things as they were. What I see is that interest rates will fall. What we don't know is when it will start, and we have a consensus that it could fall by one point. One point is enormous. The French have lost 25% of purchasing power in 2 years. If this decrease occurs, we would recover 10% of purchasing power, half. And don't forget that in 2022, 2023, and 2024, wages have increased, and the average wage increase has allowed the French to recover half of the real estate purchasing power they lost due to the rate hike. So we are starting to see some rather positive things.
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Interviewer6:32
Do you think the central banks badly anticipated the impact of this rate hike on mortgage credit production, because the fall was extremely sharp in 2023, 40%, and it is general in Europe?
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Véronique Bédague6:46
I think the problem with monetary policy is that it is very complicated to monitor. The effects of the time it takes to reach the economy and the magnitude are not mechanical.
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Interviewer6:58
When you say we are at the bottom of the crisis, I believe you, but at the same time, when we look at 2024, for you the bottom of the crisis is today, so you have the whole year 2024 ahead. When we see the reservation rate at Nexity, should we be worried?
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Véronique Bédague7:13
Well, you only see 2023 at this stage. You don't see 2024. But 2024 will not be better. That's a good question. I think at this stage we assume it will be like 2023 because we are cautious. But as soon as there is a little rate cut, as soon as there is a palpable movement from the government, things can pick up. We even feel a slight recovery in sales. And the French just need to be housed.
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Interviewer7:46
When you see everything the government is doing for farmers, aren't you thinking, like the construction industry, which will be very strongly impacted, that it's time for the government to do something? We'll link to the social plan you are preparing. They say 300,000 people in construction could be laid off. Do you think it's time for the government to listen? What do you expect from the government?
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Véronique Bédague8:15
You're right. When we see what's happening with farmers, there are times when we think we understand the effect of regulations. I recognize that. The farmers have European standards, which we have less of. And obviously, we think that what really needs to be done, and I think the government has heard it, is that the thing that is collapsing the most is private investment in housing, simply because the rate hike made this investment less attractive. That part of the market fell by 50% last year. So I understand, and the withdrawal of Pinel at the same time, a procyclical measure, really accelerated the fall in real estate investment. It was a bad decision, but we have said that several times.
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Interviewer9:07
I don't know if you saw the outburst from your counterpart at Altarea, Mr. Jacquemard, who said about Bruno Le Maire that he is the irrigator watered, because he says Bruno Le Maire is looking for 10 billion in savings, but it was enough not to stop the Pinel, to perhaps irrigate the housing sector to allow home sales, and he would have gained 2 billion more in VAT. Do you share this reasoning? Is the government's view that housing costs too much, so it has cut back, for example Pinel, and now it's backfiring?
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Véronique Bédague9:45
I would put it differently. I would say what I said to the ministers I saw when I was at Bercy a long time ago: we were very wary of economies that cost. You know, the economies we brandish, we do them, and then they cost. I think the economy on Pinel is an economy that costs. The government sees losses on VAT, yes, that's normal because we build and launch fewer projects. There will be many job losses in construction, I think about 300,000. It's written now. The reservations from last year, no reservations, no projects. 150,000 in collective housing, 150,000 in individual houses, so 300,000 in construction. It's mechanical. So I think all this means that there are avenues for reflection today. I go to Parliament a lot, the National Assembly, the Senate. Deputies are really clear on what's happening. I understand there are reflections on the status of private landlords, on the proposal made by the Federation of Property Developers, which is the famous Balladur measure. I think discussions are happening now.
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Interviewer11:07
Véronique Bédague, since you run the leading property developer, and you were offered Matignon? I know you hate that, but it shows you have a broader vision. What would be your three measures to get out of this crisis if you were appointed Housing Minister or Prime Minister?
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Véronique Bédague11:22
I think we really need to address the issue of rental investment. How to bring back a measure like Pinel or something suitable for the government? The essential thing is to bring back yield. The problem with rental investment today is interest rates that have risen a lot, and behind it, you have a tax system that is very specific. You have income tax, property tax that is rising by 7% per year. There is no other investment in dividends or bonds that has such a high tax burden. It's not fair. We need to bring back fair competition between investment in housing and investment in bonds or stocks. That's not the case now. That's what needs to be done immediately.
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Interviewer12:16
Yes, but a question, forgive me, I don't understand why housing always needs to be subsidized. Is it because it is overtaxed?
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Véronique Bédague12:29
It is overtaxed, and on the other hand, I remind you that its yield is controlled. Rents are either blocked or capped. So it is an investment with special characteristics.
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Interviewer12:46
How many new homes should be built?
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Véronique Bédague12:48
That's a very good question. Because you remember at the opening of the National Council for Refoundation on housing, which you chaired with Christophe Robert, the representative of the Treasury said that according to their calculations, 200,000 to 250,000 new homes per year are needed. We'll see what that gives. By 2026, there is progress. I see that the figures coming out now are well... There are many sources: the UN, the Caisse des Dépôts did a study a few months ago, and now the National Housing Council, which is a body chaired by a deputy from the majority, said that now we need 450,000 new homes, new or renovated, per year. So I think we are realizing that there is a housing problem in this country.
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Interviewer13:44
One thing I don't understand: you are rather optimistic, we are at the bottom of the crisis, you see positive figures like the rate cut, possible government measures. Why did you decide to launch this job protection plan? Because if you believe in it, why?
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Véronique Bédague14:07
Because I was the first to warn about the crisis. You remember, in 2022, I said be careful, what is coming will be extremely violent. I was called pessimistic then. But I will also be the first to transform the company. Because out of the crisis, our business will not be the same as it was before. So I am reorganizing my company to be more aligned with the territory. We don't operate in the South of France the same way as in the North or West. I will ask my bosses to be able to build many different products, not just housing or offices. That's the reorganization I am doing. And in the reorganization, we will adapt to the new market. The market has lost about 40% in 2 years, we are at 30%, so I need to downsize my company. We won't regain 40% of the market in 6 months.
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Interviewer15:10
But you have 8,200 employees. Among them, 3,000 will leave the group in April because you sold your property management subsidiary. So that leaves 5,000-5,100. You said you have 30% less. Is it about reducing the workforce by 30%?
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Véronique Bédague15:27
No, fortunately it's not that. These figures still include services, and it's not that mechanical. You know that a job protection plan is extremely demanding. You have to describe all your organization charts and operating methods. That's what we're doing. Once we've done that, we'll know how many jobs it will affect.
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Interviewer15:56
But your goal is 5,000 employees for the new Nexity, recalibrated with the sale of international?
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Véronique Bédague16:00
No, I'm not going to do something I criticize others for doing: putting numbers in an Excel spreadsheet and saying here's the result. I think that's not what I want to do. So I'm really sitting down with my teams to say we're switching to another mode of operation, and it depends on where you are and the markets. We'll draw the consequences in terms of employment in a few weeks.
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Interviewer16:26
And you can't, like some of your competitors, redeploy your forces?
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Véronique Bédague16:36
Listen, we'll see. But for now, I have less service. The proportion of promotion and urban operations is very important in my team. So everything that can be done will be done.
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Interviewer16:51
If this plan had to be qualified, would it be a massive plan?
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Véronique Bédague16:52
No, no, no. It's an adjustment plan to the market, and a plan that will translate, you'll see when we release it, the transformation of Nexity to be ready for the new markets of urban life, which will be different. The fact that we are really on urban regeneration, city centers, improving city entrances... that's a different business.
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Interviewer17:16
2024 in one word, an adjective, a qualifier.
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Véronique Bédague17:19
Yes, well, it's the moment of transformation. I really feel that this year is the year of the crisis.
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Interviewer17:27
Will you buy back shares? Will Alain Dinin buy back shares? Is it time to buy back shares?
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Véronique Bédague17:34
I bought some this morning. Ah, good. That's a sign of confidence. Yes, but I believe in it. Of course, of course.
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Interviewer17:41
Thank you, thank you for coming today with this stock price that is a bit battered, but as you say, we are at the bottom of the wave, so you hope that 2024 will be better. Thank you very much, Véronique Bédague, the president of Nexity.