Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on DANONE. We currently have 10 research reports from 2 professional analysts.
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FY in line, launches €1bn cost savings plan and awaits WhiteWave approval
15 Feb 17
FY and Q4 update: Q4 sales grew +2.1% (in line with consensus). OG by division: FD +0.7%, Waters +6.3%, Baby Food +0.6%, Medical Nutrition +6.1%. On a FY basis, sales grew organically +2.9% (in line with consensus), and were down 2.1% on reported figures (FX: -5.5%). The operating margin is up 87bp (+70bp lfl). FY OG by division: FD +2%, Waters +2.9%, Baby Food +3.5%, Medical Nutrition +7.4%. OG by region: Europe -1.4%, CIS & North America +4.6%, ALMA +6.7%. The company announced a new cost-savings programme with a target of €1bn by 2020. The efficiency savings will target professional spending, media and logistics. They are part of the implementation of the group’s mid-term guidance of an operating margin progression of 250bp by 2020. For the FY17, Danone sees a volatile and uncertain environment. Costs of raw materials should increase by mid single-digits (milk costs to rise in Europe and North America). The group said that the weak environment in China might also last into FY17 and that it is expecting a slower start to the year. FY17 guidance is to deliver at least +5% EPS growth lfl (excluding the WhiteWave integration). Once this is completed, the group will review its annual targets. The proposed dividend is €1.7 (+6.3%).
Fresh Dairy's turnaround in Europe will take longer than expected
19 Dec 16
Danone has adjusted its FY16 guidance on the back of a weaker than expected Q4 in Spain and Activia’s performance. Consequently, the company expects the FY16 top-line to be slightly below the guidance of 3-5%, whereas the operating margin should be above the 50-60bp guidance (with a possible positive impact of 5-10bp).
Q3: Transition in China weighs on results
18 Oct 16
Q3 update: sales grew lfl +2.1% (cons. +2.4%) with -0.7% volume growth and +2.8% pricing. On reported figures, sales were down 1.8% (FX: -4.1%, scope of consolidation +0.2%). OG by division: Fresh Dairy +2.2% (cons. +2.5%), Waters -0.1% (cons. +1%), Early Life Nutrition +1.7% (cons. +2.5%), Medical Nutrition +9.7% (cons. +7%). Fresh dairy saw stronger pricing +4.2% on the back of negative volumes in the CIS and LatAm regions. Waters were impacted by the transition phase and floods in China (excluding China, the Waters performance is up mid single-digit). The Early Life Nutrition performance was impacted by tough comparables and the transition from an indirect to a direct sales model in China (excluding indirect sales, ELN was up mid single-digit in China). Medical Nutrition’s excellent performance was driven across all geographies. The company maintains its FY guidance: 3-5% organic top-line growth and 50-60bp lfl improvement in the operating margin, although the top-line is likely to be in the lower range of this.
Very solid Q2; on track to deliver its FY guidance
28 Jul 16
Danone released its Q2 and H1 update. In Q2, sales grew organically 4.1% (cons. +3.7%) with volumes up +1% and pricing +3.1%. On reported figures sales were down 3% (FX:-7.7% and net acquisitions: +0.6%). OG by division: Fresh Dairy +3% (cons +2.7%), Waters 2.7% (cons. +2.7%), Early Life Nutrition +7.2% (cons. +6.2%) Medical Nutrition 7.1% (cons. +6.5%). OG by geography: Europe -0.2%, CIS&North America +4.8%, ALMA +8%. Overall, in H1 sales grew organically by +3.8%, whereas the operating margin was up +93bp lfl and +125bp on reported figures. Waters was the only division where the margin lfl was down (due to inventory adjustments in China). The company confirmed its FY guidance: 3-5% organic top-line growth and 50-60bp lfl improvement in the operating margin.
Danone finally gets exciting!
07 Jul 16
Danone has announced the acquisition of WhiteWave Foods (the US-based, natural and health-focused food group) for $12.5bn in cash (including $2.1bn debt). The proposed price per share of $56.25 offers a premium of around 24% to WhiteWave’s average close price over the past month and represents a c. 21.2x EBITDA multiple. The deal is expected to close by the end of the year. It is subject to WhiteWave shareholders and regulatory approval.
Q1 as expected; FX weighs on reported figures
19 Apr 16
Danone released its Q1 trading statement. The OG stood at 3.5% (cons. 3.2%) driven by pricing of +2.7% and volumes of +0.8%. The FX impact was -7.2%. Net acquisitions showed an impact of +0.7%. OG by division: Fresh Dairy +2.3% (cons. 2%), Waters +3.9% (cons. 2.1%), Baby Food +4.8% (cons. +5.5%) and Medical Nutrition +6.6% (cons. 6.7%). OG by region: Europe +0%, CIS & North America +5.1%, ALMA +6.3%. The group maintains its FY guidance: 3-5% OG in sales and a solid improvement in the organic operating margin.
13 Feb 17
Middlesbrough-based pawnbroker Ramsdens Holdings is set to join AIM on 15 February. Its growth is not coming from its core business but from providing foreign currency, pre-paid travel cards and international payments. The strategy is to increase the group’s online activities and grow the number of branches. In the year to March 2016, group revenues improved from £29.2m to £30m. The accounts of the main subsidiary show that foreign-currency margin rose from £5.36m to £7.59m. This contributes 35% of group gross profit. By contrast, the core business of pawnbroking, precious metal purchases and retail sales fell from £21.3m to £19.8m. Revenues from other financial services were flat at £2.6m. Ramsdens has 127 sites and last year it made an operating profit of £3.19m. In the six months to September 2016, revenues increased from £16.2m to £18.4m and operating profit improved from £2.81m to £3.48m. The placing will raise £15.6m at 86p a share, valuing the company at £26.5m. NorthEdge Capital, which backed a buyout in September 2014, will receive just over £10m from share sales. The NorthEdge stake will fall from 75.6% to 30.7%. The other £5m will go to the company and be used to repay the remaining loan notes and the costs of the flotation. By the end of March 2016, there were still £4m of loan notes outstanding to NorthEdge, with £4.86m paid off during the previous year.
FY16 pre-close +ve surprise: Raising FY16, 17, 18 PBT c.1%, 4% and 6%
12 Jan 17
Today’s slightly better-than-expected FY16 pre-close trading statement prompts us to raise our FY16 PBT estimate by c.1%, reflecting the combination of (1) growth in several of HFG’s key markets, (2) strong overall operating performance, and (3) favourable fx translational benefits (recalling that 62% of FY15 sales were ex-UK). To reflect the positive profit contribution impact of the Portuguese j/v agreement signed on January 4th, the j/v income line is boosted by €1.5m (c.£1.3m) and €2.5m (c.£2.2m) in FY17 and FY18 respectively, representing upgrades of c.4% and c.6%. Once operating at full capacity utilisation, the j/v could well add €3m (c.£2.6m) in FY19. To reflect (1) our increased FY16-FY18 forecasts, (2) current peer EV/EBITDA valuation multiples, and (3) our view that HFG now deserves to trade at a premium to the peer group in view of its impressively strong financial track record (i.e. FY06-FY16 since IPO) for organic and investment-led profitable growth, combined with an array of emerging, highly promising initiatives (see our note “Start of a new chapter of growth” published on October 4th) to expand the scale and scope of HFG’s core business, we raise our TP to 805p (previously 755p). Maintain BUY.
04 Nov 16
Looking at the top 50 non-listed casual dining and bar operators, it appears that the £80bn market for eating and drinking out in the UK is alive and well. The AlixPartners Growth Company Index (October 2016) shows that 2-year profit CAGR has improved over the last few years, and recent surveys from Greene King, Coffer Peach and Deloitte highlight elevated spend on out-of-home occasions. We attribute this to 1) a shift amongst consumers from an ownership to experience-led mentality which has driven habitual spend on leisure 2) an increasing focus on food from historically wet-led operators as they diversify their revenue streams to mitigate competition from the off-trade and match consumer gravitation towards eating out and convenience; 3) increasing regional penetration resulting from oversupply and high rental costs in London and 4) strong sector support from Private Equity investors, attracted to the Leisure sector's cash flow profile which can be leveraged against. Nevertheless, we may look back on 2016 as the peak for casual dining and bar operator profitability, particularly for London-weighted operators who face unfavourable rent and rate costs as well as potential loss of cheap migrant/seasonal labour. Past performance is certainly not a guide to future performance.
Joy of Techs
21 Nov 16
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
25 Nov 16
Sound Energy (SOU): Completion of fundraise (BUY)| Ithaca Energy (IAE): Inspection delay (BUY) | Zambeef* (ZAM): Good performance in a challenging year (CORP) | Gresham House Strategic* (GHS): Attractively priced (CORP) |Joy of Techs: Analyst interview | Support Group: Analyst interview
27 Jan 17
We initiate on Hotel Chocolat with a 270p price target and Hold rating. While the investment case is attractive, capturing production efficiencies accounts for half of the 21% PBT CAGR forecast to FY19E. Any slippage in the timing of related capital projects or resulting production disruption could weigh on the stock, which at 37x forward earnings is, in our view, priced for perfection. With the share price up 90% since IPO last year, we suggest investors await a more favourable entry point.