Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on EDF. We currently have 18 research reports from 1 professional analysts.
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FY16 ahead of expectations. Weak guidance and lower dividend payments expected
14 Feb 17
The company published its FY16 results which missed expectations on the revenue side with a 5.1% yoy decrease, but EBITDA reached the upper range of the revised expectations at €16.4bn (-6.7% yoy). The positive effect came from other activities, which includes services, trading, and renewables as together these showed a 22% increase in EBITDA. Operating income contracted by 3.4% due to higher provisions on the nuclear side from a 30bp reduction in the discount rate to 4.2%, generating an increase in provisions of €1,342m and €680m in financial expenses. However, adjusted net income, including hybrid payment, is ahead of expectations as it reached €3.5bn, which represents a 15% yoy contraction but is still 3.5% better than expected, representing an EPS of €1.77/share, 14% ahead of expectations. Reported net debt remained stable at €37.4bn, which is a positive, although operating cash flows decreased by 12.6% yoy to €11.1bn. Free cash flow continues to be on the negative side, but has decreased to €-1.6bn despite the scrip dividend payment. In 2016, the company will pay €2.1bn in dividends (scrip), or €1.06/share. This is above expectations and corresponds to a 60% payout ratio. For the coming years, EDF has reduced dividend payments with a payout ratio maintained for 2017 at 55-65%, but decreased to 50% in 2018, and 45-50% thereafter. In terms of guidance, this is weak as the group expects EBITDA to be in the €13.7-14.3bn range in 2017, and at €15.2bn in 2018, which is in line with our expectations, but below market forecasts. The neutral free cash flow by 2018 does not include the dividend payment, which implies a slight downward revision from previous guidance.
Profit warning on 2017 earnings
15 Dec 16
After a Board of Directors meeting held on 14 December 2016, EDF has issued another profit warning, now expected on its 2017 earnings. Despite confirming its 2016 guidance (after two profit warnings issued this year), the company has substantially revised downwards its 2017 EBITDA expectations to a range of €13.7-14bn (down -14% yoy). This is mainly driven by lower power prices in its main markets, that is the UK and France. The group expects a significant rebound in 2018 earnings. On top of a lower guidance for next year, the company expects to continue its operating expenses (opex) reduction as it targets €1bn cost cuts by 2019. Moreover, the disposal of 49.9% of the French electricity transmission network (RTE) has been signed and should be achieved by 2017.
UK revenues hurt 9m results; approval of capacity market is a positive
09 Nov 16
EDF published today its Q3 update in which the group released only its revenue numbers. These showed a 4.7% yoy decrease to €51.96bn, which represents -3.1% in organic terms. If we take out the one-off €1.02bn increase due to retroactive tariff adjustments, then the effect would have been a 5% yoy organic decrease. In France, the group achieved 0.4% in organic terms (including the tariff increase). In the UK, sales dropped 19.7% yoy and 10.4% organically due to lower prices, customer losses and lower volumes. Italy was down 6.3% and -5.8% organically, driven by lower commodity prices and lower demand, partially compensated by higher production volumes. Other activities were down 2% yoy and -3.8% yoy: EDF renewable sales were down 2.6% in organic terms, Dalkia -1.2% from lower gas prices and weather effects, while EDF trading was +6.3% yoy due to the positive performance in short-term markets in gas and electricity. Other international revenues were down 9.5% and -6.5% organically, mainly due to Belgium (-9.1% yoy) and lower gas and power prices. Guidance has been maintained (at the level of the previous downgrade made on 4 November 2016) with EBITDA expected in the €16-16.3bn range.
Concerns over French security of supply and carbon tax application
21 Oct 16
According to the press, the French government will most likely drop the current carbon tax plans. The government was planning to apply a carbon tax only to coal generation assets, but there are growing concerns over the measure being too complicated to implement given that it will be applied only to some assets. If implemented, it might be unconstitutional and not be accepted by the European Commission given that it can be considered state help for EDF in order to boost power prices and improve the profitability of lower emission assets. Moreover, EDF has been forced once again by the nuclear regulator (ASN) to close five additional nuclear reactors by the year-end to perform additional tests on the reactor vessel and steam generator of these reactors. With a third of the nuclear park already stopped in the country, there are increasing doubts over EDF’s ability to cover its supply needs over the winter and this has once again boosted wholesale prices across Europe. Driven by a spike in French wholesale electricity prices (as they are currently above the €70/MWh level) and an expected lower production from its nuclear fleet, EDF has demanded both the Minister of Economy and the Minister of the Environment and Energy to apply a temporary suspension of the ARENH mechanism (a regulated price given to competitors to buy nuclear electricity, set around €42/MWh). As a result, concerns over security of supply and a tight reserve margin for the coming winter have emerged and the output from coal and gas plants has more than doubled in recent weeks due to lower nuclear production. On the other hand, and despite the expected outages, EDF has maintained its nuclear production targets (which were already reduced twice in 2016) at 380-390TWh for 2016 and 390-400TWh for 2017. Moreover, EDF has finally provided the timeline for the five nuclear reactors outages that will be stopped for the additional testing demanded by the ASN: the period will be mainly (for four reactors) during the holiday season from 10 December 2016 to 15 January 2017, with one reactor stopped from 22 October 2016 to 19 December 2016.
UK government gives green light to Hinkley Point C
15 Sep 16
In a communique provided by the UK Department for Business, Energy and Industrial Strategy, it has been stated that the UK government has finally approved the Hinkley Point C (HPC) project. Nevertheless, the government has included some additional measures for this and on all future nuclear projects built after HPC: • no changes have been made to the contract-for-difference strike price of £92.5/MWh; • significant stakes in HPC cannot be sold without the government’s knowledge or consent; • the UK government will be able to prevent the sale of EDF’s controlling stake in the project prior to the completion of HPC’s construction; • the UK government will be able to intervene on any future sale of EDF’s stake once HPC is operational; • the UK nuclear regulator must be informed in due time of any changes in the ownership or partnership of any of the nuclear sites; • the UK government will take a special share in all future nuclear projects built after HPC.
Better visibility over strategy and strong cash flow performance
29 Jul 16
EDF has confirmed that it had entered exclusive discussions with the French financial public entities Caisse des Depots and CNP Assurances over the divestment of 49.9% of RTE. The price at which it has been set for 100% of RTE has been valued at €8.45bn. The Hinkley Point project has been approved by the board of directors (10 to 7), giving the green light for the project. The UK government has responded after the news that it will look into all elements of the project and would make a decision in the autumn. Moreover, the group has confirmed the purchase of Areva NP for €2.5bn, in addition to a €350m earn-out, without the risks linked to OL3 or the audit on the Creusot plant. The group has signed an MoU which is a non-binding agreement and has to be presented to the CE for validation. At the half year mark, the group’s revenue decreased 5.7% yoy to €36,659bn, with EBITDA falling 2.2% yoy to €8.944m, both within estimates. However, net income decreased 17.2% yoy to €2.08bn, mainly due to a negative contribution from associates and €731m of impairment charges. Adjusted net income on the other hand increased by +1.4% yoy to €2.97bn (including the life extension on nuclear assets), which is better than expected. Prior to the ASN decision, the group has decided to increase to 50 years the accounting depreciation of its PWR 900 nuclear reactors, resulting in a positive €0.3bn decrease in depreciation. Net debt of the group decreased to €36.2bn which is also better than expected as the group had positive free cash flows (+107m), in addition to a favourable currency effect (+€1.04bn) from the depreciation of the pound.
20 Feb 17
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21 Feb 17
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N+1 Singer - Small-cap quantitative research - New quality style screen + 11 quality focus stocks
09 Feb 17
We introduce our fourth and final style screen representing “quality”. This screens for stocks with the best combination of high returns on capital/equity, EBIT margins and operating cash-flow conversion rates. These criteria should help us monitor how strong underlying returns translate into share price performance over time and under varying market conditions. The screen selects the “best” 25 stocks from our universe of just over 500 stocks and, as usual, we focus on a shorter list of stocks we cover or otherwise know and believe to be particularly interesting. We provide brief investment summaries on these focus stocks on pages 4 – 9. We will monitor performance and refresh the screen in approximately 3-4 months time.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Time to go over weight
24 Feb 17
We believe equity investors are taking an unnecessarily cautious stance on the construction sector. Forward looking indicators (e.g. consumer confidence, construction PMIs and housing starts) point to a stable market and recent sales LFL are particularly encouraging (e.g. Marshalls). Near term margins may suffer temporary distortions as inflationary pressures build. However, history has shown that modest input cost inflation is actually a positive for earnings growth in the sector. Therefore, as we move into 2018, margin trends are likely to surprise on the upside.
N+1 Singer - Morning Song 22-02-2017
22 Feb 17
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