Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on WENDEL. We currently have 3 research reports from 1 professional analysts.
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Indebtedness has to be managed now that the 2013-17 investment project is implemented
12 Oct 15
Several important transactions have and are taking place over the year and, as we have already written (see our Latest dated 29/07/2015), Wendel’s consolidated accounts will be impacted in 2015 and over the next year by the changes in the scope of consolidation. The three major transactions are the sale of 10.9% of Bureau Veritas’s share capital and the acquisition of Constantia Flexibles both in March 2015, followed by the expected acquisition of the US group AlliedBarton by the end of this year. In H1 15, the overall contribution of the group’s companies to net income from business sectors was €333m (up 15.4% from H1 14), the major contributors being Bureau Veritas (62% of the total contribution with €207m) followed by Saint-Gobain (22% of the total with €72m) and Stahl (€41m, Stahl becoming a much larger company with the acquisition of Clariant's Leather Services). At this level of results, we also note that: • the contribution of Materis was halved, due to the sale of the company’s divisions except for Cromology (formerly Materis Paints), which remains the only activity of Materis kept by Wendel; • IHS (consolidated as an associate with 26%) reduced its losses (€5.9m compared with a loss of €9.3m in H1 14); • the intermediate holding Oranje-Nassau Développement appeared in loss, the solid performance of Parcours being insufficient to offset the losses of CSP Technologies (consolidated for the first time) impacted by negative foreign exchange rate fluctuations of the euro vs dollar and the deterioration of the profitability of Mecatherm (fully consolidated) due to a deep industrial reorganisation because of the disruptions caused by the management of too many projects at the same time; • Constantia Flexibles’ contribution was positive (fully consolidated since 01/04/2015), but weaker than we expected. After deducting operating and financial expenses, which increased because of the strong investment activity of the first half, net income from business sectors amounted to €201m (+24%) but only to €62m (-3%) for Wendel’s share. Non-recurring gains and losses netted almost to zero, the revaluation of Saint-Gobain shares being neutralised by the anticipated loss in Wendel’s accounts of the sale of Saint-Gobain’s subsidiary Verallia, the currency translation loss recognised by IHS following the devaluation of the Nigerian naira related to dollar-denominated debt and other asset impairments or other non-recurrent loss items. As already known, the capital gain of €728m on the divestment of 48m Bureau Veritas’ shares in March 2015 was not recognised in Wendel’s income statement, in accordance with accounting standards relating to a majority shareholding (IFRS 10). As a consequence, Wendel’s net income decreased to €32.2m for the group share (compared with €70.3m in H1 14).
Properly balanced asset base
29 Jul 15
Having divested a number of assets for several years, first to contribute to its financial deleveraging and secondly to reimburse the debt related to the investment in Saint-Gobain, Wendel has entered into a new investment cycle. A four-year strategic programme of development was announced in 2013, with the objective to invest €2bn over 2013-17. 2013 and 2014 went down as years of portfolio changes and, at the same time, as the start and implementation of the investment strategy. Wendel’s self-imposed conditions were: 1) to divide the amount of the investments between Europe, North America and the emerging countries; 2) to continue to deserve the “Investment Grade” status given by Standard and Poor’s in July 2014; and 3) to pay an increasing dividend to its shareholders. The geographic diversification strategy was launched with the first investments in IHS (a leader in telecom tower infrastructure for mobile phone operators in Africa) in 2014, followed by a small stake purchased in the Moroccan group Saham. The successive calls for funds which intervened afterwards made us worry of a distortion in favour of the African continent, with the risks which would have certainly followed (see our Latests dated 22/04/2014 and 10/11/2014). We know that the maximal amount allocated to IHS is not expected to exceed, at least by 2017, the $779m already invested. And no further investment should be made in Saham (only €100m invested for a 13.3% stake in the company). The investments in Africa seem now to be realised via the subsidiaries, as for example the recent acquisition of the South African packaging company Afripack by Constantia Flexibles in July 2015. The acquisition of CSP Technologies in the US and Constantia Flexibles in Austria (see our Latest dated 19/01/2015) and the announced purchase of AlliedBarton Security Services in the US (see our Latest dated 01/07/2015) have rebalanced the allocation of the funds. The completion of the acquisition of AlliedBarton will allow Wendel to have achieved its four-year strategic programme of development, two years in advance. During 2014 and the first months 2015, Wendel continued also to renew its borrowing facilities so as to reduce its financing costs and extend the maturity of its debt with the launch of three bond placements in 2014 (totalling €900m, with maturities in January 2021 and October 2024) and a bond issue in January 2015 (€500m, maturing in February 2027, bearing interest at 2.50%). In addition, Wendel entered into an agreement with seven banks for a €650m syndicated line of credit maturing in November 2019 (and replacing the undrawn €600m syndicated credit line maturing in May 2018). Finally, Wendel simplified its debt structure by repaying all of the debt related to Saint-Gobain in 2014 and unwinding the puts written on Saint-Gobain in March 2015 (at an average price of €40.19, representing a total payment for Wendel of €136m).
A second acquisition in the US
01 Jul 15
The wishes expressed by Wendel’s management have become reality: the company announced on 30/06/2015 that it has agreed to acquire AlliedBarton Security Services, a large security officers services company in the US, which is number 2 in its market behind Securitas. AlliedBarton provides physical guarding and related services to more than 3,300 customers in a large expanding market in the areas of commercial real estate, higher education, healthcare, financial services, government services, aerospace and defence, petrochemicals, retail, … Based in Pennsylvania, AlliedBarton generated annual revenues of $2.18bn and an adjusted EBITDA of $148m with a free cash flow conversion rate of about 95%. Wendel acquired AlliedBarton from funds managed by Blackstone for c.$1.7bn (11.6x free cashflow). Wendel will be investing about $670m in equity for a 96% ownership, alongside AlliedBarton’s management team. The transaction is expected to close by the end of Q3 15.
N+1 Singer - Uncovered Gems - Speed Dating Lunch - A Famous Five for the future?
12 Apr 17
On Friday we hosted our third “speed dating” lunch with the management of five very interesting and contrasting companies not under our formal coverage: Be Heard, Byotrol, Gfinity, Oxehealth and Plant Impact. Each company gave a concise and punchy overview of its business and investment case to a group of fund managers, before rapid fire Q&A. Below we summarise our thoughts on each company with more details inside the note, plus some relevant slides. We believe that all five companies are well-managed and well worth a closer look - we intend to repeat this efficient and popular format for engaging with management teams.
Small Cap Breakfast
24 Apr 17
Global Ports Holding—Intention to float on Standard List of the Main Market. International cruise ports operator. Seeking $250m raise including $75m primary offer. Dorcaster—Schedule One Update. Admission now expected on AIM 3 May. RTO of Escape Hunt raising £14m at 135p. Verditek— Intention to float on AIM. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Raising £3.5m. Admission in May. Eddie Stobart Logistics— Schedule 1 update. Admission expected 25 April on AIM raising £122m. ADES International Holding— Intends to join the Standard List of the Main Market in May raising up to $170m plus a vendor sale. Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa. Admission expected in May. Tufton Oceanic Assets– Offer extended to 9 May on specialist funds segment of Main Market to enable investors to complete further due diligence.
N+1 Singer - Small-cap quantitative research - Growth style screen revamp and 10 focus stocks
06 Apr 17
We have reviewed the performance of our consistent growth screen since the previous refresh on 27 September 2016 and revamped the selection parameters to focus more on forecast sales and EPS growth going forward. In the period under review the consistent growth style screen outperformed the small-cap benchmark by c. 6% and underperformed the microcap index by a similar amount. Interestingly, although growth doesn’t always seem to be defensive as might be expected, however it appears right to buy growth on dips caused by or coincident with wider market volatility. In the new forecast growth screen we take a close look at 10 focus stocks. We will monitor performance and refresh it in three to four months time.
24 Apr 17
Lok’nStore* (LOK): Growth supported by a strong balance sheet (CORP) | Mortice* (MORT): UK acquisition (CORP) | Avacta* (AVCT): Another milestone – 1st non-therapeutics licence (CORP) | Petra Diamonds (PDF): Trading update and Q3 results (BUY) | Nasstar* (NASA): Growth and margin focus (CORP)
N+1 Singer - Morning Song 25-04-2017
25 Apr 17
Carpetright (CPR LN) Tougher conditions leaves forecasts towards lower end of range | Centaur Media (CAU LN) Bigger steps | Elementis (ELM LN) Positive update confirms strengthening of demand | Rathbone Brothers (RAT LN) Facing the challenge to deliver growth | Vp (VP/ LN) Another niche Hire Station deal prompts 3% EPS upgrades