Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 12 research reports from 1 professional analysts.
A spectacular performance from Gucci, alongside a strong performance from the other brands in all geographies, have led to a record year for Kering. The medium-term target is to consolidate the organic growth away from acquisitions for the time being.
In a surprising move, Kering has decided to reduce its stake in Puma from 86% to 16% through distribution in kind to Kering shareholders. Artémis would then be the strategic shareholder in Puma with c.29% of its share capital.
Another excellent quarter has been released by Kering with an impressive performance in all geographies and across all product categories. Almost all group brands experienced strong market momentum except for Bottega Veneta and Volcom. Group sales were up 28.4% lfl to €3,925m (+23.2% reported) in Q3. Luxury sales soared by 32.3% lfl to €2,678m. The flagship Gucci rocketed 49.4% lfl to €1,554m. Sales at Bottega Veneta are still lagging but increased by a modest 0.9% lfl (-4.5% reported) to €280.7m. The first collections of Anthony Vaccarello enjoyed strong momentum and pulled up YSL sales by 22.2% lfl to €383.7m. All other luxury brands experienced strong momentum (+17% lfl). Sports & Lifestyle products edged up 15.9% lfl (+11.9% reported) to €1,191m. Puma soared by 17.3% lfl to €1,126m but Volcom is still struggling. As regards geographies, Western Europe and Asia Pacific outperformed, stepping up 32% and 36% lfl respectively in Q3. A lower growth of 21% and 26% was reported in North America and the rest of world countries respectively. In Japan, sales increased by 13%. Ytd sales amounted to €11,221m (+27.2% lfl). Luxury revenue inched up 29.6% lfl to €7,709m and Sports sales were up 14.9% lfl to €3,278m.
Group sales were up 24.6% lfl (+25.4% reported) to €3,722m in Q2, bringing H1 sales to €7,296m (+26.5% lfl). Luxury sales surged by 25.3% lfl to €2,614m and Sports revenue edged up by 14.7% to €1,022m in Q2. H1 luxury sales amounted to €5,031m (+28.3% lfl), followed by sports revenue of €2,086m (+14.3% lfl). A sharp jump in margins was reported in H1. The recurring operating margin rose 330bp to 17.5% with a recurring operating profit of €1,274m (+57%). The two product categories experienced a sharp increase in margins mainly with Gucci, YSL and Puma. Recurring operating income from luxury products soared by 49.4% to €1,254m. Sports & Lifestyle generated a recurring operating income of €110m (+128.7%). Group net income surged by 77.6% to €825.8m. The financial position is improving with net debt decreasing by 9.8% to €4,572m. FCF from operations has more than doubled to €718m.
The Gucci owner impressed with sharp quarterly growth acceleration in Q1. In fact, sales soared by 28.6% lfl (+31.2% reported) to €3,573m. A favourable comparable basis has helped deliver such a striking performance as sales growth in Q1 16 slowed down to 4% lfl. The outperformance was driven by increasing volumes and rising traffic across regions. The climb in Chinese demand, the recovery in Russia and the dynamic tourism in UK have pulled up the group’s performance to its highest in four years (on a sequential basis). Both retail and wholesale channels accelerated. Online sales jumped 60.1% on a comparable basis. Luxury activities were up 31.6% lfl to €2,417m and Sports edged up 14% lfl to reach €1,064m. As regards brands, Gucci was the best performer growing by 48.3% lfl to €1,354m. YSL maintained its pace of growth and increased by 33.4% lfl to €364.4m. The first collections of Vaccarello were well received in stores in January. Bottega has finally marked its upturn with a low single-digit growth of 2.3% lfl to €280.4m. Other luxury brands were up 12.3% to €418m. For Sports & Lifestyle, the repositioning of PUMA is still delivering double-digit organic growth with a 15.3% lfl sales increase to €1,009m. Although, other brands are struggling (-6.3% lfl). As regards geographies, Kering experienced strong momentum in almost all regions. The sound recovery in China raised comparable sales in Asia Pacific by 42%. The weakening pound has buoyed up revenue in the UK and enhanced sales in Western Europe (+34%). In North America, the pace of growth was softer at 25% lfl. The momentum in Japan is challenging and sales were up 1%.
Kering posted a double-digit growth rate in Q4 with sales edging up by 10.4% lfl to €3,507m. Luxury revenue surged by 11.3% lfl to €2,477m, underpinned by outperformance at Gucci and YSL (+21.4% and 20.5% respectively). Puma performed well and grew by 9.8%, raising Sports & lifestyle sales to €1,022m (+8.6% lfl). Full-year sales were up 8.1% lfl (+6.9% reported) to €12,385m. Luxury sales stepped up 7.8% lfl to €8,469m, boosted by the strong momentum reported by Gucci and YSL which grew by 12.7% and 25.5% to €4,378m and €1,220m respectively. Other brands posted sales declines, led by the struggling Bottega (-9.4%). Sports activities posted a 9% increase in sales to €3,884m, underpinned by the solid growth posted by Puma which raised sales by 10.4% to €3,642m. Other brands deepened their decline to 8.4%. Strong market momentum was experienced in Western Europe and Asia Pacific which posted a double-digit growth rates, while North America and Japan reported sluggish performances. The gross margin gained 190bp to 62.9%. Recurring operating profit edged up 14.5% to €1,886m bringing the corresponding margin to 15.2% (up by 100bp). Both sports and luxury segments experienced sound margin rises. Luxury activities generated a recurring operating profit at €1,936m (+13.3%), pulled up by the booming YSL (+59.3% to €268.5m). Sports & Lifestyle profit soared by 30% to €123.2m, generated fully by Puma up to €126.6m (+37%). Net profit amounted to €813.5m (+16.9%) including an exceptional loss from discontinued operations of €11.6m. The financial position is improving with a retreating gearing to 36.5%. The proposed dividend is €4.6.
The group has sharply accelerated its pace of growth in Q3, surging 10.5% lfl to reach €3,185m (+10% reported). All regions apart from Japan experienced double-digit organic growth led by Asia Pacific which edged up 17%. In Japan, things turned around and slipped 6%. Amid such slumping demand, the luxury division has outperformed and grew by 11.3% to €2,115m, boosted by the favourable momentum enjoyed by the retail network which is being restructured. The flagship brands, Gucci and Yves Saint Laurent, have expanded their market shares and grew 17% and 34% respectively. The other luxury brands maintained a low single-digit growth (+2.5%) with a deep 10.9% slip at Bottega which was due to lower tourist inflows in France and Japan. Sport & Lifestyle grew 9.3% on a comparable basis to reach €1,064m led by Puma (+10.8% lfl) and driven by footwear products. The expanding online platform raised luxury e-commerce by 50% boosted by consistent offering and brand positioning. Up to September, sales amounted to €8,878m (+7.3% lfl). Luxury brands gathered sales of €5,993m (+6.5% lfl) and Sports revenue came to €2,861m (+9.2% lfl).
Consolidated sales were up 3.3% (5.5% on a comparable basis) to reach €5,693m in H1 16. The pace of growth has slightly accelerated in Q2, posting a 3.8% increase vs. 2.7% in Q1. Q2 luxury sales were up 3.3%, bringing the H1 performance to 3.1% with sales of €3,878m. The division was boosted by an impressive outperformance by YSL, which surged by 23.7% to reach €548m in the first six months. Gucci’s sales increased by 3.9% to €1,947m. All other luxury brands’ sales turned down, including Bottega Venetta’s which dwindled by 9.2%. Sport & Lifestyle sales grew by 5.1% in Q2 generating H1 revenue of €1,797m (+3.8%). The activity benefited from the recovery in the appeal for Puma, which was up 5.3% (€1,686m), while other sport brands were down 14.9%. Concerning margins, EBITDA was up 4% to reach €4,011m, resulting in an EBITDA margin of 17.8%. The operating margin gained 0.2% to 14.2%, drawing an operating profit of €811.1m (+4.9%). Net income surged by 9.9% to reach €464.9m. Profitability benefited from the marked performance of YSL, generating an operating profit of €109m (+80.2%). Gucci saw operating income of €536.9m, i.e. an increase of 7% and an operating margin of 27.6%. Sports’ operating profit jumped 9.7% to €48.1m, underpinned by the strong performance of Puma. The financial structure remains quite sound with decreasing net debt from €5,337m in H1 15 to €5,066m a year later. Operating FCF rocketed to €323m in the first half of 2016 compared to €58m in H1 15. Comparable revenue growth was solid in both mature and emerging markets with a marked performance in Western Europe and Japan.
Kering posted healthy growth against a tough backdrop. Q1 sales increased by 2.7% (4% on lfl basis) to €2,724m. The luxury activities grew by 2.8% (2.6% lfl) with sales worth €1,804m. Both retail and wholesale posted positive momentum (+3%) while royalties decreased by 16%. The Sport & Lifestyle division benefited from the strong growth of Puma to deliver an organic growth of 7%, although, the negative exchange rate impact pulled down the reported growth to 2.6%. The company experienced good sales momentum in Western Europe (+10%) accounting for 31% of consolidated sales, in Japan (+7%) and in the emerging countries (+7%). Asia Pacific posted poor growth of 1% while North America dropped by 3%. The luxury retail network accounted for 1,259 stores, of which 522 branded Gucci. The flagship brand contributed 50% to luxury sales amounting to €894m boosted by solid growth in Western Europe (+20%). Bottega Veneta experienced a sales drop in all regions, posting a 7.6% decline. The Slimane collections led Saint Laurent goods to outperform the market and enjoy double-digit growth in all regions with a 27.3% reported sales surge. Jewellery brands recorded good sales momentum, while watches were pulled down by the sluggish demand. The Sport division benefited from the strong growth recorded by Puma in all categories and posted 7% comparable growth. Strongly positive momentum was reported in all regions except for North America with a weak 1% increase.
Kering Group posted a solid FY2015 sales growth of 15.4% (4.6% on comparable scope), amounting to €11.58bn. The fourth quarter has impressed with 8% organic growth to €3.18bn. The luxury unit’s sales climbed by 7.2% at a constant basis, while the Sport & Lifestyle segment grew by 9.8%, sustained by the solid sales momentum of PUMA which grew by 11.7% in Q4. Year-on-year, the luxury activities reported consolidated sales of €7.86bn, i.e. an increase of 16.4% vs. 4.1% lfl growth. Brand-wise, the iconic Gucci displayed the first signs of recovery after two years in decline, growing by 0.4% on a comparable basis, driven by directly operated stores in mature and emerging markets. Furthermore, YSL did well, being the best performer with 25.8% organic growth. The Sport & Lifestyle sales were up by 13.5% (5.9% at constant currency) to €3.68bn, pulled up by the upturn of Puma growing by 6.8% at constant rates. EBITDA climbed by only 3.3% to €2.06bn, dropping the EBITDA margin to 17.8%. The operating income from recurrent operations was 1% down to €1.65bn, dropping the operating margin to 14.2% compared to 16.6% in 2014. The deterioration was due to the sport & lifestyle activity showing an operating profit declining by 31.1%. The adjusted recurring net income amounted to €1.02bn vs. €1.18bn a year earlier, i.e. down 13.6%. The proposed dividend remains unchanged at €4.
Revenues reached €5,512m, up 17% as reported and 3.5% in organic terms. Revenue generated by the Luxury division rose 18% as reported and 2.8% on a comparable basis. This overall performance was fuelled by a much stronger showing by the luxury brands in Q2 as a result of a significant increase in purchases by Chinese tourists, particularly in Western Europe but also in Japan. Revenue for the Sport & Lifestyle division was up 15.5% as reported. At comparable exchange rates, revenue growth came to 5.3%, driven by the achievement of strong sales momentum due to Puma's relaunch plan implemented from the second half of 2014. Consolidated EBITDA came to €972m, on a par with the first half 2014 figure as reported, and the EBITDA margin narrowed by 300bp on a reported basis to 17.6%. The Luxury division's recurring operating income amounted to €806m for H1. The recurring operating margin came in at 21.4%, down 380bp. More than half of this decrease was due to the combined effects of exchange rate fluctuations and currency hedges, which had a massive dilutive impact in the period. The remainder of the decline was attributable to the contraction in recurring operating income posted by Gucci and a weaker performance in Watches.
Sales at the Gucci brand have failed to match the performance of the group’s smaller labels in recent years. New CEO Marco Bizzari's action plan is to rejuvenate the brand with a more contemporary vision by investing more in Fashion. Q2 results due to be released on 27 July will not yet benefit from better momentum at Gucci.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 12 research reports from 1 professional analysts.
CVS has this morning announced an intention to conduct a placing of up to 6.391m shares via an accelerated bookbuild. The proceeds will be used to pay down debt and create additional headroom to help fund a strong pipeline of future acquisitions. Management has an excellent consolidation and investment track record and we note that it successfully put to good use the Dec’16 fund raise in a timely manner. Today’s corporate news is accompanied with an inline set of interims. We put our forecasts under review and will publish updated numbers once the final outcome of the placing is confirmed.
Companies: CVS Group
Interims are a slight miss due to costs, and increased cost guidance, especially WS losses, points to downgrades of c4% this morning, which is disappointing so soon after the pre-close. The dividend was better than expected though driven by confidence in the future potential, which hasn’t changed, and cash generative dynamics. Significant investment in the last 2-3 years, incl. areas with rapid payback, and a low-ticket bias (£30 ATV), mean DNLM isn’t reliant on the backdrop. In particular, integration benefits from WorldStores have turbo-charged its online and category capability, further distancing it from the discounters. Key to today is a positive update on strategic growth initiatives, and reassurance on reversing H1 gross margin mix dilution (H2 margin expected to be c+100bps). But the additional costs/losses at WS are a disappointment. Whilst the previous lack of clarity about the growth strategy has been addressed (CMD, 11 Oct), recovering confidence in Dunelm’s potential and online growth may be set-back today, albeit temporary. Weakness in the shares, should it materialise, would present an opportunity.
Companies: Dunelm Group
Dart Group has provided a trading update this morning, indicating that improving pricing dynamics are likely to see FY18 underlying PBT materially ahead of current market expectations (Bloomberg consensus: £95m). In addition, the Group highlights that FY19 trading performance is expected to be “broadly” inline with FY18.
Companies: Dart Group
Interims on Tues are expected to reveal a c£2-3m PBT decline (c3-5%) to c£63m, driven mostly by a full period of WorldStores ownership (vs 5 weeks H1’17). Given the wide range of growth and integration initiatives underway, updates on progress will inform sentiment for H2 and into FY19. We see a lot of potential from these in the absence of any execution risk or phasing delays. Given sentiment towards the margin decline in H1 (which was mix driven), a detailed update on their expectation of growth in H2 will also be important for sentiment. Having last increased PBT in H1’16, the key to the investment case is restoring the group to growth again and the building blocks look to be in place for c36% growth in H2 and therefore 12% for the full year. Recent weakness looks to be an opportunity.
Companies: Dunelm Group
FOOT held a brief CMD yesterday with presentations led by CFO Claire Nesbitt and CFO Danielle Davies. Overall we found the presentation credible and the management knowledgeable. That said the strategy is based significantly on physical expansion from 65 current UK stores to a target of 150 in the UK and EBITDA margins are low (at 7.6% 2/17A v JD Sports 13%) and likely to remain so in the near term as the business invests in infrastructure.
Although the macro scenario is still positive, more than 40% of LNGC projects under construction is behind schedule or slowing down, which has reduced GTT’s expected orders from 52 to 37 by 2022. As a reminder, LNG carriers remain GTT’s main activity, contributing 83% to sales in 2017.
Companies: Veltyco Group
7digital is a B2B music streaming business. We believe a combination of an extensive music catalogue, limited competition and a well capitalised balance sheet uniquely positions 7digital to exploit the fastgrowing voice assistant market and accelerate the penetration of music streaming. However, our analysis shows the shares currently price an overly bearish mid-term scenario (zero growth and margins -200bps). We initiate coverage of 7digital with a Buy rating and a DCF-driven PT of 9.5p, implying +111% upside potential. In our view, the shares could reach 15p (233% upside) as the market’s confidence in execution grows.
Companies: 7Digital Group
CVS has successfully raised £60m in an over-subscribed placing to take advantage of an attractive site pipeline in the UK and Dutch market. Management has an excellent consolidation track record and we note that it put to good use the Dec’16 fund raise in a timely manner. We estimate re-leveraging the balance sheet back above 2.0x in the next 30 months would augment FY19/FY20 EPS by 9.3%/16.5% respectively. Interims last week were in line. Fundamentally, this remains a highly attractive and consolidating industry with CVS very well positioned.
Companies: CVS Group
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO ESG FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV
Topic of the quarter: It’s alive! Infrastructure and assets in general have traditionally been built to provide a fixed service and are maintained and renovated to a fixed schedule – dead and dumb. Technology will completely change this. Sensors and wireless networks have the potential to allow assets to ‘talk’ to us. These living, smart assets will be able to tell us when they need maintenance, how efficient they are being and provide the data that will directly influence their construction, availability and use. The implications for construction costs through to operating costs and the ability to service changing user needs are very significant. The Support Services, Construction and Technology sectors need to work together to maximise this potential, recognise and harness the power of data, and invest in and embrace change. These are daunting challenges in highly competitive markets where politics play a role, different skill sets (that are currently in short supply) are needed and shareholders are looking over management's shoulders. However, the prize for those companies who get it right is significant, and the risk from not changing much greater. There are positive early signs with Crossrail providing tangible examples of Smart Infrastructure using innovative sensors.
Companies: FOUR DSCV BOOT CLL CNCT FCRM LOK PPH RNWH STAF UTW WATR VANL WYG
The latest Office for National Statistics (ONS) survey, ‘Ownership of UK quoted shares: 2016’, shows that retail investors are more important than most company managements realise or most capital markets professionals admit. When it is also appreciated that the data shows that retail investors set the share price for most quoted companies, most days, it becomes clear that engaging with such an audience enhances a company’s standing, whilst ignoring them courts disaster.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GDR INL MCL MUR NSF OBT ODX OXB PPH NIPT RE/ REDX SCLP SCE SIXH TRX TON VAL
In the February 2018 edition of the Hardman Monthly Newsletter, Nigel Hawkins addresses the issue of the UK's infrastructure expenditure, much of which is energy-related.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY GDR INL MCL MUR NSF OBT OXB PPH NIPT PHP RE/ REDX SCLP SCE SIXH TRX TON VAL
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
Companies: 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD ELCO ESG FDSA FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO ONEV
Since April, our growth style screen has performed very strongly, outperforming the main small-cap index by 20pp and 24pp on an unweighted and weighted basis respectively, also comfortably outpacing microcap. In this note we provide more detail on the constituent and basket performance in the period and present the new screen constituents. As usual we focus on 10 of the current constituents, providing brief summaries and financials for clients to consider. We will refresh again in 5-6 months time and report back on performance.
Companies: SUN DOTD ERGO TEF AVG SOG IDE FEN LOOP YU/
A look back at our 2017 ideas In aggregate our analyst picks outperformed the FTSE All Share last year by 9% and the cumulative performance of our portfolio over 6 years would have given a total return of 300% (almost double the return on the FTSE All Share). In addition, many of our top-down themes played out very well such as our focus on secular growth in Tech, Life Sciences, Healthcare and Financials, an increase in M&A, our cautious stance on the Consumer and especially our bet on continued strength in the Industrials last year and solid growth in the global economy. What does 2018 have in store? We continue to play ongoing secular growth themes in Tech, Life Sciences, Healthcare and Financials. In addition, we tap into domestic areas of cyclical strength such as regional construction and house building, plus self-help initiatives and potential market share gains. We maintain a favourable view of Industrials given the global economic backdrop but think this could moderate during the year. Other changes of nuance include the potential for a better H2 in the Consumer sectors, which remain under pressure for now, and a better outlook in Media from a mini-quadrennial year in 2018.
Companies: AMO AVG CBP CVSG DNLM EKF FENR IOM SAA GLE RLM SFR PGIT RLM SFR SOG VRP