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Travel Retail drives Lagardere profit turnaround in H1 23 While revenues came in line, Lagardere produced a solid EBIT performance in H1 23 at EUR141m some 15% ahead of our forecasts. No consensus data is available. Lagardere Publishing reported 1.6% organic revenue growth (vs. our forecast of 1.0%) but suffered a 150bps fall in margins (vs. our forecast of 30bps) on higher labour and paper cost inflation. This was more than offset by a strong performance in Travel Retail profitability. TR reported 32% orgrev growth (BNPPE at 38%) and 4.0% EBIT margins, some 250bps ahead of H1 22 (BNPPE at +30bps). This reflected solid top line growth and efficiency gains. Solid Q3 trends - outlook reaffirmed Lagardere has reaffirmed its FY23 outlook. Both divisions pointed to solid trends in Q3. Publishing is likely to benefit from market share gains in Spanish Education and from the benefits of a curriculum reform as well as from new Asterix and Britney Spears memoirs. In Travel Retail, we expect further solid trends in the US and Europe and a gradual recovery in Chinese domestic traffic. Management suggested that the ongoing strike at JDD would not have a meaningful impact at the group level. Lagardere announced a new JV with ADP to operate retail outlets in Paris airports. Management pointed to a better product mix and new stores but also mentioned that it will pay higher rents to ADP. No comments on Simon and Schuster. Vivendi deal expected to close by November Management refrained from making any comment on a potential acquisition of Simon and Schuster (as discussed in news articles e.g. Le Figaro). Management also pointed out that it expects Vivendi to take control in October or November. We have kept our forecasts unchanged and reaffirm our Neutral rating.
Lagardere SCA Lagardere SA
Following the validation of Vivendi’s tender offer on Lagardère by the European Commission, AlphaValue will stop coverage of Lagardère starting from 30-06-2023 onwards as coverage is no longer relevant in light of the shallow free float that will remain.
Lagardere has released reassuring Q1-23 results. The company reported revenue of €1,675bn, representing a 28% increase on a reported basis and a 24% increase like-for-like. The significant growth was mainly driven by the Travel Retail segment, which experienced substantial growth to €1,046bn, representing a 51% increase on a reported basis. The Publishing segment increased to €570m, up 3% on a reported basis.
The company is returning to profitability. After another record year for revenues in FY22, Lagardère expects its Publishing business to be at the same level of turnover in FY23e in a market that is calming down. Travel Retail will certainly boost business in FY23.
Strong profitability improvement Lagardere reported solid FY22 results, with revenues 2% ahead of VA consensus. This solid revenue performance was driven by the ongoing recovery in Travel Retail, which ended 2022 8% below 2019. Publishing was broadly in line with expectations. Group EBIT came 9% ahead of consensus and benefited from EUR50m of one-time government and airport aid. Lagardere Publishing posted 11% EBIT margin, its second-best performance in 10 years. Management reinstated a EUR1.30 DPS. No numerical outlook Management refrained from providing numerical guidance but indicated that ''despite pressure on costs, Publishing should be able to maintain similar performances to 2022'' while it argued ''as global traffic continues to recover, Travel Retail has potential for revenue and profitability growth''. Travel Retail is off to a strong start with January and February 2023 revenues ahead of 2019. Publishing had a mixed start of the year with a solid performance in France, UK and LatAm but further pressure in a soft US market. Simon and Schuster: nice to have but not a must have Management confirmed it could take a look at Simon and Schuster should it come back to market. It insisted that Lagardere Publishing had a standalone plan with revenue growth and margin expansion and that it did not need Simon and Schuster to deliver on this plan. It also argued that Vivendi''s shareholding in MMB could help in negotiations. Price will be key. Neutral rating maintained The European Commission has until May 23rd, 2023, to take a decision on the proposed Vivendi transaction. Until then operating trends are unlikely to be a strong driver of MMB''s share price. We remain Neutral.
A robust 9-month 2022 performance; the musty smell of books was masked by Travel Retail’s rebound to near-2019 levels. The tables have definitely turned.
While Travel Retail is bouncing back post-lockdowns, Publishing, which had its heyday during the outbreak, is now the division under pressure.
Lagardère reported a very satisfactory set of Q1 22 results, driven by the accelerated recovery of Travel Retail. Despite the difficult macro environment, the FY22e guidance is maintained.
The tables are turning. After a record year in FY21, Lagardère expects its Publishing business to slow down in FY22e in a less buoyant environment for book sales. Travel Retail is gradually recovering in a re-opening context.
Solid Q3 performance At EUR1,463m, Lagardere Q3 revenues came ahead of consensus expectations with a beat in both Publishing and Travel Retail. On a 2y stack, Publishing is up 4% while Travel Retail is down 39%. But management commented that Travel Retail revenues had seen an improvement in the last two weeks of October from -39% every month in Q3 and early October to -35% more recently (like for like vs 2019). Management expects corporate travel to improve but not return to pre-pandemic levels. With corporate travel accounting for an estimated 20-30% of Lagardere Travel Retail revenues and given recent announcement of a reopening of US-European routes, management remained confident on a further gradual recovery. The operating loss flow-through to guidance (based on 2019 numbers) has been improved from 15-20% previously to 12-15% now, in line with our forecasts. Publishing margin guidance well ahead of consensus Management also guided for close to 12% EBITA margin in Publishing (vs. cons. at 10%), a level not seen in over 10 years. A solid top-line performance coupled with cost efficiency gains is driving up the profitability of this division. While margins should benefit from synergies from the Workman Publishing acquisition, management sounded a cautious note with comments on FY22 margins below 12%. Publishing drives earnings upgrades We have increased our EBITA in Publishing by 15% and 11% for 2021 and 2022 (Workman accounts for less than one third of the upgrade in 2022). This drives the vast majority of our earnings upgrade. Vivendi bid remains the key share price driver Lagardere currently trades at a 6% discount to Vivendi''s mandatory offer, reflecting regulatory uncertainty. But with Publishing beating expectations and Travel Retail gradual recovery on track, we believe the question of a revised bid could soon come on the table.
Lagardère lifted its FY21e guidance on the back of a robust Q3 21 performance. Finally free of most restrictions, Travel Retail is re-establishing itself as the group’s leading activity. No news on Vivendi’s takeover bid.
Vivendi likely to launch a tender offer at EUR24.1 Vivendi has announced that it has accepted Amber Capital''s sale proposal for the French group to buy its stake in Lagardere at EUR24.1 per share. The sale is conditional upon the approval of the European Commission and the CSA, the French audiovisual authority. Vivendi expects the deal to close by December 15th, 2022. On the back of this transaction, and assuming it is validated by both the EC and CSA, Vivendi will own 45.1% of Lagardere''s capital and 36.1% of its voting rights. As Vivendi would then cross the 30% regulatory threshold, the group has announced that it would launch a public tender offer for the remaining 55% share in Lagardere. The price of the tender offer has been set at EUR24.1. A merger makes sense As discussed in LAGARDERE, VIVENDI: A twist in the tale? we note that cost synergies in trade publishing mergers are significant, and also believe that the regulatory background to the merger has improved since 2003 when the European Commission prevented Lagardere from buying most of the trade and school publishing assets now owned by Vivendi. We note that Lagardere recently commented on Vivendi''s announcement of the stake purchase by saying that ''it is delighted with the investment project that Vivendi wishes to carry out'' and that ''this project demonstrates Vivendi''s confidence in the relevance of Lagardere''s strategic model based on the complementarity of its activities and its operational efficiency''. Upgrading to Neutral Lagardere''s share price has jumped on the back of Vivendi''s announcement. We expect this deal, rather than ongoing operating trends, to be the main driver of the shares in the medium term. We upgrade Lagardere to = and raise our TP to EUR24.1 based on the technical elements of the deal. Our forecasts are unchanged.
One year after its entry into Lagardère’s capital, and after several months of speculation, Vivendi finally announced a full takeover of the group.
While the transformation of the group from a limited partnership with shares to a public limited company seemed to put an end to capital movements, the situation is changing again…
Lagardère has signed an agreement with JD.com and JIC for a minority stake in Lagardère Travel Retail Asia, as part of a strategic partnership in Asia.
Lagardère announced that Hachette Book Group, the US subsidiary of Hachette Livre, has signed an agreement to acquire the US independent publisher Workman Publishing.
Lagardère published satisfactory H1 21 results, driven by the record performance of its Publishing division. Although still penalised by COVID-19, Travel Retail benefited from a gradual return of domestic air traffic, notably in the US and China. Overall, management expects a good year in 2021 despite uncertainties related to the Delta variant.
Lagardere delivers a solid beat on H1 profitability Lagardere reported H1 21 revenues 5% ahead of consensus expectations, driven by a 6% beat on Travel Retail with a faster than expected recovery in the US and Asia. Publishing and Other also delivered ahead of consensus revenue forecasts. Both Publishing and Travel Retail also surprised on the upside in terms of profitability, especially with a decade-high EBIT of EUR110m in Publishing. The 12% flow-through (of the fall in revenues) in Travel Retail came ahead of our 18% forecasts. No detailed outlook for FY21 As at Q1, management did not provide a full-year outlook for group EBITA. It did, however, point out that Publishing H2 21 revenues would be comparable to H2 19 and that FY EBITA margins would be slightly ahead of 10%. In Travel Retail, it reaffirmed a 15-20% flow-through guidance with additional cost savings and the solid H1 performance offset by recovery costs. We still see upside on that guidance. We have raised our EBITA21 forecasts from an operating loss of EUR5m to a profit of EUR125m. We have also adjusted our share count to reflect the recent capital increase on the transformation from an SCA into a regular SA. Underperform maintained Lagardere operating trends are improving. July is seeing a recovery in European Travel Retail but management remains cautious on the impact the Delta variant could have and expects no sequential improvement in August vs. July. We do not believe that the strong bounce in book publishing reading habits is likely to be sustained when markets fully reopen. Lagardere fundamentals are improving in terms of corporate governance, balance sheet risk and operations. But we see more attractive investment opportunities elsewhere in Media and maintain our relative Underperform stance with a revised TP of EUR20.
On the back of our sector report Back in the fast-track lane, we hosted conference calls with former executives from privately-owned Travel Retail operators Aer Rianta and Heinemann. Three key conclusions: 1. a full recovery may not come before 2025-2026, 2. there will be less pressure on rents in upcoming re-bids, and 3. the Chinese market remains closed to foreign operators. Autogrill (+) benefits from the most favourable revenue mix. We would avoid Lagardere (-) ahead of technical share support easing. We rate SSP, Dufry, and WHSmith Neutral. 1. Full recovery by 2025-2026 Bain and Company and Castlepole forecasts suggest that the global Travel Retail market can recover to revenue between 90% and 100% of its 2019 pre-COVID levels by 2025. This bakes in a continued c. -1% p.a. contraction in spend per passenger, in line with 2014-2019. The recovery should be led by intra-Asia flows (back to peak in Q3 2022), followed by domestic US (Q1 2025), and with intra-Europe and cross-border lagging (Q1 2026). Our view: Autogrill (+) boasts the most attractive portfolio mix, with a unique c. 45% exposure to North American airports. 2. Pressure on rents likely to reduce There is a large backlog of contract rebids that did not go ahead in 2020, and could be re-tendered by 2022 or 2023. At that time store-level EBITDA should still be significantly below peak so that landlords are unlikely to secure historical rents. Minimum Guaranteed Amounts were already losing traction in favour of structures such as passenger-indexed rents. Our view: Dufry (=) has the most to win if legacy contracts renew at lower MAGs, but so far the status quo prevails (e.g., AENA). 3. China not material enough to move the needle short term There isn''t much to expect in terms of formal opening to foreign licensees. The focus is on transforming domestic destinations, including the Hainan province, into attractive shopping hubs. Dufry, LVMH / DFS, and Lagardere all have a foot in the...
MMB MMB SMWH AVOL SSPG AGL
Lagardère registered poor Q1 21 underlying revenues trends as Travel Retail continued to be badly hit by travel restrictions linked to COVID-19. Unsurprisingly, no precise FY21e guidance was communicated due to the highly uncertain environment. Further cost-cutting measures are obviously being pursed.
Lagardère’s share price rose yesterday after the group confirmed plans to become a limited company. Discussions are ongoing in this respect between the company and its main shareholders. The change in legal structure would be a game-changer, causing Arnaud Lagardère to lose absolute control of the group.
Lagardère reported very poor FY20 results as expected. The Travel Retail division, which fell more sharply than anticipated, continues to weigh on results. By contrast, the Publishing division limited the damage with a better-than-expected performance. The group loss reached €660m (FY19: €-15m). Although Arnaud Lagardère indicated that no decision has been taken regarding potential disposals, he was rather open to a modification of the “commandite” structure.
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