Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Bollore. We currently have 4 research reports from 1 professional analysts.
The battles waged by Vincent Bolloré in and on the media could almost make investors forget that the group is currently facing problems – or even setbacks – in nearly all of its activities. We have already discussed the strategy (or is it tactics?) relating to Vivendi. Yet, a series of disappointments have occurred over the last few months, and not just in the media sector. Bolloré SA is a family-owned company that is seriously geared (the financials at the Omnium Bolloré level give a clearer picture of the risk attached to the complex legal structure). Still, Bolloré will not raise capital for fear of diluting family control. Being the 7th generation at the helm, Vincent has dynastic priorities. He has already announced that he will be leaving in 2022, for the bicentenary of the family business. His four children work in the group with three as managers. The Bolloré group is currently waging a number of battles with questions about managerial resources (several “historical” managers left the group) as well as financial resources. Bolloré’s objective is to stick to a 40-50% gearing (nominal at Bolloré SA, closer to 100% at the Omnium Bolloré level). As of today, the group has been able to extract slightly less than €800m in dividends from Vivendi for both 2015 and 2016 and has made good use of Vivendi’s rich balance sheet to push for “strategic” acquisitions, but this source is drying up unless Vivendi monetises its ownership of UMG. It all looks like a financial corner in the making. The group is obviously conscious of this. Willing to remain diversified in several sectors, Bolloré has benefited up to now from a degree of phasing in some investments and projects in Africa while the forthcoming investments in electrical storage should be contained. But, in our view, it is unlikely that this could be sufficient.
Once upon a time (say about 6 months ago), Mediaset and Vivendi concluded a splendid strategic alliance: the French group was to acquire 100% of Mediaset Premium, while each entity would be taking a 3.5% stake in the other on the occasion. The ambition was to build a pan-European OTT platform and to create a southern European content and VOD powerhouse… The announced wedding has since moved to the divorce legal battlefield, maybe paving the way for a ménage à trois .
While the economic and financial press makes its headlines over Vivendi, the company’s investments, its takeover bids and the changes of some executive managers within the Vivendi Group and its holdings, only a few people question the good execution of Bolloré’s activities in Africa. In 2014, the transportation and logistics activities represented 53% of Bolloré’s turnover and 87% of the operating result. Africa’s contribution was 42% of the Transport & Logistics’ turnover, that is 22% of the consolidated revenues (the figure is not available for the operating result). For 2015, Transport & Logistics amounted to 56% of the 2015 turnover. We have, for now, no indication about the share of the African continent, only that Bolloré has already warned about the slowdown in mining and petroleum activities in some countries like Nigeria, Gabon, Democratic Republic of Congo, Sierra Leone, Mozambique and Angola. In any case, Africa remains a continent of strategic importance for the Bolloré group. Since October 2014, the chairmanship of Transport & Logistics has belonged to Vincent Bolloré’s son, Cyrille Bolloré. The activity has been reorganised from geographical areas (on one hand, Africa and, on the other, Europa-Asia-America) into four operational divisions: port activities, transport fees, railway operations in Africa, and energy. But all these divisions may involve activities in Africa. Bolloré Africa Logistics (BAL) operates the largest integrated logistics network in Africa, covering 46 countries, employing 24,000 persons and publishing about €2.5bn of revenues. With 250 subsidiaries, the company managed 14 container terminals and around 20 inland container depots in customs warehouses at the end of 2014. In the transit and logistics area, BAL takes care of all customs and administrative procedures, upstream and downstream of transportation by both sea and air on behalf of its clients and deals with the carriage of goods by road or by rail. Within the Bolloré Group, changes are always happening within management. We have already mentioned that an important reshuffling of the teams was conducted inside the transportation and logistics activity (see our Latest dated 28/04/2015). Since then, we have learnt that Dominique Lafont, who headed up the Bolloré Africa Logistics (BAL) subsidiary for a 10-year period until Autumn 2014, has moved to KKR in July 2015, the US equity company, looking to invest in Africa’s infrastructure. The regional manager of BAL in western Africa, Lionel Labarre, is also now going to leave the African activities for Vivendi, having been involved in all of Bolloré’s strategic projects in the Ivory Coast for 16 years …. In addition to the port and logistics businesses, the company is now reinforcing Bolloré’s presence in railway concessions. Requiring major investments (at least €2bn) over several years (about eight), the aim of the project is to open up the hinterland in order to facilitate the export of agricultural and mining resources, increasing the volumes processed by the ports which are managed by Bolloré (Abidjan, Cotonou, Lomé). In connection with the railway projects, the Bolloré Group plans to install Bluezone, inland container depots with handling and storage capacities and optic fibre networks all along the railway.
Even if the H1 15 publication has taught us one thing, it is the magnitude of the investments which are facing Bolloré for the coming years as well as the consequences of them: to find the resources needed to finance these projects and potentially to disentangle the ongoing legal actions in connection with the African concessions. The investments have two major purposes: on one hand, electricity storage with the related businesses and, on the other, the ambitious project planned in Western Africa with the aim of securing Bolloré’s logistics business in African harbours. At 30/06/2015, relatively strong growth in investments (+45% to €112m) was recorded in the electricity storage industry with the progression of car-sharing and developments in the bus and stationary activities. The group continued to sell electric vehicles (Bluecars, Bluebuses, Bluetrams and the Bluesummer, a cabriolet version designed by Bolloré and produced by the PSA-Peugeot Citroën group). A car-sharing service was inaugurated in London in June and the car-sharing service of Indianapolis (USA) was launched in September 2015. Due to be completed by end-2019, the plan to roll out 16,000 charging points across France is expected to get under way before the end of the year (€116m to invest between 2015 and 2018, see our Latest dated 08/09/2014). In H1 15, the battery business, Blue Solutions, was breaking even for the first time, but this was not the case for the whole electricity storage and solutions activity which remained (with no surprise) in losses. Remember that the listed company, Blue Solutions, holds options which are exercisable between September 2016 and June 2018 over almost all the other companies within the scope of the electricity storage and solutions activity. But the current greatest project of the Bolloré group is the construction of a railway loop, which is part of the completion of the building of an integrated logistics network through five countries in Western Africa (see our Latests dated 08/09/2014 and following ones). To boost its logistics flow capacities, the group decided to strengthen its presence in African rail concessions by planning investments to renovate and upgrade the road linking Abidjan (Ivory Coast) to Kaya through Ouagadougou (Burkina Faso), to construct the stretches between Kaya and Niamey (Niger) and to renovate the line to Cotonou (Benin), giving a total of 2,740km of rail to construct or renovate. The group also plans to develop the railway from Cotonou to Lomé (Togo) and then to Nigeria. Bolloré intends to install Bluezone (areas equipped with their own electricity supply), inland container warehouses with handling and storage capacities and a fibre optic network (internet, voice/data) all the way along the railway. Last year, up to €2bn was announced for these investments (€1m per km), to be realised over the next eight years. Furthermore, some developments are expected in Cameroon and Guinea for the renovation of a line which should reduce the congestion from Conakry (Guinea) to the Kagbelen inland container warehouse operated by the group. This is an ambitious project to finance, while the group is already indebted. At 30/06/2015, the consolidated net debt amounted to €4.3bn (compared with €1.8bn at the end of 2014), leading to a gearing of 36% (18% at 31/12/2014). The acquisition of Vivendi shares for €3.6bn (of which only €0.6bn obtained from the sale of 22.5% in Havas) was the reason, Bolloré increasing his holding from 5.1% to 14.4% during the half year in Vivendi, of which 2.5% is hedged. Note that at the end of July, the group completed a 6-year bond issue for €450m with a 2.875% annual coupon, with the aim “to extend the average maturity of its debt”. Having initially been determined that he would finance the African project practically alone without approaching any development bank, Vincent Bolloré said during the analysts’ meeting that he was now looking for industrial partners in Africa. If this does not work, an IPO of the railway activity could be launched - in the next three or four years? But for the next three years, the higher level of operating and financial costs should be more than offset by the dividends already received and expected from Vivendi. Bolloré’s H1 15 net result was already very high, due to €325m of dividends received from Vivendi. With the company not being consolidated as an associate, Bolloré receives dividends. Vincent Bolloré is the Chairman of the Supervisory board of Vivendi, held today with 14.5% by the Bolloré Group. In 2015, Vivendi paid an ordinary dividend with respect to 2014 of €1 per share which was supplemented by an extraordinary interim dividend of the same amount, due to the success of the sale of GVT and the 20% interest in Numericable-SFR. Added to the ordinary dividend, a second extraordinary interim dividend (€1 per share) is expected in 2016. In 2017, Vivendi should pay an ordinary dividend, already expected at €1 per share. Between 2015 and 2017, Bolloré will consequently receive a total of €914m from Vivendi.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Bollore. We currently have 4 research reports from 1 professional analysts.
In light of the UK election, we highlight our favoured overseas earners, operators in defensive markets and those capable of taking market share, but our main topic is the structure of the UK employment market. The UK has the lowest unemployment rate since 1975 at 4.6%, and there are, consequently, fewer and fewer candidates to fill vacancies. This suggests recruitment companies may struggle to grow, but there are structural changes in the UK labour force that offer growth opportunities. Temporary labour continues to expand relative to the point in the economic cycle, its importance accelerating since 2008, and part-time labour has grown at twice the rate of full-time labour throughout both the last cycle and over the long term. There are, of course, specialist temporary recruiters, but the part-time market appears relatively untapped (at least by the quoted companies) despite being c.5x the size of the temporary segment in terms of numbers.
Companies: FOUR ACL BOOT CLL CMS CNCT FCRM LOK PPH RNWH SVCA STAF UTW WATR
Surface Transforms* (SCE): Progress headwinds (CORP) | Aukett Swanke* (AUK): Interim results (CORP) | Horizonte Minerals* (HZM): Awards further contracts for the feasibility study (CORP) | 7digital* (7DIG): Acquisition confirmed and major new contract (COR) | Accsys (AXS): A year of strong progress (BUY) | Shanta Gold (SHG): Fund raise, debt restructure and acquisition (U/R)
Companies: SCE AUK HZM 7DIG AXS SHG
Last Friday we reprised our successful speed dating format with excellent presentations from the CEOs of Access Intelligence, Corero Network Security, LiDCO Group, OrganOx and Yu Group. Each company gave a ten minute overview of its business and the investment case and we had quick-fire Q&A from a group of fund managers. Below we summarise our thoughts on each company, with more details inside, plus we include the slides presented by each management team. We believe all five companies have excellent potential and are happy to arrange further contact. We also look forward to setting up our next speed dating event.
Companies: ACC CNS LID YU/
As already announced, record FY17 profits have exceeded management expectations and growth was delivered with a strong cash performance and a sharp rise in the dividend. We have increased our EPS estimates marginally for 2018 with restrained growth expectations. As Trifast continues to deliver on its strategy, the 10% rating discount to peers should moderate.
Flowtech Fluidpower* (FLO): Acquisition of Hi-Power (CORP) | SRT Marine Systems* (SRT): Somalia contract underpins forecasts (CORP)
Companies: Flowtech Fluidpower Srt Marine Systems
Carador Income Fund (CIFU LN) Level of refinancing and reset activity remains high | Imagination Technologies Group (IMG LN) No progress with Apple; Whole group for sale | Uncovered Gems - Speed Dating Lunch Another five sparkling gems
Companies: IMG CIFU ACC CNS LID YU/
Flowtech has announced that it has acquired Hi-Power Limited, a distributor of hydraulic equipment components and systems design and build, serving the mobile and transport sectors across Eire and Northern Ireland. The acquisition strengthens the group’s Power Motion Control (PMC) division, deepens technical expertise and expands its core product offering, as well as establishing relationships with key European suppliers. This deal is the first acquisition since the Group’s £9.6m fund raise in March and comprises of an initial £1.9m consideration, representing 1.0x NAV, with a further £0.5m subject to an earn out over the 18 months to December 2018. We upgrade our forecasts for the Hi-Power acquisition with FY17 EPS +2.8%, reflecting six months trading contribution, and a 5.4% upgrade to FY18 EPS. On a PER of 10.4x the shares trade at a sizable 45% discount to sector peers. We expect the company to deploy its remaining financial firepower on further earningsaccretive deals, bringing into focus this valuation discrepancy. At current levels the shares also offer an attractive 4.3% dividend yield.
Companies: Flowtech Fluidpower
Good momentum is apparent in Severfield’s results, with healthy progress in revenue and margins in the UK and a profit contribution from the Indian JV. Our estimates now expect a sustained JV profit contribution (previously neutral) and, with unchanged UK expectations, Severfield is on track to double PBT between FY16 and FY20. All in all, we see a clear strategy that is being well executed against visible financial targets.
In recent years, Chemring has been a graveyard for reputations. Today’s interims show that the new FD is leaving nothing to chance but at the same time offering a glimpse of what is possible. For instance, the £20m investment in working capital to improve supplier payments looks like a sensible move if the management wants to achieve operational excellence. There are still shortterm risks to FY2017 such as the requirement to extend the funding on the letter of credit for the 40mm ammunition contract offers. However, we believe that the management has a reasonable chance to become consistently predictable in an "under promise over deliver" way. We raise our TP to 216p reflecting the re-rating of the Aerospace and Defence sector.
Companies: Chemring Group
Flowtech Fluidpower* (FLO): Upgrade to forecasts post Hi-Power acquisition (CORP) | Transense Technologies* (TRT): Glencore – further contract win (CORP) | Victoria* (VCP): Group reorganisation (CORP) | Savannah Resources* (SAV): Portuguese lithium metallurgical testwork (CORP) | Ncondezi Energy (NCCL): Termination of coverage (N/A)
Companies: FLO TRT SAV VCP
GYG—Intention to float by the superyacht painting, supply and maintenance company. Due 5 July. Raising £6.9m new plus vendor sale of £21.5m at 100p. Mkt Cap c. £47m. Revenue of €54.6m in FY16 and adjusted EBITDA of €6.7m. Greencoat Renewables - Schedule 1. Targeting a portfolio of operating renewable electricity generation assets, initially investing in wind generation assets in Ireland. Offer TBC. Due Mid July. FFI Holdings— Specialist in the provision of completion contracts to the entertainment industry for films, television, mini-series and streaming product. Offer TBA. Expected 30 June. QUIZ— Omni-channel fast fashion womenswear Company intention to float. Due July 2017. Offer TBA Ethernity Networks—Schedule 1 from Israeli based specialist in data processing technology used in high end carrier ethernet applications across the telecom, mobile, security and data centre markets. Expected late June. Offer TBA. Jangada Mines—Sch 1 advanced stage PGM exploration project containing what the Directors understand to be the largest PGM resource, and only pre-development PGM project, in South America. Offer TBA. Expected late June. Phoenix Global Mining— US Brown field copper play. Expected late June. Offer TBA Touchstone Exploration— Oil E&P company active in the Republic of Trinidad and Tobago. Interests of approximately 90k gross acres. Production c. 1.3k boepd. Raising £1.5m. Expected mkt cap £7.5m - 26 June. I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 7 June admission. Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission late June Tiso Blackstar Group—Schedule 1 update. Media, entertainment and marketing solutions group/ £160m mkt cap. Admission only. Postponed. Rockpool Acquisitions—Northern Ireland based Company seeking strong NI acquisition with an international outlook. Raising £1.5m at 10p. Due 5 July. Residential Secure Income - social housing REIT raising up to £300m Admission due c.12 July. ScotGems—Admission due 26 June. Seeking £50-£100m. To investing in a diversified portfolio of Small Cap Companies listed on global stock markets DP Eurasia—Intention to float from the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia . £20m primary raise plus a partial vendor sale. AIB—Intention to float from AIB, Ireland's leading retail and commercial bank. The Minister for Finance intends to sell approximately 25% of the Ordinary Shares of AIB. Valuation range €10.6-€13.3bn. Admission end June. Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus. NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June. Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe Supermarket Income REIT– Up to £200m raise to acquire a diversified portfolio of supermarket real estate assets in the UK, providing long-term RPI-linked income. Due 21 July.
Companies: VLS GSH EGI MSG FDEV UNG TND LTHM REDX CREO
Last week the group acquired Hi-Power, a complementary bolt on acquisition, for a total consideration of up to a maximum £3.5m. Hi-Power offers additional hydraulic products, wider geographic coverage and medium-term synergies and wider collaboration opportunities. This acquisition is in line with existing strategy and we expect management to achieve further acquisitions over the coming year as it deploys cash raised through its recent placing. This potentially offers future upside to forecasts. We increase our EPS forecasts by 2.4% in 2017 and 4.7% in 2018. The shares remain attractively rated on a P/E of 10x and offer good upside.
Companies: Flowtech Fluidpower
Today’s AGM update reflects an improvement in Q1 over a disappointing comparable period. Trading profit has improved, benefitting from cost savings undertaken. Shipbroking has performed well in Q1 and Technical has seen a modest improvement, helped by cost savings. Regarding the outlook, the improvement in Q1 is encouraging, although end markets remain challenging. Full year expectations remain unchanged. We are forecasting FY2018E PBT of £7.9m, EPS of 21.7p and a 15p dividend. We retain our Buy and 400p TP.
Companies: Braemar Shipping Services
The FY17 prelims confirm Fulcrum has progressed to its growth phase as it develops the top line. FY17 results were significant with PBT growth of 51%, DPS growth of 111%, a net cash balance of £12.6m and a 39% increase in the order book. We expect PBT growth of 14% and 9% in FY18 and FY19 as it evolves into a multi-utility infrastructure service provider and grows its annuity income. EBITDA margins are set to expand from 19.3% in FY17 to over 21% by FY20 and the cash position will finance a growing dividend with the yield expected to reach c5% by FY20. We initiate with a buy recommendation and price target of 66p.
Companies: Fulcrum Utility Services