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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.
CyanConnode* (CYAN): Leader of the narrowband (CORP) | Ideagen* (IDEA): Consistent strength in delivery (CORP) | K3 Capital* (K3C): Director changes (CORP) | Lighthouse Group* (LGT): Trading update (CORP) | Somero Enterprises* (SOM): Strong June trading shows a pick-up in US market activity and affirms FY forecasts (CORP) | Castleton Technology* (CTP): Solid prelims (CORP) | Cello (CLL): Strengthening the offer in Health (BUY) | dotDigital* (DOTD): Yet again – positive trading update (CORP) | Allergy Therapeutics* (AGY): FY trading update drives 7% upgrade (BUY)
Companies: CYAN IDEA K3C LGT SOM CTP CLL DOTD AGY
Carador Income Fund (CIFU LN) CLO new issuance and reset activity continues | eg solutions (EGS LN) Strong H1 drives full year upgrade | Howden Joinery Group (HWDN LN) Successful NPD/pricing see pick up in recent LFLs, but risks growing | IQE (IQE LN) Photonics ramp up begins in earnest | Nichols (NICL LN) Strong interims and an accretive deal
Companies: IQE CIFU HWDN NICL EGS
We update this table which we first published in early January and highlight the continued progress of the biggest AIM companies so far this year and activity in general. The latest AIM Statistics show that there are 963 companies currently, with 28 new issues year to date raising £441m. What’s more, this momentum has been maintained since June. This demonstrates that despite, the uncertainty surrounding the UK economy, generally investors continue to be active in the AIM market. In Share News & Views we comment on Cohort, ECSC*, Porvair, Quarto*, SQS* and Xafinity.
Companies: BMS CRPR ECSC EUSP FDM PCF PPIX QRT SNX SPRP SQS TCN W7L
Since its inception in 2010, the Panmure Gordon Conviction List has outperformed the market, returning 284% against a Small Companies index that would have returned 221% over the same period.
Companies: ALD AVON CTH GKN HVN HCM INF NOG OTB POLY SNR SQS STJ
Solid State continues to make progress towards management’s goal of doubling revenues over the next five years. It delivered pre-exceptional profit growth from continuing businesses of 6% during FY17. The record order book combined with investment during FY17 in both the Manufacturing and Distribution divisions shows management is driving organic growth to complement its successful acquisition programme.
Companies: Solid State
The AIM market turned twenty-two in June and it is fair to say it has had its fair share of difficultiesH1 2017 saw a further net loss of constituents and we ask what will the rest of 2017 hold in store. Arguably the stability of the UK government, Brexit and the shift in global monetary policy will be the biggest themes for the remainder of the year.
Companies: IDP PEG AMYT SOU EVRH TST VANL W7L G4M
No change to forecasts following H117 update; our forecast equates to earnings growth of 23% in FY17. We believe a PE valuation around 10x remains inconsistent with current trading, geographical alignment and delivery of the strategy to acquire niche growth businesses such as Rishworth and ConSol. We anticipate an ongoing narrowing of the discount to its peer group as superior growth rates compensate for size/liquidity and cash generation drives a rapidly improved balance sheet. A rating of at least 13x is a realistic short term expectation providing scope for meaningful share price outperformance from current levels.
Companies: Empresaria Group
accesso Technology (ACSO LN) TE2 accelerates growth, but does not materially benefit EPS until FY19 | Alliance Pharma (APH LN) In line update; Diclectin UK approval expected Q3 | Cello Group (CLL LN) Trading update | City of London Investment Group (CLIG LN) FuM +7% in Q4, modest positive earnings surprise, better final dividend | Clinigen Group (CLIN LN) Clinigen Group (CLIN LN) | Horizon Discovery Group (HZD LN) Synergistic acquisition and proposed placing | Renold (RNO LN) AGM trading update reiterating expectations for FY18
Companies: CLL CLIG RNO CLIN HZD APH
Today we publish our H1 review of our Best Ideas for 2017 – the document in which we also outlined our key top down and bottom up investment themes for the year. Our 12 top picks in January were Cineworld, Elementis, Herald Investment Trust, Hill & Smith, IQE, MySale, Redde, ReNeuron, RhythmOne, SDL, Servelec and Severfield which have collectively outperformed the wider market by 13% YTD. At the half way stage we retire Cineworld and Hill & Smith from the portfolio (both were moved from Buy to Hold in May after outperformance), to be replaced by CVS Group and Renold. We also give a brief update on the rationale for our picks.
Companies: IQE RNO SDL CVSG ELM REDD RENE MYSL SERV HRI SFR RTHM CINE HILS
Forbidden Technologies plc (FBT.L, 5.75p/£10.4m) North American pilot opens multiple potential opportunities (12.07.17) | CloudCall plc (CALL.L, 120p/£24m) H1 trading update: accelerating growth and positive KPIs (12.07.17) | Amino Technologies plc (AMO.L, 193p/£138m) Interims: Enable provides interim upgrade and new sales route (11.07.17) | Falanx plc (FLX.L, 7p/£8.8m) Prelims: Increased push into cyber security (10.07.17) |
Companies: FBT CALL CCT AMO FLX
Good overall progress was achieved in H117 – although market conditions and business unit performance were somewhat mixed – and full year expectations are unchanged. A business strategy of increasing focus on better performing niche markets and margin enhancement is consistent with our double-digit earnings growth expectations. The rating acknowledges this and perhaps anticipates further improvement.
Companies: Low & Bonar
Renold’s AGM update has confirmed that trading is on track to deliver FY18 results in line with expectations. The group has delivered strong underlying sales growth for Q1, ahead of our assumptions. However this outperformance has been offset by a decline in margin due to rising raw material costs, and while prices have been raised in response, there will be a time lag before this benefits margin. Growth prospects remain positive, with order intake 11.4% ahead of sales, or 4.7% ahead excluding revenues to be delivered post year end. STEP 2020 self-help initiatives remain on schedule. We do not anticipate making changes to our headline profit forecasts at this stage. The shares are trading on a significant discount to sector EV/EBITDA and P/E multiples and offer material upside to our target price.
QinetiQ’s AGM statement reconfirmed the outlook even in an environment that remains uncertain post the UK election. While some order deferrals in EMEA Services have undoubtedly occurred, this was to be expected and management maintains the modest revenue growth expectation for the full year. This suggests confidence that such delays are likely be recovered during the year, leading to a more heavily weighted H2. Global Products’ results are more lumpy and dependent on timing of deliveries but further growth is forecast from improved year-on-year order backlog and pipeline, enhanced by the Target Systems acquisition. With LTPA investment on track and customer-focused change embedded, QinetiQ remains focused on driving medium-term organic growth and returns.
The QCA, which campaigns for smaller quoted companies, says that the latest MIFID II policy statement by the Financial Conduct Authority (FCA) will enable smaller companies to continue to commission research that can be distributed to fund managers for free. This will include when a smaller company is raising additional cash in order to finance growth. There were worries that the EU’s MIFID II directive could have made it more difficult to make small company research available to investors.
Companies: MLIN RHL ANCR EVG AUTG RLD
As we approach 3rd January 2018 and the coming into force of the MiFID II legislation which changes the landscape for research, we are beginning to see some of the practical implications and complications. Brokers are in the early stages of working out how to structure charging for research, asset managers have already begun cutting their brokers’ lists and a model code of conduct for Research Payment Accounts for institutions has been published.
Companies: ABZA AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG MCL MUR NSF ODX OXB PPH NIPT PHP PURP RE/ SCLP SPH VAL