Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on RWE AG. We currently have 11 research reports from 1 professional analysts.
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Trading continues to hurt results; guidance maintained
14 Nov 16
The group has posted weak 9-month results slightly below expectations with revenues falling €5.2% yoy to €33.21bn, with EBITDA reaching €3.8bn and operating income at €2.1bn, which represents -13% yoy and -20% yoy respectively. The major impact came from the financial result, driven by an underperformance in financial securities disposals pushing this above expectations to -€1.4bn, negatively impacting the bottom-line results and pushing adjusted net income to a contraction of 58% yoy to €227m. On a reported basis, net income decreased by 99.4% yoy and reached €11m, translating into an EPS of only €0.02/share, being affected in addition by non-operating results and tax effects. Operating cash flows contracted by 72% yoy to €608m, and despite a 31% yoy decrease in investments, free cash flows finished in negative territory at -€506m. Moreover, net debt has increased 7.8% yoy to €27.45bn, negatively impacted by weak cash flows and a +€2.9bn increase in provisions. Despite this, the company maintains its full-year guidance of EBITDA at €5.2-5.8bn and net income at €500-700m.
Trading backfires, but generation and UK improve; cash flow continues to suffer
11 Aug 16
Given the positive first quarter results, the group had a difficult second one as it missed all the market forecasts with revenues decreasing 3.8% yoy to €23.9bn, with EBITDA contracting 5.5% yoy to €3.11bn and the operating result falling 7.2% yoy to €1.88bn, both below market consensus. The major reason for this was the poor performance of the trading division that had a relatively strong first quarter and significant losses in the second, which is now expected to be below the 2015 level for the year. However, given a relatively low effective tax rate (8%) the group had a 10.1% increase in adjusted net income to €598m, but still fell short of expectations by 8.2%. On a reported basis, net income decreased by 73.8% yoy to €457m. Net debt increased by 11.1% ytd to €28.28bn driven by a negative operating cash flow (-€1bn) due to margin calls on hedge positions and negative working capital, where the 30% drop in capex and no dividend payments was not enough to compensate a €1.7bn fall in free cash flow. This and the increase in pension provisions (+€1.9bn) due to low interest rates have pushed net debt upwards. The group maintains its full-year guidance with EBITDA at €5.2-5.5bn, operating profit at €2.8-3.1bn and adjusted net income of €0.5-0.7bn. The IPO of the new company “Innogy” (renewables, networks and retail) continues on schedule, with separate operations expected to start from 1 September 2016 and a listing expected before the end of the year.
Interesting spin-off proposition and possibility for value creation: Innogy
01 Jul 16
RWE’s management presented on 30 June 2016 the new profile of the company that will be created from the spin-off: Innogy. This will be a company focused on distribution networks (€13.3bn RAB), renewable energy (3.1GW installed) and retail (23m customers). The listing will start with 10% of Innogy via a primary offering expected in late 2016, while a further placement of Innogy may be possible via a secondary offer at the same or different time. Innogy will have a more stable earnings contribution and a lower exposure to commodity price movements as 60% of its EBITDA will be generated from regulated or semi-regulated business such as network infrastructure and renewables. The remaining part will be linked to hydro generation (classified within the renewable business, but with exposure to price movements as they are not covered by feed-in-tariffs or PPA contracts) and retail. In terms of the financial profile of the new company, based on 2015 values, Innogy would have €4.5bn in EBITDA (61% networks, 21% retail and 18% renewables). The payout ratio has been set at 70-80% of adjusted net income, and net income for 2015 is currently estimated to be around €1.6bn. A €6-7bn planned capex programme will be attributed to Innogy, whereby both dividend payments and capex are expected to be fully covered by operating cash flows (with an expected 70% CFOA/EBITDA conversion ratio). In terms of debt expectations, all senior debt will be transferred to Innogy, although for the moment the hybrids will remain within RWE AG as it may put Innogy’s equity levels at risk. The balance sheet and capital structure expected would be based on a 4.x net debt/EBITDA ratio, which has been raised from the previous expectations of a 3-3.5x ratio. For the moment, given the low float initially proposed, rating agencies have decided that Innogy would not be able to hold a separate rating notation. No information has yet been provided in terms of growth expectations or any forward looking variables as this has been considered for the moment sensitive information prior to the IPO, additional information is expected at a later stage. Moreover, RWE’s management has reiterated once again Innogy’s listing as a priority, even under the current environment of volatile markets and increasing political uncertainty.
Trading and one-offs boost results; cash flow suffers; guidance maintained
12 May 16
A positive start of the year for the company even if revenues fell 6% yoy to €13.65bn, which is in line with expectations, but EBITDA rose 5% to €2.31bn beating forecasts mainly driven by an unusually high trading performance. Operating income followed the same path helped by lower depreciation expenses to a 7.1% yoy increase. However, higher financial expenses and lower contribution from minorities pushed adjusted net income to €857m, which is a 2.3% yoy decrease but is 29% better than expected. On the other hand, net debt increased 11.1% ytd to €27.9bn, due mainly to negative free cash flow despite the decrease in capex and a substantial increase in pension provisions. The group has adjusted upwards its expectations on net debt because of this. Moreover, despite the good results, the group still maintains its guidance, which seems conservative (net income between €500m and €700m), as it does not expect the good performance to continue.
Uncertainty over future dividend payment and operating cash flows
08 Mar 16
No major surprises in the RWE results as the group previously published that net income would finish in negative territory (-€170m), a dividend suspension for the common shares and substantially lower guidance. Nevertheless, there is no reassurance on future dividend payments as the dividend policy depends on growth opportunities’ indebtedness and the earnings situation, with an expected decrease of 37-55% in net income next year, increasing the doubts that a dividend would be paid next year. In addition to the negative results on the generation side of the business, the UK business (NPower) continues to underperform as it had an operating loss of €137m due mainly to billing problems with its residential customers and substantial customer losses to competitors. No recovery is expected before 2018, when a substantial restructuring process should have begun with an expected quarter reduction in the workforce (2,400 job reductions). Operating cash flows deteriorated substantially (-40% yoy) driven by lower margins and the payment of CO2 allowances reaching €3.34bn. Capex was reduced by 4% to €3.3bn, taking almost all the operating cash flows of the group. Net debt is not expected to decrease anytime soon, despite disposal objectives (€1.8bn). Concerning the NewCo separation, a more detailed schedule has been provided. The operational start of the NewCo is expected on 1 April 2016, with a full implementation of the new structure on 30 June 2016 and the planned IPO in Q4 16.
Dividend suspended and 2016 profit warning
17 Feb 16
Prior to the full-year results, RWE has suspended the dividend payment for 2015 on common shares and the payment of €0.13 for preferred shares. Moreover, the group has announced that it would book €2.1bn in impairments on its German and UK generation assets, added to a €0.9bn write-down on deferred taxes. RWE has presented preliminary unaudited results for 2015 with EBITDA reaching €7bn, operating profit at €3.8bn and adjusted net income at €1.1bn, with reported net income in negative territory reaching -€200m. The company has also provided a substantial cut in 2016 guidance with EBITDA expected between €5.2bn and €5.5bn and net income between €500m and €700m.
Exceptional trading continues
08 Nov 16
Keywords has announced that the strong trading in localisation and audio services has continued into H216. In particular, the Synthesis business acquired in April continues to benefit from exceptionally strong trading. Full-year results are now expected to be materially ahead of consensus and we upgrade our FY16e EPS by 13%. Erring on the side of caution, we have not changed our FY17 estimates significantly. Nevertheless, we believe the company does have a platform to sustain double-digit earnings growth, and hence medium-/long-term prospects for further share appreciation remain good.
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
Focused on the long term
08 Dec 16
These are rare events but it is nice to see a management use its public listing advantageously to trade short-term dilution in EPS for the optionality of asymmetric upside in the long term. With over £10m already in the balance sheet, ABD has successfully raised £5.4m gross in a placing and expects to raise another £1m from an offer. We were not surprised to learn that the placing was over 3.5x oversubscribed. How many listed UK companies are positioned to take advantage of the digital revolution in the automotive industry? The additional investment in new people, facilities, products & services should be dilutive to FY2017-18 EPS but this is small price to pay to establish the leading supplier of integrated test, measurement and simulation solutions to the autonomous vehicle industry. Our forecasts assume that growth will accelerate from FY2019. We raise our target price to 575p based on 15x FY2019 EPS, equivalent to Ricardo, the only other UK stock which has embraced the optionalities offered by the technological changes in the automotive industry.
07 Dec 16
Severfield’s (SFR’s) H117 results were well ahead of the previous year; margin performance and order book development cause us to raise our FY17 profit expectations. This combination has also proved to be a catalyst for share price outperformance following the results. Revenue growth and further margin development towards management’s stated aim of doubling FY16 PBT by 2020 can sustain further progress.
N+1 Singer - Waterman Group - Encouraging AGM statement in line with expectations
09 Dec 16
This morning’s AGM Statement confirms that trading in the first four months of the year to 31st October was in line with expectations. Revenue was slightly above the prior year period and cash collection has remained strong. The Group has reiterated its commitment to maintaining a progressive dividend policy. The statement is encouraging and we therefore leave our forecasts unchanged. We note the attractions of a 5% dividend yield and consider the shares inexpensive at 4.5x FY’17 EV/EBITDA.