Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on BILFINGER SE. We currently have 4 research reports from 2 professional analysts.
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BILL(finger): unsound 9m performance, messy conference call, higher restructuring BILL(finger)
10 Nov 16
Key information: • Adjusted EBITA and adjusted net profit from continuing operations improved compared to previous year. • Adjusted EBITA improves to €21m despite a significant decline in volume. • Order backlog declined by 19% in total (organically -15%). • Over the 9m period, Bilfinger has burnt close to €250m of cash. • Power division: orders received decreased by 30%. • Power division: order backlog decreased by 40% (organically -37%). • Power division: EBITA of -€1m, but output volume continues to decline significantly. • Power division: falling orders received will, however, lead to decreasing utilisation in several business units. • Industrial division: orders received increased by 3%. • Industrial division: order backlog was 9% below the prior year figure (organically -4%). • Industrial division: decrease in EBITA but margin of 5.1%, slightly above the previous year with significantly lower output volume. • Capital Markets Day on 14 February 2017: Presentation of strategy and implementation plan.
A lot of work ahead!
07 Nov 16
Business Historically, Bilfinger was a construction company with 95% of its revenues stemming from this business in 2000 and only 5% from services. As a result of numerous acquisitions (in the Industrial, Power and Building & Facility field) and disposals (of Concession, Construction and more recently the whole Building & Facility division), the company is no longer a construction company but a provider of services for industrial plants (and power plants: the Power division is up for sale on a unit basis). Indeed, after the divestment of the Building & Facility division and the strategic decision to focus on the Industrial division, Bilfinger is a leading international industrial services provider. The company delivers customised engineering and services to customers in the process industry. Bilfinger enhances the efficiency of assets, increases their availability and reduces maintenance costs. The portfolio covers the entire value chain: from consulting, engineering, fabrication and installation through to comprehensive maintenance concepts and their implementation including turnarounds. Bilfinger stands for the highest standards of quality and thus meets the strict requirements of customers active in the chemical (20%), energy (29%), oil & gas sectors (31%) and pharmaceutical sectors (4%) as well as other sectors (16%). The company generates an annual output volume of more than €4bn with about 40,000 employees. Bilfinger has a c.€1.5bn market cap. Recommendation and upside We initiate Bilfinger with a sell recommendation and 15% downside. Main earnings drivers: • Restructuring: as the restructuring goes on, financial performance should be improved. • A recovery in the oil and gas sector: this would have a positive effect on the top line and hence the bottom line. Need to know Bilfinger has suffered in the past two years from turmoil in the energy and oil & gas sectors to which many of its important customers belong, resulting in six profit warnings within two years. The first three warnings, which took place between June and September 2014, were the result of the former management not appreciating the gravity of the situation, being too optimistic and trying to stay on board. As a result of the first two profit warnings the management in place at that time led by CEO Roland Koch was fired. Investor trust was also hit by the abrupt departure of Per Utnegaard although it now seems that the fit with the company had not been ideal. Bilfinger in effect acts as a private equity company by buying and selling engineering-related businesses. Call it a de facto specialist fund. In our view, some of these transactions may have been intended to delay or mask the unwinding of aggressive past accounting practices. The company’s poor earnings quality may have been masked by acquiring companies and allocating more to intangibles, notably goodwill, in order to provide room for future earnings growth through lower-than-required depreciation expenses. However, as the power market has collapsed the goodwill impairment has underlined the fact that some of the profits recognised in the past may have been borrowed from the future, which is now the present. The goodwill impairment also shows that Bilfinger paid too much for these businesses by buying them at the top of the cycle, which is not great for a private equity type business. In our view, the sale of the Building and Facility division, the company’s most profitable division, was driven by the need to avoid tapping the equity market and the company’s limited access to the debt market with pressure from bankers due to the rapid deterioration in the unsellable Power division. As a result of the sale of the Building & Facility division, the two remaining divisions, namely Industrial and Power, are respectively unmanageable and unsellable under current conditions. The Industrial division needs to be extensively restructured, which means high restructuring costs, and the Power division needs to be broken down into three baskets, namely what can be sold, what can be restructured and what needs to be shut down, implying additional restructuring costs. Finally, if the proceeds from the sale of the Building and Facility division are not fully absorbed in this restructuring process they will have to be reallocated to new acquisitions, which means transaction costs. Overall, we are not sure the company can exit this process without destroying additional shareholder value in the medium term. History tells us that it is not that easy to rebuild a sound business from the scraps of an inefficient one. Next trigger Owing to this legacy of missed targets and following several months of strategic review, the new CEO Thomas Blade will need to present a set of fairly conservative targets to give the market some form of anchor. In a sense, Bilfinger has learned from its mistakes meaning that we see some potential for upside risk linked to the new targets expected to be announced imminently. We nonetheless prefer to await their announcement before taking a more positive view on the stock as these targets may fall short of market expectations.
Debt & renewables dominate
09 Jan 14
A total of £3.1bn was raised in the funds sector in the fourth quarter of 2013, exceeding total funds raised for the whole of 2012 (£2.7bn). The alternative asset and income theme continued to dominate, with most successful vehicles offering yields in excess of 5%.
Summary of fund raising in the sector
03 Oct 13
Three successful fund raises were announced this morning, two IPOs and one placing: - DP Aircraft I (Dr Peters) – IPO at £c70m with Canaccord (oversubscribed). - Chenavari Capital Solutions Fund (Asset Backed Securities) – IPO at c£130m with Dexion (50% of the target). - John Laing Infrastructure (JLIF) – £243m under a placing (the maximum) with JPM Cazenove. Next to announce are the two C-Shares from ABAA (Monday) and BRNA (Thursday). Updated Q4 fund raising table follows, almost at £3bn now at the top end of the targets.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
16 Jan 17
We take a look at the rankings of the various countries in Africa that have a significant exposure to mining. We take the Transparency International corruption rankings as our starting point and modify these for exceptional geology and for current UK government travel warnings. Ghana, Botswana and Namibia come out as our top three, with Eritrea, Kenya and Zimbabwe at the bottom of our rankings.
The Monthly January 2017
09 Jan 17
Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher
Small Cap Breakfast
17 Jan 17
Global Energy Development (GED.L) — To be renamed Nautilus Marine Services. Schedule 1 from developer and seller of hydrocarbons and related products. Reverse takeover. Raising $10.5m via a convertible. Expected 9 Feb. Eco (Atlantic) Oil & Gas—TSX-V listed oil and gas exploration has announced its intention to float on AIM. Assets in Guyana and Namibia. Proposed £2m-£3m fundraise. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January.
N+1 Singer - St Ives - Downgrade
19 Jan 17
Marketing activation has been impacted by further decline in grocery retail impacting profit by c£5m. Strategic The Company is also taking this opportunity to revise its guidance for Strategic Marketing as its recovery pace is not running at the planned target rate. PBT falls from N1Se £31.9m to £25m. The Company expects dividend to be held based upon lowered guidance and the implied cash flow performance. There do not appear to be any covenant issues. Forecasts and TP under review and downgrade to Hold. We expect the shares to test the 100p level.