No surprises from the Carrefour Brasil Investor Day

Carrefour’s Brazilian entity has hosted an Investor Day. While the management plans to improve the profit margin through various levers, most of these had already been expected by the market. While the strategy to shed flab and strengthen FCF is an overall positive, we do not expect any material changes to our current estimates.

Carrefour Brasil – no major surprises in the Q3 earnings

Following Carrefour’s Q3 FY23 results last week, its Brazilian business has released detailed results in line with our expectations. The adjusted EBITDA margin declined by 67bps yoy to 5.7%, with the weakness in the retail segment (1.7% margin; -212bp yoy) partially offset by the cash & carry format (6.7% margin; +4bp yoy). Although the C&C performance was weaker vs close competitor Assai, we expect margins to improve gradually. The Grupo Big integration is also likely to remain on-track. Our po

Decent Q3 performance; Brazil remains soft

Carrefour’s Q3 FY23 performance was ahead of the market’s expectations. Lfl sales grew by 9.0% yoy (+150bp vs consensus), with all the business segments remaining strong. Consumers continued to trade down, with volume still contracting in the Q3. Moreover, the integration of Grupo Big is on-track and the 2025 synergy target of BRL 2.0bn was re-confirmed. The group’s FY23 guidance is also achievable, although the market was apprehensive about the weakness in Latin America. Our positive recommenda

H1 performance: France leads the pack; softness in Brazil is non-structural

Carrefour’s H1 FY23 performance was slightly ahead of the market’s expectations. In Q2, the group’s lfl sales growth of +10.3% was +150bp vs the consensus. All operating segments clocked robust performances – France: +7.3%, Europe (excluding France): +7.4% and Latin America: +17.3%. Recurring operating income (-9.6% yoy) was c.3% ahead of the street’s expectations. Despite the current softness in Brazil, this is a non-structural issue. The management confirmed its financial targets for 2023 and

Carrefour to acquire the Cora and Match banners in France

Carrefour has announced the acquisition of the Cora and Match banners in France. According to the management, the acquired stores have a complementary geographical presence. It expects €110m of annual synergies at the EBITDA level after three years. However, the increased exposure to big box stores could be a turn-off for many. This all-cash deal has been done at an EV/EBITDA multiple of 4.2x and EV/Sales of 0.20x (0.24x excl. petrol), i.e. a 15-20% discount vs the sector average. We will incre

Robust start to 2023; French hypers are the biggest positive in Q1!

Carrefour’s Q1 trading performance was stronger than both our and the market’s expectations. The group’s lfl sales came in at +12.3% yoy, with robust performances in all operating regions. The main positives are: 1) the retailer gained market share in all key countries, 2) French hypers are benefiting from improved pricing / promotions, 3) new management in Belgium is gradually turning around the performance, and 4) the integration of Grupo Big is on-track. We maintain our positive stock recomme

Decent end to FY22; better placed for the coming times!

Carrefour’s FY22 performance was in-line with our and the market’s expectations. The group’s lfl sales grew 8.5% (vs consensus of 6.7% yoy), with positive momentum in all operating regions (France: +3.4%, Other European Countries: +4.9% and LatAm: +24.6%). While profitability was in line with the street’s expectations, the stock price surged 7% following the stronger-than-expected performance in France (both market share and margin), a new €800m share buyback plan and the on-track integration of

Promising strategic plan; not enough to cheer investors!

Carrefour has announced a promising strategic plan named ‘Carrefour 2026’. It entails measures like an increased focus on the discount format (cash & carry/hypermarkets), private labels and a switch towards a franchising model for stores. The targets of €4bn pf cost savings and net FCF of €1.7bn look achievable. While the CEO’s proven track-record is reassuring, the market was unimpressed. It may be that risk-averse investors are more concerned about the near-term performance (2023 sales, profi

An all-round show in Q3!

Carrefour’s Q3 performance was ahead of our and the market expectations. Group’s lfl sales grew 11.3% yoy, with positive momentum in all operating countries. According to the management: 1) Carrefour is on track to achieve the FY22 EBIT consensus, and 2) the net FCF target of 2022 will be comfortably above €1bn (vs previous guidance of at least €1bn). The CEO will unveil the new strategy on 8 November 2022, which will be a key stock price trigger. We maintain a positive stance on the stock’s val

Q2 results: LatAm leads the pack!

Carrefour’s Q2 and H1 performance was in line with our expectations. In Q2, the group’s lfl sales grew by 7.3%, with positive momentum witnessed in the core operating regions (France: +1.4%, Spain: +4.8% and Brazil: +19.4%). Profitability was flat yoy and the FY22 cost savings target has been increased by €100m. Management will present the new strategic plan on 08 November 2022, which should be a key stock price trigger. We maintain our positive view on the stock’s valuation.

Decent start to the year; pain-points remain unaddressed

Carrefour’s Q1 trading performance (+3.4% yoy) was in line with our estimates. While LatAm once again led the pack, the French business clocked a flattish performance. The company continued to gain market share in the core regions and also confirmed FY22 FCF of at least €1bn. However, the lfl decline in French hypers and the poor showing in Belgium were unpleasant surprises. The new strategic plan (expected in fall 2022) is likely to be a key stock price trigger. Our positive recommendation is r

Gaining strength, step by step!

Carrefour’s performance for FY21 was slightly ahead of ours and well as street estimates. The retailer gained market share in all core operating countries (France, Spain and Brazil). As a positive development, a share repurchase plan with €750m has also been launched for 2022, which reflects management’s confidence of the strength of its business model. The cost-savings plan has also been increased by €300m to €2.7bn. The CEO will share his new strategy in H2 FY22. Positive recommendation is mai

Up for grabs, again?

Carrefour has become flavour of the season as M&A news is recurring for this French grocer. News reports state that Auchan is preparing a fresh acquisition bid and is in talks with a PE fund. Any such development reiterates our conviction of the stock’s attractiveness. However, we doubt if any such announcement would be made before the upcoming French Presidential elections.

Digital Day: a promising strategy, backed by time-tested leadership

Carrefour hosted a promising ‘Digital Day’, which revealed an ambitious plan to achieve additional recurring operating income (ROI) of €600m by 2026. This amounts to c.27% of 2020 group’s performance. The four key pillars of this strategy are credible and backed by a proven track record of the top management. The key focus on food e-com and data monetisation are steps in the right direction. We maintain our bullish view on the stock’s valuation.

Q3 mired by temporary French hiccups

Carrefour’s Q3 sales performance was a mixed bag. While the LatAm business produced a robust show (despite a tough comparable base), the French operations were mired by some hiccups in the hypermarket format (temporary introduction of the health pass). The retailer will host a Digital Day on 9 November 2021, which could be a key catalyst if management is able to present a convincing strategy to boost the e-com performance (sales plus new income streams). Buy recommendation maintained.

Topps Group (TPT LN) - Initiation: Market leader trading at cyclical lows

Topps Group is the UK’s largest specialist supplier and distributor of tiles and associated products to the UK’s domestic and commercial markets. Each of the last three years the Group has successfully achieved record revenue in a market that’s seen recent volume declines and regional peers enter administration. Following the right sizing of its business, Topps Group is now well positioned to capitalise on the economic recovery and continue taking share from competitors, supported by its global

HeiQ - Forecast update and Ecolab contract

HeiQ reported its interim results for the 12-months to December 2023, a period characterised by challenging conditions in the markets in which the company currently operates. In-line with the recent trading update, the company reported revenues of $41.7m for FY23 and closed the period with a cash balance of c$10m and a net debt position of $2.2m. We have updated our forecasts to reflect the FY23 results and HeiQ’s outlook in 2024, leaving our revenue forecast unchanged but adjusting gross margin

LIBERUM: Tortilla Mexican Grill: Prioritising profitability over roll-out

Morning Note – 24 April 2024

PROGRESSIVE: Gear4music: FY24 trading in-line and debt reduction ahead of market expectations

At its FY23 results in June 2023, G4M announced its intention to focus on product margins, overhead cost reduction, and efficiency ahead of revenue growth, along with further net debt reduction, in FY24. The FY24 year-end trading update confirms G4M has delivered on these rebalanced priorities, with gross margin rising and net debt almost halving compared with FY23. Cost savings achieved in FY24 and the continued development of higher-margin categories should deliver further upside in FY25E.

LIBERUM: The Liberum Leisure Digest: NLW increase - pricing power is key

Pinewood Technologies (PINE LN) - Driving growth in automotive software

Pinewood’s transition to a pure-play automotive SaaS business is now largely complete. Today we introduce summary forecasts out to FY26 and reiterate the investment case. We see significant opportunity for Pinewood to grow its user base in the UK and internationally whilst generating high EBITDA margins and cash conversion. With a 24.5p special dividend embedded in the current price (payable Q1/Q2), the effective price today is 12.3p. Based on the Group’s FY27 target of £27m EBITDA, we estimate

PROGRESSIVE: Vertu Motors: Traction control

Vertu is the fourth largest automotive retailer in the UK, with 188 sales outlets and a track record of cross-cycle growth, principally through businesses it has acquired, funded by equity, debt and most importantly cash generation. Vertu operates across the entire vehicle lifecycle, including new and used vehicle sales, and vehicle servicing, repair and parts. Service and repair is a 40+% gross margin repeating business. With economic headwinds, the transition to electric vehicles, recent overs

Domino's Pizza - Growing the base

Domino’s Pizza Group’s (DOM’s) new CEO has set an ambitious long-term growth target, including an acceleration in its net store opening programme. With better alignment between the company and its franchisees, management believes DOM should be capable of generating improved profit growth, versus that achieved in recent years, and potential higher returns.

Borussia Dortmund - Helping itself

Borussia Dortmund’s progress to the semi-final of the Champions League brings a further upgrade to profit guidance for FY24. In addition to helping the financial results of the current year, the relative success of German teams against those of other nations in European competitions this season may ensure the club qualifies for the Champions League next season despite currently being outside the top four of the Bundesliga.

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

HeiQ - Acquisition, placing and trading update

HeiQ has announced the acquisition of a site in Portugal where the company intends to build a HeiQ AeoniQ production facility with a 3,000 tonne per year capacity. To support the acquisition, the company intends to raise c£2.44m via an equity placing, supported by the issue of a c£1.7m (€1.97m) convertible loan note (largely to management) that will convert upon completion of the raise. We see this as an important step in the development programme for HeiQ AeoniQ. Additionally, HeiQ has provided

Brighton Pier Group - Interim Results

Bright Pier Group’s (BPG) H1 results reflect the highly challenging operating environment, with revenue -9% YoY to £16.2m and Adj EBITDA of £1.4m (H1/22A £3.0m). This decline was driven by weaker consumer demand (falling disposable incomes and low consumer confidence), train strikes and poor weather. Trading in H2 has remained relatively subdued, and as such, we lower our FY23E Adj EBITDA forecasts to £4.2m (from £5.5m). Whilst disappointing, we note that the group remains cash generative and co

HY results - strong growth continues