A regrettable governance overhaul

SGO is planning a governance overhaul involving the merging of the CEO and Chairman roles with Mr Benoit Bazin holding both positions from June 6, 2024. The addition of three independent Board directors is aimed at increasing Board independence. The justification of this unification of governance is, as ever, to facilitate the decision-making process but raises concerns about power concentration and transparency. Despite an increase in the number of independent Board directors, the governance sc

Q3 23: a record margin target for FY23

In the third quarter, the company posted sales figures in line with expectations. While there were signs of a slowdown in price increases, volumes were still down. However, SGO seems optimistic about maintaining a positive price cost spread for FY23. Despite operating in this difficult market, the French company demonstrated its resilience and is forecasting a record double-digit EBIT margin, a goal that, in our view, should be easily attainable.

Record EBIT margin driven by positive price-cost spread

In H1, the company achieved 1.6% organic growth, primarily attributed to a 7.9% price increase, which effectively balanced out a 6.3% decrease in sales volume. As energy costs are normalizing, prices increased by 5.9% (vs 10.2% in Q1). Nevertheless, SGO is optimistic about implementing further price adjustments in specific regions and products. Despite the slowdown in European construction, SGO has upgraded its 2023 guidance, aiming to achieve a double-digit EBIT margin for the full year.

SGO to strengthen its North American position

Saint Gobain has announced the acquisition of “Building products of Canada Corp” (BPC), a player in the light construction sector, for an EV of €925m (EV/EBITDA multiple of 11.9x) to be paid fully in cash. BPC, a privately-owned company, specialises in the production of residential roofing shingles and wood fibre insulation panels. The company has generated in FY22 revenues of C$425m and an EBITDA of C$111m. The deal is expected to be closed by the end of 2023.

Q1 23: growth once again driven by price increases

In Q1, the company recorded sales figures that slightly exceeded expectations, mainly due to a 10.2% hike in prices that offset the decline in volume. SGO appears optimistic about implementing additional price increases to generate a favourable price-cost margin. Despite operating in a challenging market, SGO has demonstrated its resilience and maintained its 2023 guidance.

FY 22: A market slowdown is expected

SGO announced good FY22 results, registering a solid 13.3% lfl growth, with a 20bp margin improvement. The price effect was +14.6% in 2022 and the company will continue to optimize the price-cost spread to offset inflation on which the group sees a stability in energy costs. For 2023, SGO forecasts a moderate slowdown in its markets but, thanks to its favourable market position, expects to generate a double-digit EBITDA margin.

9M 22: slight volume decline yet strong sales growth

Saint-Gobain published good sales figures against a backdrop of strong pricing (as continuously indicated by management). Volume demand declined in Europe but was partially offset by strong volume demand in APAC and HPS. Overall, Saint-Gobain is confident it can achieve sufficiently strong yoy growth to offset the impact of cost inflation.

H1 22: price over cost guided for the full-year

Saint-Gobain reported an excellent set of H1 22 results, beating consensus expectations. Due to the strong demand momentum across all regions, Saint-Gobain was able to implement multiple price increases and thus was able to achieve a strongly positive price/cost mix. Given the good set of results and a positive outlook, we have raised our estimates, resulting in a 5% increase in our Target Price.

Q1 22: substantial price increases slightly offset our concerns

The company has reported record high Q1 sales figures, driven primarily by a 14.5% price increase. This growth can be attributed to good dynamics across all segments, market share gains, and a sharp increase in prices. We expect this growth momentum to continue, hence we have revised our numbers upwards, resulting in a slightly positive impact on our target price.

FY 21: need solid price effect next year too

SGO announced good FY21 results, registering a solid 18% lfl growth, with a 250bp margin improvement. The price effect was +6.7% in 2021 and the company may need another 6-7% increase in 2022 to overcome the impact of cost inflation (roughly €1.6bn). Russia accounts for just 0.5% of the sales, but we believe that the indirect risk from the current situation remains high, due to which we will be slightly conservative with our estimates.

A sweet spot found in trading ban (threat) driven freefall

Yesterday, Saint-Gobain’s share price fell 8.5%. Over the last two working days, it lost all the value that it had created over last month. While the market-wide sell-off played a major role, the Grenfell Tower related news flow also played its part, making Saint-Gobain the worst hit stock of the CAC40 yesterday.

GCPAT: another find to help build its own Sika

What was heard on the street turned out to be true. Saint-Gobain has signed a contract to acquire GCP Applied Technologies in a cash transaction for $2.3bn. Following this transaction, Saint-Gobain’s sales from the construction chemicals business will be at least €4bn. The deal is expected to close by the end of 2022.

9M 21: well managed price-cost mix

Saint-Gobain published good sales figures on the backdrop of strong pricing (as continuously indicated by management). Volume demand was also good, supported by the current renovation trend in Europe and the favourable construction trend in the Americas and APAC. The Mobility business lowered the recovery of the HPS segment but, overall, Saint-Gobain is confident it can achieve strong yoy growth with a significant margin improvement. FY21 guidance is in line with our estimates, hence we leave ou

Grow & Impact...with less impactful targets

Saint-Gobain held its CMD yesterday at which it announced its new Strategic Plan “Grow & Impact” for 2021-25. Given that it was the first CMD of the new CEO Mr Benoit Bazin (changed after 15 years), that too under a favourable backdrop, we expected the company to announce aggressive targets for the next strategic period. Hence, even though the company has set modest targets, we were slightly disappointed, but this does not overshadow the strong conviction we have for the company.

H1 21: margin expansion target exceeded

Saint-Gobain has published excellent H1 21 results, beating consensus expectations. Due to a strong demand momentum across all regions, Saint-Gobain was able to implement multiple price increases and thus was able to achieve a strongly positive price/cost mix. Given the good set of results and a positive outlook, we will raise our estimates which could have an impact on our recommendation as well.

Supreme (SUP LN) - Record performance, EBITDA ~doubled

Supreme’s FY24 trading update confirms a record performance in the 12 months to 31 March 2024. Organic revenue and profit growth across all four divisions has driven Group revenue +45% YOY to £225m, with FY24 adj. EBITDA almost doubling to ‘at least £38m’, driving record levels of cash generation. Supreme is actively exploring complementary M&A, supported by a debt free balance sheet. Trading on an undemanding FY25 PE of just 6.7x, with a 3.4% yield, we believe downside risks are more than price

Morning Note – 22 April 2024

Supreme+ (SUP, House Stock at 125p) - Supreme, Supreme!

Morning Note – 25 April 2024

Vianet Group: FY24 trading update, strategic contract win

Vianet has published a positive trading update for FY24 with turnover up 7.6% to £15.18m, a 3.5 percentage point increase in gross margin YoY, and adjusted EBITA ahead of market expectations. Net debt continues to fall and closed FY24 at £1.52m (£2.1m at 30 September 2023), demonstrating strong free cash flow generation, even without the benefit of the £0.9m tax receipt received in 1H24, which augers well for a final dividend. The company reported a new contract with Wilcomatic Wash Systems, the

SP Angel Spec Sits: FY Trading Update (LTHM)

Vianet - FY24 ahead, strategic forecourt customer win

Vianet’s FY24 trading update shows FY24 revenue +1% ahead of our previous forecast, adjusted EBITA +2% ahead, EFCF and net debt +£0.6m ahead, and a strategic new customer win with prominent forecourt operator Wilcomatic. A robust FY25 pipeline and outlook leads us to reiterate our FY25E forecasts at this point, with the update highlighting: strong progress renewing and winning new customers on 3-5 year contracts as they migrate from 3G to Vianet’s advanced 4G LTE solutions; the successful integr

Headlam Group - Strategy for growth in tougher market

Headlam Group has laid out an ambitious long-term revenue target of between £900m and £1bn, as it seeks to grow its share of the UK floor coverings distributor market. Despite a challenging backdrop due to the low level of residential housing transactions, management is seeking to expand each of its sales channels: Trade Counters, Larger Customers, Regional Distribution and Europe & Other. The FY23 results reflected the more challenging environment and the group trades at a discount to its long-

Renewi - Solid trading and better cash generation

Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value,

Norcros (NXR LN) - Sale of Johnson Tiles UK streamlines the business and improves operating margin

Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

SP Angel Morning View: Copper prices hit $9,700/t as China smelts concentrates for zero charge Tc/Rc

Hybridan Small Cap Feast - 24 April 24

24th 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

LIBERUM: Ilika: CMD confirms operational progression

LIBERUM: Gattaca: Resilient contract performance, perm tough