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Easyvista

Strong H1 earnings, with sales +50% and positive EBIT

The pattern of H1 18 confirms the consistency of the business model. After the build-up of both management and workforce in previous years, the pay-back is now visible with a positive EBITDA (€2.1m vs €-1.8m in H1 17) and is on track for the €10m envisaged in 2020.

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  • 20 Sep 18
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Salzgitter

Management raises 2018 guidance

Management continues to see revenue coming in at just above €9bn (our projection is €9.09bn), but instead of a pre-tax profit range of €250-300m, it now sees it reaching €300-350m (our projection is €310m). Management argues that this improved profit outlook is the result of protectionist measures taken by the EU. As a result, the inflow of steel coming from China has not developed as expected earlier. Whether the new trade barriers between the USA and China will lead to another change in the picture remains to be seen.

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  • 20 Sep 18
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Tesco

Tesco taking the bull by the horns

As expected, Tesco has unveiled its discount store concept today. It will be called as ‘Jack’s’, named after the company’s founder Jack Cohen. The initial details are as follows: 1. This new store is touted to be cheapest in the town. 2. 10-15 new stores will be opened over the next six months. 3. 2,600 products will be sold (vs 20,000 in a typical Tesco store). Out of the total, 1,800 would be Jack’s-branded items. 4. As much as 80% of the products will be grown, reared or made in the UK. 5. Management plans to offer a cashier-less shopping experience (scan and pay using a mobile app) vs self-service machines or traditional check-outs. With this step, the UK’s largest retailer expects to take the fight back to discounters Aldi and Lidl, who jointly command a 13.1% market share today. Notably, the decade-long aggressive expansion by German discounters has long rattled the ‘Big 4’in the UK, which have lost considerable ground during the period. Although we agree that Dave Lewis needs to check the market share erosion (27.4% on 9 September 2018 vs 29.1% in January 2015) – the rampant onslaught from German discounters is the biggest pain-point – this strategy is a bold experiment by Tesco in our opinion. The UK’s largest retailer needs to ensure that this new format does not cannibalise the revenue of its existing stores. The margin of error is also higher as management needs to don multiple hats at the same time – traditional supermarkets vs discount format vs convenience stores vs e-com. The historical failures of other peers also highlights the high implementation risk with this format. Notably, Sainsbury partnered with Netto in 2014 but had to shut these discount stores after incurring losses for two years. In addition to reviving the performance of traditional stores, it is also interesting to see these large retailers treading on different paths as a competitive strategy. Despite an ambitious plan by the CEO, implementation remains the key to success.

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  • 19 Sep 18
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GEA Group Aktiengesellschaft

A successor for outgoing CEO Jürg Oleas has been found

Several profit warnings resulted in the immediate departure of the CFO in spring 2018 and the announcement that the CEO would leave in early 2019. It has taken the Supervisory Board some six months to present a successor: Stefan Klebert, born in 1965. This announcement has resulted in quite a sharp share price recovery today (19 September). Investors seem to believe that things can only get better under the new helm. Because of the company’s regular profit warnings in recent years, the share price fell from almost €50 in September 2016 to €27 in July this year. This share price bottom was reached about three months after the management shake-up was announced. Since then, the share price has recovered to a good €31. Only the future will tell whether Stefan Klebert is the right person. He is an experienced engineer but is pretty inexperienced with GEA’s client industries. His last job was to run Schuler AG, a manufacturer of heavy forging presses that go into the auto and other industries. This is not an industry GEA sees as a target. However, at the end of the day, the CEO’s responsibility is to run and optimise a company without necessarily knowing its clients in detail.

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  • 19 Sep 18
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Mayr-Melnhof Karton

Operational resilience remains

Despite competition and cost headwinds, Mayr-Melnhof has done well to achieve consistent results. While Karton (in recent months) has been compensating for the weakness in Packaging, there are no major worries in either of the businesses. In fact, the ongoing packaging industry consolidation should result in the much-needed re-rating of packagers.

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  • 18 Sep 18
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Safran

Positive CFM56-leap transition bears fruit

Safran released solid H1 results: adj. revenue grew by +23.9% yoy and EBIT by +32.6% yoy. It is worth noting that the reassuring Zodiac integration and the better-than-expected CFM56-Leap transition have strongly contributed to these results. The group significantly raised its FY18 guidance as the H1 results exceeded the expectations, and as the outlook seems promising.

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  • 18 Sep 18
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