European High Yield Non-Food Retail

Transcription

Fixed Income Special
European High Yield Non-Food Retail
Author:
Jannik Prochnow
Analyst
+49 69 913090 595
jannik.prochnow@berenberg.com
19 February 2015
Overview
1. Recommendation and spreads
3
2. Company profiles
7
2.1 Hornbach Baumarkt
8
2.2 Maisons du Monde
16
2.3 BUT
23
2.4 Dufry
37
3. Appendix: Macroeconomic environment
36
4. Disclaimer
43
5. Contacts
51
19/02/2015
2
2. Recommendation and spreads
Company initiations*
Overweight on MdM and Dufry, marketweight on Hornbach
Recommendations:
(Screening Coverage)
Berenberg initiates with a marketweight recommendation on Hornbach’s 02/2020 bond. We like the
company’s leading market positions, its very efficient megastore network and the increasing
international presence. However, we note that Hornbach operates in a highly seasonal, cyclical and
competitive market and is strongly leveraged. We regard deleveraging potential as limited in the
near future, especially due to higher capex requirements for the expansion of the store network.
Moreover, we believe that Hornbach’s sound financial policy is already reflected in current spread
levels.
HBMGR 3 ⅞ 02/20
Senior unsecured notes
Price / Z-spread / YTW:
110.0 / 146 / 1.8
(Pricing: 19/02/2015 BGN Close)
Marketweight
Maisons du Monde has exhibited very strong sales growth in recent years despite challenging
market conditions. Furthermore, we like the company’s multi-channel approach with its unique
product offering. At the same time, MdM’s high leverage and the sales shift towards less profitable
furniture products weigh on its financial profile. Nonetheless, we believe that MdM will continue its
growth story and will be able to deleverage in the near to medium term, especially given
management’s deleveraging commitment. We therefore initiate on MdM’s 08/20 notes with an
overweight rating.
MDMFP 9 08/20
Senior secured notes
102.5 / 797 / 8.2
Overweight
We see the strong market position and brand recognition as BUT’s key strengths. We also like the
company’s multichannel distribution strategy and its ability to gain market share. However, BUT has
relatively weak operating margins which makes it more vulnerable to a setback in consumer
demand, especially given its high leverage. Moreover, credit metrics are likely to remain under
pressure due to future acquisitions, including a potential acquisition of 18 franchisee stores. As BUT
has not provided us with the latest financial information, we are not in the position to provide a
recommendation on its notes.
BUTSAS 7 ⅜ 09/19
95.8 / 825 / 8.5
No recommendation
Berenberg initiates on Dufry’s 07/22 notes with an overweight rating. This is mainly based on
Dufry’s very strong market position and large scale as well as its high profitability. More particularly,
we like Dufry’s strong free cash flow profile although we note that FCF has been constrained by its
acquisitions. On the negative side, Dufry is highly dependent on global passenger flows and its
acquisition-driven growth strategy is reflected in high leverage ratios. However, we regard the
downside risks as limited and note that Dufry’s 07/22 bonds are trading at an attractive pick-up vs.
the double-B average.
19/02/2015
Source: Berenberg FI Research; *Our recommendations are based on a fundamental analysis & a relative valuation based on market spreads
DUFSCA 4 ½ 07/22
107.0 / 269 / 2.8
Overweight
4
Recommendation overview within the HY retail sector
Current valuations of retailers offer some attractive entry opportunities
In our screening coverage
universe of European HY
retailers, we recommend to
overweight four and to
marketweight two retailers.
MDMFP 9 08/20
Ratings*: B2 / B / Price / Z-spread / YTW:
102.5 / 797 / 8.2
DUFSCA 4 ½ 07/22
Ratings*: Ba3 / BB+ / BB
107.0 / 269 / 2.8
THOEUR 7 ⅜ 07/19
Ratings*: B2 / B / Price / Z-spread / YTW:
102.0 / 652 / 6.7
Overweight
Overweight
Overweight
(19/02/2015)
(19/02/2015)
(08/12/2014 – Click here)
Even if the macroeconomic
conditions for European
retailers remain challenging,
we believe that the aboveaverage spreads can offer
very attractive entry points,
particularly given the expected
recovery in most parts of
Europe.
In our view, the following key
success factors for retailers
to remain competitive are:
DRTYLN 5 ⅞ 03/21
Ratings*: - / BB- / Price / Z-spread / YTW:
104.2 / 450 / 4.7
HBMGR 3 ⅞ 02/20
Ratings*: Ba2 / BB+ / Price / Z-spread / YTW:
110.3 / 142 / 1.7
AAFFP 5 ⅝ 04/19
Ratings*: B2 / B / BBPrice / Z-spread / YTW:
94.6 / 691 / 7.1
Overweight
Marketweight
Marketweight
(08/12/2014 – Click here)
(19/02/2015)
(08/12/2014 – Click here)
19/02/2015
Source: Berenberg FI Research *Moody’s / S&P / Fitch
- online presence or
multichannel distribution
strategy
(Darty & Maisons du Monde)
- international diversification
(Dufry & Hornbach)
- Efficient supply chain and
operating flexibility
(THOM Europe)
5
Spread landscape*
Plenty shopping opportunities for investors within retailing
1,000
900
(B) Consumer
BUTSAS 09/19
MDMFP 08/20
800
Furniture and homeware retail
bonds BUTSAS 09/19 and
MDMFP 08/20 offer the most
appealing spreads within our
observed universe.
(B) Non-Financials
AAFFP 04/19
Z-spread (in bps)
700
SMCPFP 06/20
THOEUR 07/19
600
On average, single-B
consumer bonds trade
approximately 50-150bp wider
than single-B non-financials.
500
DRTYLN 03/21
400
300
(BB) Non Financials
DUFSCA 07/22
200
HBMGR 02/20
BBB- Non Financials
100
0
0
1
2
3
4
5
6
7
8
9
10
Time to worst
19/02/2015
Source: Bloomberg (19/02/2015), Berenberg Fixed Income Research; *Outliers not shown and excluded from curve estimation
6
Spread performance
The better the rating, the better the performance
130
125
Indexed z-spread (01/10/2014 = 100)
120
115
110
After a significant spread
widening in October, the
market has recovered
recently.
105
100
Double-B names performed
particularly well, with Dufry
and Hornbach outperforming
the market.
95
90
85
80
75
01/09/2014
01/10/2014
01/11/2014
01/12/2014
BofA ML B Corporates (OAS)
BUTSAS 09/19
HBMGR 02/20
19/02/2015
Source: Bloomberg (19/02/2015), Berenberg Fixed Income Research
01/01/2015
01/02/2015
BofA ML BB Corporates (OAS)
DUFSCA 07/22
MDMFP 08/20
7
2. Company profiles
2. Company profiles
2.1 Hornbach Baumarkt
Hornbach Baumarkt
Investment thesis and company snapshot
Hornbach Baumarkt
Recommendation:
HBMGR 3 ⅞ 02/20 (Bloomberg: HBMGR<Corp>)
Marketweight
Company data
Headquarter:
Bornheim (Germany)
Investment thesis
Berenberg initiates with a marketweight recommendation on Hornbach’s 02/2020 bond. We like the company’s leading
market positions, its very efficient megastore network and the increasing international presence. However, we note that
Hornbach operates in a highly seasonal, cyclical and competitive market and is strongly leveraged. We regard deleveraging
potential as limited in the near future, especially due to higher capex requirements for the expansion of the store network.
Moreover, we believe that Hornbach’s sound financial policy is already reflected in current spread levels.
Strengths
Weaknesses
•
•
•
•
• Highly seasonal and cyclical DIY market
Very efficient megastore concept, good online presence
Leading market positions with increasing market shares
Successful everyday low price strategy
High customer loyalty and strong brand recognition
through original marketing campaigns
• Good and increasing international presence
Products:
Tools and hardware, building
materials, bathroom fittings and
tiles, paint, wall and floor
coverings, garden products
Major shareholders:
Hornbach Holding (76.4%)
• Challenging competitive environment, but less pressure
since bankruptcy of German competitor Praktiker
Next financial release:
24/03/2015 (FY2014/15)
Trading statement
• High leverage (lease-adjusted)
Company Snapshot
Bond data
German Hornbach Baumarkt AG is a leading European do-it-yourself (DIY) retailer with a network of 147 stores in Europe, of
which 98 are based in Germany, representing c. 58% of sales. The company mainly focuses on operating >10,000sqm DIY
megastores combined with garden centres. In 2010, Hornbach successfully introduced an online platform in Germany,
followed by the launch of an online store in Austria 2013. The product range comprises over 50,000 products, which are
offered at permanently low prices, and primarily target DIY customers engaged in large construction or renovation projects.
Z-spread (in bps)
1,000
Callable:
No
Selected Financials
MDMFP
08/20
BUTSAS
09/19
800
110.0 / 146 / 1.8
€ m (FY ends 28 Feb)
2012
2013
2014
Amount outstanding (€):
250m
3Q2015
600
400
DUFSCA
07/22
200
HBMGR
02/20
Net sales
3,001.0 3,020.0 3,152.0
2,669.8
Gross profit
1,122.9 1,127.7 1,178.1
1,013.0
EBITDA
0
-200
0
19/02/2015
2
4
6
Time to worst
8
10
184.3
155.8
161.0
182.7
Adj. net debt/EBITDAR
3.6x
4.2x
4.0x
3.6x*
EBITDA interest cover
7.3x
6.0x
9.6x
11.4x*
FCF (before dividends)
-5.9
-21.6
60.7
91.0
Source: Company data, Bloomberg (19/02/2015), Berenberg FI Research *Based on estimated FY2015 EBITDA/R figures.
Bond ratings:
Moody’s: Ba2 (positive)
S&P:
BB+ (stable)
Covenants:
Covenant-lite package
Payment rank:
Senior unsecured
10
Hornbach Baumarkt
The German DIY retail market
Industry characteristics
In general, a DIY retailer offers a broad range of products and solutions for the independent realization of home
improvements, in most cases targeted at private and professional consumers.
Europe is the second largest DIY market worldwide, following the US. Within Europe, Germany represents the largest DIY
market in terms of sales (c. €18.1bn in 2013). However, unlike other mature markets, the German DIY market is highly
fragmented with many regional players (comparably low market concentration in Germany with top 5 players holding roughly
70% of the market in terms of sales) and characterized by fierce price competition, causing persisting pressure on margins.
Online distribution could have important implications for the DIY market in the short to medium term. Compared to other
sectors, the DIY/home improvement industry still exhibits a relatively low level of online sales penetration and therefore
offers some potential for growth in the future.
Industry forces
•
Focus on new markets considering
mature and competitive German
DIY market
Increased focus on Eastern Europ.
and neighbouring German markets
DIY
retailing
•
3,000
20
2,000
10
1,000
State of the economy
Pricing pressures
•
30
•
Increased use of discount
campaigns to compete in the
market (low switching costs,
undifferentiated products)
Service will be key to differentiate
•
In crisis times, home
improvements come into focus
("homing")
A strong housing market
encourages people to move which
supports the DIY market
0
11% 6%
6%
7%
19%
11%
15%
12%
13%
19/02/2015
Hellweg
Praktiker/Max Bahr
Globus/Hela
Hagebau/Zeus
Hornbach
Toom
Bauhaus
Obi
Other
Internationalisation: very
profitable European markets
(except for Germany)
•
Not yet exploited potential for
online distribution
•
Further market consolidation
in the mid to long term
•
Cocooning as a social trend
Sales density (rhs)
Threats
Preferred purchasing channel by various sectors (2012)
Shipping development
100%
20%
30,000
7%
80%
56%
30%
17% 32%
31%
15% 21%
60%
25%
36%
33%
10%71%
20,000
68%
40%
56%
52%
49%
45%
67%
35%
20%
54%
50%
49%
39%
21%
0%0%
10,000
-10%
•
0
Market size
Market share by DIY retailer in Germany (2013)
EUR per sqm*
•
Cocooning/homing (consumers are
staying at home more frequently)
Increasing environmental and cost
awareness (need for energy
efficiency and sustainability)
EUR bn
•
Size and sales density of European DIY markets (2012)
40
4,000
Internationalisation
Social trends
•
Opportunities
0
'02 '04 '06 '08 '10 '12 '14 '16
Demand (world container trade, Y/Y)
Supply (containership fleet development, Y/Y)
Aver.
containership
(rhs, USD/day)
In-store
purchases earnings*
Online purchases
Source: Company data, Dähne, PWC, Berenberg Equity Research, Berenberg FI Research; *Only considering stores >1,000 sqm
11
•
Continuing slow economic
recovery in Europe
•
Intensifying competition in
German DIY market and other
European countries
Hornbach Baumarkt
Strategic positioning
Strategic direction
Customer satisfaction in German DIY market
Hornbach Baumarkt is a leading German DIY retailer which offers a broad
range of high-quality building, renovation and garden products to project and
professional customers, at consistently low prices. In addition, the company
has a strong focus on offering a range of specialists advice and customer
services. According to Kundenmonitor Deutschland 2014, Hornbach ranked
top among German DIY retailers in terms of overall customer satisfaction
(ranked 1st in 6 of 9 product range disciplines).
Hornbach
2.23
Globus Baumarkt
Berenberg
competitive scoring
2.29
Hagebau
2.36
Bauhaus
2.39
Hellweg
2.45
Hornbach’s strategic concept concentrates on a large network of DIY
megastores (average store size of 11,600 sqm) located in urban catchment Toom Baumarkt
2.49
areas, with the aim to permanently offer a large product selection (over
Obi
2.51
50,000 products per store on average) in close proximity to its customers.
Hornbach in particular convinces with a high efficiency (net sales/sqm) in its
2.6
2.5
2.4
2.3
2.2
Industry average
domestic market , despite a challenging market environment with a rather low
sales density in Germany. Moreover, Hornbach pursues an active European expansion plan with currently 49 stores in 8
non-domestic markets, which offer a higher sales density (c. 40% of sales and c. 60% of EBIT).
Since 2010, with the launch of its online shop, Hornbach also makes use of a multi-channel retailing approach, helping the
company to also attract customers outside of the catchment area of its megastores. Since 2013, an online shop is also
available for Hornbach’s second largest market, Austria.
German industry-wide DIY efficiency (2013)*
Megastores
8,000
0
160
4,000
2,000
0
750
1,000
1,250
1,500
1,750
Net Sales (€/sqm)
19/02/2015
2,000
120
0
20
Brand awareness
low / average / high
22.8
41
43
46
49
80
40
10
Distribution strategy
weak / average / strong
22.4
22
92
91
92
92
€/sqm
6,000
No. of stores
Avg store size (sqm)
10,000
Scale & geographic
diversification
Financial policy
conservative / sound / aggressive
5
Sweden
3
5
Slovakia
6
1
Czech…
8
10
11
Austria
12,000
Regulatory risks
Competitive position
Evolution of store network and weight. average sales / store
14,000
Sensitivity to macro cycles
Profitability
21.6
Revenue & cash flow volatility
21.2
2011 2012 2013 2014
Stores all over Europe
Stores in Germany
Weighted Average Sales per Store (rhs)
Source: Company data, Kundenmonitor, Dähne, Berenberg FI Research; *Bubble size = total net sales in Europe, Praktiker went bankrupt.
12
Hornbach Baumarkt
Focus on bond structure
Capital structure
Senior Unsecured Notes
Maturity profile
300
€m
250
250
200
100
€m
3Q2015
Cash & cash equivalents
Bank liabilities
Other
(423.7)
101.1
6.2
246.8
Net cash
69.6
–
1,313.0
3.6x*
Adj. net debt (lease-adjusted)
0
Maximum availability under RCF
RCF 12/16
xEBITDA/R
HBMGR 3 ⅞ 02/20
Maturity
Issuer:
Hornbach Baumarkt AG
Guarantor(s):
Hornbach International GmbH
02/2020
250.0
Comments on Covenants
• Covenant-lite package resulting
in considerably less covenant
protection than found in most high
yield bonds (Restricted Payments,
Asset Sales, Merger, Affiliate
Transactions & Anti-Layering
provisions missing)
12/2016
Senior Unsecured Notes 02/20
• No restriction on the amount of
secured bank debt (debt will be
senior to unsecured notes)
Corporate structure
• No limit on the amount of
structurally senior subsidiary debt
which will rank ahead of notes
• Only optional redemption for tax
reasons
Senior Notes
Issuer of the Notes
• Weak Change of Control clause
with double trigger (put at par; put
not effective if at end of CoC
period lower rating than BB+/Ba2
is assigned to issuer or long-term
liabilities outstanding)
Guarantors of the Notes
Hornbach Holding AG
Hornbach Baustoff
Union GmbH
Hornbach Baumarkt
AG
RCF
Hornbach Immobilien
AG
• Events of Default contain both a
cross acceleration and cross
default clause (typical IG clauses;
positive for investors)
Hornbach International
GmbH
19/02/2015
Source: Company data, Berenberg FI Research; *Based on estimated FY2015 EBITDA figures
13
Hornbach Baumarkt
The rating agencies’ view
The rating agencies’ opinion*
•
Strong position in German DIY market (M, S&P)
•
Relatively small size compared to other retailers (M)
•
Meaningful geographic diversification and further
growing international presence (M, S&P)
•
Relatively high gross financial leverage (M)
•
High seasonality and cyclicality of the DIY industry –
strong dependence on weather (S&P)
•
Stiff competition and additional pressure from
specialized online retailers (S&P)
•
High CAPEX requirement for expansion of store
network limits FCF generation (M)
•
Good strategy execution and customer
satisfaction (M, S&P)
•
Well-positioned e-commerce platform (S&P)
Ratings
Moody’s:
Corporate Family: Ba2
Senior unsecured: Ba2
Outlook: Positive
Rating pressure could arise from*…
Last update: 02/09/2014
•
Sustainably maintain LFL revenue growth in
Germany (M)
•
On-going negative sales trend (S&P)
•
Financial leverage trends towards 5.5x (M)
•
EBITDA margin expansion causing FFO/Debt to
sustainably increase to more than 30% (S&P)
•
Contradiction of (S&P) adj. EBITDA margin to well
below 10% causing (S&P):
•
Adj. Debt/EBITDA trends towards 4.0x (M)
•
EBITA/Interest Expense ratio remaining above 2.5x
(M)
S&P:
Corporate Family: BB+
i) FFO/Debt to fall below 20%
ii) FOCF/Debt to fall below 10%
iii) EBITDA interest coverage to fall below 3.0x
Senior unsecured: BB+
Outlook: Stable
Threshold for rating pressure…
Adjusted Debt/EBITDA (Moody’s)
Fitch:
EBITA/Interest Expense (Moody’s)
Corporate Family: NR1
6.0x
3.0x
5.0x
4.7x
5.1x
4.9x
Senior Secured: NR1
threshold for upward rating pressure
threshold for downward rating pressure
Outlook: n.a.
5.1x
2.5x
Last update: n.a.
2.4x
2.5x
2.3x
4.0x
2.0x
2.0x
1
3.0x
1.5x
2011
2012
2013
2014
2011
Debt/EBITDA
19/02/2015
Source: Company data, Moody’s, S&P, Berenberg Fixed Income Research; *M = Moody’s
2012
2013
2014
EBITA/Interest Expense
14
NR = Not rated
Hornbach Baumarkt
Summary of company figures
Selected profit & loss and cash flow financials (€ m)
€ m (FY ends 28 February)
Selected balance sheet financials, ratios and store network evolution
2012
2013
2014
3Q2015
€ m (FY ends 28 February)
2012
2013
2014
3Q2015
3,001.0
3,020.0
3,152.0
2,669.8
Store network (#)
134
138
141
147
LFL growth
2.8%
-1.4%
2.7%
4.9%
1,628.1
1,597.4
1,670.3
1,755.2
Gross profit
1,122.9
1,127.7
1,178.1
1,013.0
% o/w intangibles
1.0%
0.8%
0.7%
0.6%
EBITDA
184.3
155.8
161.0
182.7
Cash
404.3
317.2
371.1
423.7
EBITDA Margin
6.1%
5.2%
5.1%
6.8%
FCF/Total debt
-1.4%
-5.6%
16.3%
14.1%*
Change in working capital
-40.2
-13.1
19.4
34.1
Debt/EBITDA
2.3x
2.5x
2.3x
1.9x*
Capex
-95.6
-116.1
-71.9
-76.9
Net debt/EBITDA
0.2x
0.4x
0.0x
Net cash*
Cash interest
-25.2
-26.1
-16.9
-12.4
Adj. debt/EBITDAR
4.8x
5.2x
5.2x
4.8x*
Cash taxes
-29.1
-22.1
-31.0
-36.5
3.6x
4.2x
4.0x
3.6x*
Free Cash flow
-5.9
-21.6
60.7
91.0
EBITDA interest coverage
7.3x
6.0x
9.6x
11.4x*
Customer sales
Revenue & Profitability
4,000
1,600
8%
Total assets
Adj. net debt/EBITDAR*
6.0x
6.8%
1,200
6%
4.0x
3.6x
€m
2,000
4%
4.5x
800
9.0x
7.3x
125
3.0x
2%
0
0%
2012
19/02/2015
2013
2014
3Q2015
Revenue
EBITDA
EBITDA margin (rhs)
400
1.5x
0
0.0x
6.0x
6.0x
4.5x
50
3.0x
25
1.5x
0
0.0x
2012
2012
2013
2014
3Q2015
Adj. Net debt
EBITDAR
Adj. net debt/EBITDAR (rhs)
Source: Company data, Berenberg FI Research; *Based on estimated FY2015 EBITDA/R and FCF figures.
7.5x
100
75
1,000
12.0x
10.5x
150
3.6x
€m
5.1%
4.2x
€m
5.2%
9.6x
175
6.1%
3,000
11.4x
200
2013
2014
3Q2015
EBITDA
Cash Interest Expense
15
2. Company profiles
2.2 Maisons du Monde
Maisons du Monde
Maisons du Monde
Recommendation:
MDMFP 9 08/20 (Bloomberg: MDMFP <Corp>)
Overweight
Company data
Headquarter:
Vertou, Nantes (France)
Investment thesis
Maisons du Monde has exhibited very strong sales growth in recent years despite challenging market conditions.
Furthermore, we like the company’s multi-channel approach with its unique product offering. At the same time, MdM’s high
leverage and the sales shift towards less profitable furniture products weigh on its financial profile. Nonetheless, we believe
that MdM will continue its growth story and will be able to deleverage in the near to medium term, especially given
management’s deleveraging commitment. We therefore initiate on MdM’s 08/20 notes with an overweight rating.
.
Strengths
Weaknesses
•
•
•
Broad product range with a unique brand offering
Multi-channel approach combining a strong French
store with an integrated European-wide online platform
Supply-chain integrated business model
Strong track record of achieving market share gains
and growth in earnings and profitability
•
•
•
•
•
Products:
Furniture, large and small
decorative items
Major shareholder:
Bain Capital, management
9 April 2015
FY 2014 financial statements
Modest size of business operations and limited
geographical diversification (~ ⅔ of sales in France)
High seasonality and cyclicality of the furniture and
decoration market
High leverage
Sales shift towards less profitable furniture products
Bond data
102.5 / 797 / 8.2
Company Snapshot
Maisons du Monde (MdM) is a France-based multi-channel retailer which offers a wide range of furniture and decorative
items under its own brand label. Founded in 1996, the company currently operates a network of 241 stores across Europe,
with a primary focus on France. In addition, MdM increases its geographical reach by offering its products via its website in
countries where it has no brick-and-mortar presence. In 2013, the majority stake of MdM was acquired in an LBO by Bain
Capital. The management team around founder and CEO Xavier Marie has remained another significant shareholder.
Z-spread (in bps)
1,000
Selected Financials
MDMFP
08/20
BUTSAS
09/19
800
€ m (FY ends 31 Dec)
2011
2012
2013
LTM
3Q2014
Customer sales
421.3
494.7
549.7
602.2*
Gross profit
257.4
305.3
366.4
424.7
EBITDA
59.6
75.0
70.9
65.6
7.1x
6.5x
5.2x
6.5x
3.7x
4.6x
3.2x
2.0x
Free cash flow
12.6
11.0
-5.9
-2.7
600
400
DUFSCA
07/22
200
HBMGR
02/20
0
-200
0
19/02/2015
2
4
6
Time to worst
Callable (only on dates shown)
08/01/2016 @ 104.50%
08/01/2017 @ 102.25%
08/01/2018 @ 100.00%
08/01/2019 @ 100.00%
8
10
Source: Company data, Bloomberg (19/02/2015), Berenberg FI Research *Reported FY 2014 sales volume according to trading statement.
325m
Bond ratings:
Moody’s: B2 (stable)
S&P:
B (stable)
Covenants:
HY standard package
Payment rank:
Senior secured
17
Maisons du Monde
The French homeware & equipment retail market
The homeware retail market covers products from home furniture to decorative items. This definition is extended to home
equipment when including electrical goods (white & brown goods). In general, the sub-segment for decorative items is more
resistant to economic downturns considering its less discretionary character.
Over the past years, the size of the European homeware market remained relatively stable with a CAGR of c. 0.15%. The
French market exhibited a similar development with a slightly higher CAGR of c. 0.55%. Compared to other European
homeware markets, the French market is characterized by a relatively low consumer spending per household. This is mainly
attributable to prevailing low furniture renewal rates in France, where furniture is generally replaced less often on average.
Opportunities
In the future, internet sales will constitute a key driver also for the French homeware industry, considering the generally high
level of web-generated sales in France compared to other European markets and further growth expectations.
Consumer spending levels
•
Highly competitive market
•
•
•
•
Rising trend in France
Demographic trends (ageing
population tend towards
ownerhsip)
Developments in housing finance
•
Homeware
retailing
•
Service is key to differentiate
•
200
Discretionary good
Dependent on disposable income
and consumer confidence
Focus on home improvements
during crisis times ("homing")
152.6
143.7 147.2 149.7 147.2 149.5
Housing market activity
0
16.2
16.3
15.9
15.7
16.2
80
16.8
17.4
17.2
•
Higher growth potential for
French market due to
population trends (number of
households) and relatively low
market penetration (low
renewal rates)
603
16.9
16.9
17.2
16.8
Threats
Other EU countries
500
1.0
1.2
60.7
0%
40.7
40
3.0 1.4
20,000
5.4
6.5
8.2
10,000
0
47.5
'02 '04 10.6'06 13.0
'08 '10 '12 '14 '16
5.6
0
Supply2008
(containership
fleet development,
2007
2009 2010
2011 2012 Y/Y)
2013
Aver.
containership
earnings*
France
Germany
Italy Spain
Belgium (rhs,
UK USD/day)
Austria Others
25.6
20
Homewares
Furniture and electrical goods
generally more cyclical and
vulnerable to adverse
economic developments
•
Risk of a prolonged economic
downturn in France
•
Highly competitive market with
significant competition from
international online retailers
(e.g. Amazon)
74.2
60
-10%
•
30,000
YoY Growth in %
10%
€ bn
€ spend / HH
20%
Home Furnishings
19/02/2015
16.4
1,020
716
142.5 145.6 146.1
Web sales evolution by European countries
1,142
800
Positioning as service
specialist (home design, clickand-collect, etc.)
50
Decrease in real estate
transactions negatively affects
demand for furniture products
Sales of decorative accessories
less affected (less discretionary)
Consumer spending on homeware across Europe
907
•
100
France
1,200
1,000
800
600
400
200
0
158.8 164.7 155.6
150
€ bn
•
•
Sophisticated multi-channel
approach: integration of webbased and mobile platforms
Size of European vs French homeware market
Industry forces
Homeownerhsip trend
•
Source: Company data, OC&C, Euromonitor, Berenberg Fixed Income Research; *No figure for other EU countries in 2012 available
18
Maisons du Monde
Strategic direction
Competitive landscape
High share of
decoration
Specialists
Maisons du Monde (MdM) targets a niche segment in the homeware
market, offering a broad range of stylish and authentic products at
affordable prices. The French homeware retailer focuses on a
complementary multi-channel approach, combining a strong store
presence (241 stores as of 2014) with an increasing focus on
website and mobile application as well as catalogue offerings.
Berenberg
competitive scoring
Furniture &
furnishing stores
High share of
furniture
Besides the strong exposure to its core market France, MdM also
Home equipment
focuses on building up its presence in other European countries. As
Mail order &
of 2013, the company operated 45 stores outside of France and
Internet
opened a further 7 in 2014. Additionally, MdM offers a large part of
Department
stores
its products via its website in countries with no store presence,
Store-based
Click & Mortar
Internet-only
retailers
retailers
including Austria and UK. In the future, Maisons du Monde aims to
increase its physical presence in other promising European markets such as Germany, where Maisons du Monde opened
two stores in 2014, and Switzerland, where the company opened its first store in 2014.
Nonspecialists
Regulatory risks
Scale & geographic
diversification
With regard to its product offering, the company sets a focus on the continuous renewal and rotation of its product
collections to limit the impact of inventory and fashion risk. The focus within its product range is on small decorative items
(c.52% of sales in 2013), which have a higher net margin contribution due to the transportation costs associated with
furniture and large decorative items, which are not fully offset by delivery fees.
Sales distribution by country and channel
Sales split by product category (2013)?
Large decorative
items
Others
69%
8%
Tables & chairs
6%
7%
86%
Financial policy
Decorative objects
Household textile
12%
Outdoor furniture
€ 550m
Dressers & welsh
dressers
Cupboard &
wardrobes
14%
1%
2%
18%
Coffee& side tables
4% 6%
Bookshelves &
shelves
3%
2%
1%
4%
3%
2%
10%
Armchairs &
couches
Italy
Belgium
Web
19/02/2015
Spain
Germany
4%
Brand awareness
Lighting
9%
Mirrors & frames
9%
9%
Beds & bedsides
France
3% Kitchenware
6%
Junior
Tableware
Small decorative
items
Others
Stores
Source: Company data, OC&C, Berenberg Fixed Income Research
Profitability
19
Maisons du Monde
Capital structure
Senior Secured Notes
€m
Maturity profile
400
325
300
€m
3Q2014
200
100
60
xEBITDA/R
Maturity
MDMFP 9 08/20
Issuer:
Magnolia (BC) S.A.
Guarantor(s):
Magnolia (BC) Midco S.A.R.L.,
Magnolia (BC) S.A.S.,
Maisons du Monde S.A.S. &
Maisons du Monde Italie S.R.L.
(14.2)
Senior secured RCF (€60m)
20.0
08/2019
325.0
08/2020
Net senior secured debt
330.8
5.0x*
Net senior secured debt (lease-adj.)
689.4
6.5x*
0
RCF 08/19
• Holdco issuance level - Issuer
without revenue-generating
operations, depending on cash
from subsidiaries to service notes
• RCF ranks pari passu to notes, but
poss. super priority status of RCF
and certain hedging debt up to
AMT of €80m during enforcement
• Certain post-completion mergers
should be completed latest by
31/12/2014 (cf. corpor. structure).
Following completion i.a. IPO Debt
Pushdown could take place (under
certain conditions), which would
trigger certain changes to the
Indenture, i.a. the removal of
certain covenants, the substitution
of BidCo for the issuer and the
release of certain security interests
over the collateral.
• Weak LMT on Liens covenant
allows substantial additional debt
(contribution debt, purchase
money debt, credit facility basket,
general debt basket, uncapped
hedging debt) to be secured on
the collateral. Moreover, ratio debt
(including additional notes) may
also be secured on collateral
without a monetary cap only
subject to a CSSLR ≤3.5x
Senior Secured Notes 08/20
Corporate structure
Magnolia (BC)
Luxco S.C.A.
Magnolia (BC)
Holdco S.a.r.l.
("LuxCo 2")
("LuxCo 1")
Bain Capital
Issuer of the Notes
Magnolia (BC) Midco
S.a.r.l.
("LuxCo 3")
Senior Secured
Notes
€ 325m
Magnolia (BC) S.A.
€ 60m
RCF
Magnolia (BC) S.A.S.
("BidCo")
(Post-closing merger 1)
Cadr' Academy 1
S.A.S.
€ 269.7m notes
proceeds loan
Cadr' Academy 2
S.A.
Ginkgo B. S.A.S.
("Target")
Abaco S.A.S.
Maisons du Monde
S.A.S.
Maisons du Monde
Italie S.R.L.
Non-Guarantor
Subsidiaries
(Restricted Group)
19/02/2015
Source: Company data, Berenberg FI Research *Based on LTM figures
20
Maisons du Monde
The rating agencies’ opinion
•
Good track record of achieving revenue growth
(M)
•
Large exposure to the fragmented, low-growth
French furniture market (M/S&P)
•
Diversity of the product range – often renewed
(M)
•
High cyclicality and seasonality of the business
(M/S&P)
•
Above average operating efficiency (S&P)
•
•
Complementary distribution channels with a
successful e-commerce platform (M/S&P)
Fashion and inventory risk with regard to the
business model (S&P)
•
Highly leveraged (S&P)
Ratings
Moody’s:
Corporate Family: B2
Senior Secured: B2
Outlook: Stable
Rating pressure could arise from…
•
Significantly positive LfL growth rates (S&P)
•
EBITDA/cash interest falling below 2.0x (S&P)
•
Successful execution of store repositioning (M)
•
•
Continued positive FCF generation and above
industry-average profitability (M)
EBITDA deterioration due to increased competition
or failure to manage fashion and inventory risks
(S&P)
•
Adj. (Gross) Debt/EBITDA sustainably below 5.0x
and EBITA/interest expense above 2.0x (M)
•
•
S&P:
Corporate Family: B
Adj. (Gross) Debt/EBITDA remaining above 6.0x
(M)
Deterioration of the liquidity profile (S&P)
Senior Secured: B
Outlook: Stable
Thresholds for rating pressure…
Fitch:
12-18m forward view
Moody‘s
(as of 15/10/2014)
Adj. (Gross) Debt/EBITDA
5.8x-6.2x
S&P
EBITDA/cash interest
(as of 27/03/2014)
Outlook: n.a.
Last update: n.a.
5.0x
Threshold for upward rating pressure
3.0x
Threshold for downward rating pressure
6.0x
2.0x
19/02/2015
Senior Secured: NR1
>2.5x
EBITA/Interest Expenses
12m forward view
1.3x-1.5x
1
2.0x
Source: Company data, Moody’s, S&P, Berenberg Fixed Income Research *M = Moody’s
21
NR = Not rated
Maisons du Monde
Selected profit & loss and cash flow financials
Selected balance sheet financials, ratios and store network evolution*
€ m (FY ends 31 December)
2011
2012
2013
LTM 3Q14
€ m (FY ends 31 December)
2011
2012
2013
LTM 3Q14
Customer sales
421.3
494.7
549.7
602.2*
Store network (#)
215
224
236
241*
LFL growth
13.4%
5.9%
-0.1%
1.2%*
Total assets
509.1
549.9
827.6
808.9
Gross profit
305.3
366.4
404.7
424.7
% o/w intangibles
54.5%
47.9%
59.1%
58.5%
EBITDA
59.6
75.0
70.9
65.6
Cash
62.2
70.0
62.8
14.2
14.1%
15.2%
12.9%
10.7%
FCF/Total debt
2.5%
2.0%
-1.8%
-0.8%
-9.2
-4.6
-11.9
-1.4
Debt/EBITDA
8.5x
7.4x
4.7x
5.3x
Capex
-20.2
-39.3
-42.1
-32.4
Net debt/EBITDA
7.5x
6.5x
3.8x
5.0x
Cash interest
-16.0
-16.3
-22.2
-32.9
Adj. debt/EBITDAR
7.7x
7.1x
5.7x
6.6x
Cash taxes
-1.6
-3.9
-0.6
-1.7
7.1x
6.5x
5.2x
6.5x
Free Cash flow
12.6
10.9
-5.9
-2.8
3.7x
4.6x
3.2x
2.0x
Revenue & profitability
800
750
12.9%
€m
12%
€m
600
10.7%
400
8%
200
4%
0
0%
2011
2012
2013
LTM
Customer sales
3Q2014
EBITDA
EBITDA margin (rhs)
19/02/2015
900
16%
15.2%
14.1%
9.0x
7.1x
6.5x
6.5x
6.0x
7.5x
4.6x
60
5.2x
600
6.0x
450
4.5x
300
3.0x
150
1.5x
0
0.0x
2011
80
€m
EBITDA Margin
4.5x
2.0x
20
3.0x
1.5x
0
0.0x
2011
2012
2013
LTM
3Q2014
Adj. net debt
EBITDAR
Source: Company data, Berenberg FI Research; *FY 2014 figures according to trading statement
3.2x
3.7x
40
2012
2013
LTM
3Q2014
EBITDA
Cash interest expenses
EBITDA interest cover (rhs)
22
2. Company profiles
2.3 BUT
BUT
BUT
Recommendation:
BUTSAS 7 ⅜ 09/19 (Bloomberg: BUTSAS<Corp>)
No recommendation
Company data
Headquarter:
Emerainville (France)
Investment thesis
We see the strong market position and brand recognition as BUT’s key strengths. We also like the company’s multichannel
distribution strategy and its ability to gain market share. However, BUT has relatively weak operating margins which makes it
more vulnerable to a setback in consumer demand, especially given its high leverage. Moreover, credit metrics are likely to
remain under pressure due to future acquisitions, including a potential acquisition of 18 franchisee stores. As BUT has not
provided us with the latest financial information, we are not in the position to provide a recommendation on its notes.
Strengths
Weaknesses
•
•
•
•
•
Leading position in the French home equipment market
Very high brand awareness
Largest store network and balanced national footprint in
France, good online presence
Consistent growth in market share over recent years
•
•
•
Products:
Furniture, decorative items,
electrical and home appliances
Major shareholders:
Colony Capital, Goldman Sachs
ESSG, OpCapita
Modest size and strong concentration on France
Cyclical, seasonal and highly competitive nature of the
French home equipment market
Weak operating margins and high leverage
Potential cash outflow of €48m from November 2015
onwards due to a franchisee put option of 18 stores
N.A.
Bond data
95.8 / 825 / 8.5
Company Snapshot
Founded in 1972, BUT is one of the leading home equipment retailers in France. The company’s business model is based
on a one-stop shop concept, offering a broad range of furniture, decoration items as well as electrical and home appliances.
With 258 stores (including franchisees) the company currently operates the largest home equipment store network in France
and its online platform, launched in 2010, is one of the top 30 commercial websites in France nowadays. Since 2008, a
consortium around Colony Capital, Goldman Sachs Group and OpCapita holds the majority stake in BUT.
Z-spread (in bps)
1,000
180m
€ m (FY ends 30 Jun)
2011
2012
2013
LTM
3Q2014
Retail sales
972.0
1050.4
1104.9
1164.2
Gross profit
392.4
450.8
457.4
485.0
Adj. EBITDA
70.6
66.0
43.0
57.4
Adj. net debt/adj. EBITDAR
5.4x
4.4x
5.5x
4.9x
600
400
DUFSCA
07/22
200
HBMGR
02/20
0
-200
0
19/02/2015
2
4
6
Time to worst
Callable (only on dates shown)
15/07/2016 @ 103.6875%
15/07/2017 @ 101.8438%
15/07/2018 @ 100.0000%
Selected Financials*
MDMFP
08/20
BUTSAS
09/19
800
8
10
Adj. EBITDA interest cover
3.9x
4.6x
4.9x
4.0x
Free cash flow
33.2
12.0
6.5
64.3
Source: Company data, Bloomberg (19/02/2015), Berenberg FI Research
Bond ratings:
Moody’s: B3 (negative)
S&P:
B (stable)
Fitch:
B (stable)
Covenants:
HY standard package
Payment rank:
Senior secured
24
BUT
The French homeware & equipment retail market
The homeware retail market covers products from home furniture to decorative items. This definition is extended to home
equipment when including electrical goods (white & brown goods). In general, the sub-segment for decorative items is more
resistant to economic downturns considering its less discretionary character.
Over the past years, the size of the European homeware market remained relatively stable with a CAGR of c. 0.15%. The
French market exhibited a similar development with a slightly higher CAGR of c. 0.55%. Compared to other European
homeware markets, the French market is characterized by a relatively low consumer spending per household. This is mainly
attributable to prevailing low furniture renewal rates in France, where furniture is generally replaced less often on average.
Opportunities
In the future, internet sales will constitute a key driver also for the French homeware industry, considering the generally high
level of web-generated sales in France compared to other European markets and further growth expectations.
Consumer spending levels
•
Highly competitive market
•
•
•
•
Rising trend in France
Demographic trends (ageing
population tend towards
ownerhsip)
Developments in housing finance
•
Homeware
retailing
•
Service is key to differentiate
•
200
Discretionary good
Dependent on disposable income
and consumer confidence
Focus on home improvements
during crisis times ("homing")
152.6
143.7 147.2 149.7 147.2 149.5
Housing market activity
0
16.2
16.3
15.9
15.7
16.2
80
16.8
17.4
17.2
•
Higher growth potential for
French market due to
population trends (number of
households) and relatively low
market penetration (low
renewal rates)
603
16.9
16.9
17.2
16.8
Threats
Other EU countries
500
1.0
1.2
60.7
0%
40.7
40
3.0 1.4
20,000
5.4
6.5
8.2
10,000
0
47.5
'02 '04 10.6'06 13.0
'08 '10 '12 '14 '16
5.6
0
Supply2008
(containership
fleet development,
2007
2009 2010
2011 2012 Y/Y)
2013
Aver.
containership
earnings*
France
Germany
Italy Spain
Belgium (rhs,
UK USD/day)
Austria Others
25.6
20
Homewares
Furniture and electrical goods
generally more cyclical and
vulnerable to adverse
economic developments
•
Risk of a prolonged economic
downturn in France
•
Highly competitive market with
significant competition from
international online retailers
(e.g. Amazon)
74.2
60
-10%
•
30,000
YoY Growth in %
10%
€ bn
€ spend / HH
20%
Home Furnishings
19/02/2015
16.4
1,020
716
142.5 145.6 146.1
Web sales evolution by European countries
1,142
800
Positioning as service
specialist (home design, clickand-collect, etc.)
50
Decrease in real estate
transactions negatively affects
demand for furniture products
Sales of decorative accessories
less affected (less discretionary)
Consumer spending on homeware across Europe
907
•
100
France
1,200
1,000
800
600
400
200
0
158.8 164.7 155.6
150
€ bn
•
•
Sophisticated multi-channel
approach: integration of webbased and mobile platforms
Size of European vs French homeware market
Industry forces
Homeownerhsip trend
•
Source: Company data, OC&C, Euromonitor, Berenberg Fixed Income Research; *No figure for other EU countries in 2012 available
25
BUT
Strategic direction
Competitive landscape
BUT is one of the leading French retailers for home equipment,
targeting a low-to-middle class customer segment with an increased
awareness for value and quality.
High share of
decoration
Berenberg
competitive scoring
Specialists
Furniture &
The company offers an appealing multi-channel approach, focusing
furnishing stores
increasingly on a click-and-collect strategy. As of March 2014, BUT
operated 258 stores of which 176 are operated directly and the
remaining 82 by franchisees. The typical store is located in or near
Home equipment
middle-sized cities to attract both local and regional customers.
Besides its classic store format and a few stores in large cities, the
Mail order & Internet
company also offers BUT Cosy stores. The Cosy concept is based on
Department stores
smaller-sized stores (1,400 sqm vs 2,800 sqm), located in small
Store-based retailers
Click & Mortar
Internet-only retailers
towns, aiming to further increase the company’s customer reach.
BUT’s extensive store network is complemented by its strong online presence. The company’s e-commerce platform is one
of the most visited commercial websites in France, attracting approximately 2.5m unique visitors per month.
BUT is a well-established household brand in France and profits form a strong customer perception. Moreover, the company
was able to achieve continuous market share gains over the past 5 years, mainly associated to a successful change in its
strategic direction since 2010, shifting focus away from low-margin potential grey goods (computers, printers, etc.) towards a
higher share of decorative products (lightening, textiles, wall decorations, etc.), providing higher margins and footfall sales.
High share of
furniture
Non specialists
How do French customers perceive BUT?
Regulatory risks
Scale & geographic
diversification
Growth of market share against main competitors
Financial policy
20%
#1
Favorite for
furniture
overall
Best prices
Best quality
of products
#2
#3
#4
#5
#6
17.8%
18%
17.8%
17.9%
17.0%
16.9%
16%
14.6%
14.0%
14.5%
14.9%
15.3%
Brand awareness
14%
12%
9.7%
10.0%
2009
2010
10.3%
10.6%
11.3%
Profitability
10%
Best advice
8%
IKEA
19/02/2015
Source: Company data, OC&C, Roland Berger, IPEA, Berenberg Fixed Income Research
2011
Conforma
2012
2013
BUT
26
BUT
Capital structure*
Maturity profile
300
€m
250
200
180
150
100
50
30
0
€m
3Q2014
Super senior secured RCF (€30m)
(54.0)*
-
11/2018
180.0
09/2019
Other debt
18.3
Net debt
144.3
2.5x**
Guarantor(s):
Décomeubles Partners S.A.S,
BUT International,
Cogesem S.A.S.
Net debt (lease-adjusted)
657.1
5.4x**
xEBITDA/R
Maturity
BUTSAS 7⅜ 09/19
Issuer:
BUT S.A.S.
• Subsidiary guarantees from BUT
International and Cogesem
essentially useless unless/until
issue proceeds downstreamed
(French corporate law)
• Weak Change of Control clause
due to leverage-based portability
feature (immediate portability)
• LMT on Indebtedness provision
with aggressive features leaving
some immediate headroom i.a. for
ratio debt (higher-than-standard
FCCR at 2.25x BUT opening level
at 4.0x) and Credit Facilities
(c.€10m immediate headroom).
Moreover, material Permitted Debt
baskets (~€125m over all baskets)
in context of notes’ issue size
• Alarming LMT on Liens provision
with scope of Permitted Collateral
Liens allowing to secure additional
notes under any permitted debt
basket on collateral pari with initial
notes without CSSLR test (dilution
of initial noteholders)
• Risk of uncapped cash leakage
due to Restricted Payments
provision allowing unlimited
dividends if NLR ≤2.25x (just
below 2.5x opening level)
2014 2015 2016 2017 2018 2019
RCF 11/18
Senior Secured Notes 09/19
Corporate structure
Private Equity
Consortium
Issuer of the Notes
100%
Fair Partners Sàrl-SCA
100%
(Luxembourg)
Fair Finance Sàrl-SCA
99.9%
(Luxembourg)
Fair Finance Sàrl-SCA
0.1%
(Luxembourg)
100%
Décomeubles Partners
SAS
(France)
100%
€ 180m
Senior Secured
Notes
€ 30m
RCF
BUT SAS
(France)
100%
Immobut SCI
(France)
Non-Guarantor
Subsidiaries
BUT International
(France)
Cogesem SAS
(France)
19/02/2015
Non-Guarantor
Subsidiaries
Source: Company data, Berenberg FI Research; *Based on pro forma figures **Based on LTM adj. EBITDA/R
27
BUT
•
Good position and growing market share in the
French home equipment market (M/S&P)
•
Strong exposure to fragmented, competitive
French home equipment market (M/S&P)
•
Good brand recognition (M)
•
•
Turnaround initiated in 2013 and expectation of
continuing improvements (S&P)
Exposure to discretionary spending with regard to
the furniture retail business (M/S&P)
•
Weak current profitability levels (M/S&P)
•
Management initiatives (flexible pricing policy,
cost control, etc.) created positive operating
momentum (S&P)
•
Highly leveraged (M/S&P)
•
Inadequate liquidity for further acquisitions (M)
Ratings
Moody’s:
Corporate Family: B2
Senior Secured: B3
Outlook: Negative
Rating pressure could arise from…
•
Financial policy remains commensurate (S&P)
•
Unable to restore sustainable levels of FOCF (S&P)
•
Sustainable FCF generation combined with a on-going
improvement of its market position (M/S&P)
•
More aggressive financial policy (S&P)
•
•
Unadj. FFO/Cash Interest in the high end of the 2.5x3.0x range (M)
Adj. leverage exceeding 5.0x or unadj. FFO/Cash
Interest below 2.0x on a long-term basis (S&P)
•
Adj. (Gross) Debt/EBITDA sustainably below 5.5x (M)
•
Adj. (Gross) Debt/EBITDA remaining above 6.5x for
a prolonged period of time (M)
•
Any weakening of the liquidity profile (M)
S&P:
Corporate Family: B
Senior Secured: B
Outlook: Stable
Thresholds for rating pressure…
Fitch:
Adjusted (Gross) Debt/EBITDA (Moody’s)
9.0x
8.7x
S&P
8.4x
8.0x
7.6x
7.0x
6.4x
6.0x
5.0x
Adj. Debt/EBITDA
Outlook: n.a.
>5.0x
Last update: n.a.
FFO/Cash Interest
>2.0x
2010
2011
2012
Senior Secured: NR1
(as of 27/03/2014)
3.7x
4.0x
‘15 forward view
2.5x-3.0x
1
<2.0x
2013
19/02/2015
Source: Company data, Moody’s, S&P, Berenberg Fixed Income Research *M = Moody’s
28
NR = Not rated
BUT
Selected profit & loss and cash flow financials (€ m)
€ m (FY ends 30 June)
2011
2012
2013
LTM 3Q14
€ m (FY ends 30 June)
2011
2012
2013
LTM 3Q14
Retail sales
972.0
1050.4
1104.9
1164.2
Store network (#)
213
217
228
258
LFL growth
-2.4%
3.5%
-3.0%
0.1%
Total assets
880.1
774.7
732.2
723.7
Gross profit
392.4
450.8
457.4
485.0
% o/w intangibles
17.2%
22.3%
25.0%
26.1%
EBITDA
70.6
66.0
43.0
57.4
Cash
38.5
58.9
77.9
54.0
EBITDA Margin
7.3%
6.3%
3.9%
4.9%
FCF/Total debt
9.9%
7.0%
4.1%
32.4%
9.3
4.9
11.9
47.7
Debt/adj. EBITDA
4.8x
2.6x
3.7x
3.5x
Capex
-28.6
-33.9
-31.3
-24.8
Net debt/adj. EBITDA
4.2x
1.7x
1.9x
2.5x
Cash interest
-17.9
-14.3
-8.8
-14.3
Adj. debt/adj. EBITDAR
5.7x
4.9x
6.2x
5.9x
Cash taxes
-0.2
-10.7
-8.3
-1.7
Adj. net Debt/adj. EBITDAR
5.4x
4.4x
5.5x
5.4x
Free cash flow
33.2
12.0
6.5
64.3
Adj. EBITDA interest cover
3.9x
4.6x
4.9x
4.0x
Revenue & profitability
1,200
750
9%
600
4.9%
400
4.6x
6.0x
60
4.5x
45
450
4.9x
5.0x
4.0x
3.9x
0%
300
3.0x
150
1.5x
15
0.0x
0
2011
2012
2013
LTM
3Q2014
Retail sales
Adj. EBITDA
Adj. EBITDA margin (rhs)
Source: Company data, Berenberg FI Research
0
2011
2012
2013
4.0x
3.0x
30
2.0x
3%
0
19/02/2015
5.4x
6.0x
4.4x
€m
€m
6%
5.5x
5.4x
6.3%
800
75
7.5x
7.3%
3.9%
Adj. ÉBITDA interest cover
€m
1.0x
2011
LTM
3Q2014
Adj. net debt
Adj. EBITDAR
Adj. net debt/adj. EBITDAR (rhs)
29
0.0x
LTM
3Q2014
Adj. EBITDA
Adj. EBITDA interest cover (rhs)
2012
2013
2. Company profiles
2.4 Dufry
Dufry
Dufry
Recommendation:
DUFSCA 4 ½ 07/22 (Bloomberg: DUFSCA<Corp>)
Overweight
Company data
Headquarter:
Basel (Switzerland)
Investment thesis
Berenberg initiates on Dufry’s 07/22 notes with an overweight rating. This is mainly based on Dufry’s very strong market
position and large scale as well as its high profitability. More particularly, we like Dufry’s strong free cash flow profile
although we note that FCF has been constrained by its acquisitions. On the negative side, Dufry is highly dependent on
global passenger flows and its acquisition-driven growth strategy is reflected in high leverage ratios. However, we regard the
downside risks as limited and note that Dufry’s 07/22 bonds are trading at an attractive pick-up vs. the double-B average.
Strengths
Weaknesses
• By far the market leader in global travel retail (after
Nuance acquisition) with strong exposure to key markets
• Scale benefits (after acquisition) resulting in increased
purchasing and bargaining power
• Solid and stable profitability and strong operating FCFs
• Well-balanced concession portfolio
• Cyclicality of the business (highly dependent on global
passenger flows)
Products:
Beauty products, alcohol,
confectionary & food, fashion &
jewellery, electronics, etc.
Major shareholders:
Family Dynasty Trust (22.2%)
Franklin Resources (5.1%)
12/03/2015 (FY2014)
• Focus on acquisition-driven growth, weak organic growth
• Highly leveraged (aggressive acquisition strategy)
Bond data
• Integration risk related to the recent Nuance acquisition
107.3 / 258 / 2.7
Company Snapshot
Swiss-based Dufry is a global travel retailer operating over 1,700 shops in more than 60 countries across 5 continents. The
company’s business model is based on concession agreements with products from more than 1,500 suppliers worldwide,
including well-known international luxury brands. Dufry’s shop concept comprises four different approaches including general
travel retail shops and brand boutiques, which are located in airports, seaports and other tourist hot spots. In September
2014, Dufry concluded the acquisition of Nuance, creating the leading global travel retailer.
Z-spread (in bps)
1,000
500m
Selected Financials*
MDMFP
08/20
BUTSAS
09/19
800
Callable (on and anytime after:)
15/07/2017 @ 103.375%
15/07/2018 @ 102.250%
15/07/2019 @ 101.125%
15/07/2020 @ 100.000%
CHF m (FY ends 31 Dec)
2011
2012
2013
3Q2014
Bond ratings:
Moody’s: Ba3 (stable)
S&P:
BB+ (stable)
Fitch:
BB (negative)
600
400
DUFSCA
07/22
200
HBMGR
02/20
0
-200
0
19/02/2015
2
4
6
Time to worst
8
10
Net sales
2,637.7 3,153.6 3,571.7
2,930.9
Gross profit
1535.3
1856.6
2105.7
1725.8
EBITDA
370.9
474.3
511.1
413.6
4.7x
3.4x
4.6x
5.0x*
EBITDA interest cover
9.0x
7.8x
5.5x
5.7x*
FCF (before acquisitions) 203.3
210
145.9
234.5
Source: Company data, Bloomberg (19/02/2015), Berenberg FI Research *Based on annualized EBITDA/R
Covenants:
Covenant-lite package
Payment rank:
Senior unsecured
31
Dufry
The global travel retail industry
According to Generation Research, the global retail travel market had an approximate size of $60bn in 2013. In general,
travel retailing primarily takes place at airports, seaports, and at international borders, whereby airport retailing constitutes
the largest sector in terms of sales. Within the industry it can be distinguished between duty-free shops, targeted towards
international travellers, and duty-paid shops, focused on domestic costumers, both offering primarily brand products.
The global travel retail market is highly fragmented with the top 10 players holding roughly 55% of the market in 2013, which
indicates further potential for market consolidation, particularly after Dufry’s recent acquisition of Nuance.
Opportunities
In terms of growth drivers, the industry is profiting from steadily increasing passenger numbers, predicted to grow at a CAGR
of c. 4.1% until 2031. In this context, Europe currently represents the major market, followed by North America and the
Asia/Pacific region. However, the Asia/Pacific and ME/Africa regions offer the greatest growth potential in the medium term.
Industry forces
Market share by sales of key airport retailers (2013)
•
Growth in global passenger
numbers
•
Increasing international
tourism travel
•
Increasing passenger traffic
from EM (particularly from
China, the world’s leading
market for luxury goods)
•
Further market consolidation
in the medium to long term
20%
Need to adapt product offering
Increasing global passenger travel
•
•
•
•
•
Increasing world population and
tourism trends
Growth opps in emerging markets
Improvements in air transport
(greater accessibility, affordability)
•
Low-cost carriers gaining ground
Increasing number of "budget"
passengers
Need to adapt offering for cheaper
products
Travel
retailing
Regulatory environment
Force majeure
•
Regional travel impacted by certain
events (e.g. political turmoil,
epidemics, forces of nature etc.)
•
•
15%
~15%
10%
9.5%
8.0%
6.2% 5.7%
5.4% 5.3% 4.8%
4.5%
5%
3.8%
2.6% 1.9%
0%
Increasing security procedures at
airports
Regulations on transportation of
liquids and hand baggage
Threats
Long term global passenger forecast (2012)
14
bn passengers
12
10
8
Regional distribution of global passenger travel (2013)
20%
2
Europe
10%
28%
30%
0%
0
19/02/2015
-10%
Increasing security and
product regulations (varying
by region)
•
Growing political tensions and
terroristic acts negatively
impact passenger numbers
•
Highly competitive,
fragmented market
(competition for concession
rights)
30,000
20,000
Latin America
10,000
Middle East/Africa
6
4
•
Asia/Pacific0
'02 '04 '06 '08 8%'10 '12 '14 '16
27%
North
America
Demand (world7%
container trade,
Y/Y)
Supply (containership fleet development, Y/Y)
Aver. containership earnings* (rhs, USD/day)
Source: Company data, Generation Research, ACI-DKMA, Verdict Research, Berenberg Fixed Income Research
32
Dufry
Strategic direction
Dufry’s key regions after Nuance merger
Following the recent acquisition of the Swiss-based Nuance Group, Dufry
became the leading global travel retailer with a market share of c.15%. The
acquisition extended Dufry’s store network with Nuance adding c.360 stores,
spread across 19 countries, giving Dufry a stronger exposure to Asia and a
leading market position in the Mediterranean region. Dufry has already
pursued an acquisition-driven growth strategy for several years now, which US & Canada
helped the company to improve its concession portfolio and constantly expand
into new markets. Dufry’s strong exposure to emerging growth markets,
generating c.56% of revenues in 2013, highlights this fact.
Mediterranean
Berenberg
competitive scoring
Asia
Dufry’s strong focus on geographical diversification (operations in more than
Presence of Dufry
60 countries across 5 continents) is complemented by a broad product
Presence of Nuance
Presence of Dufry & Nuance
offering, with goods ranging from beauty products over fashion to food and
Key regions
beverages. With regard to its sales channels, Dufry has a clear focus on
airport retailing (77% of total retail space located in airports in 2013), with
around 67% of its total revenues generated in duty-free and 33% in duty-paid shops. Also the company’s concession
portfolio convinces through its diversified nature, with high-quality rights for attractive locations, combined with long
concession terms and comparatively low fees. The majority of Dufry’s revenues are based on long-term concession
agreements, which provide the company with a high degree of revenue visibility.
Regulatory risks
Scale & geographic
diversification
Sales by remaining term of concession portfolio (2013)
Sales by channel and sector (2013)
Financial policy
23%
33%
6%
4%
4%
Brand awareness
50%
€ 3,465m
Profitability
19%
86%
67%
8%
Airports
Borders, downtown & hotels
Duty-free
19/02/2015
Railway stations & other
Cruisers & seaports
Duty-paid
Source: Company data, Berenberg Fixed Income Research
10+ years
6-9 years
3-5 years
1-2 years
33
Dufry
Capital structure
Senior Unsecured Notes
CHF m
CHF m
Maturity profile
3,000
2,500
2,000
1,500
1,000
500
0
301.7
1503.5
900.0
RCF 2019
Syndicated facility 2019
Senior Notes 07/22 (EUR)
442.1
607.5
Term Loan 2019 (EUR+USD)
Senior Notes 10/20 (USD)
3Q2014
xEBITDA/R
DUFSCA 4½ 07/22
Maturity
USD term loan ($1,010m)
EUR term loan (€500m)
EUR syndicated CF (€250m)
(798)
896
Issuer:
Dufry Finance SCA
607.5
301.7
2019
RCF (CHF900m) and other
124.4
2019
Senior unsecured notes ($500m)
442.1
10/2020
Guarantor(s):
Dufry AG &
Dufry International AG &
Dufry Holdings/Investments AG &
Hudson Group Inc. &
Dufry Financial Services B.V.
Senior unsecured notes (€500m)
607.5
07/2022
Net debt
2,181.2
n.m.
Net debt (lease-adj.)
3,399.9
n.m.
• Covenant-lite package (Asset
Sales, Affiliate Transactions &
Anti-Layering provisions missing)
• Subsidiary guarantees may cease
to apply before final redemption
(upon guarantee of new CF and
notes maturing 2019 and 2020)
• Fall-Away provision does not
require reinstallation of covenants
after IG is subsequently lost again
• Weak LMT on Indebtedness
provisions (i.a. credit facility
≤CHF900m+ $1,010m +€500m;
debt basket ≤ $125m/11% NTA)
• Weak LMT on Liens allowing to
secure substantial amounts of
additional debt without notes
having to be equally secured over
such assets
• Weak Restricted Payments
provision allows very generous
Permitted Investments and has
various generous carve-outs (i.a.
general RP basket >$200m & 22%
of con. NTA; basket for unlimit.
payments (divid., subord. oblig.) if
con. Total Leverage ratio ≤3.25x)
Corporate structure
Dufry AG
RCF
Dufry
International AG
Hudson Group (HG)
Inc.
Dufry Financial
Services B.V.
Dufry Holdings &
Investments AG
Senior Unsecured
Notes (due 2020)
Dufry Finance SCA
Senior Unsecured
Notes (due 2022)
The Nuance Group
AG
Issuer of the Notes
Non-guarantor
subsidiaries
19/02/2015
Source: Company data, Berenberg FI Research;
• No requirement for Nuance to
guarantee notes after acquisition
34
Dufry
•
Market leadership and strong business scale
(S&P, F)
•
Cyclical nature of travel retail business (M)
•
Risk with regard to renewal of concession
contracts, shorter average concession lifetime
after Nuance acquisition (M, S&P, F)
•
Efficiency gains due to global procurement
strategy / increased purchasing power (M, S&P)
•
International footprint and exposure to
strategically important regions (M, F)
•
Pressured credit metrics after Nuance acquisition
(M, F)
•
Flexible concession-based business model (M)
•
Aggressive acquisitions strategy (M, F)
•
Comfortable liquidity position (F)
•
Integration risk of Nuance acquisition (S&P)
Ratings
Moody’s:
Corporate Family: Ba3
Senior Unsecured: Ba3
Outlook: Stable
Rating pressure could arise from*…
•
Continuing improvement of geographical reach (M)
•
•
Reduction of indebtedness (M)
•
Adj. Debt/EBITDA remaining above 5.5x (M)
•
Sustaining current growth in profits (M)
•
Debt/EBITDA sustainably exceeding 3.5x (S&P)
•
Adj. Debt/EBITDA sustainably below 4.0x (M)
•
FFO/Debt falling below 20% (S&P)
Corporate Family: BB+
•
Improvement of FFO/Debt to more than 30% (S&P)
•
Adj. FFO leverage around 5.0x in medium-term (F)
Senior Unsecured: BB+
•
Adj. FFO leverage below 4.0x (F)
•
EBITDA margin below 12% coupled with FCF
margin below 4% on sustainable basis (F)
Outlook: Stable
Difficulties in integrating Nuance (M)
S&P:
Threshold for rating pressure…
Adjusted (Gross) Debt/EBITDA (M)*
Fitch:
EBITA/Interest Expense (M)*
6.0x
Corporate Family: BB
2.5x
Senior Unsecured: BB
5.0x
5.4x
4.8x
5.3x
Outlook: Negative
5.3x
2.0x
4.0x
2.4x
2.5x
2.0x
2.3x
3.0x
1.5x
2011
2012
2013
Q12014
2011
2012
19/02/2015
Source: Company data, Moody’s, S&P, Berenberg Fixed Income Research; *M = Moody’s, F = Fitch
2013
Q12014
EBITA/Interest Expense
35
Dufry
Selected profit & loss and cash flow financials
2011
2012
2013
3Q2014*
CHF m (FY ends 31 December)
2011
2012
2013
3Q2014*
2,637.7
3,153.6
3,571.7
2,930.9
Store network (#)
>1,200
1,243
1,389
>1,700
LFL growth
7.5%
2.4%
2.4%
2.0%
Total assets
3,317.8
3,526.3
4,238.4
7,264.2
Gross profit
1,535.3
1,856.6
2,105.7
1,725.8
% o/w intangibles
62.6%
57.6%
64.5%
63.9%
EBITDA
370.9
474.3
511.1
413.6
Cash
199.1
434.0
246.4
798.0
EBITDA Margin
14.1%
15.0%
14.3%
14.1%
FCF/Total debt
13.0%
15.2%
7.3%
10.5%
8.3
-21.4
-25.4
65.9
Debt/EBITDA
4.2x
2.9x
3.9x
n.m.
Capex
-95.0
-112.5
-222.5
-134.5
Net debt/EBITDA
3.7x
2.0x
3.4x
n.m.
Cash interest
-41.1
-60.8
-92.9
-72.4
Adj. Debt/EBITDAR
5.1x
4.1x
4.9x
n.m.
Cash taxes
-39.8
-69.6
-24.4
-38.1
Adj. Net Debt/EBITDAR
4.7x
3.4x
4.6x
n.m.
Free cash flow*
203.3
210.0
145.9
234.5
9.0x
7.8x
5.5x
5.7x
Total revenue
Revenue & Profitability
4,000
14.5%
15.5%
16%
14.8%
14.6%
8x
3,500
7x
3,000
12%
2,500
2,000
8%
1,000
4%
0
0%
2011
2012
2013
3Q2014
Revenue
EBITDA
EBITDA margin (rhs)
19/02/2015
CHF m
CHF m
3,000
4,000
5.0x
4.7x
4.6x
5x
3.4x
2,000
6x
4x
1,500
3x
1,000
2x
500
1x
0
0x
2011
2012
2013
3Q2014
Adj. net debt
EBITDAR
Adj. net debt/EBITDAR (rhs)
Source: Company data, Berenberg FI Research; *Figures include Nuance acquisition on 9 September 2014.
600
500
12.0x
10.0x
9.0x
7.8x
400
CHF m
CHF m (FY ends 31 December)
8.0x
5.5x
300
6.0x
200
4.0x
100
2.0x
0
0.0x
2011
2012
2013
EBITDA
EBITDA cash interest coverage
36
3. Appendix: Macroeconomic environment
Macro driver #1: Economic growth (I)
Close link between development of retail sales and GDP
6.0%
5.0%
4.0%
Retail sales growth is
strongly correlated with
overall economic growth.
3.0%
Growth rate (yoy)
2.0%
1.0%
Eurozone retail sales have
showed stronger growth
than GDP since end of
October 2013, particularly
within the recent months.
0.0%
-1.0%
-2.0%
.
-3.0%
-4.0%
-5.0%
-6.0%
Eurozone GDP
19/02/2015
Eurozone non-food retail sales (3M average)
Source: Bloomberg (19/02/2015), Eurostat, Berenberg Fixed Income Research
38
Macro driver #1: Economic growth (II)
Putin shock fading, growth is expected to accelerate in early 2015
Country
Non-Food Retail Sales (yoy %)
GDP (yoy %)
Nov 2014
Dec 2014
Jan 2015
Q3 2014
Q4 2014
2015e*
2016e*
1
Ireland
6.5%
7.4%
7.4%
3.5%
4.8%*
3.5%
3.6%
2
Malta
-4.8%
-4.4%
-4.4%
4.0%
3.3%*
3.3%
2.9%
3
Luxembourg
13.3%
10.9%
10.9%
3.8%
3.0%*
2.6%
2.9%
4
Slovenia
1.0%
-2.0%
-2.0%
3.1%
2.6%*
1.8%
2.3%
5
Estonia
7.7%
6.7%
6.7%
2.3%
2.6%
2.3%
2.9%
6
Slovakia
3.7%
5.6%
5.6%
2.5%
2.4%
2.5%
3.2%
7
Spain
3.9%
6.8%
6.8%
1.7%
2.0%
2.3%
2.5%
8
Latvia
4.4%
2.4%
2.4%
2.4%
1.9%
2.9%
3.6%
9
Greece
-3.7%
-
-
1.6%
1.7%
2.5%
2.6%
10
Germany
3.6%
5.7%
5.7%
1.2%
1.5%
1.5%
2.0%
11
Netherlands
4.0%
-
-
1.0%
1.0%
1.4%
1.7%
12
Belgium
2.1%
3.8%
3.8%
1.0%
0.9%
1.1%
1.4%
Ø
Euro Area
3.2%
3.5%
3.5%
0.8%
0.9%
1.3%
1.9%
13
Portugal
0.7%
-
-
1.1%
0.7%
1.6%
1.7%
14
France
3.2%
3.1%
3.1%
0.4%
0.2%
1.0%
1.8%
15
Austria
-2.0%
1.8%
1.8%
0.0%
0.0%
0.8%
1.5%
16
Finland
-1.6%
-3.5%
-3.5%
0.0%
-0.1%
1.0%
1.8%
17
Italy
2.5%
-
-
-0.5%
-0.3%
0.6%
1.3%
18
Cyprus
8.2%
2.3%
2.3%
-1.8%
-1.9%
0.4%
1.6%
The upswing within the euro
area has been interrupted,
mainly due to geopolitical
crises (especially in Russia
and Ukraine) which have
weakened business
confidence and investment.
However, this effect is fading
and a rebound is expected in
early 2015. Moreover,
peripheral countries reap
rewards of their painful reform
efforts with gains in GDP and
employment.
Click here for Berenberg’s
latest economic forecasts
19/02/2015
Source: Bloomberg (19/02/2015), Eurostat, EU Commission, Berenberg Fixed Income Research; *EU Winter Forecast (yoy %)
39
Macro driver #2: Unemployment (I)
Close link between development of retail sales and employment
6.0%
7%
5.0%
4.0%
8%
3.0%
9%
1.0%
0.0%
10%
-1.0%
-2.0%
Unemployment rate
Growth rate (yoy)
2.0%
After having remained on its
peak of 12% from January to
September 2013, Eurozone
unemployment has
constantly decreased to
11.4% at the end of last year,
which had a positive impact
on retail sales volumes.
11%
-3.0%
-4.0%
12%
-5.0%
-6.0%
13%
Eurozone non-food retail sales
19/02/2015
Eurozone unemployment (rhs, inverted)
Source: Bloomberg (19/02/2015), Eurostat, Berenberg Fixed Income Research
40
Macro driver #2: Unemployment (II)
Eurozone unemployment rates expected to decrease and converge
Country
Rank by GDP
Unemployment Rate
as of December 2014*
2015e**
2016e**
as of Q2 2014
1
Germany
4.8%
4.9%
4.8%
#01
2
Austria
4.9%
5.2%
5.0%
#06
3
Malta
5.8%
5.9%
5.9%
#18
4
Luxembourg
5.9%
6.4%
6.3%
#12
5
Estonia
6.6%
6.8%
5.9%
#16
6
Netherlands
6.7%
6.6%
6.4%
#05
7
Belgium
8.4%
8.3%
8.1%
#07
8
Finland
8.9%
9.0%
8.8%
#08
9
Slovenia
9.7%
9.5%
8.9%
#14
10
France
10.3%
10.4%
10.2%
#02
11
Ireland
10.5%
9.6%
8.8%
#09
12
Latvia
10.7%
10.2%
9.2%
#15
Ø
Euro Area
11.4%
11.2%
10.6%
-
13
Slovakia
12.5%
12.8%
12.1%
#13
14
Italy
12.9%
12.8%
12.6%
#03
15
Portugal
13.4%
13.4%
12.6%
#10
16
Cyprus
16.4%
15.8%
14.8%
#17
17
Spain
23.7%
22.5%
20.7%
#04
18
Greece
25.8%
25.0%
22.0%
#11
Euro area unemployment has
reached its lowest value
since August 2012 at the end
of last year with 11.4%. It is
expected to further decrease
to 10.6% in 2016, mainly
driven by peripheral countries.
Click here for Berenberg’s
latest economic forecasts
19/02/2015
Source: Bloomberg (19/02/2015), Eurostat, EU Commission, Berenberg; *Excp.: Lativa (09/2014) & Estonia (11/2014); **EU Winter Forecast
41
Macro driver #3: Consumer confidence
Consumer confidence as an indicator for future retail sales
5.0%
0
4.0%
-4
3.0%
-8
2.0%
-12
1.0%
-16
0.0%
-20
-1.0%
-24
-2.0%
-28
-3.0%
-32
-4.0%
-36
-5.0%
-40
-6.0%
-44
Eurozone non-food retail sales
19/02/2015
Consumer confidence has
consistently improved since
the beginning of 2013 and has
already reached pre-crisis
levels, indicating a
continuing upward trend for
Eurozone retail sales.
Consumer confidence index level
4
Growth rate (yoy)
6.0%
.
Eurozone consumer confidence (rhs)
Source: Bloomberg (19/02/2015), Eurostat, EU Commission, Berenberg Fixed Income Research
42
4. Disclaimer
Disclaimer
Please note that the use of this research report is subject to the conditions and restrictions
set forth in the “General investment-related disclosures” and the “Legal disclaimer” at the
end of this document.
For analyst certification and remarks regarding foreign investors and country-specific
disclosures, please refer to the respective paragraph at the end of this document.
Disclosures in respect of section 34b of the German Securities Trading Act
(Wertpapierhandelsgesetz – WpHG)
Company
Alain Afflelou
Darty PLC
Dufry
Maisons du Monde
THOM Europe SAS
(1)
(2)
(3)
(4)
(5)
Disclosures
no disclosures
no disclosures
no disclosures
3
no disclosures
no disclosures
Initiation of coverage
8 December 2014
8 December 2014
19 February 2015
19 February 2015
19 February 2015
8 December 2014
Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) or its affiliate(s)
was Lead Manager or Co-Lead Manager over the previous 12 months of a public offering
of this company.
The Bank acts as Designated Sponsor for this company.
Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement
with this company for investment banking services or received compensation or a promise
to pay from this company for investment banking services.
The Bank and/or its affiliate(s) holds 5 % or more of the share capital of this company.
The Bank holds a trading position in shares of this company.
19/02/2015
44
Disclaimer
Historical recommendation changes for AAFFP 5 5/8 04/19 in the last 12 months
Date
08 December 2014
Recommendation
Marketweight
Historical recommendation changes for DRTYLN 5 7/8 03/21 in the last 12 months
Date
08 December 2014
Recommendation
Overweight
Historical recommendation changes for DUFSCA 4 1/2 07/22 in the last 12 months
Date
19 February 2015
Recommendation
Overweight
Historical recommendation changes for HBMGR 3 7/8 02/20 in the last 12 months
Date
19 February 2015
Recommendation
Marketweight
Historical recommendation changes for MDMFP 9 08/20 in the last 12 months
Date
19 February 2015
Recommendation
Overweight
Historical recommendation changes for THOEUR 7 3/8 07/19 in the last 12 months
Date
08 December 2014
19/02/2015
Recommendation
Overweight
45
Disclaimer
Berenberg distribution of recommendations and in proportion to investment banking
services
Overweight
Underweight
Marketweight
27.35 %
26.50 %
46.15 %
9.09 %
18.18 %
72.73 %
Valuation basis / recommendation key
Overweight:
Sustainable spread tightening potential higher 10% within 3-6 months.
Underweight:
Sustainable spread widening potential lower 10% within 3-6 months.
Marketweight:
Limited spread movement potential. No immediate catalyst visible.
NB The Bank’s Fixed Income Research Department does not make recommendations on the
basis of absolute performance, but on performance expected relative to the market or peer
group as spreads move with markets and sectors as well as with the issuer itself.
Competent supervisory authority
Bundesanstalt für Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory
Authority),
Graurheindorfer Straße 108, 53117 Bonn and Lurgiallee 12, 60439 Frankfurt am Main
19/02/2015
46
Disclaimer
General investment-related disclosures
Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as „the Bank“) has made every effort
to carefully research all information contained in this financial analysis. The information on which
the financial analysis is based has been obtained from sources which we believe to be reliable
such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well
as the company which is the subject of this financial analysis.
Only that part of the research note is made available to the issuer (who is the subject of this
analysis) which is necessary to properly reconcile with the facts. Should this result in
considerable changes a reference is made in the research note.
Opinions expressed in this financial analysis are our current opinions as of the issuing date
indicated on this document. We do not commit ourselves in advance to whether and in which
intervals an update is made. The companies analysed by the Bank are divided into two groups:
“full coverage“ - continued updates - and “screening coverage“ - updates as and when required
in irregular intervals.
The functional job title of the person/s responsible for the recommendations contained in this
report is “Fixed-Income Research Analyst” unless otherwise stated on the cover.
The
following
internet
link
provides
further
remarks
onon
our
financial
analyses:
The
following
internet
link
provides
further
remarks
our
financial
analyses:
https://www.berenberg.de/en/fir_en.html
https://www.berenberg.de/en/fir_en.html
19/02/2015
47
Disclaimer
Legal disclaimer
This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to
as „the Bank“). This document does not claim completeness regarding all the information on the
stocks, stock markets or developments referred to in it.
On no account should the document be regarded as a substitute for the recipient procuring
information for himself/herself or exercising his/her own judgements.
The document has been produced for information purposes for institutional clients or market
professionals.
Private customers, into whose possession this document comes, should discuss possible
investment decisions with their customer service officer as differing views and opinions may
exist with regard to the stocks referred to in this document.
This document is not a solicitation or an offer to buy or sell the mentioned stock.
The document may include certain descriptions, statements, estimates, and conclusions
underlining potential market and company development. These reflect assumptions, which may
turn out to be incorrect. The Bank and/or its employees accept no liability whatsoever for any
direct or consequential loss or damages of any kind arising out of the use of this document or
any part of its content.
The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this
document, derivatives thereon or related financial products. The Bank and/or its employees may
underwrite issues for any securities mentioned in this document, derivatives thereon or related
financial products or seek to perform capital market or underwriting services.
Analyst certification
I, Jannik Prochnow, hereby certify that all of the views expressed in this report accurately reflect
my personal views about any and all of the subject securities or issuers discussed herein.
In addition, I hereby certify that no part of my compensation was, is, or will be, directly or
indirectly related to the specific recommendations or views expressed in this research report, nor
is it tied to any specific investment banking transaction performed by the Bank or its affiliates.
19/02/2015
48
Disclaimer
Remarks regarding foreign investors
The preparation of this document is subject to regulation by German law. The distribution of this
document in other jurisdictions may be restricted by law, and persons into whose possession
this document comes should inform themselves about, and observe, any such restrictions.
United Kingdom
This document is meant exclusively for institutional investors and market professionals but not
for private customers. It is not for distribution to or the use of private investors or private
customers.
United States of America
This document has been prepared exclusively by the Bank. Although Berenberg Capital Markets
LLC, an affiliate of the Bank and registered US broker-dealer, distributes this document to certain
customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this
document constitute research of Berenberg Capital Markets LLC. In addition, this document is
meant exclusively for institutional investors and market professionals, but not for private
customers. It is not for distribution to or the use of private investors or private customers.
This document is classified as objective for the purposes of FINRA rules. Please contact
Berenberg Capital Markets LLC (+1 617.292.8200), if you require additional information.
19/02/2015
49
Disclaimer
Third-party research disclosures
Company
Alain Afflelou
Darty PLC
Dufry
Maisons du Monde
THOM Europe SAS
(1)
(2)
(3)
(4)
(5)
Disclosures
no disclosures
no disclosures
no disclosures
no disclosures
no disclosures
no disclosures
Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class
of the subject company by the end of the prior month.*
Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed
any public offering for the subject company.*
Berenberg Capital Markets LLC is making a market in the subject securities at the time of the
report.
Berenberg Capital Markets LLC received compensation for investment banking services in
the past 12 months, or expects to receive such compensation in the next 3 months.*
There is another potential conflict of interest of the analyst or Berenberg Capital Markets
LLC, of which the analyst knows or has reason to know at the time of publication of this
research report.
* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the
‘Disclosures in respect of section 34b of the German Securities Trading Act
(Wertpapierhandelsgesetz – WpHG)’ section above.
Copyright
The Bank reserves all the rights in this document. No part of the document or its content may be
rewritten, copied, photocopied or duplicated in any form by any means or redistributed without
the Bank’s prior written consent.
© February 2015 Joh. Berenberg, Gossler & Co. KG
19/02/2015
50
4. Contacts
Contacts
INSTITUTIONAL SALES / SALES TRADING
Hamburg
Institutional Sales
Michael Brehmer
+49 40 350 60 704
Nico Bürger
+49 40 350 60 483
Sabine Hahn
+49 40 350 60 754
Lutz-Dieter Mikus
+49 40 350 60 752
Ingo Pufahl
+49 40 350 60 499
Sven Zimatrys
+49 40 350 60 390
Sales Trading
Jan Bruhns
+49 40 350 60 703
Dusseldorf
Vienna
Institutional Sales
Jörg Bunse
+49 211 540 728 44
Stephan Burmeister
+49 211 540 728 41
Sebastian Krammich
+49 211 540 728 43
Institutional Sales
Marco Ferrari
+43 1 22 757 0
Klaus Giesecke
+43 1 22 757 14
Stefan Haupt
+43 1 22 757 20
Dr. Robert Hengl
+43 1 22 757 22
Gerald Kohlmayer
+43 1 22 757 18
Christoph Mayrhofer
+43 1 22 757 12
Iris Sahinoglu
+43 1 22 757 17
Dr. Marija Tomic
+43 1 22 757 16
Ilenia Tonetti
+43 1 22 757 19
Martin Zezula
+43 1 22 757 21
Sales Trading
Daniel Meier
+49 211 540 728 42
London
Institutional Sales
Stefan Binder
+44 20 3207 7882
Conor Daly
+44 20 3465 2734
Romain Foussadier
+44 20 3465 2695
Owen Powell
+44 20 3465 2735
Alexandru Toroican
+44 20 3207 7919
DEBT CAPITAL MARKETS
Frankfurt/Main
Vienna
Dominik Gansloser
+49 69 91 30 90 566
Jennifer Rojahn
+49 69 91 30 90 562
Sven-Erik Schipanski
+49 69 91 30 90 560
Christian Wagner
+49 69 91 30 90 564
Christian Wöckener-Erten
+49 69 91 30 90 565
Alexandra Ács
+43 1 227 57 23
Renate Mayer
+43 1 227 57 15
RESEARCH
Corporates
Public Sector & Financials
Alexandre Daniel
+49 69 91 30 90 593
Jannik Prochnow
+49 69 91 30 90 595
Patrick Weber
+49 69 91 30 90 594
Philipp Jäger, CIIA, FRM
+49 69 91 30 90 590
Helge Schunck
+49 69 91 30 90 591
Timo Segieth
+49 69 91 30 90 592
19/02/2015
Sales Trading
Aleksandar Doric
+43 1 22 757 24
Rainer Kapeller
+43 1 22 757 13
E-Mail: firstname.lastname@berenberg.com
Internet: www.berenberg.com
52

European High Yield Non-Food Retail

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