Casino: So what is the Debt figure?
All,
A very short call this morning with limited questions from analysts. Like the Brexit situation, lots of unanswered questions remain.
But what has Casino said:
Guidance for 2019-2021
Increase in EBITDA margin by 20 basis points p.a.
Growth in trading profit for retail business of 10%+
Free cash flow before financing & dividends of €500m p.a.
Gross retail CAPEX below €350m p.a.
Net Debt France has reduced by €1bn, and is likely to reduce further from disposals already in place in Q1 2019 and the Company’s announcement of yet another €1bn of disposals.
The increase in EBI|TDA margin guidance is partially driven by cost savings expected in 2019 & 2020: €200m split evenly between the two. Tying the guidance of EBITDA margin improvement and €100m cost savings together, it appears there is a headwind of c. €60m in Casino France.
So what is the Debt figure?
Never straight forward, but from the numbers we calculate the following:
Bank and other senior debt €. 595m
Bonds €5,338m
Cash on B/S at Dec 31st €2,097m
Net Debt €3,836m = 4.2x
This differs from the Company reported number as they include €1,126m in IFRS 5 adjustments for Assets held for sale. To be fair to the Company, they have already disposed of some of these assets. €754m of assets have already been signed and €605m of proceeds already received.
Allowing for this Net Debt is effectively €3,082 or 3.37x, if cost/EBITDA contribution for these assets is assumed neutral - which it substantially has been in the past.
The above debt calculation does not include two deeply subordinated perps - totalling €1,350m and bringing Net Debt unto €4,432m or 4.85x.
Bridge to EV:
Total debt less Cash €4,432m
Less listed equity stakes:
Mercialys € 300m
Grupo Exito €1,020m
GPA Direct €. 230m
Segisor €. 870m (net of the debt)
Total €2,420m
This brings net Debt down to ~€2,010m or 2.27x.
Question: What value should we equate to 65% stake in Cnova? Our model assumes c. €560m.
Using this value, and the current Casino equity price of €43.38, market cap is €4.8bn and EV at €6.3bn, trading at 6.8x 2018 EBITDA of E914m.
First glance reconfirms our relative comfort around the Casino structure. Many questions remain, and we are working through them again to find an attractive angle anywhere along the cap structure.
Please feel free to give us a call on the name. Tomas is your analyst.