HEMA following Franprix announcement

All,

On Friday HEMA announced a new partnership with Franprix (Casino) under which HEMA will be wholesaler to Franprix, supplying the French retailer with its range of non-food products. Financial details of the partnership have not been given.

While on the one hand this is a welcome addition of revenue for HEMA, we would really have liked to see a financial framework to help us gauge the impact on working capital and other items that will affect its leverage going forward.

HEMA have already been tight lipped about their working capital arrangements in the supply of Walmart in the US and Canada and the concern some of us have is that the bonds are being effectively layered by customer pre-payments or product financing intermediary arrangements - perhaps even affiliated to Ramphastos.

On the face of it however, this is clearly a positive development. The 8.5%s jumped on Friday, but overall the name remains exceedingly highly leveraged - going into a downturn - compared to other retail names that offer a similar return (on the SSNs).

Wolfgang