The H1 results were below expectations but the sales outlook was reiterated; further dilution in store?
The H1 results were below expectations but the sales outlook was reiterated; further dilution in store?EARNINGS/SALES RELEASES
Gaussin sales for the first semester of 2023 were half the level of the previous year mainly due to a decline in the sales of port vehicles as well as Metalliance (underground activities). In the wake of the Amazon orders, inventories also increased significantly. Moreover, the group recently raised funds via equity financing which has led to dilution. This arrangement could potentially lead to further heavy dilution as the group needs funds to ramp-up its manufacturing and deliveries.
FACT
Key H1 highlights
Sales of €13.6m, down 49% yoy
Order backlog of €155.5m, up 20% yoy
Other highlights
First truck of 329 delivered to Amazon
€7m raised via the issuance of 7m warrants
Potential equity financing likely, implying further dilution
ANALYSIS
H1 analysis
Sales in the first half were lower due to lower demand in the Seaports and Containers (APM) segment where sales declined by 87% to €0.8m. Sales in Metalliance declined by 32% to €8.6m. On the positive side, sales in Logistics & E-Commerce (TSBM and ATM) were up by 26% to €3.9m. Licensing and Royalty revenues were down by 55% on the previous year. The order book in the first half grew with orders in Logistics & E-Commerce and was almost flat at €94.7m and Metalliance orders up by 94% to €58.7m. Total orders increased by 20% to €155.5m.
Amazon delivery plan put forward and the first vehicle delivered
In June, Gaussin put forward its delivery plan for the order of 329 vehicles for Amazon. As per this plan, the group is aiming to deliver the entire fleet by the end of 2023. The first vehicle was delivered in July and the deliveries will progressively ramp-up in the coming months.
Outlook hinges on Amazon deliveries
With this release, Gaussin reiterated its target of more than €100m for the full year. This target hinges on growth in Metalliance, Amazon orders and Licensing revenues. In our view, deliveries for the Amazon order are contingent on funding for working capital and, thus, there is a possibility that some of the orders will be delivered in 2024.
Equity financing poses a threat of dilution
This week Gaussin announced a fundraise via equity which boosted shareholders’ equity by €7m via the issuance of 7m in equity shares. As per the original agreement, the maximum amount agreed under this arrangement is €30m. These funds are crucial to Gaussin’s ambitions to deliver large orders and will most likely be raised via equity. Hence, there is a possibility that there will be further dilution for existing shareholders.
IMPACT
In the light of all the events mentioned above we have updated our forecasts and share count, and expect a material downward revision in our target price. Note that the latest induction of funds into the company was achieved through an equity line of financing which could lead to another.
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