Gorenje 2017: Another disappointment, investors turning toward M&A speculations.
2017 started well in the first half, but the second half spoiled the broth. Sales revenues were up by 4.1% YoY in 2017 however core appliance segment generated only 0.4% YoY growth. Even more importantly costs and investments spoiled profitability in 2017. Namely Gorenje Group generated EBITDA of only EUR 76.4m in 2017 with margin at 5.8% or 1.1 p.p. lower than in 2016. CAPEX of EUR 83.2m was spent. This translated into meagre EUR 1.0m of profit out of which EUR 8.8m was generated by non-core segment. Therefore, in reality appliance segment was at a loss. Results were below management plan and below our estimates. Guidance for 2018 is EBITDA at EUR 86.3m, lower CAPEX numbers and profit at EUR 8.1m with strong 10.4% growth of sales in appliance division seen based on price and volume improvement. We have adjusted our valuation according to a new data feed with target price at 5.8 EUR and a hold recommendation.
We however believe the main focus on investors this year will be a possible M&A story tied to a search of a strategic partner which is already ongoing. On the other hand for a long term investment story, Gorenje will need to start delivering.
Gorenje dd is a Slovenia-based company engaged in the production and sale of household appliances. The Company operates through three business segments: Home, producing and selling products and services for home, such as major domestic appliances (MDA), small domestic appliances (SDA), heating, ventilation, air conditioning (HVAC) and kitchen furniture; Ecology, providing ecology-related services; and Other, with such activities as tool-making, engineering, hotels and hospitality services, trade, and design services. The Company covers the global markets with a portfolio of ten brands: Gorenje, Gorenje+, Korting, Sidex, Mora, Atag, Etna, Pelgrim, Asko and Upo. As of December 31, 2011, the Company was the parent company of the Gorenje Group, which consisted of numerous companies in such countries as Slovenia, Austria, Germany, Italy, France, Spain, the United Kingdom, Denmark, Sweden,, Norway, the Czech Republic, Slovakia, Hungary, Poland, Bulgaria and Croatia, among others.
ALTA Invest, investicijske storitve, d.d., (ALTA Invest, investment services, Inc.) is a part of ALTA Group, the biggest financial non-banking group in Slovenia. ALTA Invest has around 28% market share on the domestic Ljubljana Stock Exchange and has more than EUR 95m of assets under management.
Our trading advantage is our execution of large trading blocks with low impact on the market. We offer trading on several platforms on numerous markets, with a wide variety of financial instruments. Our advantage is also a research department, which is both sell side and buy side and has the far most extensive and regular coverage of domestic companies. We cover 9 companies on Ljubljana Stock Exchange, which is around 90% of Mcap on LJSE – and here we are practically the only local broker providing this kind of extensive and regular coverage for Slovenian companies.
A part of ALTA Group are ALTA Skladi, a mutual fund asset management company with roughly EUR 260m of asset under management. ALTA Group is also extensively involved in corporate finance projects and raised considerable assets (fixed income and equity) in the last two years for several companies.
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