Solocal, A light at the end of the tunnel
Solocal is the first Stock Conviction we published. About 9 months ago, against a very positive consensus, we issued a SELL report on the company which was then valued at 1.11 euros per share (see our Stock Conviction of 18/07/18). At the time, we feared two things: one that the restructuring undertaken by the company, which targeted in particular 25-30% of field sells, would result in a very sharp drop in turnover. Secondly, that the decline of PagesJaunes would accelerate due to the active promotion of Google's products by the company. Solocal managed to avoid this last pitfall by intelligently repackaging its product offer, but could not avoid a violent drop in sales due to its restructuring. Digital order intake fell by 20% in Q3 2018 and by 24% in Q4 2018, and the stock collapsed. We hesitated to remove Solocal from our Stock Conviction after the annual results but as we expected further decreases in order intake and sales at the beginning of 2019, we left it. We made a mistake (the stock rebounded 40% in 15 days just before its quarterly publication!) but we were not mistaken in our estimates.
Solocal Group SA is a France-based company, which is engaged in local online communication. The Company provides digital content, advertising solutions and transactional services that connect people with local businesses. Solocal Group SA operates in France, Spain, Austria and the United Kingdom and supports the online development of SMB and client accounts, mainly through its four flagship brands: PagesJaunes (engaged in local advertising and information on the Internet and in mobile and print media), Mappy (a portal of services relating to travel: maps, journey planners, local area information searches, before and during the journey), Ooreka (a database of content with practical guides, tutorials, among others, written by such specialists as notaries, lawyers, doctors, electricians and gardeners, among others.
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