EUR 100.00 For Business Accounts Only

DIA: 1H'19 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

1H'19 vs 1H'18 Results
Sales: € 3.445 Bn (-7%);
EBITDA: € 13.5 M (-90.2%);
EBIT: € -315.0 M (€ 151 M in 1H'18);
Net Profit: € -418.7 M (€ 29.6 M in 1H'18);
The 1H’19 Results show a negative performance in all magnitudes due to the impact from the uncertainty on the final outcome of the takeover bid and from the Group’s refinancing process on its business. Thus, the fall in LfL sales growth speeded up in the 2Q, ending the 1H’19 at -7.8% including Clarel (vs. -4.4% in 1Q’19, excluding Clarel). By markets, Spain (~60% sales) reports a significant LfL drop to -6.8% (vs -3.9% in 1Q’19), while Brazil (~17% sales) shows significant business deterioration with -9.7% LfL sales in 1H’19 (vs. -0.8% in 1Q’19).
On the operating level, EBITDA came in at € 13.5 M, which is -90% lower than in 1H’18, whereas in adjusted terms, the company recorded a loss of €-55.6 M (vs. € 205.9 M in 1H’18), which is due to the above-mentioned sales performance and one-off effects totalling €-88.8 M that are mainly linked to stock clearance and the drop in accounts receivable in Spain and Brazil.
On the financial level, debt rose to € 1.82 Bn, meaning a €~362 M increase over Dec’18, due largely to a deterioration of working capital (falling sales, reduced supplier payment period and lower factoring/confirming volume). Additionally, the impact from applying IFRS 16 will mean a €~689.3 M increase in this figure.
In short, the results are negative, but to some extent expected, as over the course of the quarter the management team has not focused so much on the business, but rather on the company’s financial viability. In any event, beyond this fact, we think the visibility on the business is very low. Thus, we reiterate our SELL recommendation and place our T.P. Under Revision (from the previous € 0.67/sh.) until the company releases a clear strategic plan with the arrival of the new management team.