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GLOBAL DOMINION: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results
Sales: € 178.3 M (-16.1% vs. -16.7% BS(e) and -16.9% consensus);
EBITDA: € 12.0 M (-51.6% vs. -56.5% BS(e) and -54.8% consensus);
EBIT: € 0.0 M (n/a vs. -95.4% BS(e) and -95.4% consensus);
Net Profit: € -3.0 M (€ 7.8 M in 1H'19 vs. € -3.4 M BS(e) and € -2.4 M consensus);
1H'20 vs. 1H'19 Results
Sales: € 402.8 M (-5.2% vs. -5.5% BS(e) and -5.6% consensus);
EBITDA: € 30.0 M (-34.4% vs. -37.0% BS(e) and -36.1% consensus);
EBIT: € 7.8 M (-63.4% vs. -61.0% BS(e) and -61.0% consensus);
Net Profit: € 0.9 M (-93.8% vs. -96.6% BS(e) and -89.7% consensus);

The company has released 2Q’20 results in line with expectations on the operating level, showing good cash performance, and has reiterated its guidance for 2020. The quarter’s EBITDA fell slightly less than expected (-52% vs. –56% BS(e) and –55% consensus) thanks to slightly higher margins (6.7% vs. 6.1% BS(e) and 6.3% consensus) and sales in line with expectations (-16% vs. –17% BS(e) and consensus). We highlight the impact from several one-off effects on the operating level, including the sale of DOM Networks (€~7.5 M) and the effect from restructuring costs (€~6 M BS(e)). Nothing relevant in Net Profit, which showed the company’s operating performance (€-3 M vs. €-3.4 M BS(e) and €-2.4 M consensus).
Good net cash performance, which remained stable at € 102 M (vs. 103 M BS(e) and € >100 M 1Q’20). On another note, DOM reiterated its 2020 guidance of sales growth (vs. –1% BS(e) and –2% consensus), positive Net Profit (vs. € 9 M BS(e) and € 12.5 M consensus) and positive operating cash generation (vs. ~ € 9 M BS(e)). Note that in the long-term it foresees a 1-year delay (until 2023 vs. 2024 BS(e)) to meet the targets set in its strategic plan (doubling its recurring Net Profit’18 to € ~64 M).
After outperforming the IBEX by +6% since the Covid-19 pandemic broke out (DOM had performed very poorly previously, falling by -15% in 2019; -27% vs. IBEX), we do not expect a significant market reaction. We maintain our BUY recommendation, and we believe that, as recovery materialises (starting in 2H’20) and the company gradually meets its long-targets, the stock should perform accordingly. BUY. T.P. € 4.90/sh. (upside +65.54%).