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Scaling to a national presence

Portobello 12 April 2022 Initiation
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Portobello SpA

Scaling to a national presence

Initiation of coverage

Retail

12 April 2022

Price

€39.2

Market cap

€127m

Net debt (€m) at 31 December 2021

17.3

Shares in issue

3.2m

Free float

35%

Code

POR

Primary exchange

Euronext STAR Milan

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

31.1

1.8

32.0

Rel (local)

22.4

13.3

30.3

52-week high/low

€51.40

€27.10

Business description

Portobello aims to build a national Italian retail presence (from 24 current stores) via a rapid rollout of own-stores and franchises. It uses a combination of barter (own and third-party media) and cash purchases to source branded products from its suppliers.

Next events

AGM

29 April 2022

H122 results

19 September 2022

Analysts

Russell Pointon

+44 (0)20 3077 5700

Sara Welford

+44 (0)20 3077 5700

Portobello SpA is a research client of Edison Investment Research Limited

Portobello’s unique business model, primarily the use of media barter, enables it to source branded products at extremely competitive prices for sale, in its own retail outlets and to other distributors in Italy, at a significant discount to its competitors. Management’s aspiration is to leverage this competitive advantage to grow its retail operations to national coverage over the long term, which suggests significant potential for new space from its current low market penetration versus its peers. Our discounted cash flow (DCF) based valuation of €121 indicates significant upside potential if Portobello can successfully expand across Italy.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

62.7

8.3

1.96

0.0

20.0

N/A

12/21

85.5

13.0

2.61

0.0

15.0

N/A

12/22e

137.9

19.0

3.46

0.0

11.3

N/A

12/23e

211.0

29.2

5.29

0.0

7.4

N/A

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Competitive sourcing maximises profits

Portobello’s ability to source products more competitively than its peers stems from the use of its own media (no/limited cost) or third-party media (significant discounts to rate-card) in exchange for goods that are ultimately sold by Portobello. With a current store base in Italy that totals 24, management aspires to grow the number of Portobello’s stores (company-managed and franchises) to a nationwide presence over the long term, which is likely to mean several hundred stores, versus its peers that currently have up to 700+ stores.

Retail expansion drives revenue growth

Portobello’s aspiration is to grow its retail footprint across Italy. If management can execute this strategy, it would produce premium revenue and profit growth in the long term versus its peers. With a clearer outlook for the economy following the initial COVID-19 pandemic, management will accelerate its store expansion plans from FY22. We forecast total revenue growth of 61% to c €138m in FY22 and 53% to c €211m in FY23, and EBITDA growth of c 34% in FY22 and 53% growth in FY23. Management states it will continue to raise debt to fund the initial investment in stores, and dividend payments are unlikely with a preference to invest cash in the store rollout programme.

Valuation: DCF-based valuation €121/share

Our DCF-based valuation of €121/share represents c 208% upside potential to the current share price. Our growth forecasts for Portobello (see above) are significantly higher than consensus expectations for its peers (source: Refinitiv) of sales growth of 5–6% in FY22 and FY23, and median EPS growth of 3–10% in FY22 and FY23, as Portobello is a younger company with significant retail space growth potential. Peer group valuation comparison is complicated by Portobello not yet reporting using International Financial Reporting Standards (IFRS).

Investment summary

Company description: Value-based retailer, unique sourcing

Portobello was founded in 2016 with a key focus of developing a national presence for its Portobello-branded retail outlets (company-managed and franchises) over the long term, from its current base of 24 stores. Management has yet to elaborate on its definition of ‘national coverage’, but some competitors have over 700 stores in Italy, suggesting significant potential for future space growth. Portobello’s integrated business model is unique, in public markets, as it sources its products through a combination of media barter (own and third-party) and cash purchases more cost effectively than its competitors, enabling it to act as a price leader in its chosen categories. Portobello’s core offer of branded homewares, electronics, personal hygiene and home care, clothing, and other (eg jewellery) is likely to evolve further. In addition to retail outlets, it sells to the consumer via marketplaces (eg Amazon). Beyond, its consumer-facing activities, Portobello clears unsold inventory and sells other more opportunistic products not suited to Portobello’s retail outlets (eg cars) via its B2B business to other distributors.

Valuation: DCF-based valuation €121 per share

Our primary valuation method for Portobello is a DCF analysis, which results in valuation of €121/share. Our key assumptions are that Portobello’s footprint increases to c 240 company-managed stores and 100 franchise stores by FY31, with a normalised operating margin of c 16%. We factor in a cost of capital of 12% (risk free rate 1.9%, company-specific risk premium of 15% and company beta 0.8 (source: Refinitiv)), and a terminal growth rate of 2%. As Portobello does not report using IFRS, comparing its multiples to international peers is not meaningful. Our growth forecasts for Portobello (see below), which are much higher than consensus estimated growth rates for the peers, would point to a premium valuation, prior to any discount for liquidity or execution risk.

Financials: Strong growth due to Retail expansion

From FY16–21, Portobello’s revenue CAGR has been c 145%, with the highest rates of growth from Retail (c 282%) and Media (c 175%) followed by B2B (c 100%). Despite the short-term disruption from COVID-19, Retail (and other revenues) continued to grow in FY20 and FY21 as the company continued to increase its store numbers and average store size. The increasing relative contribution of higher-profit Retail at the expense of lower-profit Media and B2B has driven strong growth in Portobello’s gross margin from c 20–25% in the early years to 37.3% in FY21. We forecast total revenue growth of 61% to c €138m in FY22 and 53% to c €211m in FY23. The key driver to our forecasts is the rapid expansion of the Retail portfolio, with new and larger Portobello stores and the gradual maturing of the new space over the following three years. These lead to EBITDA growth of c 34% in FY22 and 53% in FY23.

Sensitivities: Execution, unique business, macroeconomic

Portobello is a young company with limited operating history, albeit good progress has been made already. Therefore the most apparent risk is management’s ability to execute the ambition to scale the business nationally (including new franchises) while continuing to enjoy the benefits of the barter business model as it grows. The barter model includes non-cash transactions, which complicate the accounting. As a small consumer-facing company Portobello faces potential macroeconomic challenges and shocks (eg COVID-19) that may affect consumer discretionary income, and a high level of competition from better-capitalised companies. The share has a limited free float, albeit that has been increasing (currently 35%).


Company description: Value-based retailer, unique sourcing

Portobello was founded in September 2016 by four partners: Simone Prete (chief executive officer), Roberto Panfili (chief operating officer), and Stefano Caporicci and Luca Nardi (two investors who had no executive involvement). They recognised the ongoing changes in the retail market (increasing competitiveness), the changing purchasing habits of consumers (moving online and greater value focus), and the opportunity provided by the use of media bartering activities in helping to maximise the profit potential of a new retail format. The shares were listed on 13 July 2018 on the AIM Italia market with the issue of 444.3k new shares at a price of €4.4, raising gross proceeds of c €2m, to give a free float of 16.4%.

Portobello has a clear mission: to provide quality products at affordable prices, anytime, anywhere to consumers. The primary focus is to grow its retail activities to a national presence level (from a current base of 24 stores). At the time of the IPO there was an aspiration to develop the business in other European markets, but we believe this is now unlikely in the medium term given the perceived opportunity in Italy.

Portobello sources branded products from its suppliers/clients through a combination of media barter (ie using the exchange of owned and third-party advertising inventory in return for the purchase of those goods) and cash purchases. The use of barter and third-party media enables Portobello to acquire goods at more competitive prices than its competitors, and in turn, sell those products at lower prices than its competitors. Any residual stock that cannot be sold in its retail outlets, as well as other more opportunistic product purchases are sold through its business to business (B2B) channel to commercial partners, typically at a significant (greater than 50%) discount to prices it achieves in the retail outlets.

The company has three strategic business units (Exhibit 2):

Retail (or B2C): includes Portobello branded retail outlets, including soon-to-launch franchises under the Portobello brand, and sales through marketplaces.

Media: the purchase and resale of advertising, including in Portobello’s own publishing activities (ie magazines), for use in its bartering activities.

Business to business (B2B): for the sale of ‘residual’ goods or those that are acquired opportunistically and are not suited to other channels due to size or product category (eg food and beverages and cars).

Portobello has demonstrated strong growth (Exhibit 1), with FY21 revenue of €85.5m and EBITDA of €16.5m. Media has consistently been its most important revenue source, but Retail revenue will become the biggest source of revenue given management’s anticipated growth in the number of stores, both company owned and franchised.

Exhibit 1: Revenue and EBITDA progression

Exhibit 2: FY21 revenue split

Source: Portobello SpA, Edison Investment Research

Source: Portobello SpA accounts

Exhibit 1: Revenue and EBITDA progression

Source: Portobello SpA, Edison Investment Research

Exhibit 2: FY21 revenue split

Source: Portobello SpA accounts

Portobello’s business model

As the barter business model is relatively uncommon in publicly-listed equities, below we focus on the mechanics of the business, and how the transactions are reflected in Portobello’s financial statements, ahead of focusing on the activities of the individual business units.

Income statement

The transactions with respect to the use of barter for the purchase of products acquired that are subsequently sold are shown in Exhibit 3 below.

Exhibit 3: Barter business model

Source: Portobello SpA

The example shows the acquisition of goods valued at €100k by Portobello, in return for the sale of advertising valued at €100k. The goods are then sold through Retail at €120k. Depending on the cost of the media (zero/low cost if Portobello’s own advertising inventory or an indicated €20k if third-party media) the reported gross profit is either €120k or €100k, respectively. The key difference between this and the more typical cash purchase of goods is the use of an estimated market value of advertising inventory, in return for the goods acquired. Simplistically, at the group level, Portobello’s gross profit is the difference between the Retail selling price (€120k) and the cost of Media (€0–20k).

In the example above, Portobello’s Media business unit invoices the client for the imputed market value of the advertising, and the client invoices Media for the value of the goods; importantly, no cash changes hands. Portobello determines the imputed value of the inventory and associated advertising based on what it believes the products can ultimately be sold for. The Media revenue and associated cost are recognised as the advertising inventory is used/consumed. For Retail and B2B, there is no cost of goods sold as Portobello allocates all of the acquisition cost against Media, and there is no subsequent invoicing between Media and Retail or B2B. Under Italian GAAP, Portobello reports revenue and costs on a gross basis, so would recognise gross revenue of €220k (Media €100k and Retail €120k), COGS of €100k (all Media), with no inter-company elimination. As the company moves to IFRS, likely for the reporting of FY22 results, management believes Portobello would report lower revenue and costs as these are netted off, but would still report the same absolute gross profit. As an aside, in the interim, this makes comparison of Portobello’s sales multiples versus its peers, which may report under IFRS, not meaningful.

In determining the purchase price of the goods from the client, and therefore the estimated value of media advertising revenue, the skill is in the knowledge of the product markets, specifically competitors’ pricing, and taking a view on the ultimate selling price, with the aim of being a price leader. Portobello is then able to determine a media strategy based on the client’s brand requirements, for example geographic focus or demographic target, and the value of media acquired.

Extending the company’s example above in Exhibit 3, below we demonstrate the potential variability of Portobello’s income statement depending on the source of products and channel sold through. In both examples we assume all media consumed is Portobello’s own (ie with a zero cost of sale).

Exhibit 4: All products sold through Retail example

€k

Media

Retail (barter purchases)

B2B (barter purchases)

Total (barter purchases)

Retail (cash purchases)

Total group

Revenue

200

240

0

440

330

770

Cost of goods

(200)

0

0

(200)

(200)

(400)

Gross profit

0

240

0

240

130

370

Gross margin

0%

100%

N/A

55%

39%

48%

Source: Edison Investment Research

Exhibit 5: All products sold through Retail and B2B example

€k

Media

Retail (barter purchases)

B2B (barter purchases)

Total (barter purchases)

Retail (cash purchases)

Total group

Revenue

200

120

20

340

330

670

Cost of goods

(200)

0

0

(200)

(200)

(400)

Gross profit

0

120

20

140

130

270

Gross margin

0%

100%

100%

41%

39%

40%

Source: Edison Investment Research

Exhibit 4 shows Portobello’s financials if 100% of goods purchased via barter are sold in Retail at the same mark-up as Exhibit 3 (ie 20%), and the goods acquired for cash are sold in Retail at a higher mark up of 65%. For the goods acquired through barter, Portobello would recognise revenue of €440k and gross profit of €240k, a gross margin of 55%. The addition of goods acquired with cash and sold physically in the stores increases group revenue to €770k and gross profit to €370k, but the gross margin reduces to 48%.

In Exhibit 5, we change the assumption for the channel split of goods acquired through barter to 50:50 Retail:B2B, with goods sold in B2B at an 80% discount to Retail price (and also a discount to the imputed value of the advertising inventory). For the goods acquired through barter, Portobello would recognise revenue of €340k and gross profit of €140k, a gross margin of 41%. The addition of goods acquired with cash increases group revenue to €670k and gross profit of €270k, a gross margin of 40%.

In all cases, the absolute gross profit for goods acquired through barter is equivalent to Retail plus B2B revenue less the cost of Media: €240k and €140k in the examples above. Portobello’s revenue, gross profit and gross margin are maximised when it is able to sell a greater proportion through Retail than B2B. However, B2B fulfils a key role in that it enables a faster sell through than might be achieved elsewhere, which is beneficial for the timing of cash flow, albeit at a lower revenue and gross profit.

Management estimates that c 50% of its goods acquired for its own retail activities are acquired using barter, and goods for B2B are 100% sourced using barter.

Cash flow and balance sheet

As already highlighted, there are no cash flow implications on the initial invoicing between the client/advertiser and Portobello when barter is used to purchase goods. On the asset side of the balance sheet, the purchase of the inventory (goods acquired) is recognised when invoiced, and the advertising to be delivered is recognised as a deferred liability (deferred advertising income), which appears in creditors in Exhibit 13 (Financial summary). As the advertising revenue is delivered it is recognised in the income statement and the deferred income balance reduces. When Portobello contracts with a third-party media owner for the delivery of media, it recognises a prepaid advertising asset (equivalent to the value of the inventory acquired) and creditor for the value of the media acquired. As the media is consumed, the balance sheet asset is reduced and the expense of the media is recognised in the income statement.

At the end of an accounting reference period, as well as the physical inventory, Portobello’s balance sheet includes an asset for prepaid advertising (to be consumed) and a liability for deferred advertising income (advertising to be provided to the client). As these are both non-cash items and given the scale of the items, the movements can distort the working capital section of Portobello’s cash flow statement. The only media assets and liabilities for which there are cash flow implications are those with respect to the actual cost of third-party media, which is a small proportion of the rate card.

We believe Q4 is typically a seasonally important time of year for Portobello as its clients will have greater demand to sell unsold products as they approach the calendar year-end, therefore, according to management, Portobello’s physical working capital investment (inventory) is higher at the year-end than is typical through the year.

Advantages of barter

The advantages of the barter model to Portobello’s suppliers are:

The ability to gain greater advertising exposure with no need to spend cash.

Improved turnover of products (fully invoiced to Portobello) that have proven to be slower moving than would otherwise have been the case, with a consequent improvement in working capital management and logistics/warehouse costs.

The advantages to Portobello of the barter model are:

The acquisition of goods for a lower cost than would otherwise have been the case, using media that is either owned (zero cost of inventory) or third party (acquired on very favourable terms given good relationships according to Portobello’s management).

Favourable working capital as advertising payment terms are longer than the period required to monetise the products with consumers.

Leveraging advertising inventory across more clients in more industries.

Retail

Portobello’s Retail activities include its own physical stores and the resale of products on other marketplaces (mainly Amazon). There is no internal e-commerce activity as management prefers to focus its marketing and promotion on developing its physical locations. In FY22, the company will begin the (delayed) rollout of franchise stores, which had been indicated as an opportunity for future growth at the time of the IPO. The rollout of franchises was delayed due to the operating restrictions caused by the COVID-19 pandemic.

Company-managed stores: Seeking national coverage

The first Portobello store was opened in December 2016 and the first store in Rome followed in April 2017. The number of stores increased to 21 by the end of FY21 and 24 at the time of writing, with a geographic footprint for open and soon-to-open stores as shown in Exhibit 6.

Exhibit 6: Locations of Portobello stores (25 March 2022)

Source: Portobello SpA

Management has an ambitious target to grow the store portfolio to a national presence, through a combination of company-managed and franchise stores, but the extent and phasing of the ambition has not been quantified. Portobello’s competitors, albeit all do not overlap in all product categories, have store portfolios that range in size from c 40 stores (Dmail) to 80 stores (Satur) to 700+ stores (Acqua e Sapone, Kasanova and Tigota), with various models (ie a combination of company-managed stores and franchises). Therefore, there appears to be a significant growth opportunity for Portobello.

The original Portobello stores were conceived and developed as neighbourhood shops located in areas of high pedestrian footfall with a served population of over 100k inhabitants. The earlier stores typically have a trading footprint of 200–250 square metres (including on-site storage), but some of the more recent stores opened have been in shopping malls and ranged in size from 1,000–2,250 square metres, albeit the latter is an outlier. Across the store portfolio, the format is the same but the number of stock keeping units (SKUs) across the product ranges varies.

Exhibit 7: A Portobello store

Exhibit 8: Inside a Portobello store

Source: Portobello SpA

Source: Portobello SpA

Exhibit 7: A Portobello store

Source: Portobello SpA

Exhibit 8: Inside a Portobello store

Source: Portobello SpA

Portobello’s product offer is typically of branded products that are slow moving for its suppliers, and therefore the suppliers are keen to monetise the inventory more quickly than otherwise might be the case. The core product categories, in descending order of sales, are: homewares (25%), electronics (25%), personal hygiene and home care (20%), clothing (15%) and other, including jewellery, gifts and food and beverages (15%). The brands offered include Samsung, Panasonic, Singer, Candy, Sodastream, Palmolive and Dove. The brand owners do not place any restrictions on the level of discounts that Portobello can offer on the products. Management expects the product offer will continue to evolve including the likely addition of furniture (which is already being trialled in larger stores), vouchers (restaurants and hotels) and extending the food range in the near term. There are the usual seasonal changes in the offer, for example back to school and Christmas, but the number of SKUs by category through the year is relatively consistent. Portobello aims to be the price leader in all categories versus its competitors, instead of being a product leader (ie it does not carry the entire product range of a supplier, only those products that can be sourced cost effectively). With respect to product selection, the stores are restocked on a weekly basis with wider product rotations made on a monthly basis, and much greater seasonal changes made every three to four months. The stores do not target a specific demographic and there is no skew to lower-income customers.

In order to increase the recognition of the brand, Portobello advertises and promotes itself both through traditional means of communication (adverts, flyers, posters etc) and through the website. Each month, Portobello creates and distributes a flyer (manually within a 1km range of each store, electronically and a 3D replica flipbook version is available on the company’s website). The flyer typically promotes the best offers available on c 150 products. At the time of the IPO, the flyer was typically four to eight pages and has grown to 12 pages at the time of writing as the store base and number of SKUs have increased. The March 2022 flyer included the following:

Front page: a range of products with prices from 0.49–399.99

Three pages of homewares (casalinghi) with prices from €1.49–69.99

One page of kitchenware (cucina) with prices from €9.99–199.99

Two pages of domestic appliances (elettrodomestici) with prices from €2.99–399.99

One page of personal care (cura della persona) with prices from 0.293.99

One page of home care (cura della casa) with prices from 0.494.99

One page of textiles (tessile) with prices from €2.9919.99

One page of textiles and kitchenware (tessile e cucina) with prices from €1.4924.99

One page of gift ideas (idee regalo) with prices from 0.9999.00.

In February 2021, PB Retail Srl (PBR) was established as the vehicle through which Portobello would accelerate its space expansion plan across Italy. Portobello owns 51% and the balance is owned by a commercial partner with strong expertise in apparel retail stores in shopping malls.

Franchises: A new route to market

Franchises will be used to develop the Portobello brand in regions where local knowledge is required and the stores are likely to be a combination of small and large stores.

Under the new franchise relationships, the franchisee is responsible for the investment in setting up the store using Portobello’s prescribed store formatting. Portobello will sell inventory to the franchisees on consignment (ie the franchisee has no inventory risk as unsold inventory can be returned to Portobello), and in return Portobello receives a royalty equivalent to 50% of the gross profit of the franchisee.

Competitors: Broad range with varying product overlap

The competitors (mentioned above) do not compete with Portobello across its entire product range. Acqua e Sapone’s offer is more focused on household care and personal care; Kasanova is focused on homewares, furniture, textiles and gift ideas; Tigota’s offer is more aligned with that of Portobello, although Tigota has a significantly higher representation in cleaning products and personal care; and Satur offers domestic appliances, table/kitchenware and home furnishings (including bathroom). In the majority of categories, Portobello also competes with local and national food retailers and online with Amazon.

Retail financials: The engine of Portobello’s growth

Following the IPO, Retail generated strong revenue growth through FY19 as space grew (number of stores and increase in average store size) and sales densities increased. The effects of COVID-19 can be seen in the slowing rate of new store growth from H120 through H121, and the decline in sales densities through FY20. The recent addition of larger stores is positive for the group’s average sales densities.

Exhibit 9: Retail financials

€m

FY16

FY17

FY18

FY19

H120

H220

FY20

H121

H221

FY21

FY22e

FY23e

Revenue

0.0

0.7

1.6

3.9

2.2

3.4

5.6

3.5

8.0

11.5

38.0

81.9

Growth y-o-y

5031%

126%

139%

56%

37%

44%

59%

134%

105%

231%

115%

Company-managed stores (number)

2

3

6

11

12

14

14

14

21

21

41

71

Sales per average store (€k)

289

364

460

191

263

449

249

407

657

1226

1462

Growth y-o-y

0%

26%

27%

(5%)

(0%)

(2%)

31%

55%

46%

87%

19%

Space (sqm)

1,045

1,295

1,965

3,066

N/A

N/A

4,969

N/A

N/A

12,988

27,988

50,488

Growth y-o-y

24%

52%

56%

N/A

N/A

62%

N/A

N/A

161%

115%

80%

Sales per average sqm (€)

618

1,004

1,554

N/A

N/A

1,398

N/A

N/A

1,280

1,800

2,000

Growth y-o-y

0%

62%

55%

N/A

N/A

(10%)

N/A

N/A

(8%)

41%

11%

Franchise stores (number)

5

20

Source: Portobello SpA, Edison Investment Research

We expect Portobello’s expansion plans for the company-managed stores including larger average store size, the maturing of new space added (typically within three years), the addition of franchises and the recovery from the initial effects of COVID-19 that affected FY20 and FY21 will lead to strong revenue growth. We forecast revenue growth of c 230% to c €38m in FY22 and further growth of 115% to c €82m in FY23.

We assume Portobello adds 20 company managed stores and five franchise stores in FY22 and a further 30 and 15 stores, respectively, in FY23, an almost doubling of company-managed space in both years. With respect to sales densities, we assume a large uplift in FY22 (fewer days’ disruption from COVID-19 and more, larger new stores) and FY23 (larger new stores)

Media

Portobello’s Media activities focus on the sale of advertising space in its proprietary fully-owned media (magazines), partially-owned media (five local newspapers), concessions (outdoor advertising in Rome and Milan, and Metro (free newspapers) in major cities including Rome, Milan and Turin, and in third-party media (Il Giornale, Forbes, Mediaset, RDS (radio), Mondadori, Gedi Group and Sky Italia).

The advertising is sold either for monetary consideration or, primarily for barter (ie in exchange for products, which it subsequently sells via its Retail or B2B channels). Therefore, with zero/low cost to Portobello, the use of its own media for barter gives Portobello a competitive advantage versus its retail competitors. With respect to third-party media, management believes it has very good relationships with media owners and therefore gains high discounts to the rate card.

Portobello's publishing activities include a number of proprietary and licensed titles. Its sole focus is selling the advertising inventory, with functions such as printing and distribution outsourced. Content creation for the individual magazines is either done in house or outsourced.

Portobello entered the publishing market in 2018 with the February launch of ORA.IT WEEKLY, a weekly magazine with a focus on gossip and entertainment, and the May launch of LEI STYLE a monthly magazine dedicated to fashion and style, both in print and online. There followed three further launches in 2018 and one in 2019. VOI, a biweekly magazine with a broad demographic focus in the family segment was launched in 2019. The number of publications has varied (six in FY19 including MONDO PET, ORA CUCINA and VOI NUOVA CRONACA. There are currently two magazines published, ORA and LEI STYLE.

In 2019 Portobello acquired 24.5% of Web Magazines Maker, which holds the exclusive Italian licence for Rolling Stone and Variety magazine under a rolling five-year licence.

Media has consistently been Portobello’s largest source of revenue, and at €54.6m in FY21, it represented 64% of group revenue. (Note Publishing’s revenue was separately disclosed until it was subsumed into the wider Media business after H119.) Media’s revenue has grown in every six-month period since IPO, except H121, as the inventory available has grown and Portobello’s client base has increased. In H121, media revenue declined by c 11% y-o-y as economic weakness surrounding COVID-19 related lockdowns led many clients to shift their advertising spend to H122, when Media revenue grew by c 50%.

B2B

All products sold through B2B channels are acquired through barter and are made to other commercial partners. Historically, the products sold through B2B were typically residual inventory (ie products not able to be sold through the other channels due to having higher inventory than the smaller store base, at the time, could sell). However, this has progressed to now include more opportunistic purchases of products that are not suitable for the retail outlets, for example cars and food and beverages, as well as remaining an outlet for residual retail inventory. Cars are only purchased after a resale channel has been identified. The cars are then retrieved from the seller and despatched to the buyer without passing through the Portobello warehouse. There is no inventory risk to Portobello.

As Portobello’s Retail channel develops, B2B is likely to become a less important source of revenue to the group, which should be positive for the absolute level of sales and profitability from a group perspective given products sold via B2B are typically at a significant discount to prices achieved in Retail.

Management believes the main benefit of the B2B channel is it improves the cash cycle by enabling it to get rid of excess stock quickly.

B2B’s revenue growth has been volatile with declines reported in H218 (c 20%) and H120 (c 33% due to COVID-19 restrictions and a greater proportion of sales through Retail, albeit both were preceded (H118: +124%) or followed (H220: +116%) by strong rates of growth.

There are no stated KPIs for B2B, and management’s narrative typically highlights the activity as opportunistic.

Management

Chairman of the board of directors – Pietro Peligra. In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. Portobello acquired a 24.5% shareholding in Web Magazine Makers (the licensee of the Rolling Stone publishing brand in Italy in 2019). After gaining a degree in electronic engineering and a master’s degree in marketing, Pietro joined Vodafone as product manager in 2003. From 2006–08 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com, and Gruppo SAE.

Co-founder and CEO – Simone Prete. Prior to co-founding Portobello, he founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM in the role of business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

CFO – Mirco Di Giuseppe. Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he became sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Co-founder and COO – Roberto Panfili. Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

Sensitivities

We believe the main sensitivities are:

Portobello is clearly exposed to the outlook for consumer disposable incomes and spending and wider macroeconomic variables such as corporate spend on advertising. Portobello’s focus on delivering greater value versus its competitors may make it less vulnerable to macroeconomic factors than its competitors. If Portobello is unsuccessful at selling products through Retail, it is exposed to further discounting in B2B.

The product categories to which Portobello is exposed are subject to changes in consumer preferences and tastes, and are highly competitive. In addition, existing or new customers may increase their focus on Portobello’s product categories. Portobello’s brand currently lacks national recognition.

Execution risk is a constant given Portobello’s ambitions to develop a national presence with a number of operating models. Its future profitability is dependent on the relative growth rates of its Retail (including franchise) and B2B activities, the relative share of goods purchased for cash and barter, and the share of owned (lower cost) versus third-party media (higher cost) required for barter. Its product offer is also likely to evolve; we note the recent entry to the sale of cars.

Management’s aspirations to expand Retail quickly will require strong working capital management given the initial investment in inventory ahead of a store opening, and expansion of the barter required to fulfil the expected demand.

Portobello’s growth strategy is partly dependent on its success in developing franchise operations, which is currently untested, and is also dependent on its ability to find suitable franchise partners. With a lower gross margin (Portobello shares half of the franchisee’s gross profit) but lower operating costs (borne by the franchisee), Portobello’s group profitability will vary with the relative rate of growth of franchises.

As Portobello’s scale evolves with a planned national coverage, its sourcing requirements will significantly increase, requiring greater volume from more suppliers than previously.

Portobello will require significantly more regional and national media coverage to continue operating with the benefits of barter. It will have to establish similar strong relationships with new media owners in order to deliver the value to suppliers that it enjoys at present. Portobello has acquired media assets to help promote its presence more regionally/nationally, therefore further acquisitions of media assets are likely in order to grow its presence across new geographies.

As for all consumer-facing companies, Portobello is exposed to possible further COVID-19 related operating restrictions, which have negatively affected its trading and store development plans. Longer-term effects from COVID-19 could include changes to working and shopping patterns including potentially less travel to city centres.

Subsequent to its IPO, Portobello has raised further equity and has continuously raised new debt to help fund its working capital requirements, chiefly the investment in new inventory ahead of store openings, and space growth.

The company’s business model is unusual and there are currently no other market examples that can serve as a reference for an assessment of its solidity and performance.

The financial statements are prepared in accordance with accounting standards as published by the Italian Accounting Body, not IFRS. Portobello is likely to adopt IFRS from FY22 and there has been no quantification by management of the potential impact of adopting IFRS. The nature of the barter model is there are non-cash transactions and hence potentially less transparency in the accounting statements with respect to working capital. Portobello is owned by a number of key shareholders who are directors of the company. Although there are clearly many associated advantages (aligned with growth etc), there is a risk their interests may not be aligned with other shareholders. Another by-product is the relative lack of liquidity in the shares. In February 2022, Roberto Panfili and Pietro Peligra modestly reduced their shareholdings in order to increase the institutional base and the free float, which rose to 35% from 32.25% previously.

Portobello undertakes related party transactions that are concluded at arm’s length, with each transaction being reviewed by an internal independent committee. The related party transactions are with companies connected to directors, former shareholders and equity-accounted companies. There are no off-balance sheet liabilities with respect to related party transactions. In FY20 the aggregate related party transactions were sales (c €2.6m) and purchases (c €3.2m).

Valuation

Our primary valuation method for Portobello is a DCF as it reflects the long-term growth potential as Portobello builds its national retail presence, albeit short-term macroeconomic shocks are difficult to predict.

DCF-based valuation: €121 per share

Our 10-year DCF assumes Portobello grows to c 240 company-managed stores (with a sales density of €2,640 per sqm) and 100 franchise stores by FY31, with a normalised operating margin of c 16% (versus c 14% in FY22e). We factor in a weighted average cost of capital (WACC) of 12% (risk-free rate 1.9%, company-specific risk premium of 15% and company beta 0.8 (source: Refinitiv)), and a terminal growth rate of 2%. In Exhibit 10 below we show the sensitivity of the valuation to differing terminal growth rates and cost of capital assumptions.

Exhibit 10: DCF sensitivity ( per share)

Terminal growth rate

121

0.0%

1.0%

2.0%

3.0%

4.0%

WACC

14.0%

86

90

94

99

105

13.5%

91

95

100

105

112

13.0%

96

101

106

113

120

12.5%

102

107

113

120

130

12.0%

108

114

121

129

140

11.5%

115

121

129

139

152

11.0%

122

130

139

151

165

10.5%

130

139

150

163

181

10.0%

139

149

162

178

200

9.5%

149

161

176

195

222

Source: Edison Investment Research

To demonstrate the sensitivity of the valuation, if we keep a consistent operating margin of 14% from FY22–31 versus our assumption above of a terminal FY31 margin of 16%, the DCF-based valuation reduces to c €102 per share.

Peer valuation: High growth justifies premium valuation

Portobello’s unique business model in the public markets, with a combination of media and retail assets and the use of barter to source products, means there are no direct peers with which to compare its valuation. In addition, financial reporting under Italian GAAP rather than IFRS means that enterprise-value based multiples are not meaningful, given for example no capitalisation of lease liabilities. In addition, under Italian GAAP lease costs are expensed through the income statement, and EBITDA is lower than under IFRS.

Notwithstanding the above, below we show consensus estimates (source: Refinitiv) for sales growth, profitability and P/E multiples for a range of general merchandise and electricals retailers across Europe and the United States. The peer group is not perfect due to the range of product exposures and the relative maturities of those businesses.

Exhibit 11: Peer valuations

Year-end

Share price (local ccy)

Currency

Market cap (local m)

EV (local m)

Sales growth 2022 (%)

Sales growth 2023 (%)

EBIT margin 2022 (%)

EBIT margin 2023 (%)

EPS growth 2022 (%)

EPS growth 2023 (%)

P/E 2022 (x)

P/E 2023 (x)

B&M European Value Retail SA

Mar

544.4

GBp

5,451

7,408

5

7

11.2

10.9

(5)

3

13.9

13.5

Ceconomy AG

Sep

3.4

EUR

1,226

1,151

1

2

1.9

2.2

(14)

13

6.4

5.7

Dunelm Group PLC

Jun

1038.0

GBp

2,100

2,348

9

6

13.3

13.2

11

1

13.2

13.0

Fnac Darty SA

Dec

47.3

EUR

1,267

2,147

0

2

3.6

3.9

N/A

10

8.1

7.3

Maisons du Monde SA

Dec

17.0

EUR

769

1,415

6

8

8.7

9.1

3

17

10.8

9.2

Puuilo Oyj

Jan

6.9

EUR

582

667

N/A

11

16.9

17.1

N/A

14

15.1

13.3

Tokmanni Group Corp

Dec

14.4

EUR

850

1,164

5

6

9.0

9.3

3

10

10.8

9.9

Unieuro SpA

Feb

16.8

EUR

348

171

0

1

2.3

2.3

(8)

1

6.9

6.9

Westwing Group SE

Dec

11.5

EUR

240

199

5

18

0.6

3.8

(53)

111

44.2

20.9

European median

5

6

8.7

9.1

-5

10

10.8

9.9

Dollar General Corp

Jan

245.8

USD

56,235

60,063

8

6

9.4

9.3

11

9

21.7

19.9

Dollar Tree Inc

Jan

162.9

USD

36,675

39,107

6

6

8.8

9.2

34

14

21.0

18.3

US median

7

6

9.1

9.2

23

12

21.3

19.1

Total median

5

6

8.8

9.2

3

10

13.2

13.0

Portobello SpA

Dec

39.2

127

144

61

53

14.0

14.0

33

53

11.3

7.4

Source: Refinitiv, Edison Investment Research. Note: priced 11 April 2022. All figures annualised to December, Portobello’s year end.

Our forecast revenue growth for Portobello of c 50–60% in FY22e and FY23e is significantly ahead of the median growth rates expected for the European peer group (5% and 6% respectively) due to its earlier stage and consequently higher rate of new space growth versus the peers. Portobello’s higher growth in sales translates to significantly higher EPS growth of 33-53% in FY22e and FY23e, which should warrant a premium valuation ahead of any discount for share liquidity and other company-specific (ie execution) risk. Attributing the median consensus European P/E multiple for FY23 of 9.9x would provide a share price for Portobello of c €52.

We consider the US-listed peers to be less relevant for comparison given the greater size of their addressable market and market capitalisation versus Portobello. However, we note there is some product overlap in lower-priced goods such as homeware, house, personal care and food. Attributing the median consensus US P/E multiple for FY23 of 19.1x would produce a share price for Portobello of c €101, and the median consensus P/E multiple for FY23 for all companies (European and US) of 13.0x would give a share price of €69.

Financials

The expansion of all Portobello’s activities has led to strong growth in revenue and profitability, including gross and EBITDA margin expansion, while its cash flow reflects the ongoing investment in the business.

Income statement: Strong growth profile

Between FY16 and FY21 Portobello achieved a revenue CAGR of c 145%, with the highest rate of growth from Retail (c 282%) and Media (c 175%) followed by B2B (c 100%). The increase in the relative contribution from the higher-profit Retail at the expense of lower-profit Media has resulted in Portobello’s gross margin growing from c 20–25% in the early years to 37.3% in FY21. In addition to revenue, Portobello reports ‘value of production’, which includes revenue and ‘other income’ (eg government grants and landlord refunds due to COVID-19 closures). As all margins quoted by the company are calculated with reference to value of production, we have adopted this method in our model. At €2.7m (c 3% of revenue) in FY21 and €1.2m (c 2% of revenue) in FY20, ‘other’ income is not material, and, by definition, quite variable. In our forecasts we assume other income continues at €1.5m pa.

Exhibit 12: Summary income statement

€m

FY16

FY17

FY18

FY19

FY20

FY21

FY22e

FY23e

Revenue

1.0

10.0

21.5

45.3

62.7

85.5

137.9

211.0

Growth y-o-y

928%

115%

111%

38%

36%

61%

53%

Media

0.3

5.9

15.3

30.4

43.0

54.6

76.6

103.5

Growth y-o-y

1591%

161%

93%

42%

27%

40%

35%

% of total

36%

58%

71%

67%

69%

64%

56%

49%

Retail

0.0

0.7

1.2

3.9

5.6

11.5

38.0

81.9

Growth y-o-y

5031%

188%

139%

44%

105%

231%

115%

% of total

1%

7%

6%

9%

9%

13%

28%

39%

B2B

0.6

3.4

4.2

11.1

14.0

19.4

23.3

25.7

Growth y-o-y

460%

20%

169%

27%

39%

20%

10%

% of total

63%

34%

19%

24%

22%

23%

17%

12%

Value of production

1.0

10.0

22.1

46.0

64.0

88.2

139.4

212.5

Gross profit

0.2

1.9

5.6

14.1

20.1

32.9

46.6

76.1

Gross margin

24.8%

18.9%

19.4%

30.6%

31.5%

37.3%

33.4%

35.8%

EBITDA

0.1

0.5

3.4

8.2

10.9

16.5

22.2

34.0

Margin

9.4%

5.4%

15.4%

17.9%

17.0%

18.7%

15.9%

16.0%

Operating profit

0.1

0.5

2.3

6.8

8.6

13.9

19.4

29.6

Operating margin

8.4%

5.1%

10.6%

14.7%

13.4%

15.7%

13.9%

13.9%

Source: Portobello SpA, Edison Investment Research

We forecast total revenue growth of 61% to c €138m in FY22 and 53% to c €211m in FY23. The key driver to our forecasts is the rapid expansion of the Retail portfolio (see Retail section), with new and larger Portobello stores and the gradual maturing of the new space over the following three years.

With limited visibility for the outlook for B2B revenue, we forecast revenue growth of 20% to c €23m in FY22 and c 10% to €26m in FY23, which is much lower than its historic growth rates. Portobello’s future gross margin should improve as B2B’s relative contribution to group revenue reduces over time.

Our revenue forecasts for Media assume that c 40% of Retail revenue and 100% of B2B revenue (ultimately sold at 40% of acquisition cost) are acquired via barter.

For gross profit we assume company-managed stores generate a gross margin of 60% (40% margin on cash-purchased items and 90% margin on barter-purchased items), and B2B’s gross margin is 100%. Our estimated gross margin of c 33% in FY22 and c 36% in FY23 compares with FY21’s 37.3%, which was flattered by other income due to the pandemic.

Below the gross margin line, we assume other operating costs, including personnel, grow in line with Retail and B2B revenue. These lead to EBITDA growth of c 34% in FY22 and 53% growth in FY23, with a slightly lower margin than FY21 due to the dilutive effect of the addition of new space with lower sales densities.

Portobello’s effective corporate tax rate has been quite volatile since IPO, ranging from c 23% in FY18 and increasing to c 32% in FY21. Our forecasts assume a corporate tax rate of 32%.

Cash flow and balance sheet: Financing funding growth

The cash flow dynamics of the use of barter were described earlier. To summarise, the company’s cash conversion cycle in barter is favourable as advertising services are typically provided over a few months while Portobello sells the products over a shorter timeframe.

A good portion of sales of advertising campaigns are concentrated in the second half of Portobello’s financial year, and more precisely, in the fourth quarter. As a result of this seasonality there may be greater concentration of advertising sales revenue and a consequent increase in the inventory of goods received in payment for the advertising sold at the end of the year.

We assume that each new store requires capex of €300k, with an additional c 15% to help fund central investment (warehouses etc) to support the growth, which we allocate equally across fixed and intangible assets. In August 2020, the company transferred its operational headquarters and warehouses in Rome. The site has approximately 2.5k sqm of office space and approximately 7.5k sqm of warehouse space. We believe the company will increase its investment, including the addition of further warehouses in new parts of Italy, as it builds its presence. For each new store, Portobello must invest capex (30–35% of total initial investment), inventory (c 50%) and a down payment to the landlord (c 15%), with the latter expensed through the income statement.

Portobello’s growth has been funded by debt raises in every year since IPO and an equity raise (a private placement that resulted in the company’s free float increasing to 26.5% from 22.7%) of c €10m in June 2021 at a share price of €41. We believe further debt raises are likely to fund the company’s expansion and initial investment in new stores.

At the end of FY21, Portobello’s gross debt was €19.8m and its net debt position was €17.3m. Portobello does not report using IFRS, therefore lease liabilities are not capitalised and its net debt position appears lower than companies that have adopted IFRS.

Exhibit 13: Financial summary

€m

2016

2017

2018

2019

2020

2021

2022e

2023e

31-December

IAB

IAB

IAB

IAB

IAB

IAB

IAB

IAB

INCOME STATEMENT

Revenue

 

 

1.0

10.0

21.5

45.3

62.7

85.5

137.9

211.0

Value of production

 

 

1.0

10.0

22.1

46.0

64.0

88.2

139.4

212.5

Cost of Sales

(0.7)

(8.1)

(15.9)

(31.2)

(42.6)

(52.6)

(91.3)

(134.9)

Gross Profit

0.2

1.9

5.6

14.1

20.1

32.9

46.6

76.1

EBITDA

 

 

0.1

0.5

3.4

8.2

10.9

16.5

22.2

34.0

Normalised operating profit

 

 

0.1

0.5

2.3

6.8

8.6

13.9

19.4

29.6

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

0.1

0.5

2.3

6.8

8.6

13.9

19.4

29.6

Net Interest

0.0

(0.0)

(0.0)

(0.1)

(0.3)

(0.9)

(0.4)

(0.4)

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

0.1

0.5

2.3

6.7

8.3

13.0

19.0

29.2

Profit Before Tax (reported)

 

 

0.1

0.5

2.3

6.7

8.3

13.0

19.0

29.2

Reported tax

(0.0)

(0.2)

(0.5)

(1.9)

(2.3)

(4.2)

(6.1)

(9.3)

Profit After Tax (norm)

0.1

0.3

1.8

4.8

6.0

8.8

12.9

19.9

Profit After Tax (reported)

0.1

0.3

1.8

4.8

6.0

8.8

12.9

19.9

Minority interests

0.0

0.0

0.0

0.0

0.0

(0.0)

(0.1)

(0.1)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

0.1

0.3

1.8

4.8

6.0

8.8

12.8

19.8

Net income (reported)

0.1

0.3

1.8

4.8

6.0

8.8

12.8

19.8

Basic average number of shares outstanding (m)

N/A

N/A

2.7

2.7

2.8

3.1

3.2

3.2

EPS - basic normalised (€)

 

 

N/A

N/A

0.66

1.75

2.15

2.84

3.97

6.11

EPS - diluted normalised (€)

 

 

N/A

N/A

0.60

1.59

1.96

2.61

3.46

5.29

EPS - basic reported (€)

 

 

N/A

N/A

0.66

1.75

2.15

2.84

3.97

6.11

Dividend (€)

N/A

N/A

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

928.3

114.9

111.0

38.3

36.4

61.3

53.0

Gross Margin (%)

24.8

18.9

25.3

30.6

31.5

37.3

33.4

35.8

EBITDA Margin (%)

9.4

5.4

15.4

17.9

17.0

18.7

15.9

16.0

Normalised Operating Margin

8.4

5.1

10.6

14.7

13.4

15.7

13.9

13.9

BALANCE SHEET

Fixed Assets

 

 

0.0

0.1

2.4

3.6

5.1

8.4

12.5

18.5

Intangible Assets

0.0

0.1

2.1

2.3

2.9

5.3

4.6

4.2

Tangible Assets

0.0

0.0

0.3

0.5

0.7

2.0

6.8

13.1

Investments & other

0.0

0.0

0.0

0.8

1.4

1.1

1.1

1.1

Current Assets

 

 

2.3

7.2

29.1

36.1

47.4

78.2

104.0

135.3

Stocks

1.7

3.3

10.5

9.3

16.4

43.9

54.9

72.6

Debtors

0.5

1.6

5.7

6.7

2.6

4.3

8.5

15.0

Cash & cash equivalents

0.0

0.5

0.6

1.0

2.6

2.5

4.7

1.5

Other (Including prepaid advertising)

0.0

1.8

12.3

19.1

25.7

27.5

35.9

46.2

Current Liabilities

 

 

(2.2)

(6.9)

(26.1)

(24.3)

(23.9)

(36.9)

(50.9)

(68.5)

Creditors (including deferred income)

(2.2)

(6.7)

(25.0)

(21.0)

(15.8)

(23.6)

(35.7)

(50.0)

Tax and social security

0.0

(0.2)

(0.6)

(2.2)

(3.7)

(7.0)

(8.9)

(12.2)

Short term borrowings

0.0

0.0

(0.5)

(1.1)

(4.3)

(6.2)

(6.2)

(6.2)

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(0.0)

(0.0)

(0.1)

(5.3)

(12.5)

(14.7)

(18.1)

(18.1)

Long term borrowings

0.0

0.0

0.0

(5.2)

(12.2)

(13.5)

(16.9)

(16.9)

Other long term liabilities

(0.0)

(0.0)

(0.1)

(0.1)

(0.3)

(1.1)

(1.1)

(1.1)

Net Assets

 

 

0.1

0.4

5.4

10.1

16.1

35.0

47.5

67.3

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.1

0.1

Shareholders' equity

 

 

0.1

0.4

5.4

10.1

16.1

35.0

47.6

67.4

CASH FLOW

Op Cash Flow before WC and tax

0.1

0.5

3.4

8.2

10.9

16.5

22.2

34.0

Working capital

(0.0)

0.3

(3.1)

(12.9)

(14.8)

(23.8)

(11.5)

(20.2)

Exceptional & other

0.0

0.0

0.0

2.1

(0.3)

(0.3)

(0.1)

(0.1)

Tax

(0.0)

(0.2)

(0.5)

(0.3)

(0.8)

(0.9)

(4.2)

(6.1)

Net operating cash flow

 

 

0.1

0.7

(0.3)

(2.9)

(5.0)

(8.5)

6.4

7.6

Capex

(0.0)

(0.2)

(3.3)

(1.5)

(2.8)

(2.7)

(6.9)

(10.4)

Acquisitions/disposals

(0.0)

0.0

0.0

(0.8)

(0.6)

(2.1)

0.0

0.0

Net interest

0.0

(0.0)

(0.0)

(0.1)

(0.3)

(0.5)

(0.4)

(0.4)

Equity financing

0.0

0.0

3.1

5.8

0.1

10.0

0.0

0.0

Borrowings

0.0

(0.0)

0.5

(0.1)

10.2

3.3

3.4

0.0

Dividends

0.0

0.0

0.0

(0.0)

0.0

0.0

0.0

0.0

Other

(0.0)

0.0

0.0

0.1

0.0

0.0

0.0

0.0

Net Cash Flow

0.0

0.5

0.0

0.4

1.6

(0.5)

2.5

(3.1)

Opening cash

 

 

0.0

0.0

0.5

0.6

1.0

2.6

2.1

4.6

FX

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Closing cash

 

 

0.0

0.5

0.6

1.0

2.6

2.1

4.6

1.5

Closing net debt/(cash)

 

 

(0.0)

(0.5)

(0.1)

5.2

13.9

17.3

18.5

21.6

Source: Portobello SpA accounts, Edison Investment Research

Contact details

Revenue by geography

Piazzale della Stazione Snc
0071 Pomezia - Zona Industrial Santa Palomba
Roma
Italia
+39 062294725
www.portobellospa.com/

Contact details

Piazzale della Stazione Snc
0071 Pomezia - Zona Industrial Santa Palomba
Roma
Italia
+39 062294725
www.portobellospa.com/

Revenue by geography

Management team

Chairman: Pietro Peligra

Chief Executive Officer: Simone Prete

In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. Portobello acquired a 24.5% shareholding in Web Magazine Makers (the licensee of the Rolling Stone publishing brand in Italy). After gaining a degree in electronic engineering and a master’s degree in marketing, Pietro joined Vodafone as product manager in 2003. From 2006–08 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com and Gruppo SAE.

Prior to co-founding Portobello, Simone founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM as business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

Co-founder & COO: Roberto Panfili

CFO: Mirco Di Giuseppe

Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he was sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Management team

Chairman: Pietro Peligra

In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. Portobello acquired a 24.5% shareholding in Web Magazine Makers (the licensee of the Rolling Stone publishing brand in Italy). After gaining a degree in electronic engineering and a master’s degree in marketing, Pietro joined Vodafone as product manager in 2003. From 2006–08 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com and Gruppo SAE.

Chief Executive Officer: Simone Prete

Prior to co-founding Portobello, Simone founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM as business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

Co-founder & COO: Roberto Panfili

Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

CFO: Mirco Di Giuseppe

Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he was sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Principal shareholders

(%)

Simone Prete

21.3

Stefano Caporicci

18.5

Pietro Peligra

14.3

Roberto Panfili

6.7

Expandi S.r.l.

4.1

AcomeA SGR

2.9

Florida State Board of Administration

1.4


General disclaimer and copyright

This report has been commissioned by Portobello SpA and prepared and issued by Edison, in consideration of a fee payable by Portobello SpA. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Portobello SpA and prepared and issued by Edison, in consideration of a fee payable by Portobello SpA. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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