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Storming ahead

La Doria 22 March 2021 Update
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La Doria

Storming ahead

FY20 results

Food & beverages

22 March 2021

Price

€16.94

Market cap

€525m

Net debt (€m) at 31 December 2020

140.2

Shares in issue

30.6m

Free float

37%

Code

LD

Primary exchange

Borsa Italia (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

16.5

28.1

106.6

Rel (local)

11.4

16.4

32.2

52-week high/low

€16.94

€8.19

Business description

La Doria is the leading manufacturer of private-label preserved vegetables and fruit for the Italian (17% of revenues) and international (83% of revenues) market. It enjoys leading market share positions across its product ranges in the UK, Italy, Germany and Australia.

Next events

Q121 results

14 May 2021

AGM

10 June 2021

H121 results

10 September 2021

9M21 results

12 November 2021

Analysts

Sara Welford

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

La Doria is a research client of Edison Investment Research Limited

La Doria has had an outstanding year, driven by record volume growth as consumers were forced to eat more meals at home. Volumes were up an impressive 16.2% during the year, which led to significant operating leverage. Margins also benefited from the cost savings coming through from the industrial plan launched in 2018, hence were up 200bps at the EBITDA level. The board has proposed a dividend of €0.50/share, and has approved a new three-year strategic plan, given that the FY20 results exceeded the FY22 goal. The new plan continues to target growth in the value-added and higher-margin product categories, and recognises that FY20 was an exceptional year: revenues are expected to fall in FY21 as consumption slowly returns towards more normal levels, although profitability will continue to benefit from the aforementioned cost savings.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/19

717.7

32.7

64.0

18.0

26.5

1.1

12/20

848.1

63.3

182.8

50.0

9.3

3.0

12/21e

805.7

61.8

153.5

41.0

11.0

2.4

12/22e

813.8

66.5

164.1

44.0

10.3

2.6

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

An excellent FY20 performance

Group revenues for FY20 were €848.1m, up 18.2% on FY19, while Q4 revenues were €214.7m (+16.0% y-o-y). FY20 EBITDA was €83.1m (+48.4% on FY19), with margins up 200bp. Q420 EBITDA was €26.6m (+68.4%), with margins up 390bp. Net debt was €140.2m, versus €105.2m at the end of the first nine months of 2020 (9M20). All segments and geographies contributed to the excellent revenue growth: international growth was 20%, while domestic markets (17% of sales) were up 8%. The sauces line witnessed sales growth of 24%, and hence contributed to a positive mix effect given its higher margins.

FY21 will be softer, still ahead of FY19 expectations

The volume growth experienced in FY20 is not sustainable, and indeed we expect lower volumes in FY21. La Doria’s benefit from operational gearing will reduce as volumes fall, but its cost-cutting efforts will continue to have a positive impact on the bottom line. We also believe the pandemic has caused a structural and lasting increase in at-home consumption owing to more working from home in future.

Valuation: Fair value of €20.00

Our DCF model indicates a fair value of €20.00 per share (previously €17.00), or c 20% upside from the current share price. La Doria trades on a P/E of 11.0x FY21e, a c 40% discount to its private-label peer group. On EV/EBITDA it trades at 7.9x FY21e, a c 10% discount. We believe La Doria remains an attractive proposition, given the strength of its market position in the private-label segment. Management remains committed to improving the stability of the business, while continuing to invest to maintain its competitive edge.

FY20 results review and outlook

Consolidated revenues were up 18.2% to €848.1m year-on-year, or +19.1% at constant currency. EBITDA was up 48.4% to €83.1m, with the EBITDA margin up 200bp to 9.8%. EBIT was up 87.5% to €64.8m, with the margin up 280bp to 7.6%. Net debt was €140.2m vs €148.8m at the end of FY19 and €105.2m at the end of 9M20 (net debt at the 9m stage is always at a seasonal high). As planned investment – detailed in the 2018 industrial plan – to upgrade La Doria’s business capabilities and UK logistics platform has come to an end, we should see net debt falling at a faster rate over the next few years.

We illustrate how the FY20 results fared compared to our expectations in Exhibit 1 below.

Exhibit 1: Estimates vs actual FY20 results (€m)

Forecast

Actual

% change

Revenue

839.7

848.1

1.0

EBITDA

72.3

83.1

15.0

EBIT

55.3

64.8

17.2

PBT (pre-exceptional)

53.8

63.3

17.8

Net profit

41.4

56.7

37.0

Net debt

130.3

140.2

7.6

EBITDA margin

8.6%

9.8%

120bp

EBIT margin

6.6%

7.6%

100bp

Source: Edison Investment Research, La Doria data

Performance was good across all categories, with the ready-made sauces segment as the stand-out performer, up 23.8% in revenue terms. The red line performed strongly, with organic sales up 19.8%. The pulses and vegetables and fruit lines also showed good growth (+10.3% and 4.3%, respectively), while ‘other lines’ (ie the trading business that goes through UK subsidiary LDH) was up 27.4%.

Forecasts

As usual with its full year results, La Doria has published its updated rolling three-year business plan. In light of the exceptional performance in FY20, which exceeded the 2022 target originally set in the 2020–22 plan, targets have been raised. As mentioned above, FY20 volume growth is unsustainable, and indeed management now expects a decline in FY21, though margins are still expected to expand. This is due to the profitability continuing to benefit from cost savings stemming from the industrial plan and to a more favourable supply/demand balance in the industry (given stocks remain low). We illustrate the change in targets in Exhibit 2 below.

Exhibit 2: Old vs new company financial targets

€m

2021e

2022e

Old

New

% chg

Old

New

% chg

Revenue

753

800

6.2

757

813

7.4

EBITDA

63

83

31.7

66

91

37.9

EBIT

42

62

47.6

46

69

50.0

PBT

40

62

55.0

44

68

54.5

Net Profit

31

46

48.4

34

51

50.0

Operating cash flow

54

66.0

22.2

56

69.0

23.2

Capex

12

13.0

8.3

12

13.0

8.3

FCF

42

53.0

26.2

44

56.0

27.3

Dividend payout (on parent company profit)

30%

30%

30%

30%

Net cash flow

27

35

29.6

30

37

23.3

Net debt

129

105

(18.6)

99

68

(31.3)

Debt/EBITDA (x)

2.0

1.3

(35.0)

1.5

0.7

(53.3)

Gearing (x)

0.4

0.3

0.3

0.2

ROI

10.1%

14.7%

460

11.2%

16.3%

510

ROE

10.7%

14.4%

370

10.8%

14.4%

360

Source: La Doria data

We have adjusted our FY21–23 forecasts to reflect the FY20 results and updated guidance. Our revenue forecasts are cut slightly (although we believe management is being conservative in its guidance), while EBITDA increases materially thanks to the higher FY20 base.

Exhibit 3: Old vs new forecasts

2021e

2022e

2023e

€m

Old

New

% chg

Old

New

% chg

Old

New

% chg

Revenue

814.5

805.7

-1.1%

822.6

813.8

-1.1%

834.9

830.1

-0.6%

EBITDA

72.5

83.8

15.5%

74.1

89.5

20.8%

76.0

95.5

25.6%

EBIT

53.5

62.8

17.3%

54.1

67.5

24.8%

56.0

73.5

31.1%

PBT

52.0

61.8

18.8%

52.6

66.5

26.5%

54.5

72.5

32.9%

Net profit

40.1

47.6

18.8%

40.2

50.9

26.5%

39.8

52.9

32.9%

Net debt

101.0

100.8

-0.2%

74.1

63.8

-13.9%

43.1

21.5

-50.1%

Source: Edison Investment Research

Valuation

We illustrate La Doria’s valuation versus its peers in Exhibit 4 below. On 2021 estimates, La Doria currently trades at a c 40% discount on P/E, which we believe is unwarranted given the company’s balance sheet is conservatively managed. On EV/EBITDA, La Doria trades at a c 10% discount.

Exhibit 4: Benchmark valuation of La Doria relative to peers

Market cap

P/E (x)

EV/EBITDA (x)

Dividend yield (%)

(m)

2021e

2022e

2021e

2022e

2021e

2022e

Greencore

£821.4

37.6

34.5

14.2

12.0

0.0

1.5

Ebro Foods

€ 2,649.1

13.2

15.1

8.0

9.1

3.6

3.6

Bonduelle

€ 710.0

11.8

11.5

8.2

7.5

2.2

2.2

Valsoia

€ 145.4

17.4

17.7

9.4

9.8

2.8

2.8

Centrale del Latte d'Italia

€ 42.2

11.6

4.6

8.8

5.3

0.0

0.0

Newlat

€ 270.5

17.6

19.6

5.8

5.9

0.0

0.0

Peer group average

18.2

17.1

9.1

8.3

1.4

1.7

La Doria

€ 525.1

11.0

10.3

7.9

7.4

2.4

2.6

Premium/(discount) to peer group

(39.3%)

(39.8%)

(12.6%)

(10.0%)

70.4%

54.7%

Source: Edison Investment Research estimates, Refinitiv. Note: Prices at 17 March 2021.

Our primary valuation methodology is DCF analysis and we calculate a fair value of €20.00/share (previously €17.00) or c 20% upside from the current level. This is based on our (unchanged) assumptions of a 1.5% terminal growth rate and a 7.0% terminal EBIT margin. Our WACC of 6.4% is predicated on an equity risk premium of 4.5%, borrowing spread of 6% and beta of 0.8.

Below, we show a sensitivity analysis to our assumptions and note that the current share price is discounting a terminal EBIT margin of 5.5% and a terminal growth rate of c 1%. This compares with La Doria’s FY19 EBITDA margin of 7.8% and trough EBIT margin of 4.8%, and FY20 margins of 9.8% and 7.6% respectively.

Exhibit 5: DCF sensitivity to terminal growth rate and EBIT margin (€/share)

EBIT margin

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Terminal growth

-2.5%

11.7

12.4

13.0

13.7

14.4

15.0

-1.5%

12.4

13.2

13.9

14.7

15.4

16.2

-0.5%

13.3

14.2

15.0

15.9

16.8

17.6

0.5%

14.5

15.5

16.6

17.6

18.6

19.7

1.5%

16.2

17.5

18.7

20.0

21.3

22.5

2.5%

18.8

20.4

22.1

23.7

25.3

26.9

3.5%

23.4

25.6

27.9

30.1

32.3

34.6

Source: Edison Investment Research estimates

Exhibit 6: Financial summary

€m

2018

2019

2020

2021e

2022e

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

687.9

717.7

848.1

805.7

813.8

830.1

846.7

Cost of Sales

(581.7)

(604.2)

(706.9)

(668.3)

(671.7)

(682.7)

(695.5)

Gross Profit

106.2

113.5

141.3

137.4

142.1

147.4

151.2

EBITDA

 

 

52.8

56.0

83.1

83.8

89.5

95.5

98.2

Operating Profit (before amort. and except.)

34.8

34.6

64.8

62.8

67.5

62.8

67.5

Intangible Amortisation

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

FX Gain / (loss)

3.2

(5.0)

4.9

0.0

0.0

0.0

0.0

Operating Profit

37.9

29.5

69.7

62.8

67.5

73.5

78.2

Net Interest

(1.7)

(1.8)

(1.5)

(1.0)

(1.0)

(1.0)

(1.0)

Profit Before Tax (norm)

 

 

33.1

32.7

63.3

61.8

66.5

72.5

77.2

Profit Before Tax (FRS 3)

 

 

36.3

27.7

68.2

61.8

66.5

72.5

77.2

Tax

(8.9)

(7.9)

(11.5)

(14.2)

(15.6)

(19.6)

(20.8)

Profit After Tax (norm)

27.3

19.9

56.7

47.6

50.9

52.9

56.4

Profit After Tax (FRS 3)

27.3

19.9

56.7

47.6

50.9

52.9

56.4

Average Number of Shares Outstanding (m)

31.0

31.0

31.0

31.0

31.0

31.0

31.0

EPS - normalised fully diluted (c)

 

 

88.2

64.0

182.8

153.5

164.1

170.6

181.8

EPS - (IFRS) (c)

 

 

88.2

64.0

182.8

153.5

164.1

170.6

181.8

Dividend per share (c)

18.0

18.0

50.0

41.0

44.0

46.0

49.0

Gross Margin (%)

15.4

15.8

16.7

17.1

17.5

17.8

17.9

EBITDA Margin (%)

7.7

7.8

9.8

10.4

11.0

11.5

11.6

Operating Margin (before GW and except.) (%)

5.1

4.8

7.6

7.8

7.8

8.3

8.8

BALANCE SHEET

Fixed Assets

 

 

203.5

246.0

246.8

255.4

264.2

273.8

285.5

Intangible Assets

5.5

5.1

7.5

6.8

6.1

5.4

4.7

Tangible Assets

175.9

221.6

219.5

212.2

203.9

195.6

188.3

Investments

22.1

19.3

19.9

36.5

54.3

72.8

92.5

Current Assets

 

 

419.4

384.4

433.5

456.9

497.0

547.8

600.2

Stocks

204.4

219.1

247.2

233.2

235.1

240.3

243.4

Debtors

110.2

109.8

126.1

124.1

125.3

128.7

131.2

Cash

86.8

42.0

51.1

90.5

127.5

169.8

216.5

Other

18.0

13.5

9.1

9.1

9.1

9.1

9.1

Current Liabilities

 

 

(242.3)

(246.6)

(276.2)

(259.4)

(259.4)

(262.1)

(264.4)

Creditors

(148.4)

(153.9)

(172.2)

(155.4)

(155.4)

(158.0)

(160.4)

Short term borrowings

(93.9)

(92.7)

(104.0)

(104.0)

(104.0)

(104.0)

(104.0)

Long Term Liabilities

 

 

(139.3)

(130.3)

(112.7)

(112.7)

(112.7)

(112.7)

(112.7)

Long term borrowings

(105.2)

(98.2)

(87.3)

(87.3)

(87.3)

(87.3)

(87.3)

Other long term liabilities

(34.1)

(32.2)

(25.4)

(25.4)

(25.4)

(25.4)

(25.4)

Net Assets

 

 

241.4

253.6

291.5

340.2

389.2

446.8

508.6

CASH FLOW

Operating Cash Flow

 

 

48.2

38.7

54.9

68.9

70.7

70.0

74.0

Net Interest

(1.7)

(1.8)

(1.5)

(1.0)

(1.0)

(1.0)

(1.0)

Tax

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Capex

(46.5)

(59.4)

(19.1)

(13.0)

(13.0)

(13.0)

(12.0)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Financing

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

(9.6)

(6.9)

(19.8)

(15.5)

(12.7)

(13.7)

(14.3)

Other

(4.6)

(7.0)

(5.9)

0.0

(7.0)

0.0

0.0

Net Cash Flow

(14.1)

(36.5)

8.6

39.4

37.0

42.3

46.7

Opening net debt/(cash)

 

 

98.2

112.3

148.8

140.2

100.8

63.8

21.5

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(0.0)

0.0

(0.0)

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

112.3

148.8

140.2

100.8

63.8

21.5

(25.2)

Source: Edison Investment Research, company data


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Australia

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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.

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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.

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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

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