Working towards a transformation

La Doria 29 May 2019 Outlook
Download PDF

La Doria

Working towards a transformation

Q119 results

Food & beverages

29 May 2019

Price

€8.19

Market cap

€254m

Net debt (€m) at 31 March 2019

122

Shares in issue

30.9m

Free float

37%

Code

LD

Primary exchange

Borsa Italia (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.6

(3.5)

(24.3)

Rel (local)

9.0

(1.3)

(17.8)

52-week high/low

€12.14

€7.48

Business description

La Doria is the leading manufacturer of private-label preserved vegetables and fruit for the Italian (20% of revenues) and international (80% of revenues) markets. It enjoys leading market share positions across its product ranges in the UK, Italy, Germany and Australia.

Next events

H119 results

12 September 2019

9m 19 results

13 November 2019

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

The challenging economic backdrop continues, as expected, but La Doria has delivered a good start to 2019. There was some benefit due to UK customers stockpiling ahead of a potential hard Brexit, but it is hard to quantify. Organic growth of 2% was mainly volume-driven, while margins were down due to higher production costs, which were only partially offset by increased volumes and pricing. The industrial plan set out in March 2018 continues to be delivered, with several new production lines added during FY18 and the UK logistics platform undergoing a significant upgrade. We leave our estimates unchanged ahead of the all-important seasonal campaigns and our fair value remains €13.60.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

669.1

39.7

98.1

23.0

8.3

2.8

12/18

687.9

33.1

88.2

18.0

9.3

2.2

12/19e

690.0

35.0

82.4

20.0

9.9

2.4

12/20e

717.6

39.7

93.5

21.0

8.8

2.6

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

Q119 results

Organic growth of 2% benefited from Brexit-related stockpiling. Although the company has not quantified this, we estimate the impact could be c 50bps, and is likely to unwind in Q2, though this is likely to be offset by improvement in other markets. At a divisional level, the vegetables and sauces businesses were up, while the tomato and fruit businesses were down. The group EBITDA margin contracted 60bps to 6.2% due to higher production and raw material costs.

Continuing to invest for the future

In March 2018 La Doria announced the implementation of an investment plan to shift the business mix further towards its value-added products (which are faster-growing, command higher margins and are less exposed to seasonal cycles). The plan also targets cost reductions by closing some industrial sites, extending and automating warehouses, and improving logistics. The overall project capex over the FY18–21 period is expected to be €122m, with €45m invested in FY18 and €50m forecast for FY19. To date, the plan has been executed on schedule and on budget.

Valuation: €13.60 per share

Our estimates are unchanged following the Q1 results. Consequently, our DCF model still indicates a fair value of €13.60 per share (unchanged), suggesting the current share price offers a good entry point. La Doria trades on 9.9x FY19e P/E, a c 30% discount to its private-label peer group. On EV/EBITDA it trades at 7.4x FY19e, a c 15% discount. We believe La Doria remains an attractive proposition, given the strength of its market position in the private-label segment, as well as management’s commitment to improving the stability and visibility of the business by reducing its reliance on the more volatile tomato line, while continuing to invest in the business in order to maintain its competitive edge.

Investment summary

Company description: Leading private-label manufacturer

La Doria is a leading manufacturer and processor of tomatoes, sauces, pulses and fruit-based products. It has a presence in both the Italian market (20% of sales) and internationally (80% of revenue). Over time, management has been trying to shift the product mix towards higher-value and higher-margin products, which also tend to exhibit less volatility, and expand into new markets.

La Doria was founded in 1954 by the Ferraioli family. The family maintains active management of the company. Antonio Ferraioli is group chairman and co-CEO, and Andrea Ferraioli is co-CEO. Iolanda Ferraioli, Diodato Ferraioli and Enzo Lamberti are members of the Board, meaning the family fills five of the nine board positions and owns 63% of the group’s share capital.

Valuation: Significant upside remains

We calculate a DCF-based fair value of €13.60 per share, or c 65% upside. As ever, there is good visibility regarding the current year’s numbers: pricing for the tomato, vegetable, fruit and sauces lines is complete and costs are fully calculated, as the 2018 seasonal campaigns are over and the annual pricing rounds have occurred. Conversely, the outcome of the 2019 seasonal campaigns (affecting mainly FY20) is still unknown. Success here would provide a catalyst for the shares. The updated three-year rolling industrial plan, announced in March, follows the stated strategy to transform the business by shifting the product mix towards higher-margin products, while ensuring competitiveness is maintained on the more commoditised lines. The investment plan, announced in March 2018, continues to be executed. We also look at La Doria’s key metrics compared to its peer group. At 9.9x 2019e P/E and 7.4x 2019e EV/EBITDA, it trades at c 30% and c 15% discounts, respectively, to its peers.

Q119 results

Q119 group revenue was €183.8m, up 2.7% on the prior year. Organic growth was 2%, mainly driven by volume increases, though pricing was also positive on the manufacturing side. The trading activities of LDH witnessed particularly strong revenue growth (+9.2%) despite strong competition. Performance was boosted by customer stockpiling ahead of a feared hard Brexit on 29 March, though it is hard to gauge the precise impact on sales (we estimate c 50bps). Q1 group EBITDA was €11.4m vs €12.2m in the prior year, with margin contracting 60bps to 6.2% due to continued raw material pressures and higher production costs. Over the next few years, we expect the benefits of the industrial plan will come through and will help to improve margins. Management is currently targeting a 9.4% EBITDA margin in FY21; we forecast 8.8% and this compares to FY18 reported (trough) margin of 7.7%. In the shorter term, we expect Q2 to witness similar trends to those in Q1 in terms of higher raw material and production costs. In addition, the Brexit-related stockpiling should unwind, though we believe this should be compensated by improvements in other geographies. Q3 and – to a greater extent – Q4 will partially depend on the results of the 2019 seasonal campaigns.

Sensitivities: Raw materials still a key variable

La Doria’s key sensitivities include:

input cost inflation on the agricultural commodities it processes to manufacture its products;

the supply/demand balance affecting the achievability of price inflation on finished goods (particularly for the red line);

consumer consumption patterns and competitive pressures; and

FX, specifically euro/sterling due to the consolidation of its trading subsidiary, LDH.

Company description: A private-label champion

La Doria is the leading Italian producer of tinned tomatoes, and processed pulses and vegetables for the Italian and international markets. It is the largest producer of private-label (PL), ready-made sauces. It is the second-largest producer of fruit juices and beverages in the Italian market. Exhibits 1 and 2 below break down revenues by category and by geography. In FY18, 20% of revenue was from the domestic market and 80% was international. Its largest market by far is the UK (c 50% revenues), gained through its subsidiary LDH.

Exhibit 1: Group revenue split by category (FY18)

Exhibit 2: Group revenue split by geography (FY18)

Source: La Doria data

Source: La Doria data

Exhibit 1: Group revenue split by category (FY18)

Source: La Doria data

Exhibit 2: Group revenue split by geography (FY18)

Source: La Doria data

La Doria supplies a wide selection of European and international food retailers. Tesco remains its largest customer, but the customer base includes Asda, Sainsbury’s, Carrefour, Morrisons, Walmart, Aldi, Lidl and many more. 95% of La Doria’s sales are in the private-label segment, with 4% of sales deriving from branded products and the remainder from co-packing arrangements for branded manufacturers.

La Doria commands leading PL market share positions in its largest markets (the UK and Italy) and some of its other markets (Germany, Scandinavia, Japan, Australia), and across many of its product categories. It has benefited from its scale and reliability when dealing with its major customers, and from the increasingly discerning consumer, who prefers high-quality, private-label products.

Over the past decade or so, the group strategy has been to gradually shift the sales mix of the group towards non-seasonal, value-added products, in order to reduce the volatility of results and to increase margins. For example, in FY08, the tomato business (red line) accounted for 31% of sales and 60% of EBITDA. In FY18 the tomato business represented 22% of sales and we estimate c 30% of EBITDA. The business plan announced in March builds on last year’s industrial plan. The strategy remains to:

expand the higher-margin product lines;

invest in the premium and organic segments (which are also higher margin);

extend the group’s geographic reach to faster-growing markets; while

strengthening the group’s existing positions by reducing costs in order to remain competitive.

The business plan to FY22

La Doria outlines its financial targets and strategic business plan for a rolling three-year period, usually at the beginning of each financial year. The industrial plan set out in March 2018 continues to be implemented, and the new targets published in March 2019 were below prior guidance, as illustrated in Exhibit 3 below. Management cut its expectations in light of the tough trading environment. In particular, the introduction of European duties on imports of dried pulses from the US was unexpected, and the 2018 tomato campaign was the toughest in recent years.

Exhibit 3: Current vs prior financial targets (2019–21e)

2019e

2020e

2021e

€m

Old

New

% change

Old

New

% change

Old

New

% change

Revenue

712

691

-2.9%

736

721

-2.0%

757

742

(2.0%)

EBITDA

65

53

-18.5%

71

64

-9.9%

79

70

(11.4%)

EBIT

48

38

-20.8%

54

45

-16.7%

59

48

(18.6%)

PBT

46

35

-23.9%

52

43

-17.3%

57

47

(17.5%)

Net profit

34

26

-23.5%

38

32

-15.8%

43

35

(18.6%)

Net debt

117

148

26.5%

96

131

36.5%

66

101

53.0%

EBITDA margin (%)

9.1%

7.7%

150bps

9.6%

8.9%

-80bps

10.4%

9.4%

-100bps

EBIT margin (%)

6.7%

5.5%

-120bps

7.3%

6.2%

-110bps

7.8%

6.5%

-130bps

Source: La Doria data

We compare our forecasts to guidance in the Financials section on page 9.

The industrial plan was borne out of the prevailing circumstances, namely an increasingly challenging competitive environment, and the ever-increasing clout of the major retailers, particularly in the private-label category.

The industrial plan aims to transform the business by:

strengthening La Doria’s leadership in the private-label markets in which it operates; and

laying the foundations for future organic growth and improving flexibility to tackle upcoming market challenges. This includes assessing acquisition-led growth opportunities.

This is being implemented via a major investment plan, which is expanding and reshaping capacity while increasing efficiency and reducing costs. The overall capex spend over the FY18–21 period is expected to be €122m, with €45m invested in FY18 and €50m forecast for FY19.

The industrial plan is based on two strategic aims: revenue growth and margin expansion.

Revenue growth

The 2019 strategic guidelines confirm those set out in 2018 and are as follows:

Expand higher value-added product ranges, investing in the premium and organic/bio segments, which are higher margin.

Strengthen existing group market positions in international markets, for example Germany, France, Scandinavia, Japan and Australia.

Extend growth in markets where La Doria is currently under-represented (mainly the US), or where there is high potential, such as emerging markets (China, South-East Asia, Latin America).

Assess acquisition opportunities to extend the range, in particular with the objective of reducing the group’s exposure to the volatile tomato line.

Margin expansion

Margin expansion should come through together with revenue growth if the guidelines above are implemented, as improved mix should drive higher margins. In addition, investment in new technology should continue to improve efficiency, thus reducing costs and hence driving up margins.

During FY18 the group increased its production capacity in sauces by installing a new production line at its Parma plant. All sauces are now produced in the same location, as the Acerra plant was closed. A new automated warehouse facility was also installed at the Parma site, doubling storage capacity. A new can production line was added at the Sarno plant, and tomato-based products manufacturing capacity was increased at the Fisciano site by adding a new aseptic production line. In the UK, La Doria subsidiary LDH is implementing an extensive, highly automated logistics platform.

More specifically, the investment plan includes:

an expansion of capacity, mainly focused on ready-made sauces, pulses and the internal production of cans. This is aimed at supporting future growth and commercial development, and driving economies of scale. As discussed above, most of these new lines were installed during FY18.

rationalising industrial sites by closing the Acerra plant and streamlining production. Again, as discussed above, the Acerra plant was successfully closed during FY18 so this objective has been met.

increasing efficiency and reducing costs through the improvement and automation of existing warehousing facilities, and establishing a major UK logistics platform to better serve its large-scale retail customers. This is a large and complex investment, and the first phase of the UK logistics platform overhaul has been completed, though the automated facility is not expected to be fully operational until FY21.

management’s published targets point to an EBITDA margin of 9.4% by FY21 vs 7.7% reported in FY18 and also expected in FY19. We forecast margins of 7.7% in FY19 and 8.8% in FY21, as detailed in Exhibit 6.

Business overview

La Doria operates in four distinct categories, namely tomato-based products, pulses and vegetables, ready-made sauces, and fruit-based products. In addition, it also sells both its products and those of third parties through a holding in its UK subsidiary, LDH. We look at each of these in turn.

Tomato-based products – the red line

La Doria is the largest producer in Italy of peeled and chopped tomatoes and it is market leader in UK, German, Scandinavian Australian and Japanese private-label canned tomatoes. As illustrated in Exhibit 1, the red line (tomato-based products) contributed 22% of revenues in FY18.

La Doria’s tomato business is seasonal and can be volatile. Over the last five years or so, the supply of Italian tomatoes has stabilised considerably thanks to legislative reform and structural consolidation. The industry now operates more effectively as a cohort and interests are better-aligned to avoid significant overproduction. Indeed, over the past few years, production has come in broadly in line with expectations, and huge overproduction seems to be an issue of the past.

Sector consolidation among the producers has also helped pricing, as there were a number of small businesses that at times made seemingly irrational pricing choices. Although consolidation has helped to mitigate the fragmentation issue, some small players still remain and pricing still comes under pressure if campaign conditions are imperfect.

The annual tomato campaign runs from the end of July to the end of September. Typically, La Doria negotiates annual contracts with its customers, and hence prices, just before or during the processing season. This gives La Doria good visibility over the outlook for its profitability until Q3 of the following year, when the next pricing rounds occur. La Doria establishes both the volume and pricing of the contracts, so by the end of the processing campaign the total cost is broadly known.

In 2018 the tomato campaign was difficult due to the poor climatic conditions, particularly from the middle of August. This resulted in lower yields, which combined with less land dedicated to tomato cultivation caused the overall Italian tomato crop to come in at 4.65m tonnes, down 10.5% on the 2017 crop. The problems were compounded by poor crop quality and intermittent supply, thus resulting in higher production costs (due to lower industrial yields and lower processing efficiency). In addition, tin plate and energy costs were also higher.

On the demand side, Italian tomato consumption continues to decline: during FY18 the market (including the discount channel) was down 4.3% in both volume and value terms (source: IRI Infoscan). This compares to volumes down 0.5% in FY17 and value down 1.8%. The brands increased their promotional activity in the face of a declining market, and hence private-label share was down to 30.8% in FY18 from 31.7% in FY17 (source IRI Infoscan).

In contrast, a number of La Doria’s larger export markets expanded. In the UK the tomato-based products market was up 1.8% in volume terms and 2.1% in value terms (source: Kantar Worldpanel). Private label outperformed the market by growing 4.2% and gaining 160bps share to reach 71.6% market share. Conversely, brands contracted by 3.6% and lost share.

2019 outlook

It is still early days for the 2019 campaign, but our current forecast is for a 5–7% increase in total tomato production at national level, to 4.9–5.0m tonnes. La Doria management expects fresh tomato pricing to be up compared to FY18, though quality of the crop and industrial yield are still to be determined. The drop in production in 2018 caused sector destocking, which has resulted in a recovery of market prices for tomato-based products. Our forecasts reflect this relatively benign outlook.

Pulses and beans

La Doria is market leader in Italy and the UK in private-label preserved pulses. As shown in Exhibit 1, the vegetable line (pulses and beans) represented 28% of revenues in FY18.

FY18 was mainly affected by the 2017 summer harvest. This witnessed substantially improved harvests compared to the prior year, and hence a reduction in raw material costs. The 2018 summer harvest was broadly stable in terms of crop quality and quantity, and hence procurement prices were also flat. That said, in H218 pulse prices were affected by customs duties levied by the EU in response to US duties that became applicable to certain goods. As mentioned above, tin plate prices were higher in FY18. All this resulted in higher production costs.

On the consumption side, during FY18 the Italian canned vegetable market was down 4.3% in volume terms and 3.5% in value terms (source: IRI InfoScan). The private-label segment gained 40bps of volume share to 60.4%. In the UK, La Doria’s key product in the category is private-label baked beans. In 2018 the overall baked beans market grew in both volume (+0.9%) and value (+1.3%). Private-label share gained significantly (+7.5% in volume terms) and was up 270bps to 43.8% (source: Kantar Worldpanel).

La Doria management is keen to further expand the vegetable line, and indeed part of the investment in the industrial plan was to free up capacity for further production of pulses in carton packaging. Although this division has suffered from competitive pressures in the past – in the UK, in particular, due to Brexit-related effects – it offsets the more commoditised red line products and also has the advantage that production can occur throughout the year, rather than being concentrated in the three summer months of the tomato processing campaign. Further expanding the vegetable line would therefore help improve group efficiency and reduce the volatility of the overall group.

Outlook

We expect costs will continue to be elevated also due to the duties levied by the EU, and therefore margins are likely to remain at FY18 levels.

The fruit line

During FY18 the fruit business accounted for 9% of revenues (Exhibit 1). La Doria remains the market leader in Italian private-label fruit juices and fruit beverages, and has a number two position in the Italian market overall. The profitability of the fruit line is below that of other segments, as it has suffered through years of underperformance caused by weak economic conditions, reduced consumption and a general industry overcapacity. As for the other divisions, 2018 pricing was mainly driven by the 2017 crop, which featured a slight increase in supply, and hence a small decline in procurement prices. The 2018 crop, however, witnessed a reduction in supply due to cold spring weather, and hence a slight increase in pricing.

On the demand side, during FY18 the Italian fruit juice market was down 4.8% in volume terms and 5.4% in value terms (source: IRI InfoScan). The private-label segment had stable volume market share at 44%.

Sauces

La Doria is the market leader in Italy in private-label pasta sauce, and the segment accounted for 13% of revenues in FY18 (see Exhibit 1). FY18 was a tough year, as the segment was hit by raw material price increases, while fierce competition led to pricing declines.

During the year the overall Italian market (excluding the discount channel) witnessed growth in both value (+3.5%) and volume (+2.1%) terms (source: IRI InfoScan). Tomato-based sauces volumes were up 1%, while pesto sauce volumes were up 7% (source: IRI InfoScan). Private-label tomato-based sauce volumes were up 6.3%, and pesto sauce volumes were up 12.9%. Private label holds a c 17% market share in both subcategories, up from c 16% in FY17 (source: IRI InfoScan).

In the UK, the sauces market (excluding pesto) was down 1.3% in volume terms, and 5.7% in value (source: Kantar Worldpanel). Private-label share grew by 410bp to 47% at the expense of the brands. The pesto market was up significantly, with volume growth of 8.2% and value up 10.6%. Again, private-label share expanded, and now stands at 70.3%.

Other lines (trading as LDH)

La Doria owns 58.0% of its subsidiary, La Doria Holdings, or LDH. For accounting purposes, it consolidates 100% of its minorities, and treats as debt the value of the put options that exist against it. LDH is the leader in the British market for private-label, tomato-based products, baked beans, dry pasta and canned tuna. The ‘other’ category is mainly composed of LDH’s sales and accounted for 28% of group sales in FY18.

The remaining 42% stake in LDH is owned by a combination of Thai Union Group, Di Martino and management. LDH’s three major shareholders – La Doria, Thai Union Group and Di Martino – together supply the majority of its ranges across tomatoes, pulses, tuna and pasta.


Valuation

We illustrate La Doria’s valuation versus its peers in Exhibit 4 below. On 2019 estimates, La Doria currently trades at a c 30% 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 15% discount.

Exhibit 4: Benchmark valuation of La Doria relative to peers

Market cap (m)

P/E (x)

EV/EBITDA (x)

Dividend yield (%)

2019e

2020e

2019e

2020e

2019e

2020e

Greencore

£932.9

13.2

11.2

8.3

7.9

2.9

3.2

Ebro Foods

£2,871.1

16.8

15.3

9.8

9.2

3.3

3.4

Bonduelle

€ 896.9

11.3

10.1

6.9

7.8

1.9

2.1

Valsoia

€ 126.4

18.3

N/A

9.4

N/A

3.2

N/A

Peer group average

14.9

12.2

8.6

8.3

2.8

2.9

La Doria

€ 253.9

9.9

8.8

7.4

6.7

2.4

2.6

Premium/(discount) to peer group

(33.3%)

(28.2%)

(14.1%)

(19.3%)

(13.7%)

(11.3%)

Source: Edison Investment Research estimates and Bloomberg consensus. Note: Prices as at 28a May 2019.

Our primary valuation methodology is a 10-year DCF analysis, and we calculate a fair value of €13.60, or c 65% upside from the current level. This is based on our 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%, a borrowing spread of 5% and beta of 0.8. We note our fair value would be €14.90 if our WACC moved down 40bps to 6.0%. Below, we show a sensitivity analysis to these assumptions and note that the current share price is discounting a terminal EBIT margin of 5.6% (which compares to La Doria’s reported EBIT margin of 5.1% in 2018, and 6.2% in 2017) and a terminal growth rate of -0.5%. We expect La Doria’s 2018 EBIT margin to mark a trough level due to the tough competitive environment. We forecast an EBIT margin of 5.4% in FY19. We also expect revenues to continue growing and currently forecast a 2.4% revenue CAGR to FY21 (mainly driven by the more value-added businesses such as sauces, as per management’s strategy) and a more conservative 1.7% revenue growth thereafter, falling to 1.5% in perpetuity.

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

EBIT margin

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Terminal growth

-2.5%

6.8

7.4

7.9

8.5

9.1

9.6

-1.5%

7.4

8.0

8.6

9.3

9.9

10.6

-0.5%

8.1

8.8

9.6

10.3

11.1

11.8

0.5%

9.0

9.9

10.8

11.7

12.5

13.4

1.5%

10.4

11.4

12.5

13.6

14.7

15.7

2.5%

12.4

13.8

15.1

16.5

17.9

19.2

3.5%

15.9

17.7

19.6

21.4

23.3

25.2

Source: Edison Investment Research estimates

Sensitivities

La Doria’s key sensitivities include:

input cost inflation on the agricultural commodities it processes to manufacture its products;

the supply/demand balance affecting the achievability of finished goods price inflation, particularly for the red line;

consumer consumption patterns and competitive pressures, particularly in Europe with a subdued economic environment, although La Doria and PL in general tend to benefit from consumers trading down; and

FX, specifically euro/sterling due to the consolidation of its trading subsidiary, LDH. The UK represents c 50% of group sales.

Financials

Q119 results

Q119 group revenue was €183.8m, up 2.7% on the prior year. Organic growth was 2%, mainly driven by volume increases, though pricing was also positive on the manufacturing side. The trading activities of LDH witnessed particularly strong revenue growth (+9.2%) despite an aggressive market. Performance was certainly boosted by customer stockpiling ahead of a feared hard Brexit on 29 March, though it is hard to gauge the precise impact on sales: we estimate c 50bps. Q1 group EBITDA was €11.4m vs €12.2m in the prior year, with margin contracting 60bps to 6.2% due to continued raw material pressures and higher production costs.

During the quarter the red line witnessed revenue contraction of 2.4% driven by lower volumes (pricing was up). The pulses and vegetables business had an excellent quarter, with sales up 8.5%, with growth principally driven by volumes. The sauces segment also experienced a strong quarter, with revenues up 1.8%. The fruit line was down 6% in revenue terms during the quarter, as fierce competition and reduced consumption continue to feature in the segment despite cost increases (mostly sugar). The ‘other lines’ business saw revenues up 4.6%; as discussed above this was partly driven by customers stockpiling ahead of a feared hard Brexit, which never came to pass. Some unwinding of this is thus to be expected during Q2.

By geography, domestic sales were down 6.5%, while international sales were up 4.8% at constant currency.

We make no changes to our forecasts. We have extended our model to FY22, and we illustrate below our forecasts versus La Doria’s targets. Our forecasts are broadly in line with current targets for FY19, and below management’s targets for FY20 and FY21. Nevertheless, our DCF valuation still points to significant upside for the shares. The balance sheet remains conservative: net debt/EBITDA should peak in FY19 at 2.8x as capital is invested in the industrial plan, but leverage should rapidly decline in FY20 and FY21. We expect the outcome of the 2019 campaigns to be partially known by the H1 results (scheduled for September), but a clearer picture will not emerge until later on in the year. Customer negotiations on the red line side will be almost complete, and good progress should be made in the vegetable, sauces and fruit lines.

Exhibit 6: Edison forecasts vs company targets

2019e

2020e

2021e

Target
(€m)

Forecast (€m)

Diff
(%)

Target
(€m)

Forecast (€m)

Diff
(%)

Target
(€m)

Forecast (€m)

Diff
(%)

Revenue

691

690

(0.1%)

721

718

(0.5%)

742

739

(0.4%)

EBITDA

53

53

(0.0%)

64

59

(8.3%)

70

65

(7.3%)

EBIT

38

37

(2.7%)

45

42

(7.4%)

48

46

(4.4%)

PBT

35

35

(0.1%)

43

40

(7.7%)

47

44

(6.6%)

Net profit

26

26

(1.8%)

32

29

(9.5%)

35

32

(8.5%)

Net debt

148

148

(0.1%)

131

129

(1.9%)

101

97

(3.6%)

EBITDA margin

7.7%

7.7%

0bps

8.9%

8.2%

(70bps)

9.4%

8.8%

(66bps)

Source: La Doria, Edison Investment Research estimates

Exhibit 7: Financial summary

€m

2017

2018

2019e

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

669.1

687.9

690.0

717.6

739.1

761.3

Cost of Sales

(555.7)

(581.7)

(583.4)

(603.9)

(618.3)

(636.1)

Gross Profit

113.4

106.2

106.5

113.7

120.8

125.2

EBITDA

 

 

60.1

52.8

53.0

58.7

64.9

67.6

Operating Profit (before amort. and except.)

41.6

34.8

37.0

41.7

45.9

47.6

Intangible Amortisation

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

FX Gain / (loss)

0.2

3.2

0.0

0.0

0.0

0.0

Operating Profit

41.8

37.9

37.0

41.7

45.9

47.6

Net Interest

(1.9)

(1.7)

(2.0)

(2.0)

(2.0)

(2.0)

Profit Before Tax (norm)

 

 

39.7

33.1

35.0

39.7

43.9

45.6

Profit Before Tax (FRS 3)

 

 

39.9

36.3

35.0

39.7

43.9

45.6

Tax

(9.5)

(8.9)

(9.4)

(10.7)

(11.8)

(12.3)

Profit After Tax (norm)

30.4

27.3

25.5

29.0

32.0

33.3

Profit After Tax (FRS 3)

30.4

27.3

25.5

29.0

32.0

33.3

Average Number of Shares Outstanding (m)

31.0

31.0

31.0

31.0

31.0

31.0

EPS - normalised fully diluted (c)

 

 

98.1

88.2

82.4

93.5

103.3

107.4

EPS - (IFRS) (c)

 

 

98.1

88.2

82.4

93.5

103.3

107.4

Dividend per share (c)

23.0

18.0

20.0

21.0

22.0

22.0

Gross Margin (%)

16.9

15.4

15.4

15.8

16.3

16.4

EBITDA Margin (%)

9.0

7.7

7.7

8.2

8.8

8.9

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

6.2

5.1

5.4

5.8

6.2

6.3

BALANCE SHEET

Fixed Assets

 

 

174.0

203.5

246.0

254.2

254.4

242.4

Intangible Assets

6.1

5.5

4.8

4.1

3.4

2.7

Tangible Assets

149.9

175.9

216.6

215.3

205.0

193.7

Investments

18.0

22.1

24.5

34.7

45.9

45.9

Current Assets

 

 

394.2

419.4

378.1

403.0

437.7

474.9

Stocks

209.5

204.4

201.3

205.3

207.1

213.1

Debtors

106.5

110.2

107.6

109.1

110.9

114.2

Cash

66.7

86.8

51.2

70.6

101.7

129.6

Other

11.5

18.0

18.0

18.0

18.0

18.0

Current Liabilities

 

 

(209.8)

(242.3)

(234.4)

(238.5)

(241.3)

(244.9)

Creditors

(142.1)

(148.4)

(140.5)

(144.6)

(147.5)

(151.0)

Short term borrowings

(67.6)

(93.9)

(93.9)

(93.9)

(93.9)

(93.9)

Long Term Liabilities

 

 

(131.5)

(139.3)

(122.8)

(122.8)

(122.8)

(122.8)

Long term borrowings

(97.2)

(105.2)

(105.2)

(105.2)

(105.2)

(105.2)

Other long term liabilities

(34.3)

(34.1)

(17.6)

(17.6)

(17.6)

(17.6)

Net Assets

 

 

227.0

241.4

266.9

295.9

327.9

349.6

CASH FLOW

Operating Cash Flow

 

 

35.4

48.2

41.3

46.6

52.3

49.6

Net Interest

(1.9)

(1.7)

(2.0)

(2.0)

(2.0)

(2.0)

Tax

0.0

0.0

0.0

0.0

0.0

0.0

Capex

(17.6)

(46.5)

(56.0)

(15.0)

(8.0)

(8.0)

Acquisitions/disposals

(0.4)

0.0

0.0

0.0

0.0

0.0

Financing

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

(7.7)

(9.6)

(8.9)

(10.1)

(11.2)

(11.6)

Other

(2.4)

(4.6)

(10.0)

(0.0)

0.0

0.0

Net Cash Flow

5.4

(14.1)

(35.6)

19.4

31.1

27.9

Opening net debt/(cash)

 

 

104.8

98.2

112.3

147.9

128.5

97.4

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

Other

1.2

(0.0)

(0.0)

0.0

(0.0)

0.0

Closing net debt/(cash)

 

 

98.2

112.3

147.9

128.5

97.4

69.5

Source: Edison Investment Research, company data

Contact details

Revenue by geography

Via Nazionale 320
84012 Angri
Italy
+39 081 516611
www.gruppoladoria.com

Contact details

Via Nazionale 320
84012 Angri
Italy
+39 081 516611
www.gruppoladoria.com

Revenue by geography

Management team

CEO: Antonio Ferraioli

CFO: Alberto Festa

Antonio Ferraioli joined the company in 1974. He has been CEO since 1984 and is a member of the founding Ferraioli family.

Alberto Festa joined the company in 2007, having held various positions in a number of Italian consumer products companies.

Management team

CEO: Antonio Ferraioli

Antonio Ferraioli joined the company in 1974. He has been CEO since 1984 and is a member of the founding Ferraioli family.

CFO: Alberto Festa

Alberto Festa joined the company in 2007, having held various positions in a number of Italian consumer products companies.

Principal shareholders

(%)

Antonio Ferraioli

11.17

Andrea Ferraioli

9.95

Rosa Ferraioli

9.66

Iolanda Ferraioli

9.66

Giovanna Ferraioli

9.66

Raffaella Ferraioli

9.66

Teresa Maria Ferraioli

9.66

Companies named in this report

Greencore (GNC.LN), Ebro Foods (EBRO.SM), Bonduelle (Bon.EN), Valsoia (VLS.IM), Tesco (TSCO.LN), Carrefour (CARR.PA), Casino (CASP.PA)


General disclaimer and copyright

This report has been commissioned by La Doria and prepared and issued by Edison, in consideration of a fee payable by La Doria. Edison Investment Research standard fees are £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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 La Doria and prepared and issued by Edison, in consideration of a fee payable by La Doria. Edison Investment Research standard fees are £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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

Share this with friends and colleagues