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Research: TMT
Vantiva’s Q1 trading update shows the group is on track to meet FY23 guidance, with a strong performance from the larger Connected Home (CH) segment (80% of Q123 revenue), and a more difficult trading backdrop for Supply Chain Solutions (SCS). CH’s revenue was up 8.7% on Q122 at constant currency (ccy), with good growth in North America and double-digit progress in Europe and Latin America driven by improved supply conditions and growing market share. SCS’s revenue retrenched 25.4%, weighed down by delays in releases by the major studios. Our forecasts are unchanged, and the shares still sit well below our DCF valuation.
Vantiva |
Good broadband growth supports FY23 prospects |
Q1 update |
Technology hardware |
28 April 2023 |
Share price performance
Business description
Next events
Analyst
Vantiva is a research client of Edison Investment Research Limited |
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Vantiva’s Q1 trading update shows the group is on track to meet FY23 guidance, with a strong performance from the larger Connected Home (CH) segment (80% of Q123 revenue), and a more difficult trading backdrop for Supply Chain Solutions (SCS). CH’s revenue was up 8.7% on Q122 at constant currency (ccy), with good growth in North America and double-digit progress in Europe and Latin America driven by improved supply conditions and growing market share. SCS’s revenue retrenched 25.4%, weighed down by delays in releases by the major studios. Our forecasts are unchanged, and the shares still sit well below our DCF valuation.
Year |
Revenue |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
12/21 |
2.25 |
(126) |
(61) |
0 |
3.2 |
N/A |
12/22 |
2.78 |
(497) |
(197) |
0 |
2.1 |
N/A |
12/23e |
2.72 |
(16) |
(14) |
0 |
2.3 |
N/A |
12/24e |
2.75 |
(7) |
(8) |
0 |
2.1 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Good progress in broadband
The Q1 update outlined revenues over the period by segment, with no commentary on earnings beyond unchanged full-year guidance. We detailed our forecasts in our recent update following the publication of Vantiva’s maiden accounts. The Q1 presentation highlighted the good progress particularly in broadband products, in EMEA and Latin America, and market share gains in fibre. In North America, WiFi 6 is stimulating demand, along with Android TV. Broadband revenues were up 14.0% (ccy). Demand for video products has tailed off, notably in Latin America and India, with revenues down 10.9% (ccy) on Q122. At SCS, revenues decreased 25.4% (ccy), with delays in major studio releases affecting optical disc sales. The diversification investment programme is pushing ahead and capacity in vinyl pressing is a little ahead of plan. Group revenues were down 0.6% (ccy) reflecting the business mix.
Circumspection on demand outlook
The trading environment continues to be mixed and management remains cautious on demand from the network service providers, key customers of the CH segment. However, relationships are very close and there is plenty of co-operation on technical developments that should drive medium-term demand, such as Wi-Fi 7 and 10G. The current volatility looks to us to be reflected in the full year guidance.
Valuation: Below DCF indication
An earnings-based valuation would be premature, given the Technicolor spin-out and current uncertain economic backdrop, and revenue-based metrics are inappropriate for the business. We have therefore run a discounted cash flow (DCF) based on modest sales and margin gains post the forecast period. Using a WACC of 10% and terminal growth of 1%, we derive a value of €0.57 per share, with the TCS shareholding worth an additional €0.06 per Vantiva share at current prices (prior to the intended further refinancing), unchanged on our last report.
Exhibit 1: Financial summary
€m |
2021 |
2022 |
2023e |
2024e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
2,250 |
2,776 |
2,724 |
2,753 |
Cost of Sales |
(1,976) |
(2,439) |
(2,388) |
(2,394) |
||
Gross Profit |
274 |
336 |
336 |
359 |
||
EBITDA |
|
|
105 |
161 |
151 |
164 |
EBITA |
|
|
40 |
57 |
66 |
79 |
Amortisation of acquired intangibles |
(30) |
(28) |
(24) |
0 |
||
Exceptionals |
27 |
20 |
(8) |
0 |
||
Reported operating profit |
(13) |
(11) |
19 |
64 |
||
Net Interest |
(117) |
(177) |
(67) |
(70) |
||
Joint ventures & associates (post tax) |
0 |
(311) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(126) |
(497) |
(16) |
(7) |
Profit Before Tax (reported) |
|
|
(129) |
(499) |
(48) |
(7) |
Reported tax |
(14) |
(30) |
(36) |
(22) |
||
Profit After Tax (norm) |
(143) |
(529) |
(52) |
(29) |
||
Profit After Tax (reported) |
(143) |
(529) |
(84) |
(29) |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
4 |
680 |
0 |
0 |
||
Net income (normalised) |
(143) |
(529) |
(52) |
(29) |
||
Net income (reported) |
(140) |
151 |
(84) |
(29) |
||
Average Number of Shares Outstanding (m) |
236 |
269 |
355 |
355 |
||
EPS - normalised (c) |
|
|
(61) |
(197) |
(14) |
(8) |
EPS - normalised fully diluted (c) |
|
|
(61) |
(197) |
(14) |
(8) |
Dividend per share (c) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
(9) |
23 |
(2) |
1 |
||
Gross Margin (%) |
12.2 |
12.1 |
12.4 |
13.0 |
||
EBITDA Margin (%) |
4.7 |
5.8 |
5.6 |
5.9 |
||
EBITA Margin (%) |
1.8 |
2.0 |
2.4 |
2.9 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
1,730 |
1,053 |
1,004 |
989 |
Intangible Assets |
1,283 |
782 |
737 |
722 |
||
Tangible Assets |
305 |
154 |
149 |
149 |
||
Investments & other |
59 |
84 |
84 |
84 |
||
Deferred tax and other |
83 |
34 |
34 |
34 |
||
Current Assets |
|
|
1,268 |
1,290 |
1,205 |
1,197 |
Stocks |
335 |
452 |
455 |
425 |
||
Debtors |
359 |
343 |
345 |
323 |
||
Cash & cash equivalents |
196 |
167 |
76 |
120 |
||
Other |
377 |
329 |
329 |
329 |
||
Current Liabilities |
|
|
(1,360) |
(1,389) |
(1,348) |
(1,357) |
Creditors |
(671) |
(855) |
(839) |
(848) |
||
Tax and social security |
(29) |
(18) |
(18) |
(18) |
||
Short term borrowings |
(65) |
(24) |
(24) |
(24) |
||
Other |
(594) |
(492) |
(467) |
(467) |
||
Long Term Liabilities |
|
|
(1,505) |
(633) |
(625) |
(625) |
Long term borrowings |
(1,170) |
(407) |
(398) |
(398) |
||
Deferred tax |
(20) |
(3) |
(3) |
(3) |
||
Other long term liabilities |
(315) |
(224) |
(224) |
(224) |
||
Net Assets |
|
|
134 |
320 |
236 |
204 |
Minority interests |
||||||
Shareholders' equity |
|
|
134 |
320 |
236 |
205 |
CASH FLOW |
||||||
Net profit |
(143) |
(529) |
(84) |
(29) |
||
Depreciation and amortisation |
139 |
135 |
100 |
90 |
||
Working capital |
(98) |
57 |
(21) |
62 |
||
Tax and interest |
(70) |
(83) |
(75) |
(61) |
||
Exceptional & other |
61 |
506 |
103 |
92 |
||
Operating Cash Flow |
|
|
(111) |
86 |
24 |
154 |
Capex |
(69) |
(81) |
(75) |
(80) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Equity financing |
0 |
284 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(33) |
(14) |
(40) |
(30) |
||
Net Cash Flow |
(214) |
275 |
(91) |
44 |
||
Opening net debt/(cash) |
|
|
812 |
1,039 |
263 |
346 |
FX |
16 |
(25) |
0 |
0 |
||
Discontinued |
63 |
501 |
0 |
0 |
||
Other non-cash movements |
(92) |
25 |
8 |
0 |
||
Closing net debt/(cash) |
|
|
1,039 |
263 |
346 |
302 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
Respiri released its Q323 activity report, updating investors on key highlights during the quarter. The period was marked by continued expansion of the company’s commercial footprint in the US, which included the signing of three additional contracts (taking the total client count to nine) and the appointment of a US-domiciled chief commercial officer to spearhead its growth strategy for the country. In addition, Respiri disclosed that it is in ongoing negotiations with two large insurers and four to six healthcare organisations, indicating a strong sales funnel. With the company recognising its first Centers for Medicare & Medicaid Services (CMS) reimbursement claims during the quarter and an increasing number of patients onboarded (including at Michigan Children’s Hospital and an undisclosed North Carolina-based healthcare organisation in Q123), we see initial validation for the company’s wheezo remote patient monitoring (RPM) model with subsequent traction likely with early patient responses. The period-end cash balance stood at A$0.9m, highlighting the need to raise capital in the near term, pending any material sales-related inflows.