Pierre et Vacances — Local hero

Research: Consumer

Pierre et Vacances — Local hero

Pierre et Vacances is successfully repositioning itself under new management in the increasingly popular market of local and environmentally friendly tourism. After last year’s restructuring, premiumisation of established brands, higher-than-expected cost savings, developing ancillary spend and portfolio rationalisation helped to deliver FY23 EBITDA well above latest guidance (€137m vs €130m+) and 30% up year-on-year, adjusted for COVID-19 support in FY22. Early indications for the current year are also positive, driving guidance of EBITDA of €145–150m, backed by clear guest satisfaction with upscaling and further efficiencies. This may be cautious if the loss-making operating leases of Seniorales are excluded (sale imminent), thereby reducing consensus FY24e EV/EBITDA of under 5x.

Richard Finch

Written by

Richard Finch

Analyst, Consumer

iStock-1172138496

Consumer

Pierre et Vacances

Local hero

Travel and leisure

QuickView

22 December 2023

Price

€1.64

Market cap

€745m

Share price graph

Share details

Code

VAC

Listing

Euronext Paris

Shares in issue

454.3m

Business description

Pierre et Vacances is a European leader in local eco-tourism, operating c 45,000 apartments, homes and villas at 283 sites under four main brands, Center Parcs, Pierre & Vacances, Adagio and Maeva.

Bull

Well-positioned brands with diverse offers in growth market of local eco-tourism.

Significant turnround potential under new management.

Strong finances (net cash) after restructuring with de-risked model, eg asset-light expansion.

Bear

Economic uncertainty mitigated by value offer and client satisfaction with improving quality.

Very competitive but loyal customer base and high level of direct distribution.

Execution risk in turnround but targets to date have been comfortably exceeded.

Analysts

Richard Finch

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Pierre et Vacances is successfully repositioning itself under new management in the increasingly popular market of local and environmentally friendly tourism. After last year’s restructuring, premiumisation of established brands, higher-than-expected cost savings, developing ancillary spend and portfolio rationalisation helped to deliver FY23 EBITDA well above latest guidance (€137m vs €130m+) and 30% up year-on-year, adjusted for COVID-19 support in FY22. Early indications for the current year are also positive, driving guidance of EBITDA of €145–150m, backed by clear guest satisfaction with upscaling and further efficiencies. This may be cautious if the loss-making operating leases of Seniorales are excluded (sale imminent), thereby reducing consensus FY24e EV/EBITDA of under 5x.

H223: Strategy already paying off

With the initial success of turnround measures in H123 boosted by a COVID-19 rebound (28% reduction in seasonally structural EBITDA loss, adjusted for non-recurring items), there was nonetheless ample vindication of the new tourism revitalisation strategy during the key H2 trading period. Rate-driven accommodation revenue growth of 8%, allied with 9% higher income from on-site activities and Maeva online holiday rentals, plus continued strict cost control, contributed to a 12% increase in EBITDA (£197m vs £176m excluding non-recurring items and losses from non-core Seniorales and major projects). Annual capex of €119m (primarily on Center Parcs renovations) as key to the premiumisation strategy was comfortably absorbed, with net cash at the period end up slightly at €79m, albeit thanks to a favourable change in working capital.

FY24 profit expectations: Scope to surprise

Apart from a positive outlook statement and likely increasing returns from recent major investments, a marked reduction in loss at non-core Seniorales (€11m in FY23) would alone account for the increase in FY24 EBITDA from €137m to €145–150m, per new guidance. Confirmed pricing power and sharply rising guest satisfaction across the board in a sweet spot of tourism (eco-friendly, close to home and nature, family oriented) suggest more in reserve, as with original FY23 guidance.

Valuation: Undemanding

An FY24e EV/EBITDA of under 5x seems to ignore the turnround potential of Pierre et Vacances, facilitated by robust finances, as well as evident progress to date.

Consensus estimates

Year
end

Revenue
(€m)*

Adjusted EBITDA (€m)*
(€m)

Net result (IFRS 16) (€m)
(€m)

EPS (IFRS 16) (€)
(€)

DPS
(€)

EV/adjusted EBITDA* (x)
(x)

09/22

1,769.8

105.2**

291.3***

10.3

0.0

6.4

09/23

1,914.6

137.1

(20.6)

(0.0)

0.0

4.9

09/24e

2,030.0

147.0

38.9

0.1

0.0

4.7

09/25e

2,084.0

173.0

52.0

0.1

0.0

3.9

Source: Refinitiv. Note: *Company operational reporting (pre-IFRS 16). **Excluding non-recurring €51m COVID-19 subsidies and rent savings. ***Including €418m gain from restructuring.

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This report has been prepared and issued by Edison. 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. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

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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 2023 Edison Investment Research Limited (Edison).

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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.

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