Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
Vantiva’s Q3 update describes markets that are still suffering from poor levels of demand from the group’s main customers, the telecoms and cable operators, who are holding high levels of inventory. Q323 revenues were 34% constant currency (cc) down on prior year. Management is maintaining guidance on EBITDA and EBITA for FY23 (which our model matches), but we have reduced our revenue estimates to reflect the sluggish backdrop. The proposed acquisition of CommScope Home Networks should transform the combined group’s market positioning ahead of the potential rebound in demand prompted by technological improvements. The deal is expected to complete end Q423/early Q124. A new €85m bridging loan is buffering the working capital requirement in the meantime.
Vantiva |
Market demand remains weak |
Q3 update |
Software |
31 October 2023 |
Share price performance
Business description
Next events
Analyst
Vantiva is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Vantiva’s Q3 update describes markets that are still suffering from poor levels of demand from the group’s main customers, the telecoms and cable operators, who are holding high levels of inventory. Q323 revenues were 34% constant currency (cc) down on prior year. Management is maintaining guidance on EBITDA and EBITA for FY23 (which our model matches), but we have reduced our revenue estimates to reflect the sluggish backdrop. The proposed acquisition of CommScope Home Networks should transform the combined group’s market positioning ahead of the potential rebound in demand prompted by technological improvements. The deal is expected to complete end Q423/early Q124. A new €85m bridging loan is buffering the working capital requirement in the meantime.
Year |
Revenue |
EBITDA (€m) |
PBT* |
EPS* |
EV/EBITDA |
P/E |
12/21 |
2.25 |
105 |
(126) |
(61) |
5.5 |
N/A |
12/22 |
2.78 |
161 |
(497) |
(197) |
3.6 |
N/A |
12/23e |
2.14 |
140 |
(34) |
(11) |
4.1 |
N/A |
12/24e |
2.08 |
134 |
(43) |
(12) |
4.3 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q3 sees cut or postponed orders across group
Both the Connected Home (76% of group 9M23 revenue) and Vantiva Supply Chain Services (VSCS) segments had difficult Q3 trading, with the former’s revenues down 37% (cc) and the latter retrenching 22%. Only revenue figures are given at this point and management guidance is held at €140m (at least) of EBITDA and €45m (at least) of EBITA for the full year, although this will require a strong profit performance in H2. Given the Q323 figures, our revenue estimates were clearly overambitious, and we have adjusted to a more reasonable level. Given the degree of current uncertainty in the group’s markets, we have taken a cautious approach on FY24 revenue prospects and increased finance expense on reduced cash flow expectations (now free cash flow marginally positive, from over €50m) and the recent €85m short-term financing put in place to fund working capital requirements ahead of the CommScope deal.
CommScope acquisition should rebalance power
The deal would transform Connected Home, with combined revenues of $3.6bn for 12 months to June 2023, enlarging its customer base and geographic reach. Run-rate cost synergies of $100m by FY26 have been identified and the deal should speed an improvement in cash generation, reducing the substantial debt burden.
Valuation: Equity overshadowed
The market value of the equity is currently overshadowed by the value of the debt, which accounts for 91% of Vantiva’s enterprise value. The CommScope deal shows a clearer path to net profitability with continuing careful cost control. The current share price is suggesting either mid-teen medium-term revenue growth, based on a DCF with a 10% WACC, or faster progress in building the EBITDA margin than we currently assume.
Customers playing waiting game
The market difficulties have been observed across recent results from suppliers to the telecoms and cable operators, including the likes of Ericsson and Nokia, so Vantiva’s experience is far from isolated. CommScope’s Q323 figures are set to be released on 9 November. The problems are attributed to the poor underlying economic backdrop, persistently high levels of inflation and rises in interest rates. With a fairly strong environment in FY22 as markets bounced back post COVID-19 lockdowns, the telcos and cable operators invested in inventory ahead of presumed sustained higher levels of demand. With those levels not materialising, they are sitting on excess inventory and not calling stock off their suppliers at the previously expected rate.
There are broadly two ways this situation can resolve. Firstly, an uplift in generic demand pulling through and drawing down stock levels. Secondly, technical enhancements will stimulate a desire for upgrades among households keen for improved reliability, wider bandwidths and greater energy efficiency. To be able to offer these attributes is a potentially important competitive advantage. However, while demand is suppressed, the telcos and cable operators are waiting and trying to optimise the timing of their inventory and marketing investment. They will need to be able to offer the latest attributes to reduce their own churn levels.
Vantiva has a deserved reputation for its technical capabilities and new product development addressing advances such as WiFi7, DOCSIS 4.0 and 5G FWA puts the company in a good position to take advantage. The timing of the CommScope deal is also crucial to be able to take full advantage when the demand for the new, higher specification kit comes through.
Q3 difficulties across the board
Exhibit 1: Summary revenue Q323 and year to date
Q323 revenue |
% change (cc*) |
9M revenue |
% change (cc) |
|
Broadband |
284 |
-65% |
931 |
-15% |
Video |
55 |
-26% |
215 |
-40% |
Connected Home |
339 |
-37% |
1,146 |
-21% |
VSCS |
134 |
-22% |
365 |
-22% |
Vantiva |
473 |
-34% |
1,511 |
-21% |
Source: Company
Within Connected Home, the key issue has been with the North American and Asia Pacific regions in broadband, correlating with the market description above. In Europe, a drop in demand for DOCSIS product has not been matched by the growing demand for fibre. Management states that a programme of strict cost control has been put in place to protect profitability. Within VSCS, structural declines in demand for discs described in (all) previous notes is not yet being compensated by the more recent additions to activities as they endeavour to scale in weak markets.
Adjustments to estimates
Our previous revenue estimates were anticipating a good recovery in demand in Q3 and Q4, which self-evidently has not materialised. Our FY23 figure is revised down from €2.64bn to €2.14bn, with a knock-on impact on FY24 from €2.70bn to €2.08bn, with added caution. Management is keeping current year guidance for EBITDA of at least €140m, which will require a substantial degree of cost and efficiency control.
Liquidity at the end of September was €39m, including €16m of undrawn credit facility. This was tight in the context of the scale of the group’s activities and a short-term additional facility has been announced of €85m. This runs to end March 2024, at a coupon of Euribor plus 10%. We have added this into our modelled interest charge.
Focus on getting the deal across the line
The focus is on getting the CommScope deal closed, and as soon as is practicable. We would expect closure in Q423 or Q124, at which point we will be able to form a clearer picture. The enlarged group should be in a much stronger position to negotiate advantageously with both its customers and its supply base. As a reminder, the deal is on a debt-free, cash-free basis, with CommScope taking a 25% stake in the combined group, so having a continuing vested interest in the success of the larger company.
Exhibit 2: Financial summary
€m |
2021 |
2022 |
2023e |
2024e |
||
Y/E December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
2,250 |
2,776 |
2,137 |
2,084 |
Cost of Sales |
(1,976) |
(2,439) |
(1,813) |
(1,754) |
||
Gross Profit |
274 |
336 |
325 |
329 |
||
EBITDA |
|
|
105 |
161 |
140 |
134 |
EBITA |
|
|
40 |
57 |
50 |
54 |
Amortisation of acquired intangibles |
(30) |
(28) |
(24) |
0 |
||
Exceptionals |
27 |
20 |
(151) |
0 |
||
Operating profit (before amort. and excepts.) |
(13) |
(11) |
(130) |
39 |
||
Net Interest |
(117) |
(177) |
(79) |
(82) |
||
Joint ventures & associates (post tax) |
0 |
(311) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(126) |
(497) |
(34) |
(43) |
Profit Before Tax (reported) |
|
|
(129) |
(499) |
(209) |
(43) |
Reported tax |
(14) |
(30) |
(5) |
0 |
||
Profit After Tax (norm) |
(143) |
(529) |
(39) |
(43) |
||
Profit After Tax (reported) |
(143) |
(529) |
(214) |
(43) |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
4 |
680 |
0 |
0 |
||
Net income (normalised) |
(143) |
(529) |
(39) |
(43) |
||
Net income (reported) |
(140) |
151 |
(214) |
(43) |
||
Average Number of Shares Outstanding (m) |
236 |
269 |
355 |
355 |
||
EPS - normalised (c) |
|
|
(61) |
(197) |
(11) |
(12) |
EPS - normalised fully diluted (c) |
|
|
(61) |
(197) |
(11) |
(12) |
Dividend per share (c) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
(9) |
23 |
(23) |
(2) |
||
Gross Margin (%) |
12.2 |
12.1 |
15.2 |
15.8 |
||
EBITDA Margin (%) |
4.7 |
5.8 |
6.5 |
6.5 |
||
EBITA Margin (%) |
1.8 |
2.0 |
2.3 |
2.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
1,730 |
1,053 |
876 |
866 |
Intangible Assets |
1,283 |
782 |
609 |
599 |
||
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 |
1,006 |
868 |
Stocks |
335 |
452 |
392 |
353 |
||
Debtors |
359 |
343 |
271 |
244 |
||
Cash & cash equivalents |
196 |
167 |
15 |
(58) |
||
Other |
377 |
329 |
329 |
329 |
||
Current Liabilities |
|
|
(1,360) |
(1,389) |
(1,284) |
(1,182) |
Creditors |
(671) |
(855) |
(691) |
(674) |
||
Tax and social security |
(29) |
(18) |
(18) |
(18) |
||
Short term borrowings |
(65) |
(24) |
(108) |
(23) |
||
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 |
(27) |
(73) |
Minority interests |
||||||
Shareholders' equity |
|
|
134 |
320 |
(27) |
(73) |
CASH FLOW |
||||||
Net profit |
(143) |
(529) |
(214) |
(43) |
||
Depreciation and amortisation |
139 |
135 |
95 |
85 |
||
Working capital |
(98) |
57 |
(31) |
49 |
||
Tax and interest |
(70) |
(83) |
(56) |
(51) |
||
Exceptional & other |
61 |
506 |
84 |
82 |
||
Operating Cash Flow |
|
|
(111) |
86 |
(123) |
122 |
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 |
(238) |
12 |
||
Opening net debt/(cash) |
|
|
812 |
1,039 |
263 |
491 |
FX |
16 |
(25) |
0 |
0 |
||
Discontinued |
63 |
501 |
0 |
0 |
||
Other non-cash movements |
(92) |
25 |
9 |
0 |
||
Closing net debt/(cash) |
|
|
1,039 |
263 |
491 |
479 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
Basilea has announced an exclusive evaluation licence and option agreement with South Korea-based iNtRON Biotechnology (KOSDAQ: 048530) for tonabacase, a potential first-class antibacterial of endolysin class. The product candidate could potentially fit well into Basilea’s portfolio of anti-fungal and anti-bacterial products, Cresemba and Zevtera. This announcement follows the recent in-licensing of GR-2397 (an antifungal compound, renamed BAL2062) and aligns with management’s strategic focus to seek anti-fungal and anti-infective synergistic additions to its portfolio. As part of the agreement, Basilea will evaluate tonabacase in a range of preclinical studies which, if favourable, could lead to a licensing agreement for further clinical development, at Basilea’s exclusive discretion and at pre-agreed financial terms. Basilea is making an undisclosed upfront payment to iNtRON and will make an additional payment if it decides to exercise its exclusive option to execute the licence agreement. While the terms of the deal are undisclosed, management maintains that the transaction has no impact on its FY23 financial guidance.