Research: Consumer
Ibersol is responding well to the ‘unexpected challenge’ of the late 2022 disposal of its Burger King operations (22% of FY22 EBITDA) with accelerating expansion of other high-quality international brands (Pizza Hut, KFC, Taco Bell and Pret a Manger) including significant new concession contracts at major airports in Spain. Strong finances (net cash at March 2024 of €147m, reinforced by c €250m Burger King sale proceeds) ensure material firepower in this regard. Meanwhile trading is resilient despite consumer spending pressures and intense competition, with Q124 restaurant like-for-like sales up by 6%, boosted by an early Easter and buoyant airport traffic, and EBITDA up over a third, if in the quietest quarter. With improving conditions and a medium-term payoff from maturing concessions, FY25 forecasts show EV/EBITDA of 3.4x.
Ibersol |
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Travel and leisure |
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21 June 2024 |
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Ibersol is responding well to the ‘unexpected challenge’ of the late 2022 disposal of its Burger King operations (22% of FY22 EBITDA) with accelerating expansion of other high-quality international brands (Pizza Hut, KFC, Taco Bell and Pret a Manger) including significant new concession contracts at major airports in Spain. Strong finances (net cash at March 2024 of €147m, reinforced by c €250m Burger King sale proceeds) ensure material firepower in this regard. Meanwhile trading is resilient despite consumer spending pressures and intense competition, with Q124 restaurant like-for-like sales up by 6%, boosted by an early Easter and buoyant airport traffic, and EBITDA up over a third, if in the quietest quarter. With improving conditions and a medium-term payoff from maturing concessions, FY25 forecasts show EV/EBITDA of 3.4x.
Proven successful strategy
Ibersol has an impressive, sustained record of restaurant and brand development. From 2000 until the Burger King disposal in November 2022, it grew the number of equity restaurants fourfold with revenue CAGR of 9%. Confidence is thus justifiable that Ibersol’s established multi-brand approach, involving both popular international and local franchised brands and its own concepts (more than 20), provides the flexibility and breadth of offering to rebuild the portfolio, specifically still in Portugal and Spain, which offer considerable potential in management’s view. 2023 was notable for 32 restaurant openings (18 in Q4) and the award and implementation of concession contracts at Madrid (for eight years), Tenerife, Malaga and Lanzarote airports, while the current period sees their conversion to definitive formats and the proposed imminent purchase of an operator of 34 KFC units.
Solid start to FY24
Given continued traffic recovery since the pandemic and the impact of new airport concessions, 10% revenue increase and 37% EBITDA growth in Q124 was driven by Concessions & Catering with revenue up 28% and EBITDA almost trebling, owing partly to the application of IFRS 16 to contracts at three airports where the standard had been suspended until traffic recovered to 2019 levels. Dine-in restaurants and counters delivered 5% higher EBITDA in line with revenue.
Valuation: Cautious
Reflecting the early stage of reinvestment and associated net bank cash, Ibersol’s FY25e EV/EBITDA of 3.4x is at a justifiable discount to 5x for SSP (operator of food and beverage outlets in travel locations) and 8x for Loungers (all-day restaurants).
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Consensus estimates (continuing operations*)
Source: Consensus is based on one estimate. Note: *Following the sale of Burger King operations in Portugal and Spain in November 2022. **Excluding exceptionals. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: TMT
Filtronic’s year-end trading update confirmed that it expects to report FY24 revenue and adjusted EBITDA ahead of our forecasts. Trading in H2 benefited from strong demand from the space market, which we expect to continue into FY25. The company confirmed that it has ramped its production capability to meet this higher level of demand and continues to invest in further capacity expansion to provide flexibility and support for future growth.