Portobello SpA — Value appeal

Portobello SpA (MIL: POR)

Currency in EUR

Last close As at 26/09/2023

EUR11.40

−1.05 (−8.43%)

Market capitalisation

EUR40m

Research: Consumer

Portobello SpA — Value appeal

Portobello’s management has a very clear strategy to expand its retail presence across Italy over the long term from its current low penetration of 35 stores. It believes the company’s relatively unique business model, the use of its own and third-party media in exchange for inventory, enables it to source products more competitively than its peers. Recent M&A should enable Portobello to shift from a historical land-based focus to an omni-channel presence and enhance its product offer so that it appeals to a greater number of retail and B2B customers. The shares continue to trade at a significant discount to its (imperfect) quoted peer group, and our revised discounted cash flow (DCF) based valuation of €91/share.

Russell Pointon

Written by

Russell Pointon

Director, Consumer

Consumer

Portobello SpA

Value appeal

Company outlook

Retail

20 June 2023

Price

€22.2

Market cap

€78m

Net debt (€m) at 31 December 2022

42.7

Shares in issue

110.4m

Free float

33%

Code

POR

Primary exchange

Euronext STAR Milan

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.3)

(7.1)

(17.2)

Rel (local)

(2.0)

(14.2)

(33.9)

52-week high/low

€34.3

€15.9

Business description

Portobello aims to build a national Italian retail presence (from 35 stores currently) via a rapid roll-out of its stores. It uses a combination of barter (own and third-party media) and cash purchases to source branded products from its suppliers.

Next events

H123 results

September 2023

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

Portobello SpA is a research client of Edison Investment Research Limited

Portobello’s management has a very clear strategy to expand its retail presence across Italy over the long term from its current low penetration of 35 stores. It believes the company’s relatively unique business model, the use of its own and third-party media in exchange for inventory, enables it to source products more competitively than its peers. Recent M&A should enable Portobello to shift from a historical land-based focus to an omni-channel presence and enhance its product offer so that it appeals to a greater number of retail and B2B customers. The shares continue to trade at a significant discount to its (imperfect) quoted peer group, and our revised discounted cash flow (DCF) based valuation of €91/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

85.5

13.0

2.63

0.0

8.4

N/A

12/22

129.9

18.6

4.63

0.0

4.8

N/A

12/23e

183.4

22.1

4.74

0.0

4.7

N/A

12/24e

222.5

30.8

5.56

0.0

4.0

N/A

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

Retail space expansion continues

Against a more challenging economic backdrop, Portobello delivered better underlying profit growth (EBITDA +49% y-o-y) in FY22 than we forecast as it executed on its strategy to expand its store base. The higher cost of debt and greater focus on working capital management led to slightly lower retail space growth than we anticipated in FY22, and near-term space growth will slow versus prior expectations but remains healthy at 30%+ per annum in FY23 and FY24.

30% underlying EBITDA growth in FY23 and FY24

We forecast year-on-year revenue growth of 41% in FY23 followed by further growth of 21% in FY24, lower than previously forecast due to the slower space roll-out for Retail. With a more cautious outlook for profitability due to inflationary pressures in FY23, we reduce our FY23 EBITDA forecast by c 19%, but still expect 30% underlying growth in both FY23 and FY24. We introduce estimates for the acquisition of ePrice Operations, with a small operating loss in FY23 before a small profit in FY24.

Valuation: Substantial discount to peers and DCF

Portobello’s prospective FY23 and FY24 P/E multiples of 4.7x and 4.0x, respectively, continue to be at a significant discount to the consensus (source: Refinitiv) medians for its peers of 15.3x and 12.3x, despite offering premium revenue and profit growth. We note that peer group comparison is complicated by Portobello not yet reporting using International Financial Reporting Standards (IFRS). The slower rate of growth than previously anticipated leads to a reduction in our DCF-based valuation of €91/share (€115 previously), still representing significant potential upside from the current share price.

Investment summary

Company description: A value-based retailer, with unique sourcing

Portobello was founded in 2016 with a key focus of developing a national presence for its Portobello-branded retail outlets over the long term, from its current base of 35 stores. Management has yet to elaborate on its definition of ‘national coverage’, but some competitors have over 700 stores in Italy, suggesting significant potential for future retail space growth. Portobello’s integrated business model is unique, in public markets, as it sources its products through a combination of media barter (own and third-party) and cash purchases more cost effectively than its competitors, enabling it to act as a price leader in its chosen categories. In addition to retail outlets, it sells to the consumer via marketplaces (eg Amazon). Beyond its consumer-facing activities, Portobello clears unsold inventory and sells other more opportunistic products not suited to Portobello’s retail outlets (eg cars) via its B2B business to other distributors. The acquisition of ePrice will enable Portobello to shift from a land-based focus to having an omni-channel presence.

Financials: Double-digit revenue and EBITDA growth

Portobello’s FY22 results were ahead of our expectations from a profit perspective despite a slower roll-out of new Retail trading space than we anticipated, which is impressive given the more challenging economic environment. We have reduced our profit estimates for FY23 to reflect the lower FY22 Retail trading base, a slower space expansion as the company looks to manage working capital more tightly, and we eliminate prior estimates for new franchises. In Exhibit 1 we show how FY22’s results turned out versus our expectations, and our new estimates for FY23 and FY24. We forecast EBITDA growth of 13% in FY23 and 28% in FY24.

Exhibit 1: Changes to estimates

Revenue (€m)

EBITDA (€m)

EPS* (€)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2022

137.9

129.9

(5.8)

22.2

24.6

10.8

3.33

4.63

39.0

2023e

211.0

183.4

(13.0)

34.0

27.8

(19.4)

5.07

4.74

(6.5)

2024e

N/A

222.5

N/A

N/A

35.5

N/A

N/A

5.56

N/A

Source: Edison Investment Research. Note: *EPS is normalised and fully diluted.

Valuation: Discount to peers despite better projected growth

Portobello’s share price has been volatile over the last 12 months with a low of €15.9 and a high of €34.3. The recent retracement of the share price has brought the valuation back towards a significant discount versus an imperfect peer group. The prospect P/E multiples for FY23 and FY24 of 4.7x and 4.0x compare with the medians for the peers of 15.3x and 12.3x, respectively, despite Portobello offering better revenue and profit growth than the peers. We recognise that Portobello’s scale, liquidity and execution risk warrant a discount to the more-established peers.

Sensitivities: Execution, unique business, macroeconomic

Portobello is a young company with limited operating history, albeit good progress has been made already. Therefore the most apparent risk is management’s ability to execute the ambition to scale the business nationally while continuing to enjoy the benefits of the barter business model as it grows. The barter model includes non-cash transactions, which complicate the accounting. As a small consumer-facing company Portobello faces potential macroeconomic challenges and shocks that may affect consumer discretionary income, and a high level of competition from better-capitalised companies. The share has a limited free float, albeit that has been increasing (currently 35%).

Company description: Value-based retailer, with a unique sourcing model

Portobello was founded in September 2016 by four partners: Simone Prete (chief executive officer), Roberto Panfili (chief operating officer), and Stefano Caporicci and Luca Nardi (two investors who had no executive involvement). They recognised the ongoing changes in the retail market (increasing competitiveness), the changing purchasing habits of consumers (moving online and greater value focus), and the opportunity provided by the use of media bartering activities in helping to maximise the profit potential of a new retail format. The shares were listed on 13 July 2018 on the AIM Italia market with the issue of 444.3k new shares at a price of €4.4, raising gross proceeds of c €2m, to give a free float of 16.4%.

Portobello has a clear mission: to provide quality products at affordable prices, anytime, anywhere to consumers. The primary focus is to grow its retail activities to a national presence level (from a current base of 35 stores). At the time of the initial public offering (IPO) there was an aspiration to develop the business in other European markets, but we believe this is now unlikely in the medium term given the perceived opportunity in Italy.

Portobello sources branded products from its suppliers/clients through a combination of media barter (ie using the exchange of owned and third-party advertising inventory in return for the purchase of those goods) and cash purchases. The use of barter and third-party media enables Portobello to acquire goods at more competitive prices than its competitors, and, in turn, sell those products at lower prices than its competitors. Any residual stock that cannot be sold in its retail outlets as well as other more opportunistic product purchases are sold through its business to business (B2B) channel to commercial partners, typically at a significant (greater than 50%) discount to prices it achieves in the retail outlets.

The company has three strategic business units (Exhibit 3):

Retail (or B2C): includes Portobello branded retail outlets and sales through marketplaces.

Media: the purchase and resale of advertising, including in Portobello’s own publishing activities (ie magazines), for use in its bartering activities.

B2B): for the sale of ‘residual’ goods or those that are acquired opportunistically and are not suited to other channels due to size or product category (eg food and beverages and cars).

Portobello has demonstrated strong growth (Exhibit 2), with FY22 revenue of €129.9m and adjusted EBITDA (pre-exceptional media write-off) of €24.6m. Media has consistently been its most important revenue source, but Retail’s importance to the group should grow given management’s aspiration to increase its geographic presence.

Exhibit 2: Revenue and EBITDA progression

Exhibit 3: FY22 revenue split

Source: Portobello SpA, Edison Investment Research

Source: Portobello SpA

Exhibit 2: Revenue and EBITDA progression

Source: Portobello SpA, Edison Investment Research

Exhibit 3: FY22 revenue split

Source: Portobello SpA

In the following interview, Pietro Peligra, chairman of the board, provides an update on Portobello’s FY22 results and the near-term growth outlook.

Exhibit 4: Video interview with Pietro Peligra

Source: Edison Investment Research

Portobello’s business model

As the barter business model is relatively uncommon in publicly listed equities, below we focus on the mechanics of the business, and how the transactions are reflected in Portobello’s financial statements, ahead of focusing on the activities of the individual business units.

Income statement

The transactions with respect to the use of barter for the purchase of products acquired that are subsequently sold are shown in Exhibit 5.

Exhibit 5: Barter business model

Source: Portobello SpA

The example shows the acquisition of goods valued at €100k by Portobello, in return for the sale of advertising valued at €100k. The goods are then sold through Retail at €120k. Depending on the cost of the media (zero/low cost if Portobello’s own advertising inventory or an indicated €20k if third-party media) the reported gross profit is either €120k or €100k, respectively. The key difference between this and the more typical cash purchase of goods is the use of an estimated market value of advertising inventory, in return for the goods acquired. Simplistically, at the group level, Portobello’s gross profit is the difference between the Retail selling price (€120k) and the cost of Media (€0–20k).

In the example above, Portobello’s Media business unit invoices the client for the imputed market value of the advertising, and the client invoices Media for the value of the goods; importantly, no cash changes hands. Portobello determines the imputed value of the inventory and associated advertising based on what it believes the products can ultimately be sold for. The Media revenue and associated cost are recognised as the advertising inventory is used/consumed. For Retail and B2B, there is no cost of goods sold as Portobello allocates all of the acquisition cost against Media, and there is no subsequent invoicing between Media and Retail or B2B. Under Italian GAAP, Portobello reports revenue and costs on a gross basis, so would recognise gross revenue of €220k (Media €100k and Retail €120k) and COGS of €100k (all Media), with no inter-company elimination. Management believes that under IFRS the company would report lower revenue and costs as these are netted off but would still report the same absolute gross profit. As an aside, this makes comparison of Portobello’s sales multiples versus its peers, which may report under IFRS, not meaningful.

In determining the purchase price of the goods from the client, and therefore the estimated value of media advertising revenue, the skill is in the knowledge of the product markets, specifically competitors’ pricing, and taking a view on the ultimate selling price, with the aim of being a price leader. Portobello is then able to determine a media strategy based on the client’s brand requirements, for example geographic focus or demographic target, and the value of media acquired.

Extending the company’s example above in Exhibit 5, below we demonstrate the potential variability of Portobello’s income statement depending on the source of products and channel sold through. In both examples we assume all media consumed is Portobello’s own (ie with a zero cost of sale).

Exhibit 6: All products sold through Retail example

€000s

Media

Retail (barter purchases)

B2B (barter purchases)

Total (barter purchases)

Retail (cash purchases)

Total group

Revenue

200

240

0

440

330

770

Cost of goods

(200)

0

0

(200)

(200)

(400)

Gross profit

0

240

0

240

130

370

Gross margin

0%

100%

N/A

55%

39%

48%

Source: Edison Investment Research

Exhibit 7: All products sold through Retail and B2B example

€000s

Media

Retail (barter purchases)

B2B (barter purchases)

Total (barter purchases)

Retail (cash purchases)

Total group

Revenue

200

120

20

340

330

670

Cost of goods

(200)

0

0

(200)

(200)

(400)

Gross profit

0

120

20

140

130

270

Gross margin

0%

100%

100%

41%

39%

40%

Source: Edison Investment Research

Exhibit 6 shows Portobello’s financials if 100% of goods purchased via barter are sold in Retail at the same mark-up as Exhibit 5 (ie 20%), and the goods acquired for cash are sold in Retail at a higher mark up of 65%. For the goods acquired through barter, Portobello would recognise revenue of €440k and gross profit of €240k, a gross margin of 55%. The addition of goods acquired with cash and sold physically in the stores increases group revenue to €770k and gross profit to €370k, but the gross margin reduces to 48%.

In Exhibit 7, we change the assumption for the channel split of goods acquired through barter to 50:50 Retail:B2B, with goods sold in B2B at an 80% discount to the Retail price (and also a discount to the imputed value of the advertising inventory). For the goods acquired through barter, Portobello would recognise revenue of €340k and gross profit of €140k, a gross margin of 41%. The addition of goods acquired with cash increases group revenue to €670k and gross profit to €270k, a gross margin of 40%.

In all cases, the absolute gross profit for goods acquired through barter is equivalent to Retail plus B2B revenue less the cost of Media: €240k and €140k in the examples above. Naturally, Portobello’s revenue, gross profit and gross margin are maximised when it is able to sell a greater proportion through Retail than B2B. However, B2B fulfils a key role in that it enables a faster sell through than might be achieved elsewhere, which is beneficial for the timing of cash flow, albeit at a lower revenue and gross profit.

Management estimates that c 40% of its goods acquired for its own retail activities are acquired using barter, and goods for B2B are 100% sourced using barter.

Cash flow and balance sheet

As already highlighted, there are no cash flow implications on the initial invoicing between the client/advertiser and Portobello when barter is used to purchase goods. On the asset side of the balance sheet, the purchase of the inventory (goods acquired) is recognised when invoiced, and the advertising to be delivered is recognised as a deferred liability (deferred advertising income), which appears in creditors in Exhibit 15 (Financial summary). As the advertising revenue is delivered it is recognised in the income statement and the deferred income balance reduces. When Portobello contracts with a third-party media owner for the delivery of media, it recognises a prepaid advertising asset (equivalent to the value of the inventory acquired) and creditor for the value of the media acquired. As the media is consumed, the balance sheet asset is reduced and the expense of the media is recognised in the income statement.

At the end of an accounting reference period, as well as the physical inventory, Portobello’s balance sheet includes an asset for prepaid advertising (to be consumed) and a liability for deferred advertising income (advertising to be provided to the client). As these are both non or low-cash items and given the scale of the items, the movements can distort the working capital section of Portobello’s cash flow statement. The only media assets and liabilities for which there are cash flow implications are those with respect to the actual cost of third-party media, which management states is a small proportion of the rate card.

We believe Q4 is typically a seasonally important time of year for Portobello as its clients will have greater demand to sell unsold products as they approach the calendar year-end, therefore, according to management, Portobello’s physical working capital investment (inventory) is higher at the year-end than is typical through the year.

Advantages of barter

The advantages of the barter model to Portobello’s suppliers are:

The ability to gain greater advertising exposure with no need to spend cash.

Improved turnover of products (fully invoiced to Portobello) that have proven to be slower moving than would otherwise have been the case, with a consequent improvement in working capital management and logistics/warehouse costs.

The advantages to Portobello of the barter model are:

The acquisition of goods for a lower cost than would otherwise have been the case, using media that is either owned (zero cost of inventory) or third party (acquired on very favourable terms given good relationships according to Portobello’s management).

Favourable working capital as advertising payment terms are longer than the period required to monetise the products with consumers.

It can leverage advertising inventory across more clients in more industries.

Retail

Portobello’s Retail activities include its own physical stores and the resale of products on other marketplaces (mainly Amazon). There is no internal e-commerce activity at present as management prefers to focus its marketing and promotion on developing its physical locations. The acquisition of ePrice (discussed below) will help Portobello to transition to an omni-channel presence. Management had anticipated it would begin the roll-out of franchise stores in FY22, however the increase in interest rates and the deteriorating macroeconomic backdrop have made it more difficult to attract franchisees and begin operating stores given the required upfront investment and uncertain trading outlook. Management’s preference is to cooperate with franchisees that have the financial resources to open a number of stores rather than just, say, one store.

Company-managed stores: Seeking national coverage

The first Portobello store was opened in December 2016 and the first store in Rome followed in April 2017. The number of stores increased to 31 by the end of FY22 following the opening of 10 net new stores in the year and stands at 35 stores at the end of May 2023, with a geographic footprint for open and soon-to-open stores as shown below.

Exhibit 8: Locations of Portobello stores, end of May 2023

Source: Portobello SpA

Management has an ambitious target to grow the store portfolio to a national presence, through a combination of company-managed and franchise stores, but the extent and phasing of the ambition has not been quantified. Portobello’s competitors, albeit all do not overlap in all product categories, have store portfolios that range in size from c 15 stores (Dmail) to c 80 stores (Satur) to Acqua e Sapone, Kasanova and Tigota, which have 600–800+ stores each, with various models (ie a combination of company-managed stores and franchises). Therefore, there appears to be a significant growth opportunity for Portobello.

In February 2021, PB Retail Srl (PBR) was established as the vehicle through which Portobello would accelerate its retail space expansion plan across Italy. Portobello owns 51% and the balance is owned by a commercial partner with strong expertise in apparel retail stores in shopping malls.

The original Portobello stores were conceived and developed as neighbourhood shops located in areas of high pedestrian footfall with a served population of over 100,000 inhabitants. The earlier stores typically have a trading footprint of 200–250 square metres (including on-site storage), but some of the more recent stores opened have been in shopping malls and have ranged in size from 1,000–2,250 square metres. Across the store portfolio, the format is the same but the number of stock keeping units (SKUs) across the product ranges varies.

Exhibit 9: Torino store

Exhibit 10: Curno store

Source: Portobello SpA

Source: Portobello SpA

Exhibit 9: Torino store

Source: Portobello SpA

Exhibit 10: Curno store

Source: Portobello SpA

Portobello’s product offer is typically of branded products that are slow moving for its suppliers, and therefore the suppliers are keen to monetise the inventory more quickly than otherwise might be the case. The core product categories, in descending order of sales, are: homewares (25%), electronics (25%), personal hygiene and home care (20%), clothing (15%) and other, including jewellery, gifts and food and beverages (15%). The brands offered include Samsung, Sharp and Singer. The brand owners do not place any restrictions on the level of discounts that Portobello can offer on the products. Management expects the product offer will continue to evolve including the likely addition of furniture (which is already being trialled in larger stores), vouchers (restaurants and hotels) and extending the food range in the near term. There are the usual seasonal changes in the offer, for example back to school and Christmas, but the number of SKUs by category through the year is relatively consistent. Portobello aims to be the price leader in all categories versus its competitors, instead of being a product leader (ie it does not carry the entire product range of a supplier, only those products that can be sourced cost effectively). With respect to product selection, the stores are restocked on a weekly basis with wider product rotations made on a monthly basis, and much greater seasonal changes made every three to four months. The stores do not target a specific demographic and there is no skew to lower-income customers.

In order to increase the recognition of the brand, Portobello advertises and promotes itself both through traditional means of communication (adverts, flyers, posters etc) and through the website. Each month, Portobello creates and distributes a flyer (manually within a 1km range of each store, electronically and a 3D replica flipbook version is available on the company’s website). The flyer typically promotes the best offers available on c 150 products. At the time of the IPO, the flyer was typically four to eight pages and has grown to 12 pages at the time of writing, as the store base and number of SKUs have increased. The May-June 2023 flyer included the following products:

front page: a range of products with prices from €6.99–399.99, all products discounted by up to 66%,

one page of kitchenware (cottura) with prices from €4.99–79.99, all discounted by up to 75%,

one page of tableware (tavola) with prices from €1.49–69.99, all discounted by up to 68%,

one page of housewares and accessories (casalinghi e accessori) with prices from €0.99–14.99, all discounted by up to 81%,

one page of kitchenware (in cucina) with prices from €8.99–99.99, all discounted by up to 50%,

two pages of home appliances (elettrodomestici) with prices from 4.99–399.99, all discounted by up to 64%,

one page of storage (sistemazione) with prices from €1.49–34.99, all discounted by up 66%,

one page of furniture and accessories (arredo e accessori) with prices from €4.99–79.99, all discounted by up to 75%,

one page of home care (cura della casa), with prices from 0.793.99, all discounted by up to 66%,

one page of personal care (cura della persona), with prices from €0.29–13.99, all discounted by up to 66%, and

one page of loyalty products (prodotti fidelity), with prices from €0.79–39.99, all discounted by up to 84%.

Competitors: Broad range with varying product overlap

The competitors (mentioned above) do not compete with Portobello across its entire product range. Acqua e Sapone’s offer is more focused on household care and personal care; Kasanova is focused on homewares, furniture, textiles and gift ideas; Tigota’s offer is more aligned with that of Portobello, although Tigota has a significantly higher representation in cleaning products and personal care; and Satur offers domestic appliances, table/kitchenware and home furnishings (including bathroom). In the majority of categories, Portobello also competes with local and national food retailers and online with Amazon.

Retail financials: Rapid space expansion

Retail has generated strong revenue growth as space grew (number of stores and increase in average store size) and sales densities increased over the long term, with sales per average store being helped by the growth in space per store. The outbreak of the COVID-19 pandemic in early 2020 and subsequent operating restrictions are likely to have affected Retail’s growth rates versus management’s initial expectations.

FY22 represented the company’s greatest rate of store expansion since its IPO. Space growth in FY22 was lower than we had forecast in our initiation note; we forecast space of 28k sqm by the period end versus the achieved 24.5k sqm, and the company opened no franchise stores, versus our forecast 2.5k sqm of space by the period end.

We believe that stores that have been trading for more than 12 months reported positive like-for-like revenue growth in FY22, and the decline in FY22 sales densities (sales per average square metre) was solely attributable to the addition of new trading space, which takes two to three years to reach sales maturity.

Exhibit 11: Retail financials

€m

FY16

FY17

FY18

FY19

FY20

H121

H221

FY21

H122

H222

FY22

FY23e

FY24e

Revenue

0.0

0.7

1.6

3.9

5.6

3.5

8.0

11.5

9.8

14.8

24.6

39.3

56.3

Growth y-o-y

5031%

126%

139%

44%

59%

134%

105%

180%

85%

114%

60%

43%

Stores (number)

2

3

6

11

14

14

21

21

27

31

31

38

49

Stores added in period

2

1

3

5

3

0

7

7

6

4

10

7

11

Sales per average store (€k)

289

364

460

449

249

407

657

407

511

946

1,139

1,293

Growth y-o-y

26%

27%

(2%)

31%

55%

46%

63%

25%

44%

20%

14%

Space (sqm)

900

1,020

1,970

3,066

4,969

4,969

12,988

12,988

20,000

24,500

24,500

32,558

45,222

Growth y-o-y

13%

93%

56%

62%

N/A

N/A

161%

302%

89%

89%

33%

39%

Sales per average sqm (€)

753

1,094

1,552

1,398

N/A

N/A

1,280

592

666

1,312

1,378

1,447

Growth y-o-y

N/A

45%

42%

(10%)

N/A

N/A

(8%)

(16%)

(25%)

3%

5%

5%

Source: Portobello SpA, Edison Investment Research

We forecast continued strong growth in Retail sales of 60% in FY23 to €39.3m and 43% in FY24 to €56.3m from a combination of space expansion and improving sales densities. We assume a slower rate of space growth in FY23 than previously, with the addition of c 8k sqm of new trading space, due to the more difficult external operating environment before a higher rate of growth, and c 13k sqm of new space in FY24. With respect to store numbers, we assume the average store size of those added in both years will be equivalent to FY22’s average, c 1,150 sqm/store. Our previous forecasts included the addition of c 22k sqm of new trading space in FY23, and we also assumed the company would end the year with 20 franchise stores, which we have now eliminated from the model given the difficulties experienced in attracting franchise partners. The lower trading base of space from FY22 and reduced estimates for new space growth than our previous estimates translate to a reduction in our FY23 revenue estimate for Retail to €39.3m from €81.9m previously.

ePrice Operations

It is almost one year since Portobello announced the proposed acquisition of a 50% stake in ePrice Operations as a joint venture with Riba Mundo Tecnologia, a leader in the purchase and resale of electronic products in the B2B segment.

Management believes the acquisition will enable Portobello to become an omnichannel operator, shifting the core Retail activities from a store-based focus, and will enable it to grow ePrice’s core volumes (consumer electronics and household appliances) while adding complementary products from Portobello’s range to ePrice’s online offer. In addition, Portobello’s B2B activities (see below) are likely to experience incremental revenue growth as the joint venture will enhance the number of suppliers to which it has access.

At the time of the acquisition, the business was not investing in advertising, which was leading to declining traffic to the portal. Since being acquired, the business has been restructured and advertising has increased, which has led to growth in traffic to the portal and the company has negotiated direct supply arrangements with new international brands.

Management anticipates ePrice will contribute a small positive EBITDA in FY23. We include provisional estimates for a trading loss at the associate line (pre-tax) of €0.5m in FY23, which dilutes growth a little before increasing to a profit of €0.5m in FY24. In addition, the income statement includes an amortisation charge of €0.6m for the goodwill of the acquisition.

Media

Portobello’s Media activities focus on the sale of advertising space in its proprietary (ie fully owned) media (magazines), partially owned media (five local newspapers), concessions (outdoor advertising in Rome and Milan) and Metro (free newspapers) in major cities including Rome, Milan and Turin, and in third-party media (Il Giornale, Forbes, Mediaset, RDS (radio), Mondadori, Gedi Group and Sky Italia).

The advertising is sold either for monetary consideration or, primarily, for barter (ie in exchange for products, which it subsequently sells via its Retail or B2B channels). Therefore, with zero/low cost to Portobello, the use of its own media for barter gives Portobello a competitive advantage versus its retail competitors. With respect to third-party media, management believes it has very good relationships with media owners and therefore gains high discounts to the rate card.

Portobello's publishing activities include a number of proprietary and licensed titles. Its sole focus is selling the advertising inventory, with functions such as printing and distribution outsourced. Content creation for the individual magazines is either done in house or outsourced.

Portobello entered the publishing market in 2018 with the February launch of ORA.IT WEEKLY, a weekly magazine with a focus on gossip and entertainment, and the May launch of LEI STYLE a monthly magazine dedicated to fashion and style, both in print and online. There followed three further launches in 2018 and one in 2019. VOI, a biweekly magazine with a broad demographic focus in the family segment, was launched in 2019. The number of publications has varied (six in FY19 including MONDO PET, ORA CUCINA and VOI NUOVA CRONACA). There are currently two magazines published, ORA and LEI STYLE.

In 2019 Portobello acquired 24.5% of Web Magazines Maker, which holds the exclusive Italian licence for Rolling Stone and Alfredo, a food and beverage magazine, under a rolling five-year licence.

In FY22, Portobello increased its own media exposure with the acquisition of daily newspaper LA Nuovo Sardegna, via its associate Sapere Aude Editori (SAE), and it subscribed €500k to the capital increase of Class Editori, which was subsequently written down to €259k.

Media has consistently been Portobello’s largest source of revenue; at €71.8m in FY22 it represented 55% of the group’s revenue. (Note that Publishing’s revenue was separately disclosed until it was subsumed into the wider Media business after H119.) Media’s revenue has grown in every six-month period since IPO, except H121 due to COVID-19 related lockdowns, as the inventory available has grown and Portobello’s client base has increased. Forecasting Media’s revenue growth is complicated as it is a function of the growth rates of Retail (above) and B2B (below), how much of Retail’s trading inventory is sourced with cash versus barter, and how much of the media consumed is sourced from the company’s owned versus third-party media.

B2B

All products sold through B2B channels are acquired through barter and sold to other commercial partners. Historically, the products sold through B2B were typically residual inventory (ie products not able to be sold through the other channels due to having higher inventory than the smaller store base, at the time, could sell). However, this has progressed to now include more opportunistic purchases of products that are not suitable for the retail outlets, for example cars and food and beverages, as well as remaining an outlet for residual retail inventory. Cars are only purchased after a resale channel has been identified. The cars are then retrieved from the seller and despatched to the buyer without passing through the Portobello warehouse. There is no inventory risk to Portobello and management believes the main benefit of the B2B channel is it improves the cash cycle by enabling it to get rid of excess stock quickly.

Management believes that the acquisition of ePrice Operations will enable it to enhance its B2B activities through wider sourcing of existing and new product categories.

Over the long term, B2B’s importance to the group’s financial results has been on a declining trend broadly, while demonstrating strong growth, and this should be expected to continue as Portobello’s Retail channel develops. This should be positive for the absolute level of sales and profitability from a group perspective, given products sold via B2B are typically at a significant discount to prices achieved in Retail. There are no stated key performance indicators for B2B, and management’s limited narrative typically highlights the activity as opportunistic.

Following two years of strong revenue growth in FY20 (27%) and FY21 (39%), there was a significant acceleration in B2B’s growth rate in FY22, increasing by 72% to €33.5m, thereby increasing the vertical’s importance to the overall group. With limited visibility given the opportunistic nature of the business, we forecast revenue growth of 20% in FY23 to €40.2m (from €25.7m previously due to the higher FY22 reported base €33.5m) and 10% growth in FY24 to €44.2m.

Management

Chairman of the board of directors – Pietro Peligra. In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. Portobello acquired a 24.5% shareholding in Web Magazine Makers (the licensee of the Rolling Stone publishing brand in Italy in 2019). After gaining a degree in electronic engineering and a master’s degree in marketing, Pietro joined Vodafone as product manager in 2003. From 2006–08 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com, and Gruppo SAE.

Co-founder and CEO – Simone Prete. Prior to co-founding Portobello, he founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM in the role of business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

CFO – Mirco Di Giuseppe. Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he became sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Co-founder and COO – Roberto Panfili. Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

Sensitivities

We believe the main sensitivities are:

Portobello is clearly exposed to the outlook for consumer disposable incomes and spending and wider macroeconomic variables such as corporate spend on advertising. Portobello’s focus on delivering greater value versus its competitors may make it less vulnerable to macroeconomic factors than its competitors. If Portobello is unsuccessful at selling products through Retail, it is exposed to further discounting in B2B.

The product categories to which Portobello is exposed are subject to changes in consumer preferences and tastes and are highly competitive. In addition, existing or new customers may increase their focus on Portobello’s product categories. Portobello’s brand currently lacks national recognition.

Execution risk is a constant given Portobello’s ambitions to develop a national presence with a number of operating models. Its future profitability is dependent on the relative growth rates of its Retail (including franchise) and B2B activities, the associate investment in ePrice, the relative share of goods purchased for cash and barter, and the share of owned (lower-cost) versus third-party (higher-cost) media required for barter. Its product offer is also likely to evolve.

Management’s aspirations to expand Retail quickly will require strong working capital management given the initial investment in inventory ahead of a store opening, and expansion of the barter required to fulfil the expected demand. We have moderated our growth expectations for the space expansion in Retail to reflect the higher cost of financing management’s expansion aspirations.

Portobello’s future growth strategy may be partly dependent on its success in developing franchise operations, which is currently untested, and is also dependent on its ability to find suitable franchise partners. With a lower gross margin (Portobello shares half of the franchisee’s gross profit) but lower operating costs (borne by the franchisee), Portobello’s group profitability would vary with the relative rate of growth of franchises versus other sources of revenue. To date, Portobello has made no progress in attracting franchisees, so we have removed our previous estimates for franchise growth.

As Portobello’s scale evolves with planned national coverage, its sourcing requirements will significantly increase, requiring greater volume from more suppliers than previously.

Portobello will require significantly more regional and national media coverage to continue operating with the benefits of barter. It will have to establish strong relationships with new media owners in order to deliver the value to suppliers that it enjoys at present. Portobello has acquired media assets to help promote its presence more regionally/nationally, therefore further acquisitions of media assets are likely in order to grow its presence across new geographies.

As for all consumer-facing companies, Portobello is exposed to possible further COVID-19 related operating restrictions, which have negatively affected its trading and store development plans. Longer-term effects from COVID-19 could include changes to working and shopping patterns including potentially less travel to city centres.

Subsequent to its IPO, Portobello has raised further equity and has continuously raised new debt to help fund its working capital requirements, chiefly the investment in new inventory ahead of store openings, and retail space growth.

The company’s business model is unusual and there are currently no other market examples that can serve as a reference for an assessment of its solidity and performance.

The financial statements are prepared in accordance with accounting standards as published by the Organismo Italiano di Contabilita (the Italian Accounting Committee), not IFRS. There is no clarity on when Portobello will adopt IFRS and there has been no quantification by management of the potential impact of adopting IFRS. The nature of the barter model is there are non-cash transactions and hence potentially less transparency in the accounting statements with respect to working capital.

Portobello is owned by a number of key shareholders who are directors of the company. Although there are clearly many associated advantages (they are aligned with growth etc), there is a risk their interests may not be aligned with other shareholders. Another by-product is the relative lack of liquidity in the shares. In February 2022, Roberto Panfili and Pietro Peligra modestly reduced their shareholdings in order to increase the institutional base and the free float, which is currently c 33%.

Portobello undertakes related-party transactions that are concluded at arm’s length, with each transaction being reviewed by an internal independent committee. The related-party transactions are with companies connected to directors, former shareholders and equity-accounted companies. In FY22 the aggregate related-party transactions were sales (c €4.1m) and purchases (c €0.5m).

Financials

Portobello’s strategy of expanding the geographic footprint of its retail locations and the required media offer has produced significant growth in revenue and profitability since its IPO. Its cash flow generation reflects the ongoing working and fixed capital investment in expanding its business.

Income statement: Earnings

In FY16–22, Portobello’s revenue CAGR was 126%, with growth driven, in descending order of growth rates, by Retail (247%), Media (143%) and B2B (95%). The growing importance of higher-margin Retail to the group’s results has led to greater growth in EBITDA with a CAGR of 154% over the same timeframe, and the EBITDA margin increased to 18.8% in FY22 from 9.4% in FY16.

Portobello’s underlying profitability in FY22 was ahead of our expectations, despite the more difficult operating environment affecting revenue growth. Revenue grew to €129.9m (+52% y-o-y and versus our estimate of €137.9m), with underlying EBITDA of €24.6m (+49% y-o-y and versus our estimate of €22.2m) and operating profit of €19.9m (+43% yoy and versus our estimate of €19.0m). The EBITDA figure excludes an exceptional cost of €6.4m for media that was unfulfilled due to the supplier entering liquidation. Management is seeking to recover some of the amount that was written off. Despite the more challenging operating environment, there was a small increase in the EBITDA margin to 18.8% from FY21’s 18.7%.

Our revenue forecasts for the individual verticals have been covered in the prior sections. In aggregate, we forecast revenue growth of 41% to c €183m in FY23, a reduction from our previous estimate of €211m, and then 21% growth to €223m in FY24. In absolute terms, the greatest contributor to growth in our FY23 and FY24 revenue estimates is Media, followed by Retail and then B2B, but in percentage terms the greatest growth comes from Retail, followed by Media and then B2B.

In addition to revenue, Portobello reports ‘value of production’, which includes revenue and other non-trading income such as government grants and landlord refunds. The company quotes all margins with reference to value of production, so we will be consistent with this to aid the comparability of the narrative. The reported other revenue of €0.6m in FY22 was relatively immaterial relative to revenue of €129.9m, but has been higher in previous years when it represented c 2–3% of revenue.

We are more cautious about the outlook for gross margin in FY23 given the impact of inflationary pressures on cost of goods sold, and it is also influenced by the changes in the mix of the different verticals, which flows through to an expected reduction in the EBITDA margin to 15.1% in FY23 before our forecast that the margin expands to 15.9% in FY24. We forecast EBITDA growth of c 13% in FY23 to €27.8m (from €34.0m previously) and 28% growth to €35.5m in FY24.

Exhibit 12: Summary income statement

€m

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23e

FY24e

Revenue

1.0

10.0

21.5

45.3

62.7

85.5

129.9

183.4

222.5

Growth y-o-y

928%

115%

111%

38%

36%

52%

41%

21%

Media

0.3

5.9

15.3

30.4

43.0

54.6

71.8

103.9

122.1

Growth y-o-y

1591%

161%

93%

42%

27%

32%

45%

18%

% of total

36%

58%

71%

67%

69%

64%

55%

57%

55%

Retail

0.0

0.7

1.2

3.9

5.6

11.5

24.6

39.3

56.3

Growth y-o-y

5031%

188%

139%

44%

105%

114%

60%

43%

% of total

1%

7%

6%

9%

9%

13%

19%

21%

25%

B2B

0.6

3.4

4.2

11.1

14.0

19.4

33.5

40.2

44.2

Growth y-o-y

460%

20%

169%

27%

39%

72%

20%

10%

% of total

63%

34%

19%

24%

22%

23%

26%

22%

20%

Value of production

1.0

10.0

22.1

46.0

64.0

88.2

130.5

184.0

223.1

Gross profit

0.2

1.9

5.6

14.1

20.1

32.9

52.6

66.5

82.4

Gross margin

24.8%

18.9%

19.4%

30.6%

31.5%

37.3%

40.3%

36.1%

36.9%

EBITDA

0.1

0.5

3.4

8.2

10.9

16.5

24.6

27.8

35.5

Margin

9.4%

5.4%

15.4%

17.9%

17.0%

18.7%

18.8%

15.1%

15.9%

Operating profit

0.1

0.5

2.3

6.8

8.6

13.9

19.9

24.4

32.2

Operating margin

8.4%

5.1%

10.6%

14.7%

13.4%

15.7%

15.2%

13.3%

14.5%

Source: Portobello SpA, Edison Investment Research

Portobello’s effective corporate tax rate has varied from c 23% in FY18 to 37% in FY22, and we assume an effective tax rate of 35% in our forecasts.

Cash flow and balance sheet: External financing funds growth

The dynamics of the company’s business model, specifically the use of barter to partially fund the acquisition of goods for sale in Retail and B2B, were described earlier. The cash conversion cycle of barter is favourable as products acquired are sold before the advertising services are delivered over a longer timeframe.

There is also a high degree of seasonality as a greater proportion of advertising campaigns are typically delivered in the second half of a year than during the first half, and specifically the fourth quarter is more important than the third quarter, c 66% of FY22’s Media revenue was booked in the second half of the year. The weighting of trading to the second half of the year is also reflected in its Retail and B2B activities, with H222 revenues for each representing c 60% and c 57% of the full year results.

There was a notable increase in the working capital outflow to c €34m in FY22 from FY21’s €24m to support the almost doubling of Retail space during the year. The slower rate of space expansion in FY23 should lead to a smaller working capital outflow than in FY22.

With respect to capital investment, we assume that each new store requires capex of €300k, with an additional c 15% to help fund central investment to support the growth.

The most significant items on the balance sheet at the end of FY22 were the current assets of inventory of c €56m and accruals and deferred income of c €30m from a total net asset base of c €43m. The deferred income figure includes the prepaid advertising balance of c €27m.

Portobello’s growth has been mainly funded by taking on new debt with an increase in borrowings in most years since the IPO. These have been complemented by a €10m equity raise via a private placement in June 2021 at a share price of €41 following the 2018 IPO. The company’s gross borrowing increased by c €26m in FY22, taking its net debt position at the end of the year to €42.7m, or 1.7x FY22’s EBITDA, towards the low end of management’s targeted net debt/EBITDA position of 1.5–2.5x. Note, the company’s quoted FY22 net debt position of €42.4m includes the value of its investment in Class Editori.

As Portobello does not report using IFRS, lease liabilities are not capitalised and therefore its net debt position will appear low relative to other companies that have adopted IFRS. The non-capitalisation is also reflected in fixed and intangible assets of c €10m of the total asset base of c €114m at the end of FY22.

Valuation

Our main valuation method for Portobello is a DCF as it captures the long-term growth potential as it expands its retail presence across Italy.

DCF-based valuation of €91/share

Our 10-year DCF-based valuation of Portobello has reduced to €91/share from €115/share previously. The reduction in valuation reflects a combination of the changed financial forecasts as highlighted above (predominantly a slower rate of Retail expansion and the elimination of estimates for franchising from the model), a lower WACC and the higher FY22 net debt position.

With respect to Retail, beyond the explicit growth in our new forecasts we assume the company reverts to our previous estimates of 20 new stores a year, taking the number of stores in FY31 to 189 (241 previously). In the absence of any progress with respect to exploiting the franchise opportunity, we feel it is prudent to eliminate this from our valuation of Portobello. We previously assumed 100 franchise stores by FY31 would contribute c 10% to Portobello’s Retail revenue at that time.

The change in our WACC to 11.5% from 12.5% previously is mainly due to the higher net debt position at the end of FY22. Our WACC includes a risk-free rate of 4.2%, a risk premium of 15% and a beta of 0.8 (source: Refinitiv). We assume a terminal growth rate of 2%.

Below we show the sensitivity of the valuation to different cost of capital assumptions and terminal growth rates.

Exhibit 13: DCF sensitivity (€/share)

Terminal growth rate

0.0%

1.0%

2.0%

3.0%

4.0%

WACC

13.5%

61

64

68

73

78

13.0%

65

69

73

78

85

12.5%

69

73

78

85

92

12.0%

74

79

84

91

100

11.5%

79

85

91

99

110

11.0%

85

91

99

108

120

10.5%

91

98

107

118

133

10.0%

98

106

117

130

148

9.5%

106

116

128

143

165

9.0%

115

126

140

159

186

Source: Edison Investment Research

Peer valuation: Significant discount to peers

Portobello’s unique business model in the public markets, with a combination of media and retail assets and the use of barter to source products, means there are no direct peers with which to compare its valuation. In addition, financial reporting under Italian GAAP rather than IFRS means that enterprise-value based multiples are not meaningful, given for example no capitalisation of lease liabilities. In addition, under Italian GAAP lease costs are expensed through the income statement, and EBITDA is lower than under IFRS.

Notwithstanding the above, below we show consensus estimates (source: Refinitiv) for sales growth and profitability and P/E multiples for a range of general merchandise and electrical retailers across Europe and the United States. The peer group is not perfect due to the range of product exposures and the relative maturities and scales of the businesses. We annualise the consensus estimates to Portobello’s December year end.

Exhibit 14: Peer valuations

Share price (local ccy)

Ccy

Market cap (local m)

Sales growth 2023 (%)

Sales growth 2024 (%)

EBIT margin 2023 (%)

EBIT margin 2024 (%)

EPS growth 2023 (%)

EPS growth 2024 (%)

P/E 2023 (x)

P/E 2024 (x)

Div. yield 2023 (%)

Div. yield 2024 (%)

B&M European Value Retail

553.4

GBp

5,544

7

7

10.8

10.6

(3)

6

15.2

14.4

3.5

3.9

Ceconomy

2.14

EUR

1,040

2

1

1.0

1.3

(25)

51

10.3

6.9

1.3

3.1

Dunelm Group

1,135

GBp

2,289

4

5

12.0

12.2

(6)

4

15.4

14.8

5.5

5.5

Fnac Darty

33.74

EUR

920

0

2

2.5

2.8

4

24

9.9

8.0

4.6

4.9

Maisons du Monde

10.13

EUR

416

(4)

5

5.2

6.2

(18)

47

15.5

10.6

2.5

3.2

Puuilo Oyj

7.17

EUR

609

10

10

16.0

16.5

6

15

16.1

14.0

5.1

5.8

Tokmanni Group Oyj

12.2

EUR

719

5

5

7.3

7.9

0

17

11.8

10.1

6.4

7.1

Unieuro

10.47

EUR

217

(2)

2

1.0

1.2

(27)

26

11.6

9.2

6.5

5.5

Westwing Group

9.23

EUR

193

1

10

(2.7)

(1.1)

(56)

(59)

N/A

N/A

N/A

N/A

European median

2

5

5.2

6.2

(6)

17

13.5

10.3

4.9

5.2

Dollar General

164.32

USD

36,042

4

6

8.2

8.1

(5)

8

16.2

15.0

1.4

1.5

Dollar Tree

136.22

USD

30,021

7

4

6.2

6.9

(14)

18

22.3

18.9

N/A

N/A

US median

6

5

7.2

7.5

(9)

13

19.3

17.0

1.4

1.5

Total median

4

5

6.2

6.9

(6)

17

15.3

12.3

4.6

4.9

Portobello SpA

22.2

EUR

41

21

13.3

14.5

2

17

4.7

4.0

N/A

N/A

Source: Refinitiv, Edison Investment Research. Note: Priced 19 June 2023.

We can see that the weaker macroeconomic environment is affecting the growth outlooks of the companies, with negative or low expected revenue growth in 2023 leading to aggregate declines in EPS for the majority of the peer companies.

Our forecasts for Portobello’s revenue growth of 41% in 2023 and 21% in 2024 are significantly ahead of the consensus forecasts for the peers, with median growth rates of 4% and 5% expected respectively, due to Portobello’s relative immaturity in its growth cycle versus these companies. The higher sales growth is translating to significantly higher EPS growth in both 2023 and 2024 versus the expected consensus declines in 2023 before an expected return to growth in 2024.

While we recognise that Portobello’s valuation should reflect a discount to its larger peers given its free float, liquidity and execution risk, we believe Portobello’s prospective P/E multiples for 2023 and 2024 of 4.7x and 4.0x look low versus its peers given its relative growth profile.

We consider the US-listed peers to be less relevant for comparison given the greater size of their addressable market and market capitalisations versus Portobello. However, we note there is some product overlap in lower-priced goods such as homeware, house, personal care and food.

Exhibit 15: Financial summary

€m

2020

2021

2022

2023e

2024e

Year end 31 December

IAB

IAB

IAB

IAB

IAB

INCOME STATEMENT

Revenue

 

 

62.7

85.5

129.9

183.4

222.5

Value of production

 

 

64.0

88.2

130.5

184.0

223.1

Cost of Sales

(42.6)

(52.6)

(77.3)

(116.9)

(140.1)

Gross Profit

20.1

32.9

52.6

66.5

82.4

EBITDA

 

 

10.9

16.5

24.6

27.8

35.5

Operating profit (before amort. and excepts.)

 

 

8.6

13.9

19.9

24.4

32.2

Amortisation of acquired intangibles

0.0

0.0

0.0

(0.6)

(0.6)

Exceptionals

0.0

(0.6)

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

8.6

13.3

19.9

23.8

31.6

Net Interest

(0.3)

(0.9)

(1.3)

(1.8)

(1.9)

Exceptionals

0.0

0.0

(6.4)

0.0

0.0

Profit Before Tax (norm)

 

 

8.3

13.0

18.6

22.1

30.8

Profit Before Tax (reported)

 

 

8.3

12.5

12.2

21.5

30.2

Reported tax

(2.3)

(4.2)

(4.5)

(6.9)

(9.7)

Profit After Tax (norm)

6.0

8.8

14.1

15.1

21.0

Profit After Tax (reported)

6.0

8.3

7.7

14.6

20.6

Minority interests

0.0

0.0

2.7

2.7

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

6.0

8.9

16.8

17.7

21.0

Net income (reported)

6.0

8.3

10.3

17.3

20.6

Average Number of Shares Outstanding (m)

2.8

3.1

3.4

3.5

3.5

EPS - basic normalised (€)

 

 

2.15

2.86

4.90

5.05

5.97

EPS - normalised fully diluted (€)

 

 

1.96

2.63

4.63

4.74

5.56

EPS - basic reported (€)

 

 

2.15

2.68

3.03

4.94

5.86

Dividend (€)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

38.3

36.4

51.9

41.2

21.4

Gross Margin (%)

31.5

37.3

40.3

36.1

36.9

EBITDA Margin (%)

17.0

18.7

18.8

15.1

15.9

Normalised Operating Margin (%)

13.4

15.7

15.2

13.3

14.5

BALANCE SHEET

Fixed Assets

 

 

5.1

8.4

14.2

12.2

12.6

Intangible Assets

2.9

5.3

6.3

4.9

4.4

Tangible Assets

0.7

2.0

3.3

3.8

4.8

Investments & other

1.4

1.1

4.6

3.5

3.4

Current Assets

 

 

47.4

78.2

100.1

121.3

149.1

Stocks

16.4

43.9

56.3

64.7

79.7

Debtors

2.6

4.3

6.4

7.7

8.5

Cash & cash equivalents

2.6

2.5

2.8

2.1

7.2

Other (Including prepaid advertising)

25.7

27.5

34.6

46.8

53.8

Current Liabilities

 

 

(23.9)

(36.9)

(39.7)

(44.2)

(46.8)

Creditors (including deferred income)

(15.8)

(23.6)

(12.5)

(17.0)

(19.6)

Tax and social security

(3.7)

(7.0)

(11.0)

(11.0)

(11.0)

Short term borrowings

(4.3)

(6.2)

(16.2)

(16.2)

(16.2)

Other

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(12.5)

(14.7)

(31.7)

(31.7)

(36.7)

Long term borrowings

(12.2)

(13.5)

(29.3)

(29.3)

(34.3)

Other long term liabilities

(0.3)

(1.1)

(2.4)

(2.4)

(2.4)

Net Assets

 

 

16.1

35.0

42.9

57.6

78.2

Minority interests

0.0

0.0

(2.7)

(5.4)

(5.4)

Shareholders' equity

 

 

16.1

35.0

40.3

52.2

72.8

CASH FLOW

Operating Cash Flow

10.9

16.5

24.6

28.4

36.1

Working capital

(14.8)

(23.8)

(33.7)

(17.4)

(20.1)

Exceptional & other

(0.3)

(0.9)

(5.9)

(0.6)

(0.6)

Tax

(0.8)

(0.9)

(0.5)

(6.9)

(9.7)

Net operating cash flow

 

 

(5.0)

(9.2)

(15.7)

3.4

5.8

Capex

(2.8)

(2.7)

(5.1)

(2.4)

(3.8)

Acquisitions/disposals

(0.6)

(2.1)

(3.3)

0.0

0.0

Net interest

(0.3)

(0.5)

(0.9)

(1.8)

(1.9)

Equity financing

0.1

10.0

(0.2)

0.0

0.0

Borrowings

10.2

3.3

25.8

0.0

5.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.0

1.0

(0.3)

0.0

0.0

Net Cash Flow

1.6

(0.2)

0.4

(0.8)

5.1

Opening cash

 

 

1.0

2.6

2.4

2.8

2.0

FX

0.0

0.0

0.0

0.0

0.0

Closing cash

 

 

2.6

2.4

2.8

2.0

7.1

Closing net debt/(cash)

 

 

13.9

17.3

42.7

43.5

43.4

Source: Portobello SpA accounts, Edison Investment Research

Contact details

Revenue by geography (FY22)

Portobello SpA
Piazzale della stazione Snc
0071 Pomezia – Zona Industrial Santa Palomba
Roma
Italia
+39 062294725
www.portobellospa.com/

Contact details

Portobello SpA
Piazzale della stazione Snc
0071 Pomezia – Zona Industrial Santa Palomba
Roma
Italia
+39 062294725
www.portobellospa.com/

Revenue by geography (FY22)

Management team

Chairman: Pietro Peligra

Chief Executive Officer: Simone Prete

In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. After obtaining a degree in electronic engineering and a master’s in marketing, Pietro joined Vodafone as product manager in 2003. From 2006 to 2008 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com and Gruppo SAE.

Prior to co-founding Portobello, Simone founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM as business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

Co-founder & COO: Roberto Panfili

CFO: Mirco Di Giuseppe

Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he was sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Management team

Chairman: Pietro Peligra

In addition to his current role at Portobello, Pietro has been CEO of Rolling Stone Italia and RS Productions since 2019. After obtaining a degree in electronic engineering and a master’s in marketing, Pietro joined Vodafone as product manager in 2003. From 2006 to 2008 he attended Harvard Business School and gained an MBA. His other roles have included various consulting and board roles at DN Capital, IMG Fashion Europe, Italia Independent, Sound Identity Communication, Independent Ideas, Italia Independent Group, Media Maker, ClubDealOnline.com and Gruppo SAE.

Chief Executive Officer: Simone Prete

Prior to co-founding Portobello, Simone founded Wins, a primary retailer of Apple products, where he still holds the position of sole director. Portobello trades with this company on a regular basis, with transactions disclosed in the annual report. Prior to that he worked at LGM as business developer in the central Italy area for leading international brands, such as Jacuzzi, Gessi, Ariston and Ideal Standard.

Co-founder & COO: Roberto Panfili

Prior to co-founding Portobello in 2016, Roberto was the proprietor and store manager of Futura Grafica (1998–09) and then the CEO of FG Distribuzione until 2016. He holds an honorary degree in business administration from Ruggero II University.

CFO: Mirco Di Giuseppe

Mirco has been CFO of Portobello since 2020. From 2016 to 2017 he was sole director of Navon. From 2009 to 2019 he was administrative manager of Nova (Euronics Group) and from 2015 he was a director at Mabe.

Principal shareholders

(%)

Simone Prete

21.3

Stefano Caporicci

18.5

Pietro Peligra

14.3

Roberto Panfili

5.6

Expandi

4.1

Lupus Alpha Asset Management

2.0

General disclaimer and copyright

This report has been commissioned by Portobello SpA and prepared and issued by Edison, in consideration of a fee payable by Portobello SpA. 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.

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 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Portobello SpA and prepared and issued by Edison, in consideration of a fee payable by Portobello SpA. 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.

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 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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