belgium │ media │ buy roularta · 1 equity research 1/06/2016 belgium │ media │ roularta...
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1 EQUITY RESEARCH 1/06/2016
Belgium │ Media │ www.roularta.be
Roularta
Tempus fugit
• Don’t let the 2015 figures fool you! Over 2015, Roularta reported adjusted net
profit of EUR 30m. This was the fourth best performance since 2000. However,
profits were still suppressed by two legacies: lease costs of circa EUR 10m p/a
related to the printing presses, and interest costs of circa EUR 5m p/a
associated with a EUR 100m bond.
• Rejoice. The end is nigh! In the annual report 2015, management explicitly
stated, and quantified, that profits should receive a boost from termination of
the lease contract in 2018, and redemption of the bond, also in 2018, assuming
no major acquisitions. In addition, Roularta should not pay any taxes for years
to come as they can use the tax losses associated with French Printed Media.
The notes to the consolidated accounts provide evidence to these statements.
Finally, management indicated there should be an end to restructuring costs
because all publications are now profitable, following cancellation of a few
remaining bleeders. There should only be start-up costs associated with a few
newly developed digital/online ventures.
• If only we had a Delorean at 88mph! Our calculations show that adjusted net
profit of EUR 30m, as reported over 2015, in fact represents underlying
earnings capacity of EUR 41m. This is based on termination of the leases and
the bond, the impact from replacement capex, and a return to a normal tax
rate of 34%, ceteris paribus. As such, Roularta’s earnings capacity is currently at
a new peak level, from an underlying point of view. However, it will take
several years before this will materialize. Luckily time McFlies, whether you’re
wasting it or not!
• TP raised to EUR 33 (from EUR 29), Buy rating reiterated. We have updated
our model following the publication of the annual report. This has resulted in
minor changes to our earnings estimates for 2016-2018. However, we have
made a few tweaks to our valuation models to better reflect Roularta’s
underlying earnings capacity. The outcome points to a fair value of EUR 33, up
from EUR 29. This provides 36% upside to the current share price.
Company description
Roularta is market leader in
Belgium in news and special
interest magazines, and free
sheets. Other activities include
third party printing, and
commercial television & radio via a
50% stake in Medialaan Group
Analyst:
Michael Roeg
+31 20 573 5422 [email protected]
BUY
Price (31/05/2016) EUR 24.35
Target price 33.00
Risk High
Reuters RLRT.BR
Bloomberg ROU BB
Shares number (m)
Market cap. (m)
Net debt 12/16e (m)
Net debt/EBITDA 12/16e
1 year price perf.
Diff. with Euro Stoxx
Volume (sh./day)
H/L 1 year
Free Float
Bestinver Gestion
Koinon NV
West Investment Holding
9.9%
57.7%
15.4%
13.14
17.0%
5,259
320
47
1.89
67.4%
26.25 - 13.87
11.6%
EUR 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Sales 712.0 676.3 299.6 290.2 293.1 296.1 299.0
EBITDA 31.4 14.0 12.7 23.9 24.9 25.9 27.3
Adj. profit 15.5 9.6 19.4 30.2 30.6 33.2 36.1
EPS 1.24 0.77 1.56 2.42 2.45 2.66 2.89
Div. 0.00 0.00 0.00 0.50 0.50 0.55 0.60
EV/EBITDA 7.0 16.4 4.3 6.7 5.6 4.7 3.7
EV/EBITA 13.6 nm 13.8 11.1 9.0 7.3 5.6
P/E 8.3 13.9 7.9 10.1 9.9 9.2 8.4
Div. Yield 0.0% 0.0% 0.0% 2.0% 2.1% 2.3% 2.5%
10121416182022242628
Mar
14
Jun
14
Sep
14
Dec
14
Mar
15
Jun
15
Sep
15
Dec
15
Mar
16
Jun
16
ue
2 EQUITY RESEARCH │ Roularta 1/06/2016
Roularta Media Group
COMPANY PROFILE VALUATION
Roularta Media Group (Roularta) is a Belgian publishing
and printing company with 2015 sales of EUR 290m. The
company is market leader in Belgium in news and special
interest magazines, and free sheets. It also operates
Belgium’s largest offset printing equipment for production
of newspapers, magazines, and catalogues for internal and
external clients in Belgium and abroad. At the end of 2015,
Roularta had 1,364 employees.
Roularta also holds a 50% stake in Medialaan, a Belgian
broadcaster that focuses on TV and radio, which recently
boosted its position in mobile telephony (MVNO) through
the acquisition of Mobile Vikings. In 2015, Medialaan had
sales of EUR 307m, EBITDA of EUR 61m (margin 20%), EBIT
of EUR 53m (margin 17%), and net profit of EUR 36m. We
estimate it to have had a net cash position of EUR 13m.
Management has not issued guidance for FY 2016. They
expect to be net cash by the end of 2018.
Target price: Our TP of EUR 33 is based on the average
outcome from the fair values from our DCF model
(EUR 34), and valuation on historic multiples (EUR 32).
DCF-model: Our model generates a fair value of EUR 34
p/s. We use our detailed forecasts for 2016-2018. For
2019-2026 we use organic sales growth of 0.5% p/a, and
an EBITDA margin that we keep flat at 12.5% as from,
2019. For long-term growth and growth-to-infinity we
assume 0.5% p/a. We use a WACC of 8.5%.
Historic multiples: Roularta is back in shape so normal
multiples of the past are justified, as opposed to depressed
multiples over 2010-2014. We would typically set these
against our estimates for 2017. However, we have made
several adjustments to better reflect underlying earnings
capacity. This points to an average fair value of EUR 32 (PE:
29, EV/EBITDA: 34, EV/EBITA: 33).
INVESTMENT CASE SWOT ANALYSIS
Underlying earnings capacity is much stronger than the
2015 results suggest. Adjusted net profit of EUR 30m was
comforting, even though it was suppressed by two
legacies: a lease contract and a bond. In the annual report,
2015 management stated that profits should receive a
boost from termination of the lease, and redemption of
the bond. In addition, Roularta should not pay taxes for
years to come as it has considerable tax losses. Finally,
there should be no more restructuring costs. Our
calculations show that adjusted net profit of EUR 30m
implies an underlying net profit of EUR 41m, based on
termination of the lease and the bond in 2018,
replacement capex in the distant future, and a return to a
normal tax rate, ceteris paribus. As such, earnings capacity
has in fact reached a new peak level, from an underlying
point of view.
TP raised to EUR 33 (from EUR 29). We have made several
tweaks to our valuation models to better reflect Roularta’s
true earnings capacity. They now point to a fair value of
EUR 33, which provides 36% upside. We consider this
sufficient to maintain our Buy rating.
Strengths
• Strong local market positions
• Broad range of digital ventures
• Balance sheet virtually debt free
• Smooth succession of CEO
Weaknesses
• Circa 95% of sales is in one country
• Printing activities are very capital-intensive
• Complex corporate structure
• Limited free float
Opportunities
• Cross-selling ads across all units (print, TV, digital)
• Further expansion into the digital realm
• Divest 50% in Medialaan, or buy the remainder
• Share buy backs
Threats
• Shift in news consumption from print to digital
• Printing contract for French mags could terminate
• Medialaan’s unproven track record in telecom
• Amazon Prime, HBO, Hulu, Netflix, The Sith
3 EQUITY RESEARCH │ Roularta 1/06/2016
Sales by business (2016e) Net profit by business (2016e)
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam
Sales by region (2016e) Sales (EUR m) *
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam; * Prop. consolidation ended in 2014
Operating margins ROIC (post-tax)
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam
P/E multiples EV/multiples
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam
0
100
200
300
400
500
600
700
800
00 01 02 03 04 05 06 07 08 09 10 11 12 13 13pf 14 15 16e 17e 18e
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15e 16e 17e 18e
EBITDA (adjusted) EBITA (reported) EBITA (adjusted)
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
17.5%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16e 17e 18e
Reported Adjusted
0
4
8
12
16
20
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16e 17e 18e
P/E P/E adjusted
0
2
4
6
8
10
12
14
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16e 17e 18e
EV/EBITDA adj EV/EBITA adj
4 EQUITY RESEARCH │ Roularta 1/06/2016
Chapter I: Two steps forward, one step…forwarder!
No taxes today, no leases tomorrow
On several occasions, management suggested that profits and cash flows of Printed Media
should get a serious boost mid-term from: 1) expiration of a lease contract related to the
printing presses in the course of 2018, and 2) recuperation of tax-losses related to the French
Printed Media activities that were sold in the course of 2015.
The annual report 2015, which was recently published, conformed these items in writing, and
it provided more colour re the potential financial impact. On page 5 is mentioned: “…over the
coming years Roularta Media Group NV will be able to recover its tax losses, mainly from
ending the French activities. Until 2018, more than EUR 10 million a year is being paid to lease
the recently acquired printing presses,…”
The amount of cumulative tax-losses, and current profitability of the continuing operations,
suggest that Roularta will not pay taxes over a period of circa ten years. Tax assets in the
balance sheet at year-end 2015 amounted to EUR 21m vs. EUR 1m at year-end 2014, and it
includes five years of capitalised tax losses. Accounting rules do not allow for capitalisation of
tax losses beyond the next five years. Consequently, the asset should remain broadly stable
for several years to come, as part of it will be used, while part of the losses not yet capitalised
will be added.
Expiration of the lease contract in the course of 2018 suggests that operating profits should
receive a boost by (more than) EUR 10m p/a as from 2019. By then, the printing presses are
fully written off, and they could run for at least another ten years before they would have to
be replaced or refurbished. Obviously, a boost in profitability would result in an accelerated
use of the aforementioned tax losses.
Charts 1 and 2 show the development of lease costs in the P&L account, and lease liabilities in
the balance sheet. The sale and lease-and-back contract was set up in 2009 and it clearly
pushed up costs (from 2008 to full impact in 2010) and liabilities (from 2008 to 2009). Both
items were impacted by IFRS 11 (2014), which ended proportional consolidation of Medialaan
(Audiovisual Media) and Bayard Group (Printed Media), and the divestment of French Printed
Media (2015).
At the end of 2015, the remaining lease-related liabilities amounted to EUR 37m, of which
EUR 13m to be paid in 2016, and EUR 23m to be paid over 2017-2021. The latter suggests the
final payments will be in 2017 and 2018, based on lease costs p/a over 2013-2015.
Exhibit 1 Operating leases as part of opex (EUR m) * Exhibit 2 Future minimum operating lease payments (EUR m)
Source: Roularta, Degroof Petercam; * No prop cons as from 2014 Source: Roularta, Degroof Petercam
0
5
10
15
20
25
08 09 10 11 12 13 13pf 14 15 16e 17e 18e 19e
0
25
50
75
100
125
150
08 09 10 11 12 13 13pf 14 15 16e 17e 18e
Future minimum operating lease payments <1 year 1-5 years >5 years
5 EQUITY RESEARCH │ Roularta 1/06/2016
Diamonds are forever, bonds are not!
On pages 5 and 6 of the annual report 2015 is mentioned: “…with another more than EUR 5
million a year of interest on the EUR 100 million bond loan maturing in 2018. If no unexpected
acquisition opportunities present themselves, Roularta will by then have a large positive net
cash position.”
The bond has a coupon of 5.125% and trades at a price of 105.8, which implies a yield of 2.8%.
This makes it unattractive to buy back the bond prior to maturity. It makes more sense to use
excess cash to grow the business through internal development or through small add-on
acquisitions. Other options are to use cash for dividends or for share buy-backs. We prefer
management to refrain from making large acquisitions in view of the unfortunate track
record, as a large transaction could shake up the risk profile and cause a stir to the share
price.
The bond expires in 2018 and we believe Roularta will have the means by then to redeem it
without having to issue a new bond. Even if they would be a few millions of euros short in
cash, they could always take on short term debt, or a credit facility to finance the remainder.
Consequently, PBT and net profit should receive a boost of close to EUR 5m p/a as from 2019,
assuming a natural pace of deleveraging, as shown in table 3, and also assuming that excess
cash does not yield any interest income. Keep in mind that our estimates for net debt do not
include the book values or the fair values of the participations in Medialaan (50%) and Bayard
Group (50%). If we consider those, Roularta is virtually net cash today.
Exhibit 3 Net debt (EUR m)
2013pf 2014 2015 2016E 2017E 2018E
Cash 45 34 38 65 91 22
ST debt 6 2 3 3 3 3
LT debt 120 113 111 111 111 11
Net debt 80 82 76 49 23 -8
Deferral re French print activities (financial assets) 31 21 11 0
Net debt adjusted for deferral 44 27 11 -8
Source: Roularta, Degroof Petercam
A farewell to R’s
A new feat to us was that management foresees an end to restructuring. Today, Roularta is in
good shape, following 1) the sale of loss-making French Printed Media, 2) recent pruning of
the remainder of the portfolio by terminating several smaller loss-making publications, and 3)
stabilisation of the continuing operations in 2015 (sales -3% y/y, but flat y/y when adjusted for
the impact from lower paper prices, and termination of a few loss-making titles). In fact,
management is actively looking for new employees to further expand into the digital realm.
On page 5 is mentioned: “…but in future Roularta will report only EBITDA and EBIT figures and
no longer REBITDA and REBIT, because in principle no further extraordinary reorganisation and
restructuring charges will be needed.”
Over 2007-2015, Roularta reported a cumulative EUR 66m in restructuring charges, or on
average EUR 7.3m p/a (chart 4). However, the majority of that related to French Printed
Media. The continuing operations were burdened by a mere EUR 2.6m p/a (chart 5), notably
in the aftermath of the economic downturn in 2008/09. Over the past three years,
restructuring charges were modest and a further decline is in the cards. Obviously we can
never rule out a charge of a million here or there for whatever requires a bit of pruning
6 EQUITY RESEARCH │ Roularta 1/06/2016
We consider it positive that there will be an end to restructuring, and that management will
shift its focus to reported EBIT and EBITDA. Adjusted EBIT and EBTIDA are all very nice, but
cash flows typically follow reported EBIT and EBITDA.
Exhibit 4 Restructuring costs (EUR m) Exhibit 5 Of which for the continuing business (EUR m)
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam
-25
-20
-15
-10
-5
0
07 08 09 10 11 12 13 14 15
Restructuring costs Average p/a
-25
-20
-15
-10
-5
0
07 08 09 10 11 12 13 14 15
Restructuring costs Average p/a
7 EQUITY RESEARCH │ Roularta 1/06/2016
Chapter II: Always in motion is the future
Explosive profit growth in 2019…
The year 2019 will be characterised by large explosions in Neo-Tokyo (Akira), in Los Angeles
(Blade Runner), in a galaxy far, far away…(Episode IX), and in Roeselare (Belgium) where
Roularta is set to enjoy explosive growth in profits!
In 2015, Roularta got back in shape with decent profitability and a solid balance sheet.
However, profitability was (and still is) burdened by a legacy: the disproportionally large
amount of lease payments. In 2009, the sale-and-lease back of the printing presses was
needed to strengthen the balance sheet amidst a period of lower profitability and inflated
debt levels. This is no longer the case and in 2019 the situation should unwind, structurally
boosting EBIT by circa EUR 10m p/a vs. current levels. We could also argue that the remaining
debt and the associated interest costs are a legacy, as the acquisitions price of French Printed
Media was higher than current debt levels.
In exhibit 6 we show net profit over 2015, and we show what it would look like in absence of
lease costs, restructuring costs, and interest costs, ceteris paribus (PF 2015 v1). Our
calculations demonstrate that Roularta’s earnings capacity is actually much stronger than the
2015 numbers suggest.
…and a return to normal profits at a later stage…
However, profitability is set to overshoot in 2019 because the P&L will no longer carry any
costs for the use of the printing presses, which is pleasant, yet unnatural and unsustainable
long term. The economic lifetime of the printing presses is finite and we assume they will be
replaced in the distant future (say 2029 or so). By then, Roularta should also be paying taxes
again.
Hence, we also show what 2015 profits would look like in absence of lease costs, restructuring
costs, and interest costs, while adding depreciation costs and a normal tax rate of 34%, ceteris
paribus (PF 2015 v2). We assume replacement capex of EUR 50m, an amortization period of
15 years, and we ignore potential benefits from new and improved equipment like broader
functionality that can grow sales, and/or lower operating costs.
Exhibit 6 The underlying strength of reported profits over 2015 (EUR m)
2015 PF 2015 v1 vs. reported PF 2015 v2 vs. reported
Assumptions Reported Ex. legacies Ex. legacies
Inc. capex, tax
Depreciation printing presses 0 0 -3
Operating leases in opex -10 0 0
REBIT 16 26 63% 23 42%
Restructuring -4 0 0
EBIT 12 26 110% 23 83%
Net financial result -5 0 0
PBT 7 26 276% 23 228%
Taxes * 0 0 -8
Associates 19 19 19
Minorities -0 -0 -0
Discontinued -8 0 0
Net profit * 18 45 148% 41 130%
Net profit adjusted 30 45 49% 41 38%
Shares 12 12 12
EPS (EUR) 1.44 3.59 148% 3.32 130%
EPS adjusted (EUR) 2.40 3.59 49% 3.32 38%
Source: Roularta, Degroof Petercam; * For the sake of simplicity we use zero taxes for 2015
8 EQUITY RESEARCH │ Roularta 1/06/2016
…imply that new peak earnings are in the cards
Charts 7 and 8 show respectively reported and adjusted net profits over 2000-2015. Reported
losses were steep in 2013 (EUR -58m) and 2014 (EUR -143m), predominantly caused by
French Printed Media, which is now a thing of the past. Reported net profit in 2015 was
astronomically strong because of tax credits of EUR 46m, in spite of an EUR 8m loss from
discontinued operations. Excluding tax credits and discontinued operations, reported 2015
net profit would have been EUR 26m, or the third best performance since 2000. Adjusted net
profit in 2015 of EUR 30m was the fourth best performance since 2000, with only minor
differences vs. second and third best.
If we take 2015 profits as a starting point, adjust for legacies, consider replacement capex and
a normal tax rate, underlying earnings capacity in 2015 reached a new peak level!
Exhibit 7 Reported net profit (EUR m) Exhibit 8 Adjusted net profit (EUR m)
Source: Roularta, Degroof Petercam Source: Roularta, Degroof Petercam
-10
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
65
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 PF15
-10
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
65
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 PF15
9 EQUITY RESEARCH │ Roularta 1/06/2016
Chapter III: Valuation
We raise our target price to EUR 33 (from EUR 29). Buy!
Following the release of the annual report 2015 and the information in the notes to the
consolidated accounts, we have updated our model. This has resulted in minor changes to our
earnings estimates. We have made a few tweaks to our valuation models so they better
reflect Roularta’s true earnings potential. This has prompted us to lift our target price to
EUR 33 (from EUR 29), which provides sufficient upside potential to maintain our Buy rating.
Our target price is based on the average outcome of the fair values from our DCF-model, and
historic valuation multiples set out against adjusted 2017 estimates. We had already
incorporated the upcoming boost in earnings in our DCF-model, and we merely fine-tuned it.
However, the standard approach of using target multiples set out against future earnings
required an update, because plain vanilla 2017 estimates do not properly reflect Roularta’s
true earnings capacity. We slightly raised the target multiples we use for determining the fair
value of the participations, as our former approach may have been too harsh; we now use a
40% discount to peer group multiples (previously 50%).
Our DCF-model points to a fair value of EUR 34 per share
Our DCF-model generates a fair value of EUR 33.5 per share. As input, we use our projections
for 2016-2018. For 2019-2026, we use organic sales growth of 0.5% p/a and an EBITDA margin
that rises strongly in 2019 to reflect the absence of EUR 10m in lease payments, after which
we keep it stable. Over 2009-2015, investments (TFA+IFA) averaged 70% of depreciation and
amortisation combined. Short term, we expect this to continue. For consistency’s sake we
assume investments to rise, and be on par as from 2022. We use a tax rate of 34% as from
2023. We keep WC unchanged at -7.5% of sales, including prepayments for which we make an
adjustment to get from EV to market cap (we treat them as debt).
We assume new investments in printing presses beyond the initial period. To this we attribute
a negative value of EUR 16m, which is the balance of capex-related cash outflow, and a
modestly positive impact on operating profits (assuming modest sales and/or cost benefits).
We use a WACC of 8.5% (post-tax), which is 50bps less than the 9.0% we used in our report
from September 2015 (‘Money for nothing and Printed Media for free’). We consider a small
reduction justified in view of a much improved risk profile now that: 1) Roularta has reported
satisfactory results for a second time in a row, 2) confirmation that Roularta can use the tax
losses from French Printed Media, and 3) a much improved outlook for mid-term profits owed
to the upcoming absence of lease payments and interest payments.
This 8.5% looks conservative in the current environment of low interest rates, especially since
Roularta uses 7.2% in their impairment tests. Nevertheless, we prefer a cautious approach
because of limited transparency, uncertainty on the long-term development of the media
sector (print vs. digital), a small market cap, and a limited free float.
A WACC of 7.2% would generate a fair value of EUR 37.0.
Exhibit 9 DCF-model: cash flows (EUR m)
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
EBITDA 26 27 37 38 38 38 38 38 39 39
Tax 0 0 0 0 0 0 -10 -10 -10 -10
Investment -5 -5 -5 -5 -7 -10 -10 -10 -10 -10
Change in WC 0 0 0 0 0 0 0 0 0 0
Operating FCF 21 22 33 33 31 29 19 19 19 19
Discounted operating FCF 19 19 25 24 20 18 11 10 9 9
Source: Roularta, Degroof Petercam
10 EQUITY RESEARCH │ Roularta 1/06/2016
Exhibit 10 DCF-model: fair value (EUR m)
Enterprise value 270 Enterprise value 270 % of value
+ Financial assets (loans + receivables) 3 Years 1-10 163 60%
+ Participations 208 Years 11-20 57 21%
+ Deferral France 21 Infinity 50 18%
- Pension provisions -4 LT sales growth p/a 0.5%
- Net debt -47 Infinity growth p/a 0.5%
- Prepayments -15 WACC 8.5%
- Capex cycle 2027-2060 -16
- Minority interests -2
- Assets under construction 0 / Number of shares (m) 12.5
= Market cap 419 = Fair value per share 33.5
Source: Roularta, Degroof Petercam; Balance sheet items at year-end 2016
In exhibit 11 we show what happens to the fair value should we change one of the
parameters in our model. Changes in our assumptions for sales growth, margins, and WACC
have a relatively modest impact because a large share of the fair value (50%) stems from
participations.
Exhibit 11 DCF-model: sensitivity analysis (EUR)
Sales
growth *
Fair
value
EBITDA
margin
Fair
value
WACC Fair
Value
Associates:
discount vs.
peer groups
Fair value
-0.5% 32.3 11.5% 31.7 7.5% 36.1 30% 36.3
0.0% 32.9 12.0% 32.6 8.0% 34.7 35% 34.9
0.5% 33.5 12.5% 33.5 8.5% 33.5 40% 33.5
1.0% 34.2 13.0% 34.6 9.0% 32.5 45% 32.2
1.5% 34.8 13.5% 35.6 9.5% 31.5 50% 30.8
Source: Roularta, Degroof Petercam; * Also growth in investments in TFA and IFA and D&A
Historic multiples point to a fair value of EUR 32 per share
Average multiples over 2005-2015 and adjusted estimates for 2017 point to a fair value of
EUR 32.0 (exhibit 12). We use the numbers in our model as a starting point, and we adjust
them so that our calculations reflect Roularta’s true underlying earnings capacity (exhibit 13).
Had we used the numbers in our model, the outcome would have been EUR 29.6.
Exhibit 12 Historic valuation multiples: fair value (EUR)
EV/EBITDA 6.6 P/E adjusted 12.4
Adj. EBITDA 2017e (EUR m) 36 Adjusted EPS adjusted 2017e 2.37
Fair value 34 Fair value 29
EV/EBITA 9.8
Adj. EBITA 2017e (EUR m) 23
Fair value 33 Average fair value 30.7
Source: Roularta, Degroof Petercam
Exhibit 13 From reported estimates to underlying earnings capacity (EUR m)
EBITDA EBITA PBT Shares (m) EPS adj. (EUR)
Our estimates for 2017e 26 17 2.66
Lease savings as from 2019e 10 10 10 12 0.80
Depreciation after capex cycle -3 -3 12 -0.27
Bond savings as from 2019 5 12 0.40
Subtotal EPS 3.59
Tax rate 34%
Adjusted estimates for 2017e 36 23 2.37
Source: Roularta, Degroof Petercam
11 EQUITY RESEARCH │ Roularta 1/06/2016
The participations represent a large share of the fair value
A large share of the fair value is derived from the participations in broadcaster Medialaan
(50% stake) and publisher Bayard Group (50% stake). We used to value these participations at
a 50% discount to their respective peer groups, and we have changed this to 40%.
We may have been a bit too harsh using 50%, and 40% is still not very generous. However, we
believe a discount is justified because of: 1) the very small size of the companies compared to
their respective peers, 2) limited transparency, which makes it impossible to fully assess the
fundamentals, 3) an above-average risk profile in view of limited geographical exposure, 4)
Roularta is only partly in control, and 5) Medialaan’s expansion into mobile telephone, a
strategy that has yet to prove itself from a financial point of view.
Our methodology values the stake in Medialaan at EUR 183m (EUR 15 p/s), and the stake in
Bayard Group at EUR 25m (EUR 2 p/s). This corresponds with respectively 44% and 6% of the
fair value of Roularta.
If we would value the two participations on par with their respective peer groups, their fair
values would be respectively EUR 303m (EUR 24 p/s) and EUR 40m (EUR 3 p/s). That would
translate into a fair value of EUR 41 per share.
The book values at year-end 2015 were EUR 103m for Medialaan and EUR 14m for Bayard
Group. These numbers were more or less similar to the year-end numbers for 2013 (pro-
forma), and 2014.
We do not expect corporate activity with respect to the participations.
12 EQUITY RESEARCH │ Roularta 1/06/2016
Profit & Loss (EUR m) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Revenues 712.0 676.3 299.6 290.2 293.1 296.1 299.0 (Y/Y - %) -3% -5% -56% -3% 1% 1% 1%
EBITDA 31.4 14.0 12.7 23.9 24.9 25.9 27.3EBITA 16.2 -3.4 3.9 14.5 15.5 16.6 17.9(Ebita margin - %) 2.3% -0.5% 1.3% 5.0% 5.3% 5.6% 6.0%
Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0Impairment -11.5 -45.8 0.0 -2.2 0.0 0.0 0.0EBIT 4.7 -49.2 3.9 12.3 15.5 16.6 17.9Net Financial Result -8.9 -7.4 -6.8 -5.4 -4.9 -4.4 -3.9Except. / Discont. operations - - - - - - -Pre-tax result -4.1 -56.6 -2.9 6.9 10.6 12.1 14.0Taxes 1.2 -1.8 -2.5 46.1 0.0 0.0 0.0Associates 0.0 -0.2 18.0 19.1 20.1 21.1 22.1Minorities 0.5 0.7 0.1 -0.1 0.0 0.0 0.0Net declared earnings -2.5 -57.9 -142.5 64.1 30.6 33.2 36.1
Net adjusted earnings 15.5 9.6 19.4 30.2 30.6 33.2 36.1
Cash Flow (EUR m) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
EBIT 4.7 -49.2 3.9 12.3 15.5 16.6 17.9Depreciation 10.5 11.2 4.2 5.4 5.4 5.4 5.4Amortization 4.7 6.3 4.6 3.9 3.9 3.9 3.9Impairment 11.5 45.8 0.0 2.2 0.0 0.0 0.0Changes in provision 2.5 19.0 -4.1 -11.4 0.0 0.0 0.0Changes in working capital 26.7 -14.5 5.0 -20.1 1.9 -0.3 -0.3Others - - - - - - -Operational Cash Flow 60.6 18.5 13.6 -7.6 26.8 25.6 26.9Tax expenses 1.2 -1.8 -2.5 -0.1 0.0 0.0 0.0Dividends from associates 0.0 0.2 22.3 16.7 7.5 7.5 10.0Net interest charges -8.9 -7.4 -6.8 -5.4 -4.9 -4.4 -3.9Others -14.7 -5.7 -5.8 -6.1 - - -CF from operating activities 38.2 3.8 20.7 -2.6 29.3 28.6 33.0
CAPEX -6.2 -6.3 -3.2 -2.3 -2.0 -2.0 -2.0Investments in intangibles -3.8 -4.7 -4.2 -3.2 -3.0 -3.0 -3.0Acquisitions -0.7 -2.0 -10.6 -1.6 0.0 0.0 0.0Divestments 0.5 3.3 0.7 14.1 10.0 10.0 11.0Others -42.1 19.7 18.6 1.2 1.0 1.0 1.0CF from investing activities -52.4 9.9 1.2 8.2 6.0 6.0 7.0
Dividend payment -4.3 0.0 0.0 0.0 -6.6 -6.6 -7.2Minor. & pref. dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0Equity financing -0.2 -0.2 -0.2 0.2 0.0 0.0 0.0Others 38.5 -20.4 -23.4 0.5 0.0 0.0 0.0CF from financing activities 34.0 -20.5 -23.5 0.7 -6.6 -6.6 -7.2
Changes in consolidation scope - - - - - - -Exchange rate impact - - - - - - -Net debt/cash change 19.8 -6.8 -1.6 6.3 28.8 28.1 32.8
FCF to Enterprise 35.9 2.0 22.6 -2.6 29.3 28.1 31.9FCF to Equity 28.2 -7.2 13.3 -8.1 24.3 23.6 28.0
As of 2014 the company no longer proportionally consolidates the 50% stake in the Audiovisual activitiesNotes
13 EQUITY RESEARCH │ Roularta 1/06/2016
Balance Sheet (EUR m) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Fixed assets 604.7 549.9 271.8 319.0 301.8 287.5 271.7 Tangible fixed assets 100.4 91.8 60.9 57.0 53.6 50.2 46.8 Goodwill 71.9 41.1 0.0 0.0 0.0 0.0 0.0 Other intang. assets 418.0 403.5 87.6 86.2 85.2 84.3 83.4 Financial fixed assets 7.6 7.5 122.0 155.1 142.2 132.2 120.7 Other fixed assets 6.8 6.0 1.2 20.8 20.8 20.8 20.8Current assets 333.8 302.2 109.4 130.6 159.2 188.1 121.7 Inventories 58.9 56.1 6.2 5.5 5.5 5.5 5.5 Trade receivables 185.7 184.2 66.1 82.3 82.1 82.9 83.7 Other current assets 10.7 11.0 3.3 4.4 4.4 4.4 4.4 Cash & Equivalents 78.5 50.9 33.8 38.5 67.3 95.3 28.1Discontinued assets 0.0 0.0 151.9 0.0 0.0 0.0 0.0Total assets 938.4 852.1 533.2 449.6 461.1 475.6 393.4
Total Equity 357.0 298.9 145.8 209.5 219.2 233.2 250.5 Equity 344.7 287.5 143.3 207.6 217.3 231.4 248.6 Minorities & preferred 12.3 11.4 2.5 1.9 1.9 1.9 1.9Provisions 134.6 148.1 48.2 12.5 12.5 12.5 12.5 Provisions for pensions 9.8 8.6 4.2 3.5 3.5 3.5 3.5 Deferred taxes 117.1 110.3 27.1 0.5 0.5 0.5 0.5 Other provisions 7.7 29.2 16.8 8.5 8.5 8.5 8.5Other LT liabilities - - - - - - -LT interest bearing debt 129.0 121.1 113.4 111.4 111.4 111.4 11.4Current liabilities 317.8 284.4 128.9 116.3 118.0 118.5 119.0 ST interest bearing debt 19.1 6.1 2.5 2.9 2.9 2.9 2.9 Accounts payables 173.1 163.0 66.8 48.1 49.8 50.3 50.8 Other ST liabilities 125.6 115.3 59.5 65.4 65.4 65.4 65.4Discontinued liabilities 0.0 0.0 97.0 0.0 0.0 0.0 0.0Total liabilities 938.4 852.1 533.2 449.6 461.1 475.6 393.4
EV and CE details (EUR m) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Market cap. 135.6 141.5 160.9 322.0 319.9 319.9 319.9+ Net financial debt 69.5 76.3 82.0 75.7 46.9 18.9 -13.9 (of which LT debt) 129.0 121.1 113.4 111.4 111.4 111.4 11.4 (of which ST debt) 19.1 6.1 2.5 2.9 2.9 2.9 2.9 (of which Cash position) 78.5 50.9 33.8 38.5 67.3 95.3 28.1+ Provisions (pension) 9.8 8.6 4.2 3.5 3.5 3.5 3.5+ Minorities (MV) 12.3 11.4 2.5 1.9 1.9 1.9 1.9- Peripheral assets (MV) -7.6 -7.5 -8.1 -3.1 -3.1 -3.1 -3.1+ Others -0.2 -1.2 -187.4 -239.3 -229.3 -219.3 -207.8Enterprise Value 219.5 229.2 54.1 160.7 139.9 121.8 100.6
Equity (group share) 344.7 287.5 143.3 207.6 217.3 231.4 248.6+ Net financial debt 69.5 76.3 82.0 75.7 46.9 18.9 -13.9+ Provisions (pension) 9.8 8.6 4.2 3.5 3.5 3.5 3.5+ Minorities 12.3 11.4 2.5 1.9 1.9 1.9 1.9- Peripheral assets -7.6 -7.5 -8.1 -3.1 -3.1 -3.1 -3.1+ Others -0.2 -1.2 -187.4 -239.3 -229.3 -219.3 -207.8Capital employed (for ROCE) 428.6 375.1 36.5 46.4 37.3 33.3 29.3
Our estimates for EBIT(D/A) exclude net income from associates, unlike the company's reported figuresNotes
14 EQUITY RESEARCH │ Roularta 1/06/2016
Per Common Share (EUR) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Adjusted EPS (*) 1.24 0.77 1.56 2.42 2.45 2.66 2.89Adjusted EPS (fully diluted) 1.24 0.77 1.56 2.42 2.45 2.66 2.89Declared EPS -0.20 -4.64 -11.42 5.13 2.45 2.66 2.89CFS 2.46 2.17 2.26 3.17 3.20 3.41 3.63FCF (to Equity) 2.26 -0.57 1.07 -0.65 1.95 1.89 2.24Dividend 0.00 0.00 0.00 0.50 0.50 0.55 0.60Book Value 27.16 22.74 11.09 15.94 16.68 17.75 19.06
Shares (m)At the end of F.Y. 13.141 13.141 13.141 13.141 13.141 13.141 13.141Average number 12.483 12.483 12.483 12.486 12.486 12.486 12.486Fully diluted Average number 12.483 12.483 12.483 12.517 12.486 12.486 12.486
(*) Adjusted EPS : pre-goodwill amortisation earnings, adjusted for post-tax non-recurrent items
Ratios 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e
Valuation analysisP/E 8.3 13.9 7.9 10.1 9.9 9.2 8.4P/CF 4.2 5.0 5.4 7.7 7.6 7.1 6.7P/BV 0.4 0.5 1.1 1.5 1.5 1.4 1.3EV/Sales 0.3 0.3 0.2 0.6 0.5 0.4 0.3EV/EBITDA 7.0 16.4 4.3 6.7 5.6 4.7 3.7EV/EBITA 13.6 -66.7 13.8 11.1 9.0 7.3 5.6EV/EBIT 46.4 -4.7 13.8 13.1 9.0 7.3 5.6EV/CE 0.5 0.6 1.5 3.5 3.8 3.7 3.4EV/CE (grossed goodwill) 0.5 0.6 1.5 3.5 3.8 3.7 3.4EV/FCF (1) 6.1 114.1 2.4 -62.9 4.8 4.3 3.1FCF yield (2) 20.8% -5.1% 8.3% -2.5% 7.6% 7.4% 8.8%Dividend yield 0.0% 0.0% 0.0% 2.0% 2.1% 2.3% 2.5%
Financial ratiosInterest cover 1.8 -0.5 0.6 2.7 3.1 3.7 4.6Net Debt/EBITDA 2.2 5.4 6.5 3.2 1.9 0.7 -0.5Net Debt/Equity 19.5% 25.5% 56.3% 36.1% 21.4% 8.1% -5.5%Net Debt/FCF (2) 2.5 -10.7 6.2 -9.4 1.9 0.8 -0.5Capital turnover 1.7 1.8 8.2 6.3 7.9 8.9 10.2ROCE pre-tax 3.8% -0.9% 10.7% 31.3% 41.7% 49.8% 61.3%ROCE post-tax 2.7% -0.9% 20.1% 241.2% 41.7% 49.8% 61.3%ROCE pre-tax (grossed goodwill) 3.8% -0.9% 10.7% 31.3% 41.7% 49.8% 61.3%ROCE post-tax (grossed gdwll) 2.7% -0.9% 20.1% 241.2% 41.7% 49.8% 61.3%ROE -0.7% -20.1% -99.5% 30.9% 14.1% 14.3% 14.5%Working capital (in % of sales) -6.1% -4.0% -16.9% -7.3% -7.9% -7.7% -7.6%Payout 0.0% 0.0% 0.0% 20.7% 20.4% 20.7% 20.8%
Margin analysis and tax rateGross margin 33.8% 34.5% 37.5% 39.5% 39.5% 39.5% 39.5%EBITDA margin 4.4% 2.1% 4.2% 8.2% 8.5% 8.8% 9.1%EBITA margin 2.3% -0.5% 1.3% 5.0% 5.3% 5.6% 6.0%Adjusted profit margin 2.2% 1.4% 6.5% 10.4% 10.5% 11.2% 12.1%Tax rate 28.1% -3.1% -87.0% -671.0% 0.0% 0.0% 0.0%
Growth analysisSales -3% -5% -56% -3% 1% 1% 1%EBITDA -50% -55% -9% 88% 4% 4% 5%EBITA -65% -chg +chg 271% 7% 7% 8%Adjusted profit -49% -38% 102% 56% 1% 8% 9%Adjusted EPS -49% -38% 102% 56% 1% 8% 9%Dividend -chg - - +chg 0% 10% 9%
(1) Based on FCF to Enterprise - (2) Based on FCF to Equity
-Notes
Degroof Petercam Financial Markets www.degroofpetercam.com
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Analysts Sales
Stefaan Genoe Telecom/Technology +32 2 662 8299 Gert Potvlieghe +32 2 662 8289
Head of Research Head of Sales
Amal Aboulkhouatem Real Estate +32 2 662 8303 Sandra Aznar y Gil (RE) +32 2 662 8291
Marcel Achterberg Technology/Services +31 20 573 5463 Bart Beullens +32 2 287 9180
Jean-Marie Caucheteux Real Estate +32 287 9920 Damien Crispiels (RE) +32 2 287 9697
Junior Cuigniez Industrials/Shipping +32 2 662 8307 Quentin De Decker +32 2 287 9287
Fernand de Boer Retail/Food & Bev. +31 20 573 5417 Raymond de Wolff +31 20 573 5414
Nathalie Debruyne, CFA Chemicals +32 2 662 8308 Damien Fontaine +32 2 662 8287
Hans D’Haese Holdings/Food & Bev. +32 2 287 9223 Laurent Goethals +32 2 287 9185
Bart Jooris, CFA Financials +32 2 287 9279 Pascal Magis +32 2 287 9781
Michael Roeg Media +31 20 573 5422 Jurgen Smits van Oyen +31 20 573 5413
Luuk van Beek Energy/Engineering/Construction +31 20 573 5471 Jochen Vercauteren +32 2 662 8288
Herman van der Loos, CFA Real Estate +32 2 662 8304
Roderick Verhelst, PhD Life Sciences +32 2 662 8305 JPP Eurosecurities
Simon Vlaminck +1 212 521 6735
Middle Office
Christophe Swinnen +32 2 662 8298 Sales Trading
Joost Ceulemans +32 2 662 8285 Hans de Jonge +31 20 573 5404
Sven Dhondt +32 2 662 8286 Head of Sales Trading
Katia Foy +32 2 662 8296 Pascal Burm +32 2 662 8283
Antoine Miest +32 2 662 8294 Veronique De Schoemaecker +32 2 662 8280
Hilde Van Den Bossche +32 2 662 8297 Kristof Joos +32 2 662 8284
Frans van Wakeren +31 20 573 5407
Administration
Christel De Clerck +32 2 662 8302
Monique Gérard +32 2 662 8301
Tineke Hosselaer +32 2 662 8290
Alexandra Krauss +32 2 287 9797
Charlotte Mertens Roadshow Coordinator +31 20 573 5416
Investment rating system: The Degroof Petercam stock ratings are based on the estimated performance relative to the Degroof Petercam Benelux coverage universe.
The total return required for a given rating depends on the risk profile relative to this universe. This risk profile is represented by the Beta, as estimated by the analyst.
Low risk stocks have an estimated Beta below or equal to 0.9, Medium risk stocks have a Beta between 0.9 and 1.3 and High risk stocks have a Beta equal to or above
1.3. The required relative performance for a given rating is indicated below. The price targets given and the expected relative performance are always based on a 12
month time horizon.
Information about rating distribution, analyst remuneration system, and recommendation history can be found at
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securities of companies mentioned and may also perform or seek to perform investment banking services for those companies. Institutional sell-side research is
performed by Degroof Petercam S.A. under regulatory supervision of the Belgian “Financial Services and Markets Authority (FSMA)”.
The analyst(s) claim(s) not to have any meaningful financial interest in one of the above mentioned companies nor to have any conflict of interest.
SELL REDUCE HOLD ADD BUY
High
Beta >= 1.3RP<-15% -15%<=RP<-6% -6%<=RP<+6% +6%<=RP<+15% RP>=15%
Medium
0.9 < Beta > 1.3RP<-10% -10%<=RP<-4% -4%<=RP<+4% +4%<=RP<+10% RP>=10%
Low
Beta <= 0.9RP<-6% -6%<=RP<-2% -2%<=RP<+2% +2%<=RP<+6% RP>=6%
RP : Relative Performance against Degroof Petercam coverage universe