Vantiva — Good broadband growth supports FY23 prospects

Vantiva (PAR: VANTI)

Last close As at 21/12/2024

EUR0.14

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Research: TMT

Vantiva — Good broadband growth supports FY23 prospects

Vantiva’s Q1 trading update shows the group is on track to meet FY23 guidance, with a strong performance from the larger Connected Home (CH) segment (80% of Q123 revenue), and a more difficult trading backdrop for Supply Chain Solutions (SCS). CH’s revenue was up 8.7% on Q122 at constant currency (ccy), with good growth in North America and double-digit progress in Europe and Latin America driven by improved supply conditions and growing market share. SCS’s revenue retrenched 25.4%, weighed down by delays in releases by the major studios. Our forecasts are unchanged, and the shares still sit well below our DCF valuation.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Vantiva

Good broadband growth supports FY23 prospects

Q1 update

Technology hardware

28 April 2023

Price

€0.22

Market cap

€78m

US$1.10/€

Net financial debt (€m), IFRS basis at 31 December 2022

263

Shares in issue

355.4m

Free float

86%

Code

VANTI

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

9.2

(8.8)

(77.8)

Rel (local)

3.6

(12.9)

(80.5)

52-week high/low

€1.2

€0.2

Business description

Vantiva consists of two businesses: Connected Home, a leading global supplier of strategic customer-premises equipment solutions, and Vantiva Supply Chain Services, a global leader in the production of discs and associated logistical fulfilment.

Next events

H123 figures

July 2023

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Vantiva is a research client of Edison Investment Research Limited

Vantiva’s Q1 trading update shows the group is on track to meet FY23 guidance, with a strong performance from the larger Connected Home (CH) segment (80% of Q123 revenue), and a more difficult trading backdrop for Supply Chain Solutions (SCS). CH’s revenue was up 8.7% on Q122 at constant currency (ccy), with good growth in North America and double-digit progress in Europe and Latin America driven by improved supply conditions and growing market share. SCS’s revenue retrenched 25.4%, weighed down by delays in releases by the major studios. Our forecasts are unchanged, and the shares still sit well below our DCF valuation.

Year
end

Revenue
(€bn)

PBT*
(€m)

EPS*
(c)

DPS
(c)

EV/EBITDA
(x)

P/E
(x)

12/21

2.25

(126)

(61)

0

3.2

N/A

12/22

2.78

(497)

(197)

0

2.1

N/A

12/23e

2.72

(16)

(14)

0

2.3

N/A

12/24e

2.75

(7)

(8)

0

2.1

N/A

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

Good progress in broadband

The Q1 update outlined revenues over the period by segment, with no commentary on earnings beyond unchanged full-year guidance. We detailed our forecasts in our recent update following the publication of Vantiva’s maiden accounts. The Q1 presentation highlighted the good progress particularly in broadband products, in EMEA and Latin America, and market share gains in fibre. In North America, WiFi 6 is stimulating demand, along with Android TV. Broadband revenues were up 14.0% (ccy). Demand for video products has tailed off, notably in Latin America and India, with revenues down 10.9% (ccy) on Q122. At SCS, revenues decreased 25.4% (ccy), with delays in major studio releases affecting optical disc sales. The diversification investment programme is pushing ahead and capacity in vinyl pressing is a little ahead of plan. Group revenues were down 0.6% (ccy) reflecting the business mix.

Circumspection on demand outlook

The trading environment continues to be mixed and management remains cautious on demand from the network service providers, key customers of the CH segment. However, relationships are very close and there is plenty of co-operation on technical developments that should drive medium-term demand, such as Wi-Fi 7 and 10G. The current volatility looks to us to be reflected in the full year guidance.

Valuation: Below DCF indication

An earnings-based valuation would be premature, given the Technicolor spin-out and current uncertain economic backdrop, and revenue-based metrics are inappropriate for the business. We have therefore run a discounted cash flow (DCF) based on modest sales and margin gains post the forecast period. Using a WACC of 10% and terminal growth of 1%, we derive a value of €0.57 per share, with the TCS shareholding worth an additional €0.06 per Vantiva share at current prices (prior to the intended further refinancing), unchanged on our last report.

Exhibit 1: Financial summary

€m

2021

2022

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

2,250

2,776

2,724

2,753

Cost of Sales

(1,976)

(2,439)

(2,388)

(2,394)

Gross Profit

274

336

336

359

EBITDA

 

 

105

161

151

164

EBITA

 

 

40

57

66

79

Amortisation of acquired intangibles

(30)

(28)

(24)

0

Exceptionals

27

20

(8)

0

Reported operating profit

(13)

(11)

19

64

Net Interest

(117)

(177)

(67)

(70)

Joint ventures & associates (post tax)

0

(311)

0

0

Profit Before Tax (norm)

 

 

(126)

(497)

(16)

(7)

Profit Before Tax (reported)

 

 

(129)

(499)

(48)

(7)

Reported tax

(14)

(30)

(36)

(22)

Profit After Tax (norm)

(143)

(529)

(52)

(29)

Profit After Tax (reported)

(143)

(529)

(84)

(29)

Minority interests

0

0

0

0

Discontinued operations

4

680

0

0

Net income (normalised)

(143)

(529)

(52)

(29)

Net income (reported)

(140)

151

(84)

(29)

Average Number of Shares Outstanding (m)

236

269

355

355

EPS - normalised (c)

 

 

(61)

(197)

(14)

(8)

EPS - normalised fully diluted (c)

 

 

(61)

(197)

(14)

(8)

Dividend per share (c)

0.00

0.00

0.00

0.00

Revenue growth (%)

(9)

23

(2)

1

Gross Margin (%)

12.2

12.1

12.4

13.0

EBITDA Margin (%)

4.7

5.8

5.6

5.9

EBITA Margin (%)

1.8

2.0

2.4

2.9

BALANCE SHEET

Fixed Assets

 

 

1,730

1,053

1,004

989

Intangible Assets

1,283

782

737

722

Tangible Assets

305

154

149

149

Investments & other

59

84

84

84

Deferred tax and other

83

34

34

34

Current Assets

 

 

1,268

1,290

1,205

1,197

Stocks

335

452

455

425

Debtors

359

343

345

323

Cash & cash equivalents

196

167

76

120

Other

377

329

329

329

Current Liabilities

 

 

(1,360)

(1,389)

(1,348)

(1,357)

Creditors

(671)

(855)

(839)

(848)

Tax and social security

(29)

(18)

(18)

(18)

Short term borrowings

(65)

(24)

(24)

(24)

Other

(594)

(492)

(467)

(467)

Long Term Liabilities

 

 

(1,505)

(633)

(625)

(625)

Long term borrowings

(1,170)

(407)

(398)

(398)

Deferred tax

(20)

(3)

(3)

(3)

Other long term liabilities

(315)

(224)

(224)

(224)

Net Assets

 

 

134

320

236

204

Minority interests

Shareholders' equity

 

 

134

320

236

205

CASH FLOW

Net profit

(143)

(529)

(84)

(29)

Depreciation and amortisation

139

135

100

90

Working capital

(98)

57

(21)

62

Tax and interest

(70)

(83)

(75)

(61)

Exceptional & other

61

506

103

92

Operating Cash Flow

 

 

(111)

86

24

154

Capex

(69)

(81)

(75)

(80)

Acquisitions/disposals

0

0

0

0

Equity financing

0

284

0

0

Dividends

0

0

0

0

Other

(33)

(14)

(40)

(30)

Net Cash Flow

(214)

275

(91)

44

Opening net debt/(cash)

 

 

812

1,039

263

346

FX

16

(25)

0

0

Discontinued

63

501

0

0

Other non-cash movements

(92)

25

8

0

Closing net debt/(cash)

 

 

1,039

263

346

302

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

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

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United Kingdom

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

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