Ibersol SGPS — On a journey

Research: Consumer

Ibersol SGPS — On a journey

Ibersol is responding well to the ‘unexpected challenge’ of the late 2022 disposal of its Burger King operations (22% of FY22 EBITDA) with accelerating expansion of other high-quality international brands (Pizza Hut, KFC, Taco Bell and Pret a Manger) including significant new concession contracts at major airports in Spain. Strong finances (net cash at March 2024 of €147m, reinforced by c €250m Burger King sale proceeds) ensure material firepower in this regard. Meanwhile trading is resilient despite consumer spending pressures and intense competition, with Q124 restaurant like-for-like sales up by 6%, boosted by an early Easter and buoyant airport traffic, and EBITDA up over a third, if in the quietest quarter. With improving conditions and a medium-term payoff from maturing concessions, FY25 forecasts show EV/EBITDA of 3.4x.

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Consumer

Ibersol

On a journey

Travel and leisure

QuickView

21 June 2024

Price

€7.00

Market cap

€297m

Share price graph

Share details

Code

IBS

Listing

Euronext

Shares in issue

42.4m

Business description

Ibersol is a multi-brand restaurant group, predominantly in Portugal and Spain, operating through leading international franchised brands and its own concepts. Its c 500 outlets (mainly equity) include dine-in restaurants, counters, travel concessions and catering.

Bull

Range of popular, complementary brands including Pizza Hut, KFC, Taco Bell and, newly, Pret a Manger.

Breadth and flexibility of estate, afforded by multi-brand approach.

Strong finances (net cash excluding leases), facilitating brand and site expansion.

Bear

Economic and geopolitical uncertainty, mitigated by a wide range of value offerings.

Potential loss of brand partnerships and concessions as well as link to success and reputation of brands represented by the company.

Execution risk in terms of planned expansion, although positive record of delivery.

Analysts

Richard Finch

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Ibersol is responding well to the ‘unexpected challenge’ of the late 2022 disposal of its Burger King operations (22% of FY22 EBITDA) with accelerating expansion of other high-quality international brands (Pizza Hut, KFC, Taco Bell and Pret a Manger) including significant new concession contracts at major airports in Spain. Strong finances (net cash at March 2024 of €147m, reinforced by c €250m Burger King sale proceeds) ensure material firepower in this regard. Meanwhile trading is resilient despite consumer spending pressures and intense competition, with Q124 restaurant like-for-like sales up by 6%, boosted by an early Easter and buoyant airport traffic, and EBITDA up over a third, if in the quietest quarter. With improving conditions and a medium-term payoff from maturing concessions, FY25 forecasts show EV/EBITDA of 3.4x.

Proven successful strategy

Ibersol has an impressive, sustained record of restaurant and brand development. From 2000 until the Burger King disposal in November 2022, it grew the number of equity restaurants fourfold with revenue CAGR of 9%. Confidence is thus justifiable that Ibersol’s established multi-brand approach, involving both popular international and local franchised brands and its own concepts (more than 20), provides the flexibility and breadth of offering to rebuild the portfolio, specifically still in Portugal and Spain, which offer considerable potential in management’s view. 2023 was notable for 32 restaurant openings (18 in Q4) and the award and implementation of concession contracts at Madrid (for eight years), Tenerife, Malaga and Lanzarote airports, while the current period sees their conversion to definitive formats and the proposed imminent purchase of an operator of 34 KFC units.

Solid start to FY24

Given continued traffic recovery since the pandemic and the impact of new airport concessions, 10% revenue increase and 37% EBITDA growth in Q124 was driven by Concessions & Catering with revenue up 28% and EBITDA almost trebling, owing partly to the application of IFRS 16 to contracts at three airports where the standard had been suspended until traffic recovered to 2019 levels. Dine-in restaurants and counters delivered 5% higher EBITDA in line with revenue.

Valuation: Cautious

Reflecting the early stage of reinvestment and associated net bank cash, Ibersol’s FY25e EV/EBITDA of 3.4x is at a justifiable discount to 5x for SSP (operator of food and beverage outlets in travel locations) and 8x for Loungers (all-day restaurants).

Consensus estimates (continuing operations*)

Year
end

Revenue
(€m)

Adjusted EBITDA** (€m)

Net income
(€m)

EPS
(€)

DPS
(€)

EV/adjusted EBITDA** (x)

12/22

355.6

61.2

16.7

0.39

0.135

3.6

12/23

418.2

73.7

14.6

0.35

0.005

4.9

12/24e

440.0

86.0

18.3

0.43

0.007

3.9

12/25e

461.0

92.0

21.2

0.50

0.009

3.4

Source: Consensus is based on one estimate. Note: *Following the sale of Burger King operations in Portugal and Spain in November 2022. **Excluding exceptionals.

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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General disclaimer and copyright

This report has been prepared and issued by Edison. 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. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

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 2024 Edison Investment Research Limited (Edison).

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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.

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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.

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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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