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Despite a busy earnings schedule, 9fin aims to bring you up to date with results you may have missed during the week. Below you will find a TLDR earnings summary for selected companies in the European HY market. The summary aims to capture earnings performance, recent updates and any guidance mentioned in the call.

In this week’s edition we cover United Group, Pure Gym, Schoeller Allibert, Versuni (PDA), David Lloyd, Lowell GFKL, Grupo Antolin, Constellium, INEOS, and Ardagh Metal Packaging.

Last Thursday (20-Apr), telecom provider United Group (B2/B) announced a sale & purchase agreement for ~4,800 of its mobile towers (~€60m of FY 22 EBITDA) across Bulgaria, Croatia and Slovenia to Saudi Telecom Co group, for a ~€1.22bn purchase price and 20.1x EV/EBITDAal (pre IFRS 16) to repay its outstanding 2024 and 2025 notes. 

On the back of the towers sale process, the group posted strong earnings this Monday (24 April), with FY 22 revenue up +38% YoY to €2.62bn, largely driven by last year’s Wind Hellas acquisition which contributed ~81% (3.4m) of the net additions to Revenue Generating Units (RGUs). Despite being impacted by macro headwinds, inflation and energy costs, Adjusted EBITDA increased 32% YoY to €919m in FY 22 also helped by acquisitions, with organic EBITDA only increasing by 4.6%. Management noted organic EBITDA growth would have otherwise hit ~8% had energy prices not increased.

Capex rose to €686m (26% of revenues), spent on acquisitions and sport broadcasting rights for the Premier league. Management expects FY 23 capex to remain high, ballparking 24% of revenues, as they continue to invest into network expansion and customer-premises equipment. 

The group intends to use proceeds from the Towers sale to repay its €525m SSNs due 2024 (incl. €200m tap), €550m SSFRNs due 2025, and pay down RCF with any remaining balance. The PIK Toggle Notes due 2025 will be left outstanding, as management waits for more favourable markets. FY 22 PF net leverage was 4.96x and would significantly improve to 3.99x post tower sale transaction, expected to close in the next two to three months. Management doesn’t have a leverage target, but absent new opportunities they expect leverage to drop below 4x in FY 23. 

9fin clients can read our full earnings review.

Despite the many external headwinds experienced in 2022, Pure Gym reported a 58% increase in FY 22 revenues from FY 21 (+12% YoY in Q4), and a 7.8% increase vs FY 19, to £476m. Member growth of 8% and an ARPM (average revenue per member) of 5% were instrumental in the revenue increase for Q4. Run-rate adjusted EBITDA also grew 111% to £114m, well on the way to reaching the FY19 run-rate adj. EBITDA of £161m. However, margins are slower to recover, sitting well below FY 19 at 19.9% (vs 29.7%). The company opened 55 new sites in FY 22 with a new target of 40 new sites for FY 23, almost half their initially forecasted amount in 2022.

2023 is off to a promising start, with a 12% increase in members as of Feb-23 (vs FY 22), and both adjusted EBITDA and revenues up 15%. The group achieved £43m in monthly revenues in Feb-23, putting it on target for an indicative run-rate revenue of >£500m for FY 23. Management has renegotiated fixed energy price contracts for 2024 in late 2022 limiting cost of energy increases to £5-8m, and secured 70% of energy prices at the bottom end for 2023.

The company’s £380m of liquidity includes £235m of cash and a £145m undrawn RCF, which it plans to use for repayment of their 2025 SSNs in the near future. Liquidity was boosted in Q1 2022 from £300m funding provided by KKR primarily used to reduce net debt, and partially for new site openings. Senior secured net leverage at year end was 5.4x based on run-rate adj. EBITDA (3.8x based on FY19), bringing them slightly closer to management’s target of 3.6x to 4.6x (based on FY 19 EBITDA) compared to a year ago.

9fin clients can read our full earnings review and updated CapTable for Restricted Group.

Schoeller Allibert said there is material uncertainty around the refinancing of the Nov-2024 notes and that this may cast ‘significant doubt’ on their ability to continue as a going concern. The Netherlands-based packaging manufacturer has prepared a long term business plan (2023-2027), and is in the process of selecting a financial advisor(s). Options on the table include a new debt financing or “other form of liability management transaction”.

Nonetheless, bondholders will likely breathe a sigh of relief with a much needed cash boost finally reaching the Restricted Group — €18.5m cash contribution from RentCo. Cash receipts from the sale to RentCo, alongside a €14.6m working capital reversal in Q4 saw elevated inventory levels come down to €45m from €64m in Q3 and a €22.4 repayment towards the May 2024 RCF.

Aside from this, earnings outlook remained negative as higher container prices plus customers’ tendency to defer the purchase of containers have hampered volumes particularly for the Pooling business (revenue fell to €138m from €207.6m in 2021).

9fin clients can read our full earnings review. 

Versuni (previously PDA) (B2/B+) delivered Q4 22 earnings mostly as expected on 26 April. Management was confident on the earnings call regarding the 2023 outlook, suggesting headwinds from 2022 were reversing, and that Q1 23 performance saw a marked improvement from the prior year.

Separation costs (from former parent Royal Philips) will continue into 2023 as the company ramps up its own IT infrastructure, and, coupled with cost efficiency measures, will continue to eat into cash flows and inflate reported metrics. However, margins are likely to improve and extraneous cash costs are likely to reduce, meaning the company could reach break-even FCF and potentially de-lever to ~5x (9fin estimate).

Disclosure and transparency is increasing, but there is still room for improvement in our view. No guidance was provided for 2023, but management said Q1 23 earnings in late May will be a good chance to demonstrate evidence of 2022 headwinds reversing.

FY 22 ended with €197m cash, down from €265m as of FY 21 on account of a €52m FCF burn (company definition). With full availability on the €250m RCF, liquidity of €447m is still very comfortable.

Net leverage ticked up sequentially to 5.8x from 5.3x as a comparatively stronger Q4 21 EBITDA rolled off. This is based on proforma adjusted EBITDA of €262m, which includes €40m of value creation initiatives and a €12m impact from stranded costs in Russia and Ukraine.

David Lloyd (B3/B) reported strong Q4 and FY 22 results, hitting its highest ever number of members (730,000), driving 68% revenue growth to £655.3m for FY 22. Adjusted EBITDA is up 24% compared to pre-Covid 2019 levels, recovering to £167m. 

A stable outlook was given for FY 23, with management expecting EBITDA growth despite inflationary pressures from energy and wage costs. To mitigate inflation, price increases averaging 10% were implemented in Jan-23. With regards to energy increases, more than 90% of energy costs, which would have cost £61m, have been hedged. 

Liquidity has decreased from £249m in FY 21 to £136.5m in FY 22, consisting of £125m in undrawn RCF and £12m in cash. The fall was due to capex spending on accretive investments (£62m in premiumisation projects of David Lloyd sites, £39m in new opening pipelines, and £14m in digital transformation), payment on deferred Covid payables (£44m), paid with cash at hand. With an additional £39m spent on general maintenance, total capex stood at £154m for FY 22. Management expects to spend less than £100m in capex for FY 23, while the company remains on track to open 5-6 sites per year, having opened five in FY 22, with four planned for FY 23. 

Despite a DACH cyber attack and worsening macro conditions, debt collector Lowell GFKL (B2/B+/B+) reported promising FY 22 numbers with 7% top-line growth of £73m YoY. Estimated remaining collections (ERC) rose to £4.3bn in Q4 22 from £3.6bn a year prior, bolstered by UK asset write-ups and £473m of new capital deployed surpassing FY 22 guidance of ~£450m. Increased pressure continues in the UK as the cost of living pinches NPL settlement values, but outlooks suggest increased NPL stock across FY 23 as credit card borrowing increases.

Cash EBITDA grew, despite a cyber attack impact of ~£24m, to £569m in FY 22 and margins were in line with guidance at 59%. Performance was underpinned by double-digit EBITDA growth in the UK and Nordic region despite flat growth in the cyber-attack-effected DACH. Purchasing has reduced in the Nordics, prioritising capital to other regions following record deployment in FY21 producing a 14% growth in cash EBITDA across FY 22.

Cash generation reached £146m in FY 22, boosting liquidity to £153m. Management expects a sharp increase in excess cash after replenishment across 2023, as new purchases are limited to ~£350m, as already seen in rising Pro Forma liquidity to £230m in Q1 23. 

Management denied plans to use excess cash to buy back a portion of Lowell's 2025 maturity wall, stating that cash deployment into NPLs would relatively yield more attractive returns. 

Net leverage increased to 4.0x after completing the acquisition of Hoist in October 2022, however management said it has already reduced to ~3.4x after Q1 23 developments. A clear ambition was set to reduce leverage to below 3.0x within 18 months leading up to bond maturity. 

Grupo Antolin (B3/B-), Spanish-based car interior manufacturer, reported FY 22 numbers in-line with expectations — with revenues up 10% and EBITDA up 5% YoY. Top-line growth was equally driven by higher volumes and FX impact. Once we strip out gains realised from FX, however, the group failed to outperform global light vehicle production (+6%) in 2022. This can be attributed to weak production volumes in Europe, and zero contribution from their Russian assets which were disposed of in Q1 23.

EBITDA margins were slightly weaker in FY 22, despite managements efforts to claw back all raw material inflation costs from Q2 onwards. Management highlighted that more will need to be done in 2023 as they forecast overall LfL cost increases of ~5%. 

Disappointingly GOA reported €123m of cash burn in FY 22, and a further €150-180m is guided in FY 23. As previously reported, the company intends on using non-recourse factoring lines, alongside asset disposals and efficiency initiatives in order to transform their business. As well as deleveraging to below 1.5x (from 3.5x currently), the group is focusing on achieving double-digit EBITDA margins and interest coverage above 8x by the end of the transformation period in 2026.

Aluminium producer Constellium (B1/B+) reported flat results in Q1 23, with revenues of €2bn (-1% YoY) and Adjusted EBITDA of €166m (-1% YoY). The drop was primarily due to falling demand and inventory adjustments in the packaging sector (39% of LTM Revenue as of Q1 23). Management was pleasantly surprised by the favourable trends and strong performance in the Aerospace and Automotive sectors, raising their guidance of FY 23 Adjusted EBITDA to €650m - €680m from €640m - €670m previously. 

Adjusted EBITDA guidance revision was in spite of expectations of inflation costs in FY 23 to roughly mirror those in FY 22 at €300m. Management further explained that this bullish outlook was not due to any change in the outlook for the remaining nine months of the year but only because of the better than expected performance of Aerospace and Automotive in Q1 23.

On the back of the lowest operating cash flow (CFO) in two and a half years, Constellium reported a negative quarterly FCF (CFO-CFI) figure for the first time since Q2 2020, coming in at -€34m for Q1 23. In the first quarter of FY 23, CFO nearly halved to €34m (€58m in Q1 22) due to unfavourable swings in working capital (WC) while cash used in investing more than doubled to €68m (€32m in Q1 22) due to increased capex. Management maintained their guidance of FCF at more than €125m for FY 23, guiding capex of around €340m - €350m and a roughly neutral WC.

Leverage remained unchanged from FY 22, at a multi year low of 2.8x. Management emphasised their commitment to hit their net leverage target of 2.5x (long-term target of 1.5x-2.5x). 

INEOS (Ba2/BB/BB+) delivered a weak set of Q1 23 results compared to the record high seen in Q1 22. Lower pricing and ongoing de-stocking effects across the industry led to a softer performance in topline with revenues reaching €4.12bn vs €5.67bn in Q1 22 (-27% YoY). Erosion in profitability (EBITDA of €444.2m vs €994.6m in Q1 22, -55% YoY) and shrinking margins were the highlights for Q1, as prices begin retracing amid an improved supply chain. A tornado in Jan 2023 struck the Battleground site in Texas leading to $60m of EBITDA reduction in North America’s Olefins & Polymers (of total €259m segment decline).

Chemical Intermediates demonstrated more resilience with sales volumes remaining flat overall, according to management, while Olefins & Polymers (O&P) in both Europe and North America faced significant weakness. The O&P in Europe saw €23m inventory holding losses (vs €91m gains in Q1 22).

The group exhibited negative operating cash flow of €465m (vs €481m inflow in Q1 22). Plummeting EBITDA and capex needs (€239m), including the Mitsui Phenols acquisition early in 2023) were the primary drivers, with management reiterating its €1.8bn capex guidance for FY 23. However, working capital needs remained relatively consistent with Q1 22 (€388m of net outflow), also supported by €682m of undrawn working capital facilities.

Net leverage increased 0.8x to 2.8x versus year-end. According to management, its debt burden is expected to increase by €700m in FY 23 due to further drawdowns required in relation to Project One — the capital investment in Antwerp and Belgium for production of ethylene and propylene.

Metal beverage cans supplier AMP (B2/B+/B) reported flat Q1 23 revenues (-1% YoY) at $1.1bn. Adjusted EBITDA was disappointing, declining by 10% YoY to $130m. Industry demand in Brazil has been slow to recover, which has negatively impacted volumes in the Americas market. Global demand remains restrained by retail price inflation. Nonetheless, management reinforced its 10% growth guidance for FY 23 EBITDA, as demand is expected to normalise from the second quarter along side inflation recovery. 

In line with the end of year 2022, AMP didn’t manage to fully pass-through higher input costs to costumers, as Q1 23 EBITDA margins were down to 11.5% from 12.8% a year ago. Europe showed negative volume/mix impact, only partly offset by price increases, whereas the Americas experienced a positive volumes/mix effect driven mainly by carbonated soft drinks, however higher input costs pressured margins.

The $415m ABL facility, upsized in September 2022, was €36m drawn to cover working capital outflows. Working capital build up is likely linked to seasonality effects during the quarter, in which AMP tends to increase its inventory level in preparation of the productive summer quarters. Despite generating adjusted free cash flow of negative $387m, AMP paid a $66m dividend during Q1 23. As a result, cash dropped to $124m, compared to $555m at year-end. 

Schoeller sees ‘material uncertainty’ around 2024 refinancing; RentCo funding secured

Wepa ends rollercoaster year on a high — Q4 earnings review

(The below are available to read for 9fin clients)

Versuni (PDA) management strike positive tone for 2023 as headwinds begin to reverse – Q4 22 earnings review

Thyssenkrupp CEO resignation sparks CDS widening 

Intrum CDS widens sharply against market on ‘unsatisfactory’ results

UPDATE: United Group — Further covenant analysis on towers disposal

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