Welcome back to Investing in Europe, a weekly newsletter on what’s happening in European companies and markets, filtered for what matters. Welcome to new subscribers! 🥂 Your feedback is welcome. You can find me on Twitter.
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“Congrats on the quarter”
If you listen to companies’ conference calls, you have noticed that sometimes there is a sell-side analyst who congratulates the company on the good quarter. It always makes me laugh and reminds me how some people in finance can be so short-term focused.
That was a disclaimer as the first quarter of 2021 is over. European markets performed quite well. The MSCI Europe is up 8.4% year to date. It is a big number for only three months, so - congrats.
Company news and results
It has been a short week as most markets were closed on Good Friday.
I don’t usually write about banks but this week I have a special mention to Credit Suisse. A few weeks after being in the news due to the Greensill collapse, the Swiss bank gained its place in the headlines again as the institution that could lose the most in the family office Archegos blowup. One of the reasons I don’t do banks is that it is quite impossible to assess risks. Also, at least in Europe, returns are quite poor.
There are better businesses in the financial sector, like investment platforms. AJ Bell, which operates in the UK, issued a trading update for the first half of its financial year (Sep-Mar). They continue to see strong customer acquisition and, similar to other players like the market leader Hargreaves Lansdowne, high dealing activity. People are trading more in lockdown.
Next, the UK retailer that is moving more and more online, reported its results for the year ending January 2021. Online sales accounted for more than half of revenues going into the pandemic but were not enough to offset the stores sales decline: total group sales declined 17% ca. Next stopped its dividend and share buyback programs but accelerated part of their capital expenditure, in the online business. In the first eight weeks of the year, online sales were up more than +60% on two years ago. As a result, they raised their Jan 2022 profit before tax guidance to £700mn. This is still below Jan 2020 level, while sales are expected to be in line with 2020.
What performed during the pandemic - expect this to reverse somewhat:
Finally, this is how Next has changed since 2005 - look at the increase of online:
Another retailer reported this week, H&M. They had already preannounced, and gave an update on March trading: sales increased by 55% as economies are reopening. It will not be a smooth ride as many countries are still facing restrictions. They also issued a very diplomatic statement on China.
The food service company Sodexo reported its first half results (Feb 21 end). Revenues were down almost 22% in local currency. They expect a recovery in the second half, but not as strong as some expected: Sodexo is guiding for +10/15% revenues growth. They don’t expect profitability to improve, as margins are guided to be around 3.1% margin, in line with the first half.
It was a short week and this is a short IIE - hope you are having a good break!
As usual, contact me at @AnalystInvestor - your feedback is important to shape this newsletter!
M&A and IPO
Deliveroo first-day performance set a record according to Dealogic 🤦♂️
…the worst first-day performance for a sizeable London IPO - above 1 billion pounds - on record, markets platform Dealogic said
Domino’s Pizza Group is selling its business in Iceland for £13.7mn (IR)
Used car retailer Cazoo to list in New York with $8bn valuation (FT)
Other News
Prosus increased its stake in Delivery Hero to offset the dilution impact from the Woowa deal in South Korea. Prosus owns a 22.2% stake on a fully diluted basis
Volkswagen tried to be funny 😐🔌
Lufthansa to seek approval for a possible capital increase at AGM (Yahoo) - up to 5.5bn EUR, which is almost 90% of the market cap
Will Grocery Delivery Become the Next Utility? (The Spoon) - if you have an Ocado Smart Pass you are probably already there
Have a great week and good investing!
Disclaimer: this newsletter is for informational purposes only and does not represent investment advice. I might have a position in some of the stocks discussed. Always do your own research before investing.