Investing in Europe #32
Too much trading. Hotels slow recovery. Food delivery. MedTech. Adieu Reebok. And more.
Dear reader, it’s mid August and I wish that instead of reading this newsletter about European companies, you are enjoying a boat trip around the Mediterranean Sea:
If not, anywhere else is fine. Spending some good time at home is ok too. I just hope you are having a good day, and thank you for reading this newsletter.
Company news and results
We have been trading too much. Hargreaves Lansdown, the UK’s largest investment platform, reported its full-year results (June 2021): transactional revenue increased by almost 3x compared to 2019. The more valuable ongoing revenue was largely flat in the same period.
Higher costs disappointed investors and are expected to continue “to be broadly aligned to client growth”. Over the medium term, the management is confident:
We are also confident that in the medium term beyond this period of post pandemic ‘normalisation’ and investment, as demonstrated by the benefits we are already seeing from our previous investments, HL will continue to deliver attractive earnings growth with improving operating leverage as the benefits of this investment deliver.
InterContinental Hotels Group is slowly recovering from the pandemic as RevPAR was down 36.3% vs 2019 in Q2, compared to -50.6% in Q1. Americas (58% of the global system mix) and Greater China (17%) are doing better than Europe (25%). In the US, domestic leisure is almost back to 2019 levels.
The Dutch grocery retailer Ahold Delhaize reported a 3% increase in group sales compared to last year, at constant currencies. On a 2-year stack, comparable sales ex-gas accelerated to +19.1% in the US (from +15.5% in Q1) while slowed down to +12.6% (from+18.1%) in Europe. The full-year outlook has been raised:
In the food delivery space, Deliveroo increased revenue by 82% to £922.5mn in the first half of 2021 as the number of orders almost doubled compared to last year. Gross margin was weaker, due to investments to support future growth, including:
investments to drive consumer acquisition (such as the New User Experience programme) and retention (via the Plus subscription offering), and to create differentiated content for consumers through Deliveroo's restaurant and grocery selection
Deliveroo reiterated the full-year guidance: GTV growth of 50-60% and gross profit margin as % of GTV in the lower half of the range of 7.5-8.0%.
Delivery Hero grew orders by 79% in Q2 2021. GMV expanded by +81% at constant currency. Own-delivery increased to 50% of sales, +400bps vs last year.
The 2021 outlook (including Woowa and excluding DHK) is:
In other news, they bought a 5.1% stake in Deliveroo:
Henkel (H1 2021) was another example of a company increasing its sales guidance (from +4-6% to +6-8%) but reducing the margin outlook (from 14-15% EBIT% to 13.5-14.5%) due to:
In particular, the exceptionally sharp rise in raw material prices and strained supply chains will weigh heavily on the economy in the further course of the year. We are working hard and with extensive measures to limit the impact on our business and profitability.
Adhesive is the good business here:
The hearing company Demant reported a 15% increase in organic sales in the first half of the year compared to 2019 (+51% vs H1 2020). They raised their outlook:
Straumann, the dental implants and equipment company, raised its full-year 2021 outlook, again:
…to organic revenue growth of above thirty percent, with profitability (core EBIT margin) nearly reaching the 2019 level, assuming the pandemic does not negatively impact the patient flow
Deals and IPO
UK's Vectura bows to sweetened £1.1 bln Philip Morris offer (link)
Diageo acquires Mezcal Unión (link) - small but growing
Germany's Zooplus says received takeover offer from Hellman & Friedman (link)
Adidas sells Reebok for £1.8bn to Authentic Brands (link)
Other news
Barclays on the “Subscription Society” in the UK (link)
Britain’s ‘super subscribers’ have driven a 23 per cent increase in the economy in the last 12 months
81 per cent of UK households are signed-up to at least one subscription, rising from 65 per cent last year
Entertainment services remain the firm favourite, with savvy Brits saving a yearly £290 by taking advantage sign-up discounts
Cheese, musical instruments, and underwear are among the more novel subscriptions popular with Brits
Unilever tipped as prime target for activist Peltz ($link)
Boohoo to invest £500 million, create 5,000 jobs (link)